One more data point in the public employee compensation debate

Public-sector workers provide services on which we all rely. If anything, they are undercompensated relative to similarly educated private-sector workers.

Andrew Cannon photo
Andrew Cannon

In the discussion of public workers and their compensation, let’s not lose sight of basic facts.

First, we rely on public workers every day. We may not see the public workers on a daily basis, but we certainly benefit from their work and services daily. Many of those services are such a normal part of our lives that we don’t even think about it.

So think about it for a minute. When you flush the toilet and the wastewater goes away but clean water comes out of your kitchen faucet, that’s the work of public-sector employees. The garbage and recycling you left on your curb Monday night did not magically disappear Tuesday morning; city sanitation workers collected that waste and took it away. Public employees educate our children in our elementary, middle and high schools and in our community colleges and universities. They protect our neighborhoods and respond to emergencies. They treat our ill or injured relatives in hospitals and clinics; they keep our roads in working order and ensure that traffic signals work properly; they work to protect kids in dire circumstances.

Second, the reality is that these workers are underpaid when you make a fair comparison to comparable private-sector workers. IPP’s “Apples to Apples: Private-Sector and Public-Sector Compensation in Iowa” report highlighted this reality last February. Most public-sector workers earn less than similarly educated private-sector workers. When benefits are included, the gap in Iowa narrows but still remains.

Ours was not the only report to issue such findings. Such findings have been replicated again and again, all over the nation. Some reports found that benefits erased the compensation gap or even gave public workers a slight “advantage”; others matched Iowa’s findings in that benefits narrowed the gap but did not completely eliminate it.

Well, here’s another data point. “Comparing Compensation: State-Local Versus Private Sector Workers,” written by Boston College researchers, echoes many of the findings of the IPP report (as well as reports from the Economic Policy Institute, the Institute for Research on Labor and Employment at UC-Berkeley, and the Center for State and Local Government Excellence studies).

The new Boston College report is notable for another reason, however. It examines assertions designed to undermine or call into question the findings of studies like IPP’s. Specifically, the report includes early retiree health benefits in the benefit package, adjusts for differences in pension/retirement packages between the two sectors, and examines the claim that public employees enjoy greater job security than private sector workers (when controlled for education level, they do not).

In sum, state and local government workers are paid about 9.5 percent less than private-sector workers. When benefit packages are included, the gap shrinks, but private-sector workers come out about 4 percent better.

Public-sector workers provide services on which we all rely. If anything, they are undercompensated relative to similarly educated private-sector workers. Should the debate around public employee compensation continue in coming months, let’s remember those two simple facts.

Better yet, let’s remind our family, friends, neighbors and elected representatives of those facts if the opportunity and need should arise.

Posted by Andrew Cannon, Research Associate

Health reform stakeholders should be careful what they wish for

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Andrew Cannon

Two thoughts as the 2012 legislative session nears: What is worth your time and attention? And, be careful what you wish for.

Both are vital reminders for all of us in our increasingly busy world. But as Iowa lawmakers again consider proposals for the competitive health insurance marketplace, or health insurance exchange, these reminders are relevant to health reform stakeholders.

Last legislative session, way back before the Fiscal Year 2012 budget gridlock, or the property tax debate, several lawmakers issued proposals for the creation of an exchange.

One proposal (which won the support of the health underwriters’  and insurance brokers’ lobby and no one else) seemed far more interested in protecting the insurance brokers than it was in creating an exchange that helps Iowans get affordable, quality coverage. Under that proposal, every purchase in the exchange would have been mediated by a broker, who, by law, would have received at 5 percent commission on each insurance sale in the exchange.

It’s worth remembering how the exchange is intended: Individuals, families, and small businesses will be able to quickly and easily compare health insurance plans — based on price, value, benefits and other relevant factors — and premiums will be based strictly on age, geographic area, and smoking status. Pre-existing conditions will be a thing of the past.

The exchange should permit small businesses to leverage some of the bargaining power of the larger employers. Many small businesses that offer employees coverage will be eligible for tax credits.

