PENSIONS AND COLLECTIVE BARGAINING: TOWARDS A NATIONAL POLICY ON RETIREMENT INCOME SUPPORT (MICROECONOMICS, INSURANCE INFORMATION)

The ambiguity and flexibility surrounding the cost and value of a pension promise are advantageous to employers and collective bargainers. Firms have superior control over pension finances and plan design, as well as greater awareness of the employment and demographic characteristics of the covered group. This asymmetric power and information, coupled with the tendency of workers to overestimate the value of their pension promises, allows for a gap between labor costs and perceived compensation and great latitude in bargaining.;The theoretical portion of the thesis suggests that pensions are demanded and supplied as insurance; some collect, others don't, but all pay premiums in the form of lower wages. In insurance markets asymmetric information and power cause potential moral hazard and adverse selection. The extent to which adverse selection and moral hazard exist depends upon the asymmetry between an employer's and a worker's estimated value of the defined-benefit pension promise and the ability to vary its worth.;A defined-benefit pension plan is replete with moral hazard because there are so many factors that determine the ultimate value of a pension promisee. Many of the factors are known and controlled solely by the employer. Yet, the process of collective bargaining provides the union with the opportunity to take advantage of the ambiguity and flexibility in pension costs and benefits.;The theoretical and empirical results should help policy makers evaluate the ability of the private sector to supply social insurance. Labor unions may, in the light of this analysis, reconsider their agenda for pension fund investment control and pension benefit improvements. (Abstract shortened with permission of author.);The determinants of worker overvaluation of pension promises are examined using the 1981 President's Commission on Pension Policy's household survey. Firm ability and incentive to manipulate pension funds are documented in theory, by history, by reported cases, and statistically using COMPUSTAT'S data on pension funds and the Securities and Exchange's data on corporate finances. The advantages of pensions to collective bargainers are documented in a case study of pension negotiations between United Stanford Employees, Service Employees International Union, Local 680 and Stanford University.