| Sumario: | A study was conducted to determine how pension benefits affect the distribution of earned income. Data were obtained from 3,619 households that participated in the 1983 Survey of Consumer Finances. Results indicate that private pensions increase annual income inequality—relative to inequality observed in the distribution of wage income—by only about 2 percent among all employed individuals and by 21 percent among unionized workers. Private pensions bring about this increase primarily by increasing the rate of return to tenure, perhaps through pension “backloading” (setting accruals to grow when earnings rise near retirement) and through the increased incidence of pensions with age. Meanwhile, whereas private pensions have little effect on estimates of the distribution of expected lifetime income, the addition to the analysis of social security benefits (public pensions) strongly reduces inequality in that distribution.
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