Job changes, wage changes, and pension portability
A feature of defined benefit (DB) occupational pensions is that changing jobs entails gains or losses (depending on the age at transition) in terms of overall pension entitlements. Inefficiencies may arise in the labour market if employees covered by DB pensions tend to change jobs more or less often than they would if pension entitlements were fully portable.
We propose a measure of changes in individual pension entitlements resulting from a change of jobs, which is termed potential portability gain.This measure is used to study the impact of defined benefit occupational pensions on labour market mobility. We base our analysis on a descriptive overview of worker mobility between jobs in the Norwegian public and private sectors between 2001 and 2003.
Estimation results indicate that the effect of pensions on the propensity to change jobs is either weak or non-existent. Furthermore, we regress both immediate wage changes and subsequent wage growth on the portability gain for job movers, and find no signs that gains or losses in pension entitlements are reflected in the new wage. Standard wage equations estimated separately for movers before and after the move support this result by giving the same coefficient for the portability gain. Results for earlier job change periods, 1997 – 1999 and 1999 – 2001, give the same results. This leads us to conclude that occupational pensions are of negligible importance for labour market mobility.