Fair Compensation

October 13, 2011 By Phil Welles

Public Sector Union Compensation: Not Just a Red or Blue State Issue

What is “fair” compensation for workers?  We hear the term “fair” thrown around a lot and with the national attention that was paid to the new budget bill in Wisconsin earlier this year, one might think that Republicans feel public sector union employees are overpaid while Democrats are simply defending the “fair” compensation of public sector union employees.  An interesting situation has been developing in New York. Like many other states, New York is struggling to keep a balanced budget, and Governor Andrew Cuomo has spent much of his first year in office figuring out a way to restructure public sector union contracts.

His proposed contract (detailed in the graph below) was eventually accepted by the largest union of state workers in New York, the Civil Service Employees Association. However, the second-largest union in the state, the Public Employees Federation (PEF), voted down the new legislation. New York State has subsequently sent out layoff notices to nearly 3,500 PEF employees.

In some ways, the legislation in New York appears tougher than what we saw in Wisconsin. While collective bargaining has been essentially done away with in Wisconsin, public sector unions can still bargain on base wage increases every year up to the consumer price index. However, it is important to note that under the new legislation many unions in Wisconsin have decided against recertification.

There’s no question that the next few years will be tough for New York State public sector union employees, given stricter retirement eligibility and health care contribution increases. Reform in the public sector is often seen as a fight with a firm political agenda. However, Governor Cuomo, a Democrat, doesn’t seem to be concerned about such stereotypes. When PEF rejected his deal, some mistakenly theorized that he was bluffing about subsequent layoffs. In fact, he was quoted shortly thereafter saying, “If they thought we were bluffing, we’re going ahead with the layoffs. It wasn’t a bluff.”

Wisconsin and New York are two examples of states trying to figure out the right formula for a sustainable budget. Wisconsin appears to be taking somewhat of a long view, with changes to collective bargaining that will greatly reduce the cost of public sector benefits in the future. New York hopes that the savings from their short-term deals will produce enough resources to weather the current storm. Time will tell.

There’s little doubt that other state governments will be watching both states to see how the path to economic recovery unfolds. Most importantly, hopefully with the nation also paying attention, we’ll gain a better understanding about how important the issue is.

In a time when partisan politics and rhetoric seem to reign supreme, it’s clear that this issue now transcends such pigeonholes, and hopefully will be treated as such.  

Given what we know about these two states, which public sector union solution do you see as having the best chance of success? Which parts of these legislations would you pick and choose to create your own solution? Let us know what you think.

• public unions

• Wage Compensation

• Collective Bargaining

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