Journal of Labor Research

, Volume 11, Issue 2, pp 203–216 | Cite as

Pensions and the uses of ignorance by unions and firms

  • Teresa Ghilarducci

Abstract

Pensions are contingent claims contracts that are often fashioned by collective bargaining under conditions of asymmetric information and market power. Pensions are not an employer’s or a union’s optimal contract; they represent compromise. Employers use pensions to minimize labor costs and to adjust to market changes. Pensions help unions improve and protect their members’ work lives and help unions to survive as institutions. When workers’ estimations of their pensions differ from their employers’ estimations a moral hazard can exist. Less mobile workers and those with less influence subsidize the pension benefits of other workers or reduce an employer’s costs. Econometric results based on data from the President’s Commission on Pension Policy show that certain workers, namely women, overvalue their plans, which provides an opportunity to lower labor costs and redistribute benefits. Unions have a contradictory effect on information.

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Copyright information

© Journal of Labor Research 1990

Authors and Affiliations

  • Teresa Ghilarducci
    • 1
  1. 1.University of Notre DameNotre Dame

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