Pay Cuts

[Bill Call]

When faced with declining revenue the typical action of cities and states is to demand higher taxes (higher prices for their services). If the customer (taxpayer) resists the demand higher taxes (prices) the city or state starts cutting the most visible, needed and most basic services.

The refrain goes something like "IIII've looked highhhh and lowww for things to cut and the only thing I can think of is to lay off police officers and to stop feeding the childruuun".

The underlying assumption is that generous paychecks, health plans, sick leave polices, vacation policies and (underfunded) retirement plans are off the table. The most they are willing to do is to layoff one or two people (cut services) and to agree to modest wage increases on condition that no meaningful changes are made to benefits.

Things might be about to change:

http://money.cnn.com/2009/01/07/news/ec ... 2009010811

http://www.sfgate.com/cgi-bin/blogs/nov ... y_id=39359

The government unions are quite willing to force cities and school systems into bankruptcy rather than compromise. They know that elected officials usually find it is easier to just give in.

Elected officials who serve in areas dominated by the Democratic Party find that demanding more from the taxpayers than from government unions insures their political viability within the system.

Courageous politicians who are willing to take a stand are a rare breed.

I think that is about to change.

[Gary Rice]

Not a chance.

The rules are real simple.

1) Negotiation

2) If rule 1 fails, go back to rule 1.

Back to the banjo.

[Tim Liston]

Bill....

I just came across this....

Unions vs. Taxpayers (click here)

First it points out that public employee salaries have long since eclipsed that which is paid by the private sector, where competition keeps wages in check.

A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46% more in salary and benefits than comparable private-sector workers.

That's the bad news. The good news. There really is none....

(Private sector employers) who are too generous with pay and benefits will be punished. In the public sector, however, more union members means more voters. And more voters means more dollars for political campaigns to elect sympathetic politicians who will enact higher taxes to foot the bill for the upward arc of government spending on workers. That will be the pattern for the indefinite future unless taxpayers find a way to roll back the enormous power public workers have acquired.

This author seems to think that we are past the point where public sector employment salaries and benefits can be brought back down to what private sector employees are becoming accustomed to.

[Gary Rice]

Historically, public employees made MUCH less than those in the private sector.

So much less that unionizing was necessary. If people thought that the union movement had it rough with the private sector, remember that the public employees were going up against governments. Over time, hard won victories were achieved in the courts, and in the court of public opinion. Through unions and the collective bargaining process, lower salaries were sometimes accepted as being trade-offs for fringes and pension guarantees.

Remember too, that public employees, whether police, fire, teachers, or government workers, often had jobs that placed them into health issues or into harm's way repeatedly, in order to serve the people.

Unions also served as buffers against the political whims of various groups seeking to exploit policies of expedience.

The service of public employees should be deeply appreciated, their retirement plans should be honored with dignity, and the private sector would do well to learn from their outstanding example.

[Bill Call]

This author seems to think that we are past the point where public sector employment salaries and benefits can be brought back down to what private sector employees are becoming accustomed to.

The pension costs in New York City are now so high that within a few years 50% of the budget will be spent on pension and retiree health care costs. The new aristocracy are the government employees. They and their unions have nothing but disdain for the people who create the wealth.

I am not optimistic that the process can be reversed. The free market is a fragile ecosystem. It can survive a certain level of parasitism but when the point of no return is reached the system quickly collapses. It's like the old riddle: If a 20 square mile lake is covered with 1 square mile of algae and the coverage doubles every day when the algae covers 50% of the lake when will the entire lake be covered? Answer: Tomorrow.

If you try to explain wealth creation to the average government employee they don't get it. Their minds simply cannot comprehend the concept. They think wealth comes form the mail man.

[sharon kinsella]

Bill do you know the cost of living in New York City?

Do you think it could have something to do with this?

I love that you think you are intellectually superior to public employees. Who died and crowned you Einstein?

[Will Brown]

Its very difficult to compare the incomes of private sector and public sector employees, because there are so many non-cash considerations. For example, what is the cash equivalent of security? Public sector employees have, I think it is fair to say, a lot more security than private sector employees. Companies fail, or relocate, or change their businesses, and people lose their jobs, but the government doesn't go out of business, or relocate (when they do, they relocate their employees), or change its business. Is there any risk to them of pay cuts when the economy goes soft? So what is the cash equivalent of this advantage.

Similarly, public sector employees almost all have an opportunity to retire at a very young age while private sector employees must often work to 65 (or is it 67 and rising). Granted, some private sector employees (steelworkers and autoworkers, most notably) can retire at a young age, but what happens to their retirement when their employer fails (and why should the government step in and make good on those pensions). What is the cash equivalent of being able to retire 15 or more years before someone else.

When I was a military recruiter, one of the prime selling points was 30 days of annual leave per year, and I think many public sector employees have almost comparable deals; how many private sector employees enjoy that, and how much cash is it worth?

What I describe is the general state of those employees; obviously there are many exceptions. And that is why a person may very well choose to take a public sector job at a nominally lower wage than a private sector job. And of course the government is trying to make public sector pay equal to private sector pay, with no apparent consideration of the non-cash advantages of either.