According to projections from the nonpartisan Congressional Budget Office, however, most exchange users will be individuals and families. Low- and moderate-income (up to 400 percent of the federal poverty level, or about $89,000 for a family of four) individuals and families who do not receive insurance through an employer will be eligible to receive sliding-scale premium assistance in the form of tax credits. Small businesses are likely to comprise a much smaller slice of the exchange-user pie.

This brings us back to the question this post opened with, what is worth your time and attention?

Do brokers really want to be involved in every purchase of health insurance in the exchange? Remember that most of these exchange customers won’t be HR folks, familiar with the ins and outs of insurance terminology. Most won’t be the proprietors of small businesses that have dealt with brokers in the past and know what sort of benefit and cost-sharing packages their employees have or haven’t liked.

Most exchange users are going to be members of ultra-small groups — families. Many will have moderate levels of income ($37,000 a year to about $89,000 a year for a family of four). For many, the terminology of health insurance terminology will be a new language. Deciding what benefit package they want or need will be a calculus as difficult as, well, calculus.

Is a bill like last session’s SF391 really the best use of a broker’s time and attention? I’m not a broker, so I’m in no position to say.

But it seems that rather than spending four hours describing insurance terms, benefits, and options to a family of four that has never purchased health insurance and earns $35,000 a year is a far less effective use of time than spending an hour on the phone with a seasoned HR rep from a business with 30, or even just 10 employees. And let’s not forget that many exchange users will end up not even purchasing insurance, but become enrolled in the newly expanded Medicaid.

Regardless of health reform implementation, there will be continued demand for the services of insurance brokers. They provide a valuable service, and are trusted by many small businesses and entrepreneurs. That won’t change.

But if brokers push for a repeat of last year’s offerings, they may just give themselves business that they don’t really want. Be careful what you wish (and lobby) for.

Posted by Andrew Cannon, Research Associate

Health premiums rise again; is there an end in sight?

Stagnant wages give health insurance premium increases more sting — and employers are requiring employees to contribute more toward premiums as they keep rising.

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Andrew Cannon

Anyone hoping for a reprieve from rising health insurance costs — everyone, in other words — won’t like the results of the Kaiser Family Foundation’s annual “Employer Health Benefits Survey.”

Heck, even those of us who were just hoping for premium growth near the inflation rate are disappointed.

The survey, in which more than 2,000 businesses are interviewed about the health insurance plans they offer (or in some cases, do not offer) to employees, revealed that premiums for singles increased by 8 percent while family premiums increased by 9 percent in 2011. The average premium for single coverage passed $5,400, while family coverage costs averaged $15,000.

Fifteen-thousand dollars. That’s more than the federal poverty level for a family of two. It is more, as Kaiser Family Foundation President and CEO Drew Altman noted, than the cost of a small car.

Stagnant wages give this spike even more sting. Increases in income are not offsetting these increases, and employers are requiring their employees to contribute more and more toward premiums as they continue to rise.

So, is there any end in sight? How long will premiums keep rising, and how high can they go?

It’s hard to say. Health care costs are driven by a number of factors and, as the Kaiser report illustrates, remain difficult to predict.

The health reform law, the Affordable Care Act, offers some hope for relief: Small businesses that offer health insurance to employees can receive tax credits, low- and middle-income households that do not receive insurance through an employer will be eligible for premium assistance, and the law features a number of pilot programs aimed at reducing costs.

Like any policy, however, it will require constant monitoring and occasional tweaking to meet its goals: making health care affordable and accessible for all.

Posted by Andrew Cannon, Research Associate

Census data suggests health reform is working

The new Census data offer promise that health reform may be working.

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Andrew Cannon

Despite disappointing increases in poverty and decreases in median income, new data released by the Census Bureau carried a glimmer of good news.

While the ranks of those lacking health insurance increased in almost every other demographic group, even seniors eligible for Medicare — the number and rate of uninsured young adults (aged 19-25) actually decreased (see Table 8 of this Census Report).

And even more startling: The decrease in the uninsured rate of uninsurance for young adults (1.6 percentage points) was larger than the percentage-point increases in uninsured rates among other adult cohorts.

What was the driving force in reducing uninsured rates among young adults?

