The Devolution of the American Pension System: Who Gained and Who Lost?

One of the most dramatic transformations in the economy over the last two decades has been the replacement of traditional Defined Benefit (DB) pension plans with Defined Contribution (DC) pensions. Using data from the 1983, 1989, and 1998 Survey of Consumer Finances (SCF), I find that among age grou...

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Bibliographic Details
Published inEastern economic journal Vol. 29; no. 4; pp. 477 - 495
Main Author Wolff, Edward N.
Format Journal Article
LanguageEnglish
Published Basingstoke Eastern Economic Association 01.10.2003
Palgrave Macmillan
SeriesEastern Economic Journal
Subjects
Age groups
Consumer surveys
Deferred compensation
Defined benefit pension plan
Defined benefit plans
Defined contribution plans
Economic theory
Employee pension plans
Equity
Gini coefficient
High income
Households
Income inequality
Net worth
Pension
Pension funds
Pension plans
Presidential Address
Private pensions
Retirement
Social security
Studies
Wealth
Wealth distribution
Workers
United States > US
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Summary:One of the most dramatic transformations in the economy over the last two decades has been the replacement of traditional Defined Benefit (DB) pension plans with Defined Contribution (DC) pensions. Using data from the 1983, 1989, and 1998 Survey of Consumer Finances (SCF), I find that among age group 47-64, the proportion with a DB plan plummeted from 69% to 42% between 1983 and 1998 and the share with a DC plan skyrocketed from 12% to 60%. However, median Private Accumulations (the sum of net worth and pension wealth) fell by 14% among middle-aged households over this period. The inequality of total pension wealth increased sharply over this period as a result of the switchover from DB plans to DC accounts. DB pension wealth is also found to have a very modest equalizing effect on overall wealth inequality. Moreover, DB pension wealth has a weaker offsetting effect on wealth inequality in 1998 than in 1983.
ISSN:0094-5056
1939-4632