Public School Teachers Undervalue Their Retirement Benefits?

Public sector employees receive large fractions of their lifetime income in the form of deferred compensation.  An opportunity provided to Illinois public school employees to purchase additional pension benefits was the basis of this report's estimate of employees' willingness-to-pay for benefits.

The results show employees are willing to pay only 20 cents on average for a dollar increase in the present value of expected retirement benefits.  The findings suggest substantial inefficiency in compensation and cast doubt on the ability of deferred compensation schemes to attract employees.