May 2013

The relationship between job characteristics and retirement savings in defined contribution plans


Job characteristics and DC plan contributions during recession. One set of characteristics often overlooked in the literature is the job characteristics of DC participants. Prior studies have revealed the importance of job characteristics on retirement timing and pension plan features, but no research has traced out its association with contribution behavior.27 Given a lack of empirical work in this area, the most relevant job characteristics are difficult to distinguish precisely. Further complicating the picture, job characteristics can be defined in many ways, ranging from physical and intellectual demands, organizational tasks, and earnings and fringe benefits to environmental conditions. Herein, we examine how several broad characteristics—including employment loss in DC plan participants’ industry of employment, employer size, job tenure, occupation, union membership, and earnings—were associated with contributions to DC plans during the 2007-to-2009 recession. An advantage of looking at these characteristics is that they are observable in national survey data.

The channels that are expected to link the job characteristics examined in this study with contributions to DC plans over the recession are as follows. If participants’ contribution levels respond to what is happening to the participants personally, their contributions might also respond to what is happening to workers around the participants (i.e., peer effects). Of particular significance is evidence that job losses can affect not only those losing their jobs but also those who remain employed.28 Accordingly, as employment losses in an industry increase, the perception of job security among employees within that industry decreases. Under these conditions, participants may reduce their retirement contributions, for example, by building up their precautionary savings in nonretirement accounts. Alternatively, companies operating in an industry with heavy employment losses might be more likely to reduce or suspend matching contributions. Such circumstances could place downward pressure on the contributions of DC plan participants within these industries.

Employer size also might be consequential. Relative to large employers, small businesses tend to have more employee turnover,29 are more likely to go out of business in any given year, and are more likely to reduce or suspend employer matches during a recession.30 In contrast, large employers tend to provide more job security,31 match employee DC plan contributions,32 and provide more investment choice in their DC plans.33 In this context, DC plan participants who work for smaller employers may have a greater likelihood of reducing their contributions relative to those who work for larger employers.

Union status may be important to contributions to DC plans, particularly during an economic downturn. Union contracts often include retirement plan provisions, and insofar as union membership provides job security and stable wages, unionized workers may feel less likely to be laid off during a recession which, in turn, may influence retirement savings. Another factor is job tenure. Longer-tenured workers may have longer planning horizons—and may be closer to retirement—and greater seniority sometimes provides greater job security in the event of layoffs during an economic downturn. We would expect that the longer individuals already participating in a DC plan have worked at a particular job, the less likely they would be to experience a reduction in their contributions over the recent recession, all else equal.


27 Morten Blekesaune and Per Erik Solem, “Working conditions and early retirement: a prospective study of retirement behavior,” Research on Aging, January 2005, pp. 3–30; Randall K. Filer and Peter A. Petri, “A job-characteristics theory of retirement,” The Review of Economics and Statistics, February 1988, pp.123–129; and Mark D. Hayward, “The influence of occupational characteristics on men’s early retirement,” Social Forces 64, no. 4, 1986, pp. 1,032–1,045.

28 Andrew E. Clark, Andreas Knabe, and Steffen Rätzel, “Boon or bane? Others’ unemployment, well-being and job insecurity,” Labour Economics, January 2010, pp. 52–61; and Hans De Witte, “Job insecurity and psychological well-being: review of the literature and exploration of some unresolved issues” European Journal of Work and Organizational Psychology, vol. 8, issue 2, 1999, pp. 155–177.

29 Patricia M. Anderson and Bruce D. Meyer, “The extent and consequences of job turnover," Brookings Papers on Economic Activity: Microeconomics, 1994, pp. 177–236.

30 For example, in 2006 business establishments with fewer than 20 employees comprised 68 percent of all private-sector business establishments in the U.S., but from 2006 to 2007, 77 percent of all business deaths occurred among establishments of this size. At the same time, business establishments with 500 or more employees comprised 16 percent of all establishments and accounted for 13 percent of business deaths (U.S. Small Business Administration, Office of Advocacy, “Statistics of U.S. businesses,” See also Plan Sponsor Council of America, 401(k) and profit sharing plan response to current conditions, 2011,

31 John Haltiwanger, Stefano Scarpetta, and Helena Schweiger, “Assessing job flows across countries: the role of industry, firm size and regulation,” working paper no. 13920 (National Bureau of Economic Research, April 2008).

32 William E. Even and David A. Macpherson, “Employer size and labor turnover: The role of pensions,” Industrial and Labor Relations Review, July 1996, pp. 707–728.

33 See table 2 in Papke, “Choice and other determinants of employee contributions to defined contribution plans.”

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About the Author

Christopher R. Tamborini

Christopher R. Tamborini is a senior research analyst in the Office of Retirement Policy, Social Security Administration.

Patrick Purcell

Patrick Purcell is an economist in the Office of Research, Evaluation, & Statistics, Social Security Administration.

Howard M. Iams

Howard M. Iams is a senior research advisor in the Office of Research, Evaluation, & Statistics, Social Security Administration.