Job changes, wage changes, and pension portability

Erik Hernęs1, John Piggott2, Ola Lotherington Vestad 1, Tao Zhang1
1Frisch Centre, Norway, 2University of New South Wales, Australia

We propose a measure of changes in individual pension entitlements resulting from a change of jobs, which is termed potential portability gain. This measure is used to study the impact of defined benefit occupational pensions on labour market mobility. We base our analysis on a descriptive overview of worker mobility between the public and the private sectors in Norway, over two time periods, 2001-2003 and 2003-2005. Estimation results indicate that the effect of pensions on the propensity to change jobs is either weak or non-existent. Furthermore, we regress immediate wage changes and subsequent wage growth on the portability gain for job movers, and find no signs that gains or losses in pension entitlements are reflected in the new wage. This leads us to conclude that occupational pensions are of negligible importance for labour market mobility.

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