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About California public employees' reasonable wages ...

by: Natasha Chart

Tue Oct 19, 2010 at 10:40:40 AM PDT


Surprise! State workers aren't overpaid.

... [From] a study by the University of California Berkeley's Center on Wage and Employment Dynamics.

"California public employees, both state and local, are not overpaid," the report states. Based on its research, state workers make about seven percent less in wages than private sector counterparts, but their benefits are better, so there is "no significant difference" between the two. ...

Translation: California gets its public workforce at discounted wages that it makes up for with benefits like pensions. Without those benefits, state workers are just getting ripped off for about 7% of the value of their work. Either way, the state is getting a good deal.

Natasha Chart :: About California public employees' reasonable wages ...
As much as conservatives would like to suggest that teachers and janitors and bus drivers are to blame, even those scary, underfunded pensions aren't a problem.

For every dollar California pays out in pensions (pdf), it gets $1.47 worth of economic activity. For every dollar taxpayers put into the state and local pension system, they get $7.91 worth of economic activity. Much of that activity goes through local businesses and adds to state revenues. Importantly, it represents deferred compensation that the state agreed to pay in the future so it could offer lower salaries in the present.

Then even if the state laid off even more public workers, a lot of their work would still need to be done. Hello, outsourcing.

$175 to empty an ashtray. $2,166 to fix five smoke detectors. $8,000 to scrape gum off four feet of sidewalk. Those are some of the maintenance charges from companies on contract with California's court system -- and all were approved by the Administrative Office of the Courts, which oversees court budgets. ...

If California's public workers were making that much for such small tasks, it'd be news all over the country. But it was a private, for-profit company charging that much, so the only people who care are the public employees who worry that their stable, if lower paid, jobs will be lost to companies that charge the government a lot and may pay their employees even less.

Not that governments have that kind of money to spend, because the recession has slashed state and local tax revenues.

Though for conservatives it isn't really about deficits or smaller government. It's all about the cheap labor.

They came for the private unions and their overpaid layabouts, all thinking they had a right to a decent house and a college fund for the kids. Then they came for private pensions, which were running those poor, innocent companies into the ground. Now they're coming for the last group of people in the country with any job or retirement security, because, at base, they don't believe that ordinary people should have the right to stable, comfortable lives. They heap contempt on the idea of a living wage and miss no opportunity to suggest that people-who-aren't-CEOs are lazy, greedy, and dreadfully overpaid.

Yesterday it was grocery clerks, today it's teachers. The shape of the conversation doesn't change. The salaries of the 95% are an inefficient drag on the salaries of upper management and the profits of investors. Your public services are a drag on their ability to intimidate a desperate workforce into accepting even less pay. Your quality of life is wasteful overhead, unless you're an investment banker, because those guys are under a lot of stress and $500,000 doesn't go very far.

Scapegoating public workers won't make any of the country's problems go away. All it will do is to increase inequality and make things worse for everyone.

And the truth is that the state gets a good return on money it spends on public services and pensions. I'd be curious to know if it makes as much back from shoveling money to fossil fuel companies.

While I'm proud to work for SEIU, I'm only speaking for myself in this post.

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The excesses of a few don't apply to the majority (0.00 / 0)
It's unfortunate that the greedheads in Bell make the news. That the media reports on top brass who retire young with three-figure incomes--only to draw additional salaries in their next jobs. These rare examples, while true, obscure the larger truth you talk about here.

I know teachers. Lots of them. I know public employees. None of them are getting rich. So I was glad to read the study you quote earlier today on another site. I hope it gets picked up and reported more widely. Privatization has failed in other states, just as it clearly has in the example you cite. And people need to hear the truth instead of the rhetoric.

Thanks for sharing some of it.


Pensions (4.50 / 2)
  The obvious point to make is that we need to restore
private-sector pensions, rather than eliminate public
ones (it always amazes me that Republicans decry the
"politics of envy" and then turn around and tell private
sector workers about how the public sector enjoys pensions
they no longer get--talk about envy there!).

 Anyway, it makes a lot more sense to pay private employees
7% less and put the money into pensions, and laws should be
changed to encourage (mandate, I would say) that.  Note
that the reason there is such a poor return on social
security as a pension system is that it also functions
as a social welfare, child welfare, and disability system
(which it should, but when you hear a Rep talking about
how you can make more money with a 401K they are always
removing the social insurance aspects of social security).

 Democrats should be making the restorations of private
pensions one of their issues (and it appeals to the
middle class).  This will become particularly relevant
as individuals without pensions (pretty much everyone under
40 and most under 55, other than government workers) start
planning for retirement--it is an issue Democrats can
run on.