Census data provide only a snapshot, and do not offer a definitive explanation.

However, there was one large policy change at the beginning of 2010 that might just help explain this change.

While young adults make up a small share of the overall population, they typically comprise a disproportionate share of the uninsured population. Health reform  — signed into law March 2010, sought to change that. The health reform law, or the Affordable Care Act, contained a provision allowing young adults through age 25 to remain on a parent’s health insurance plan if they did not receive an insurance offer through their employment.

Caution is warranted in ascribing a cause to the change in the uninsured rate among young adults. Nevertheless, reports seem to back up the notion that the change is at least partially due to health reform’s policy changes.

In other words, the new data offer promise that health reform may be working.

By Andrew Cannon, Research Associate

Food insecurity data symptom of larger affliction

Food insecurity, though a big problem, isn’t the problem. It is merely a symptom.

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Andrew Cannon

Here’s the good news from this week’s Department of Agriculture report on food security in America: Fewer American households reported serious disruptions in access to food in 2010 than in 2009.

Here’s the bad news: Overall, the number didn’t budge among Americans experiencing some level of food insecurity due to a lack of money. Nearly 49 million Americans — 16 million of whom are children — experienced hunger or the threat of hunger* in 2010 — a year in which, by official measures, the economy was improving.

Here’s where the bad news tells us: Food insecurity, though a big problem, isn’t the problem. It is merely a symptom.

In a lecture at the University of Iowa Wednesday night and in a recent New York Times commentary, former Labor Secretary Robert Reich diagnosed the real problem: stagnant income and wages.

It’s a problem IPP has recently noted, too. Our State of Working Iowa 2011 report found that median wages have stagnated and, adjusted for inflation, are lower now than they were a decade ago. And while the employment picture in 2010 improved, too many of those jobs pay lower wages than workers’ previous jobs — or are simply low-wage jobs, period.

The 2010 food security figures show that combating this particular symptom of stagnating incomes and wages — and others like it — requires different policy strategies. To name just a few: Increasing the wages and incomes of the middle- and working-class will require boosting the minimum wage, enforcing labor laws already on the books and making it easier for workers to unionize and enter collective bargaining contracts with employers, and encouraging employers to pay living wages.

Now, how about some more good news?

The data from recent years also suggests that stimulus measures in the 2009 Recovery Act worked as intended. Food insecurity elevated as the recession worsened in 2008; despite upward-creeping unemployment in early 2009, however, food insecurity held steady. The Supplemental Nutrition Assistance Program (SNAP), formerly known as Food Stamps, was boosted by the Recovery Act, increasing benefits and eligibility.

In other words, we can shape the economy; policy can improve situations.

Effective policy, of course, requires a correct diagnosis. In this case, the correct diagnosis requires looking at things a bit more holistically — looking at wages and other economic indicators in conjunction with food security numbers.

* Each year, the USDA measures food security — the “access by all people at all times to enough food for an active, healthy life.” Participants in the Census Bureau’s Current Population Survey — a nationally representative sample — are asked to respond to a series of statements and questions regarding the food situation in the household in the preceding 12 months. Household respondents responding negatively to several questions are classified as having “low food security;” those with negative responses to several questions and indicating disruptions in eating patterns due to a lack of resources are classified as having “very low food security.”

In the three years immediately following the onset of the recession (December 2007), the food insecurity rate among households has held steady at about 14.5 percent. In 2010, that meant 48.8 million individuals – 16 million of whom are children. This is a significant (both statistically and numerically) increase from the pre-recession years, when only about 36 million individuals, or 11 percent of households, experienced food insecurity.

Sample sizes are too small to provide one-year estimates for states; however, USDA does provide three-year averages. In Iowa, an average of 12.1 percent of households experienced food insecurity over the 2008-10 period, more than a third of whom experienced very low food security.

Posted by Andrew Cannon, Research Associate

Wellmark’s ‘uncertainty’ should not affect Iowa’s exchange

In a strong, consumer-oriented exchange, small businesses, individuals and families will want to participate. Why would Wellmark not want a share of that playing field?