[Bill Call]

For the past 20 years the public sector has been immune from economic reality. The private sector has not. Private companies have been forced to become more efficient and to cut wages. The private sector employees have been hit with a double whammy. Lower compensation to keep their jobs and higher taxes to provide raises and early retirement for government workers.

The feds helped to finance this lalaland economy through deficit spending. The states financed it buy using expanding revenue to increase wages and benefits. Local governments have been forced to finance the spending spree by delaying or cancelling improvements in infrastructure and development.

Here is a good read about pay cuts and the private sector:

http://www.cnbc.com/id/31125393

Arnold Swarzenager was elected on a promise to control the monster. Instead he double spending and placed his State at risk of bankruptcy. What would have happend if he had confronted the problem when first elected? Will any local politician take a stand or will they simply kick the can down the road?

If it wasn't so serious it would be funny that the only thing Arnold can think to do is to stop feeding the children:


http://buzz.yahoo.com/article/1:usatoda ... e-for-kids

[Gary Rice]

I'm not particularly fond of contradicting peoples' postings, so instead I'll just point out that in the collective bargaining that's gone on over the last 10 years or so, it has not always been easy for the public employees unions. While some groups may have achieved modest salary raises, that has, at times, come at the expense of benefits, increased co-pays, or even give-backs. Each negotiation is indeed its own drama.

No one has a free ride to riches here. Wages and benefits are always scrutinized, and are almost always on the table, every few years for many, if not most school and municipalitiy negotiations teams.

Back to the banjo...

[ryan costa]

the ohio supreme court reversed cleveland residency requirements recently. municipal employees are free to get the hell out of dodge from the taxpayers that pay their wages.

what this means I don't rightly know.

maybe now...the fireman and police won't need enough money to send their kids to private schools. the metropolitan centers set the pace for local civil service pay rates across the state. how can the voters vote their judgement of fair pay?

in the good ol' days this wasn't much of an issue. the villages around cleveland didn't have much going on. it was a pain in the ass to commute: the interstate highways weren't up. local passenger rail was about it. firemen and police patrolmen didn't make enough to afford the best of both worlds.

[Charlie Page]

the ohio supreme court reversed cleveland residency requirements recently. municipal employees are free to get the hell out of dodge from the taxpayers that pay their wages.

what this means I don't rightly know.

Maybe some of them who don't already live in West Park will choose Lakewood. We could use a few more quality residents. At minimum, they can discontinue renting cheap apartments only to have a Cleveland address when they really live elsewhere.

Everyone who works in Cleveland pays 2% of their earnings to the city, regardless if they live there or not. The bulk of taxes paid are by people who don't live in Cleveland but work there.

[ryan costa]

they're gonna have to dismantle the interstate.

economic theory and civic administration knowledge haven't been able to catch up with the interstate highway system.

[dl meckes]

I think we need to actively court City of Cleveland workers.

We need some nice banners along I-90. If you lived in Lakewood, you'd still have a nice house but the schools are better and the taxes are 4x higher.

[Roy Pitchford]

Historically, public employees made MUCH less than those in the private sector.

A 2-second Google search turned up this April 09 USA Today article.
http://www.usatoday.com/money/workplace/2009-04-09-compensation_N.htm
Public employees earned benefits worth an average of $13.38 an hour in December 2008, the latest available data, the Bureau of Labor Statistics (BLS) says. Private-sector workers got $7.98 an hour.

Overall, total compensation for state and local workers was $39.25 an hour — $11.90 more than in private business. In 2007, the gap in wages and benefits was $11.31.

Unions also served as buffers against the political whims of various groups seeking to exploit policies of expedience.

However, they inject themselves into politics through their massive campaign contributions and, in some cases, becoming tools for political parties.

The service of public employees should be deeply appreciated, their retirement plans should be honored with dignity, and the private sector would do well to learn from their outstanding example.

I would prefer to run my own retirement, make my own decisions about my money rather than pay into the state or federal pot. I wish I could opt out of what I'm in.

[Gary Rice]

OK Roy, let's look at these situations.

My point about comparing public employees to the private sector alluded to the past, did it not?

The present is obviously not looking so good for the private sector, although any comparison would probably be like comparing apples and oranges.

And WHY does the present not look as rosy for the private sector? I would suggest that there's been a concerted effort to de-unionize the private sector. Without collective bargaining agreements and union stewards to protect their interests, it looks to me as if our country is once again becoming a virtual 19th century sweatshop with many risks and few benefits to thousands of workers.

Of course, the unions (albeit indirectly through the PAC process) have taken an interest in the political arena! This is America, after all, and Political Action Committees are a part of that process. They are not generally, I do believe, "tools" for a particular political party. Even unions who generally support candidates of one party may well support some on the other side of the aisle.

As far as running one's own retirement? That sometimes can work well...BUT far too many of my friends just lost significant portions of their own investment portfolios, due in part to adventurous risky self-decided investments.

That's a double-edged sword. It can cut both ways, I do believe....

Back to the banjo...