The Evolving Pension System: Trends, Effects, and Proposals for Reform, edited by William G. Gale, John B. Shoven, and Mark J. Warshawsky. Washington, DC: Brookings Institution Press. 2005. Paper: ISBN 0 8157 3117 5, $26.95. 226 pages.
The recent focus on proposals for reforming Social Security has caused many academics and policy researchers to neglect America's private pension system. The Evolving Pension System, a product of the Brookings Institution in partnership with Stanford University and other organizations, attempts to refocus retirement research and provide the starting point for a discussion of pension reform. It offers a good blend of historical and institutional detail, the results of empirical studies, and goal-oriented explorations of policy possibilities. The contributors are widely respected for research in this area, and the collection reveals the strengths and limitations of today's mainstream pension scholarship.
Two early chapters trace the development of the modern pension system. Sylvester Schieber divides the history of U.S. pensions into four periods: early development (1875-1920), expansion of coverage (1921-1964), passage and implementation of the Employee Retirement Income Security Act (ERISA) of 1974 (1965-1981), and limitations on deductible contributions (1982-present). Although employers invented pensions as a management tool, Schieber writes that government regulation--shaped by an evolving set of objectives--has been the driving force behind pension evolution. His main conclusion is that many recent regulations, introduced with the stated intent of protecting pensions, have been counterproductive: "The ultimate irony ... may be that all the efforts to enhance retirement security could actually end up reducing the retirement security of the baby boom generation" (pp. 47-48).
The other chapter on pension trends, by William Gale et al., examines the shift in employer attention from defined-benefit plans to defined-contribution plans. Although this movement began before ERISA, it accelerated after 1974. Moreover, defined-contribution plans have grown since 1985 as a substitute for defined-benefit plans, not as a supplement.
Mentioned among the possible causes of this trend are employer responses to government regulations and changes in worker tastes. A review of the impact on workers and employers, meanwhile, considers a number of issues including the level and variability of retirement income among various...