In this working paper, Fitzpatrick finds evidence that public sectors workers undervalue their pension benefits relative to the cost of providing them. In response to a 1998 surplus in pension fund assets, Illinois allowed late-career public school teachers to buy upgraded, more generous retirement benefits. However, on average, teachers were willing to pay just 20 cents of their current compensation for a dollar of future retirement benefits; hence, these teachers preferred current wages over pension wealth by a factor of five-to-one.
Politicians and advocates for pensions argue that they boost increase worker retention, and that enhancements to pension plans will further boost retention. This working paper from the Center for Analysis of Longitudinal Data in Education Research (CALDER), however, could not find any evidence that this theory played out after St. Louis enacted a large pension enhancement for public school teachers. In 1999, the St. Louis teacher pension plan boosted benefits with an immediate 60 percent increase in pension wealth for all workers.