Retirement, retention, recruitment: Evidence from a federal pension policy

Abstract

I exploit a policy change for U.S. federal workers’ pension benefits to estimate the effect of pension generosity on worker retirement, retention and recruitment. The policy increased pensions by 16%–25%. I find there is a 30.3% decrease in job quits for permanent workers. However, there is little evidence that pension generosity has an effect on new hires. This suggests salience may play a role in how workers value pensions. Additionally, I find a large heterogeneous labor supply response to pension generosity. Altogether, this shows that pension generosity is effective in retaining workers and may have important implications for workforce planning.