Abstract

This paper addresses the questions of (1) how human capital investment theory and job mobility model can be applied to explain the behavior of individuals with regard to pension participation, and (2) what much more relevant and theoretical linkages between job mobility and pension participation are (3) what other determinants to affect pension participation are. Using data from the Panel Survey of Income Dynamics (PSID), results show that job mobility influences participation in pension plans. That is, we identify that duration of unemployment and employment has negative and positive impact on pension participation.

Empirical results also support the argument that union contracts can influence the pattern of pension selection as well as pension participation itself. If employees‘ contracts are switched to a union contract, and the major pension plans for union members have defined benefit (DB) plans, then they are willing to have those plans. On the other hand, if employees’ contracts are switched to a union contract, then new employees covered by the union contract may not be willing to enter defined contribution (DC) plans.

Thus, efforts by government to provide employees with pensions through the 401(k) Automatic Enrollment Act of 2005, may have unintended consequences. On the other hand, in terms of job mobility, this policy may be helpful for mobile workers because this policy will encourage those workers to enroll pension plans whenever they move their jobs.