Whitepaper: The pay deficit: Measuring the effect of pension deficit payments on workers' wages

Non-wage elements of employee compensation, such as employer pension contributions, have increased substantially since 2000. This can partly be attributed to increased payments by employers to plug defined benefit deficits. However, at this time there was also a pre-crisis slowdown in pay growth.

The Resolution Foundation's paper looks at what happened during this period and considers whether the two might be linked.

Key findings:

• The paper identifies a significant negative correlation at the firm level between deficit payments and employee pay levels.
• The effect was found to be stronger for current members of the pension scheme, but is also present among non-members when looking at the bottom end of the pay distribution.
• Overall, these effects are not large enough to explain more than a small part of the generalised slowdown in pay growth.
• At a micro firm-level the effects are sizeable.