PENSIONS AND WAGE PREMIA

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Abstract
We hypothesize that the magnitude of the pension‐wage compensating differential should vary by sector, because sectoral differences in firms ‘technologies result in cost differences in providing non‐wage benefits’. Using data from the Survey of Consumer Finances, we find that the pension‐wage compensating differential is smaller in the union sector and large firms than in small, nonunion firms. Controls for sectoral selectivity do not alter the results. Thus, workers at unionized and large firms pay a lower implicit price for their pensions either because pensions have productivity‐enhancing effects, or because these firms pay workers economic rents via pensions. (JEL 532, J31, 541)

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