As Americans continue to navigate the many consequences of the COVID-19 pandemic, some educators are considering an option many states created before the current crisis: an early retirement package. Early retirement incentives have grown in popularity over the past several decades as a cost savings strategy. The theory is that replacing experienced, higher-paid educators with younger staff at lower salaries might reduce overall expenditures.
In response to the pandemic, some policymakers have cited creating an option for employees who are more vulnerable to the virus to safely exit the workforce as another potential benefit of early retirement incentives. Older employees are at higher risk for complications and severe reactions to the coronavirus, which is a concern for education leaders given that about one-fifth of teachers in public schools are over age 55, and college professors are among the oldest Americans in the workforce. Most states offer some type of early retirement option for public school teachers, and teachers are generally responsive to incentives built into pension plans. Additionally, some higher education institutions recently adjusted their retirement policies. For example, The University of Pittsburgh announced a faculty retirement incentive program, effective June 15 through Aug. 31, 2020.
While early retirement may seem like an attractive offer, the lack of flexibility and the financial realities may create some barriers to usage. There are many unknowns about the COVID-19 pandemic, including how long it will last. Teachers and professors likely won’t be able to use early retirement to weave in and out of the education system in a way that might be most beneficial for their personal health and career goals. Furthermore, early retirement isn’t financially feasible for all instructors, and early education instructors may face the most financial constraints.
Early retirement may also be of interest to schools and institutions facing financial constraints. However, research indicates that the fiscal impacts from early retirement incentives are mixed. One analysis estimated early retirement benefits to be cost effective in Los Angeles, California, while another study found early retirement benefits increased costs in Illinois. For Pennsylvania state universities, early retirement appears to generate cost savings. Whether early retirement programs are effective in reducing costs is highly dependent on the structure of the early retirement program and is not a one-size-fits-all solution to close budget gaps. Policymakers should also factor in the potential cost of recruiting new teachers to fill vacancies.
As with any education policy, policymakers are also eager to understand the impact of early retirement incentives on student outcomes. Evidence is limited on the topic, though teacher turnover has generally been shown to be detrimental to student achievement, given the disruption and the loss of institutional knowledge. On the contrary, a study of an early retirement plan in Illinois demonstrated some positive results on standardized test scores, particularly in schools serving students from families with lower incomes. Given the limited evidence, policymakers may consider pairing proposed early retirement plans with explicit plans to study the impact of the policy change.