Study: Union Strength Impact on Pension Benefits Is Nil

(August 28, 2011) — A recent study by Boston College’s Center for Retirement Research claims that unions do not lead to higher public pension benefits.

The group’s recent paper— titled “Unions and Public Pension Benefits” — asserts that “unions have no measurable effect on plan generosity or rate of growth in pension benefits, but do have a quantifiable impact on wage levels and perhaps number of workers.”

The research notes that it is widely believed that unions have a large impact on public pensions. Nevertheless, the paper — written by Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, and Laura Quinb — asserts that because pensions are legislated, not bargained, lobbying expertise may actually be more important than union size.

Furthermore, the study describes factors that result in higher public pensions, with growth in a plan’s funded ratio during good times having the biggest impact on increasing schemes. The paper concludes that the results should be viewed as only a first step in understanding the influence of public unions on employee compensation.

This study stands in stark contrast to recent rhetoric from New Jersey Governor Chris Christie and New York Mayor Michael Bloomberg, whose public fights with city and state union leaders have raised the profile of public pensions nationwide. In June, following on the heels of the State Senate, the New Jersey State Assembly passed a public pension overhaul bill that has been championed by Christie and will see teachers pay more into their defined benefit pension plan, among other changes.

Under the bill, workers will be required to pay more of their salaries into the pension system. They would also give up annual cost-of-living increases, while also paying a percentage of their health care premiums in a tiered system based on their salary. The bill also mandates that the state make its payments to the pension fund—a requirement that would end New Jersey’s decade-long practice of skipping payments into the fund in order to shore up deficits elsewhere in the budget.

Unions, as expected, have reacted with anger to the deal. One union – the Local 1033 of the Communications Workers of America (CWA) – filed a lawsuit claiming that Christie and his predecessors’ failure to make payments to the state’s pension funds violated a constitutional prohibition against the “impairment of contracts.” The suit, brought in US District Court in New Jersey, states that since 1998 the state has made only three partial payments to the pension, skipping the remaining ones.