The second check is to confirm that, following a decline in the unemployment rate, wage change is moving higher, consistent with increased excess demand in the labor market. In addition, we have to take into account temporary forces related to, for example, minimum wage, health care costs, and exchange rates.
This incentive may make pensions more expensive because sponsors would be less likely to take on assets with higher expected returns. Put another way, plan sponsors could be given the incentive to become overly risk-averse, meaning an increase in the cost of providing for future liabilities. A fourth concern relates to the group-longevity risk I spoke about earlier.