Last-Ditch Attempts by State and Local Government to Save Jobs

In a welcome but choppy and exceptionally slow start in terms of what needs to happen, some public unions are agreeing to pay cuts in order to save jobs. In other cases, cities are imposing their will with unions fighting every step of the way.

Please consider the New York Times article More Workers Face Pay Cuts, Not Furloughs

The furloughs that popped up during the recession are being replaced by a highly unusual tactic: actual cuts in pay.

Local and state governments, as well as some companies, are squeezing their employees to work the same amount for less money in cost-saving measures that are often described as a last-ditch effort to avoid layoffs.

A new report on Tuesday showed a slight dip in overall wages and salaries in June, caused partly by employees working fewer hours.

Though average hourly pay is still higher than when the recession began, the new wage rollbacks feed worries that the economy has weakened and could even be at risk of deflation.

Pay cuts are appearing most frequently among state and local governments, which are under extraordinary budget pressures and have often already tried furloughs, i.e., docking pay in exchange for time off. Warning that they will have to lay off people otherwise, many governors and mayors are pressing public employee unions to accept a reduction in salary of a few percentage points, without getting days off in exchange.

At the University of Hawaii, professors have accepted a 6.7 percent cut. Albuquerque has trimmed pay for its 6,000 employees by 1.8 percent on average, and New York�s governor, David A. Paterson, has sought a 4 percent wage rollback for most state employees. State troopers in Vermont agreed to a 3 percent cut. In California, teachers in the Capistrano and Pacheco school districts have accepted salary cuts.

�We�ve seen pay freezes before in the public sector, but pay cuts are something very new to that sector,� said Gary N. Chaison, an industrial relations professor at Clark University. Outsize pension costs and balanced budget requirements are squeezing many states as tax revenue has come up short.

Companies frequently say that compensation for unionized workers, in both wages and benefits, is out of line. For instance, the Westin Hotel in Providence, R.I., after failing to reach a new contract with its main union, has sliced wages 20 percent, saying its previous pay levels were not competitive with those at the city�s many nonunion hotels.

The pain is felt across industries. At the Seattle Symphony, musicians have taken a 5 percent pay cut, while ABF Freight System, a major trucking company, has asked the Teamsters to agree to 15 percent less. The St. Louis Post-Dispatch has lowered pay 6 percent, while Newsday has gotten its staff to accept a 5 to 10 percent pay cut.

While most of the pay cuts seem to hit unionized workers, David Lewin, a professor of management at the University of California, Los Angeles, who has written extensively on employee compensation, says some cuts are also quietly taking place among nonunion employers.

Reed Smith, a firm with 1,500 lawyers, has cut salaries for first-year associates in major cities to $130,000 from $160,000. Warren Hospital, a nonunionized facility in Phillipsburg, N.J., ordered pay cuts of 2 to 4 percent because lower Medicaid reimbursements had squeezed the hospital�s finances.

In Madawaska, Me., 460 unionized workers accepted an 8.5 percent wage cut in May to help keep their paper mill in business.

In Albuquerque, where the mayor pushed through pay cuts to bridge a $66 million budget deficit, the largest union of municipal workers is suing, arguing that the mayor�s plan should include furloughs.

The mayor, Richard J. Berry, rejected that idea. �You want to keep people employed. You want to preserve public services. And you don�t want to raise taxes,� he said. �When you�re trying to lower the cost of government while maintaining services, furloughs don�t do the trick.�

At the Mott�s apple juice and sauce plant in Williamson, N.Y., 30 miles east of Rochester, 300 unionized workers have been on strike since May 23 over management�s demands for a $1.50-an-hour wage cut, a reduction in company 401(k) contributions and higher employee contributions to health insurance. The strikers are seething over management�s demands because the plant has been profitable and Mott�s corporate parent, the Dr Pepper Snapple Group, reported record profits last year.

�They keep piling more and more work on us, but they want to pay us less and less,� said Michele Morgan, a Mott�s employee. �It�s a slap in the face.�

Economic Reality and Slap in the Face for Mott's Employees

I approve the right of those private union employees at Mott's to strike.

On the other hand, I approve the right of Mott's to move the entire operation to North Carolina or wherever in response. I also approve right to work laws that would allow non-union workers to take jobs of those strikers.

Michele Morgan is whining about jobs that the company says pays $21 and hour. The union disputes the figure.

Regardless, Michele Morgan does not know what a slap in the face is. A slap in the face is losing your job when a company says to hell with it and moves operations to a non-union city where they do not have to deal with such problems. A further slap in the face is when you are unemployed for 12 months and exhaust all your unemployment benefits.

The above paragraphs may sound cruel or harsh to some. It is neither. It is a slap in the face of economic reality. Michele Morgan needs a cold slap in the face of economic reality before she gets a slap in the face called the unemployment line.

Economic Reality and Slap in the Face in Albuquerque

I applaud mayor, Richard J. Berry who said �You want to keep people employed. You want to preserve public services. And you don�t want to raise taxes. When you�re trying to lower the cost of government while maintaining services, furloughs don�t do the trick.�

That is something most police and fire departments have not figured out. It is also only a start. Albuquerque needs to outsource as many public jobs as it can, and kill defined benefit pension plans that are no doubt at the heart of the problem.

Mayor Berry is attempting to save unions jobs. The unions complain about it. Those Albuquerque unions desperately need a well deserved slap in the face called privatization.

Scare Tactics and Economic Reality in Baltimore

Inquiring minds are investigating police and fire union grievances in Baltimore. Please consider Union billboard bashes mayor and council

This billboard appears to have sprouted up over the weekend in view of City Hall at the mouth of I-83, the latest salvo in the fight over pensions for city police and fire fighters. A spokeswoman for the unions say it will be up throughout the month of August.



Changes in the pension system - which strip more money from the paychecks of officers and firefighters - were made necessary by a deficit in the police and fire retirement fund that could have cost the cash-strapped city $65 million. That problem came as the mayor had to close a $121 million budget shortfall by raising taxes and new fees.

Union officials have filed a federal lawsuit accusing the city of purposely underfunding the pension system and arguing that the changes violate contractual labor agreements.

The mayor's office issued this statement regarding the billboard:

"Rank and file police and fire officers understand that cities that give full retirements to 41 year old government employees will go bankrupt before long.

Baltimore Slap in the Face

Police and firefighters are so used to getting what they want they have now resorted to scare tactics. I am actually grateful because I am quite certain the public will have little sympathy.

Ironically, the sign is a complete distortion of reality. That sign was not paid for by the Fraternal Order of Police or the Association of Fire Fighters.

That sign was paid for by Baltimore taxpayers in taxes and fees. The union siphons off a portion of that taxpayer money then has the gall to resort to such scare tactics.

Baltimore has two options both of which I approve.

1. Outsource the entire police department to the Sheriffs' Association
2. Declare bankruptcy in an attempt to get out from the burden of union greed

The Baltimore police and fire departments both need a cold slap in the face of economic reality that says they are complete fools for not appreciating how good they now have it.

Baltimore is bankrupt. It needs to recognize that fact and do something about it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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