Can we get real? (5.00 / 1)
Anyone who worked with the promise of a particular pension should and will get it. No sane person is suggesting otherwise.

That said, the UC study appears to dramatically understate actual pension costs, calling them roughly 8 percent of total compensation. I don't know the source of that number, but these days, the cost has grown a heck of a lot larger when there's the least money to cover it. Blind denial of the financial reality there is ... unproductive.

Taking money from Jack to give Jill doesn't magically create new money.  The multiplier works both way. Pretending otherwise is simply dishonest.


I believe you're mistaken (0.00 / 0)
Defining pension benefits down is inevitably going to deny some people the benefits they were promised. I don't know how that's controversial.

And pension benefits are underfunded in large part because states have failed to add their agreed share, sometimes for years. They're behind in their payments and basically threatening to default.

Regarding the cost, not only do pensions represent only a small percentage of state spending and deficits, the way you bring this up misses the point. They are less than 8% of the employees' total compensation, which includes other benefits, not 8% of state costs.

So let's walk through this one more time. The state offers to pay their employees less money than they're worth today in return for agreeing to pay the rest later when they're too old to work anymore. The State of California, meanwhile, has already collected the full value of their employees' work.

Indeed, let's say a given state worker performs $40,000 worth of work for CA for 30 years. (And for the sake of having a simple example, let's just ignore inflation and pay raises and assume a steady salary the whole time.) The state's 7% discount on that work would be $2,800, so the worker takes home $37,200 instead of the $40,000 they'd be worth on the private market. In compensation for that lost $2,800/year up front, the employee gets to enjoy good health coverage and watch their retirement security improve.

To renege on this agreement is to say that state employees shouldn't be compensated for the full value of their work. Would you have the same sort of nonchalant attitude about the state hiring a private contractor to build an overpass, then deciding after the project was completed that they weren't going to pay for it because it was too expensive?

And yes, different types of spending generate different rates of economic activity. If a dollar cycles through many different hands in a local community in a year, it generates more local economic activity (and government revenue) than a dollar spent once and immediately taken out of local circulation.

When government spending is involved, it's referred to as the fiscal multiplier effect. Also of possible interest and along the same lines, Ken Meter pioneered work on the effect of developing local markets in rural communities to keep money cycling through local hands more times before leaving the community in some form, and it makes a significant difference in residents' living standards and available resources.

You shouldn't accuse me of distorting something you haven't even bothered trying to understand.


[ Parent ]
I believe I'm not (5.00 / 2)
Let's do a little math.

8.2 percent of total compensation for pensions, where salary is 64.2 percent of total compensation, translates to a 12.7 percent pension cost, per dollar of salary.

There are few public agencies in where the CalPERS employer contribution is that low. The miscellaneous rate for my local city is about double that for miscellaneous employees and triple for cops and firefighters.


[ Parent ]
Probably talking past each other, here (1.00 / 1)
Eight percent is the difference in present compensation between public and private workers across the board, less public pensions, give or take.

Mileage is going to vary widely.

I brought up a rough and minimal numerical example only to make the point that cost to the state and costs to the employee are different issues, after the previous poster inaccurately suggested that the 8% difference was related to a measure of pensions as a portion of the state budget as opposed to a compensation comparison realized by employees.

That example wasn't to be taken as the actual salary breakdown for an actual person, but an illustration of the state's bargain to pay less now and make it up later. Something I tried to convey by ignoring inflation and pay increases over time, and completely glossing over the issue of other benefits, which anyone would have to agree is far too simple to have been intended as realistic.

In addition to pay and benefits varying widely between job classifications, there's also the undiscovered country of other benefits. I don't know how much it costs to cover health and life insurance for cops and firefighters, but I bet it's a lot. Probably a lot more than it costs to insure known desk jockeys. And that doesn't touch the people who make a lot less than emergency service workers and don't get those kinds of benefits, which also have to be accounted for in an average.

California employs over 200,000 people and it doesn't compensate all of them the same. Expecting that 8% to match up exactly with the contribution percentages of a particular classification isn't going to work any better than matching my example of a person who makes $40k/yr every year for 30 years to anyone's actual benefits.


[ Parent ]
We probably are, but ... (5.00 / 2)
 ... my point is this:

The study says that public pay is lower but offset by better benefits, and that if you total it, it's roughly a wash.

But the study dramatically understates the cost of those benefits, so it's not a wash.

That's not the author's fault -- the study uses BLS data that happens to be wrong today. (Seriously, ask anyone in the field if they're pension costs are even in that ballpark.)

That's not the workers' fault -- they didn't crash the economy. But crash it did, and the financial assumptions that were used when those benefit plans were created were wrong.  Ask such known union-busters as Gray Davis.


[ Parent ]
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