Andrew Cannon photo
Andrew Cannon

Any business worth its salt can find a way to make a buck in a market with sufficient consumer demand.

Wellmark’s reported uncertainty in its ability to “break even” in the health reform-created insurance marketplace would seem puzzling for a company with 70 percent of the Iowa market.

According to an Aug. 31 Des Moines Register report (“Wellmark undecided on insurance exchange,” by Tony Leys), Iowa’s largest insurer is unsure it will participate in the health insurance marketplace created by the health reform law, citing concerns about its ability to “break even.”

This marketplace could be the place where as many as 156,000 Iowans* seek to purchase health insurance. Those with household income below 400 percent of the federal poverty line (about $89,000 for a family of four) will receive tax credits from the federal government to help cover the premium cost. And small businesses, which will also be eligible to purchase insurance in the exchange, will receive tax credits if they cover at least half of their employees’ premiums.

The stars are aligned to create consumer demand in the new insurance marketplace. Wellmark’s concern about breaking even probably should not be lawmakers’ first concern. The point of the exchange is to enhance the marketplace, not keep it restricted.

Rather, as we have repeatedly stressed, policy makers need to be focused on how to assure that lawmakers create an Iowa exchange that is fair and consumer-oriented.

Two groups heretofore are woefully underserved by the current health insurance market — individuals and families who don’t receive health insurance benefits at work, and Iowa’s small businesses. The exchange’s structure and governance should assure that Iowa individuals, families and small businesses can find affordable health insurance options.

In a strong, consumer-oriented exchange, small businesses, individuals and families will want to participate. Why would Wellmark not want a share of that playing field?

*Note: Data comes from the 2009 American Communities Survey (ACS), analyzed online using the University of Minnesota’s Integrated Public Use Microdata Series (IPUMS-USA). The ACS is conducted on an ongoing basis by the Census Bureau. Those 156,000 Iowans have household income in excess of 133 percent of the federal poverty level – the cut off point for Medicaid eligibility under health reform.

Posted by Andrew Cannon, Research Associate
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State government employment stable in Iowa across years

State government employment in Iowa has remained relatively stable in the years leading up to recent budget cuts and early retirements.

Now you might never know it to hear some of the political talk, but Iowa is not a state in which state government employment has grown.

Number of State Employees Has Remained Stable Over Time

Graph: No. of State Employees Has Remained Stable Over Time

Number of State Employees Per Thousand Iowans Has Held Steady

Graph: Number of State Employees Per Thousand Iowans Holds Steady

Both graphs above show that employment by state government has remained relatively stable. Note neither graph includes 2010 or 2011, which would indicate the more recent effects of a 10 percent across-the-board budget cut and early retirements. The second graph demonstrates that considering population growth, Iowa has seen a decline in state employment from the 1990s.

See Getting Public Value Out of Our Public Dollars,” an October 2010 report from the Iowa Fiscal Partnership, at www.IowaFiscal.org.

Posted by Andrew Cannon, Research Associate

Achievement and resources — finding the balance

Governor Branstad’s recent education summit drew over 1,600 people, and prominent speakers including the U.S. Secretary of Education, Arne Duncan, former North Carolina Governor James Hunt and New Jersey Governor Chris Christie. The forum tapped widespread concern about student achievement in Iowa and the United States. While the summit stressed the importance of teacher excellence, accountability and innovation for Iowa, most speakers stated this will not be achieved without new investments in education. What are those trends in Iowa?

The widening interest in student achievement has coincided with a decrease in overall state education funding over the past 13 years. The graph above illustrates the steadily declining levels of state education funding. As a share of the economy, overall state funding for education has declined by 17 percent since Fiscal Year 1998. Funding for higher education — both at community colleges and Board of Regents universities — has borne the brunt of that reduction.

Long, Steady Decline in Overall State Education Funding
education spending graph

One point also noteworthy about the graph is the impact of federal “stimulus” funding through the American Recovery and Reinvestment Act (ARRA). Frequently a target of political spin, the ARRA funding is demonstrated in this chart and other research to have made an important difference in saving education funding from severe cuts, particularly in 2010, the year Iowa faced a 10 percent across-the-board budget cut. ARRA bridged a gap to hold education funding relatively constant, though still far lower than its levels in the 1990s.

