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

Newspapers, above all, must stick to facts

Newspaper editorial boards have no more leeway in civic discourse than anyone else. They are entitled to their own opinions, but not their own facts.

Mike Owen
Mike Owen

It is always disappointing to see a reputable newspaper miss a chance to raise the level of political debate.

In one sweeping ideological rant, the Dubuque Telegraph Herald editorial board adopted false, political spin as its message and discarded legitimate research without reference in (1) complaining that the state of Iowa “offers a totally free insurance package to employees” when this simply is not true, and (2) asserting without evidence the idea that pay for public employees is competitive with private employees.

Regarding the first point, the newspaper’s complaint simply defies common sense.

Once and for all, let’s get one thing straight: Health benefits are part of compensation for work performed. Benefits are not “free,” any more than a paycheck is “free,” and it is absurd for anyone to suggest otherwise. Public employees receive those benefits because they put in the hours and provide the services as agreed upon by both employee and employer. They are not a gift.

Furthermore, any reduction of those bargained benefits would presumably be compensated with increased pay on the wage/salary side — unless the TH is making a case for a unilateral pay cut without offering any reason for it.

Ironically, the July 18 editorial comes about 13 months after the TH itself declared the public pay assertion to be “NOT TRUE” — the newspaper’s headline in a story noting the myth that obscures the very real pay gap favoring private-sector employees over public-sector counterparts. That story cited research by the Iowa Policy Project and others. IPP’s report may be found here. The IPP report has continued to be cited by many to correct the mythology on this issue and has yet to be substantively refuted by anyone, the TH editorial board included.

Newspaper editorial boards have no more leeway in civic discourse than anyone else. They are entitled to their own opinions, but not their own facts. We should be able to expect that principle in every editorial, especially from newspapers that have given us a reason to expect it.

Posted by Mike Owen, Assistant Director

Look at more than public employees’ health benefits

A comprehensive and holistic look at public employee compensation reveals that the political talk driving some public policy proposals is mere myth.

Andrew Cannon

It will not be surprising, in the post-Wisconsin-recall world, if policymakers feel emboldened to challenge public employee compensation. Governor Branstad has already signaled that some of his policy initiatives in the coming years will bear the stamp of Wisconsin. In a June 12, 2012, meeting with Des Moines Register reporters and editors, the Governor said he intends to require public employees to contribute 20 percent of the cost of their health insurance.

If that sounds reasonable — considering that private-sector workers contribute, on average, more than 20 percent of their health insurance premiums — it misses the realities of overall public employee compensation.

While it is true that public employees contribute less on average to their health insurance plans than private-sector workers, they have negotiated the benefit as part of overall compensation packages that, all political hyperbole and “conventional wisdom” aside, typically leave public employees behind their private-sector counterparts. As IPP research has demonstrated, public workers tend to be paid considerably less than similarly educated workers in the private sector. Generally better health insurance benefits do not compensate for the deficiency, so a gap remains.

After controlling for experience, education, and other demographic factors, public-sector employees still receive 6 percent to 8 percent lower overall compensation — that is, pay, health, dental, life and disability insurance, and retirement benefits — than private workers.

A comprehensive and holistic look at public employee compensation reveals that the political talk driving some public policy proposals is mere myth.

Requiring an employee contribution of 20 percent of health insurance premiums is a disguised cut in compensation and amounts to a repudiation of contracts that have been negotiated in good faith between public employees and the state. Furthermore, it would widen the gap between public and private sector pay.

Posted by Andrew Cannon, Research Associate

Public employees pay for, earn insurance

Public employees pay for whatever health-insurance arrangement they have in the form of lower take-home pay.

Andrew Cannon photo
Andrew Cannon

The news media need to call out some folks on their claims about public workers’ pay and benefits.

Health insurance is part of compensation for hours worked, skills used and services rendered on the behalf of the employer — in the context of current Iowa political discussion, on behalf of taxpayers who benefit from those hours, skills and services.

Thus, it’s puzzling to see references such as these:

•   A Des Moines Register editorial today cited “growing resentment — envy, perhaps? — among private-sector workers” about some public-sector workers’ benefits, including “free health insurance in some cases.”

•   A KCCI-TV report on the Des Moines Business Record Daily e-newsletter noted one lawmaker opened debate by “calling for public employees to begin paying something for their taxpayer-funded health care plans.” This lawmaker further claimed “it’s not fair for Iowans to foot the bill for the 84 percent of state workers who pay nothing for their benefits.”

I’ll bet no one quoted in such reports can produce one public employee who is receiving free health insurance. Public employees pay for whatever health-insurance arrangement they have in the form of lower take-home pay. Plus, in many cases, there are employee contributions to health insurance, particularly for family coverage, and there are co-pays and deductibles. So let’s take a step back and see what the facts are before spouting off.

As Iowa Policy Project research has shown, public workers’ pay is generally lower than for workers in the private sector with comparable education or skill levels. Where they do make up some of that gap is in negotiated health-insurance benefits. And even then, the total “deal” is likely to be lower than it is for a similar worker in the private sector.

No decision on the current collective bargaining legislation should be made under the mistaken notion that public workers are getting something for free. They have negotiated for it, and they are working for it. And if they’re not paid there, they have a right to negotiate for it in some other way.

Posted by Andrew Cannon, Research Associate

Political debate on steroids strikes out

“Many, it is clear, do not want good information whenever it comes to them, especially if they don’t want to like the source.”

Mike Owen
Mike Owen

The yellowed copy of The Des Moines Register from April 5, 1974, is one of my treasures.

First Time at Bat—Aaron Ties Ruth’s Record” the paper exclaims, beneath a banner headline in all caps: “PUBLIC BARGAINING BILL IS VOTED.”

Truth to tell, I kept the paper because of the Hank Aaron story. Little did I realize that, 37 years later, I’d see a connection between that story and the one trumpeted above it — how times have changed. Then, you didn’t have to worry about whether home-run kings were on steroids, let alone political discussions. Now, both are suspect.

The Iowa Policy Project has worked hard to correct the latter, and today put out an important report that knocks down myths about public employee pay and benefits. These myths feed political narratives that are built on foundations of polling data, marketing and talking points, with facts entering the discussion only where convenient. They defy a more honest approach, of gathering facts and then making a determination of what they show.

The 1974 Register story about the bargaining debate is interesting. It shows a bipartisan decision under a Legislature and Governor of one-party control — Republican — agreeing on a public-employee bargaining system that has stood the test of time. Neither side on a bargaining table really liked it then or now, but it reflected some sense of balance. Now, it is being challenged, and thrown into the mix of the discussion is the public employee pay mythology.

Where is the balance we could find four decades ago? Too many in politics today want their thumb on the scale, and too many are used to seeing it — so much that good research starts out tainted, just like a clean 420-foot home run may be. IPP’s report by Andrew Cannon today is an example; show people the data, and some will dismiss it without reading it because the headline doesn’t fit the world view they’ve bought into.

One commenter on the Register’s website today — didn’t have that 37 years ago — asked why a nonpartisan group would put out a study to coincide with a rally on labor rights at the Iowa Capitol — this of course would make it clearly suspect.

Of course, it also is most timely when people are talking about these issues, and when some are busy spreading bad information. Or, maybe we should have waited until after new laws were passed based on bad information. Many, it is clear, do not want good information whenever it comes to them, especially if they don’t want to like the source.

Posted by Mike Owen, Assistant Director