Ratcheting down public workers’ pay

Iowans must ask if we can continue to attract and retain good workers if we provide them no hope of gaining ground against the rising cost of living.

A bill just introduced in the Iowa Legislature would make sweeping changes to Iowa’s laws governing public employees, union and non-union, from teachers to snow plow drivers to child abuse caseworkers to nursing home inspectors.

Here we focus on one aspect of that bill, HSB84: the provisions that would drive down employee compensation on both the wage/salary side and the benefits side.

First, HSB84, prohibits an arbitrator from granting a wage increase in excess of the rate of inflation, or 3.0 percent, whichever is less. This applies to all public workers represented by a union — state, city, county, school — except for public safety workers (police and fire).

That restriction on an arbitrator will weigh against anything better than the cost of living, maxed out at 3 percent, since any impasse that leads to arbitration would enforce that limit. As the bill would remove all other topics from negotiation, there is no way for unions to negotiate for something else — better benefits, hours, working conditions or vacation — to compensate for a low wage offer.

The law also takes increases in the employee share of health insurance costs off the table. This means that any premium increase above inflation (and health care costs have been rising faster than prices generally for a very long time) will mean a loss of real wages, even in a year of low inflation overall.

What does this mean? The mathematical certainty is declining real income for public workers. Anytime inflation exceeds 3 percent, employees could lose ground. Anytime inflation is less than 3 percent, they could get no more than just enough to cover the rising cost of living, even to make up for those years of higher inflation. They could never catch up — unless the public employer agreed to it.

Suppose this mandate had been part of the collective bargaining law passed in 1974. What followed was a decade of inflation well in excess of 3 percent every year. After 10 years, the paychecks of public workers could have lost 37 percent in purchasing power. That’s a decline in your standard of living by over a third in one decade.

While inflation moderated in subsequent decades, it nonetheless exceeded 3 percent in 12 of the next 32 years (1985 through 2016). By now, wages would be just 59 percent of what they were in 1974. With employee health insurance costs thrown in, the real take-home pay of public workers could have fallen by half, or more.

Finally, the law prohibits bargaining over any wage increase or benefit based on seniority. Where public workers now can move up the pay scale through seniority, there is no guarantee that such pay scales will even exist in the future. The entire schedule of pay bumps based on experience and seniority could be eliminated by the employer. Employees would have no recourse.

We need well-qualified, experienced, dedicated workers teaching our children, taking care of the elderly, driving our buses and snow plows, protecting children from abuse and neglect. Iowans must ask if we can continue to attract and retain good workers if we provide them no hope of gaining ground against the rising cost of living.

2010-PFw5464Posted by Peter Fisher, Research Director of the Iowa Policy Project

pfisher@iowapolicyproject.org

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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