See World Class on a Shoestring Budget? at http://www.IowaPolicyProject.org for more information.

Posted by Andrew Cannon, Research Associate

Folly of the sales-tax holiday

“How many stores promote a ‘7 Percent Off’ sale?”

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Andrew Cannon

The Institute on Taxation and Economic Policy (ITEP) hits the nail on the head with a two-page policy brief about sales-tax holidays. Typically scheduled for back-to-school shopping and used in 17 states, they drain revenue, and feed unfairness in a state tax system.

In “Sales Tax Holidays: A Boondoggle,” ITEP notes sales tax holidays “are costly. Revenue lost through sales tax holidays will ultimately have to be made up somewhere else, either through painful spending cuts or increasing other taxes.”

Iowa’s tax holiday is Friday and Saturday of this week. The timing for the holiday couldn’t be worse, as it comes right before the start of the first school year in which state lawmakers have frozen school districts’ per-pupil spending. Giving up that revenue for a “back to school” sales gimmick is ridiculous.

ITEP identifies the problems with all such “holidays,” including the Iowa break:
— they do not target sales-tax relief to low-income families that are most affected by sales taxes, but offer it to the wealthiest families as well;
— they do nothing to stimulate local economies, because the purchases would be made anyway; and
— for the other 363 days of the year, they leave a state tax system unchanged in its favoritism toward the wealthy.

“Regrettably,” ITEP states, “these holidays may lull lawmakers into believing that they have resolved the unfairness of sales taxes.”

Finally, beyond these standard tax-policy concerns, the sales-tax holiday raises consumer protection issues. It actually provides an incentive to businesses to charge customers more than they would have without the break.

Think about it. The holiday saves Iowans 7 percent on a sale of a clothing item. How many stores promote a “7 Percent Off” sale? But a “no tax” sale — watch the ads this week. Why offer 15 percent off, or 20 percent off, or half off, or 2 for 1, when the state is handing you this promotion?

A “holiday” should be something to celebrate. Fixing problems with Iowa’s sales-tax law could be accomplished in better ways than a two-day boondoggle.

Posted by Andrew Cannon, Research Associate

The reality of Recovery Act funds: They helped!

More teachers will be on the job in Iowa in the coming month and class sizes will be more manageable because Recovery Act funding saved positions in recent years.

Mike Owen
Mike Owen

A new report offers one illustration of the value of funds provided to the states under the American Recovery and Reinvestment Act (ARRA) — also known as the “stimulus” bill.

Aside from political arguments about ARRA, one thing that is undeniable is that it helped Iowa lawmakers get funds to Iowa schools at a time state revenues were coming in short.

IPP Research Associate Andrew Cannon’s report on education in funding in Iowa, “World-Class on a Shoestring Budget?” notes that a decade-long decline in K-12 funding has reversed course (measured in inflation-adjusted dollars), beginning in 2009, the first of three years of the temporary ARRA help. As his report notes:

The American Recovery and Reinvestment Act (ARRA) allowed Iowa, during the leanest years of the recession, to continue funding education at levels comparable to and even higher than prior years. As those Recovery Act funds expired at the end of June, the end of the state’s fiscal year, Iowa lawmakers chose to provide state funds to replace Recovery Act funds.

While it might be expedient to complain about “one-time funds” being used for ongoing expenses in the state budget, that is precisely how ARRA funds were designed to be used. Effective stimulus policy, as the Iowa Fiscal Partnership and others have noted, is supposed to be temporary, timely and targeted. State fiscal relief in times of revenues shortfalls is one of those approaches, and in this case, education funding in Iowa was sustained at more traditional levels than otherwise would have happened. More teachers will be on the job in Iowa in the coming month and class sizes will be more manageable because that funding saved positions in the last few years.

Cannon’s full report — six pages, plus a four-page appendix of data tables on education funding — may be found here.

Part of making Iowa students educational achievers is to encourage critical thinking skills — the skills that will teach them to check the facts about programs such as ARRA before listening to the political talking points.

Posted by Mike Owen, Assistant Director