Federal workers get pay freeze. Is Michigan next?
Federal workers won't get pay raises for two years under a proposal to be unveiled later today by President Barack Obama, the New York Times is reporting.
Translation: The drumbeat for public employee compensation cuts is growing louder -- and Michigan is headed toward a similar outcome.
Does Obama's willingness to freeze pay for federal civilian workers provide political cover for Michigan Republicans hoping to slash public employee costs? Perhaps.
Gov.-elect Rick Snyder has already signaled his intention to make total public employee compensation "comparable with the private sector."
In an appearance earlier this month at the Republican Governors Association meeting in San Diego, Snyder indicated that he plans to aim for structural fixes to Michigan's chronic budget crisis -- and that a solution must include public employee compensation cuts.
"You're talking about people and their livelihoods and their families. So it's a very serious topic. I want to do it working with them," Snyder said, according to the Washington Post. "But you have to ask two questions from a fiduciary point of view. What's comparable with the private sector and what's financially affordable? And my view is I don't believe you can check either one of those boxes today. And if you can't check either of those boxes we need to sit down and have a dialogue."
A day after Snyder's comments, retiring Michigan Senate Fiscal Agency director Gary Olson told economists gathered at the University of Michigan that public employee compensation has expanded disproportionately with the state’s revenue. He suggested that cuts, if paired with changes in the state's tax structure and cuts to areas such as corrections, would be necessary to erase a projected $1.7 billion deficit.
The cost Michigan pays per state employee has risen 58.2 percent over the last 10 years, according to Olson's statistics. However, the total amount the state spends on employee compensation has risen 37.7 percent -- a discrepancy attributable to fewer total employees.
The average total cost of a state employee, a figure that includes benefits, rose from $54,412 to 1999-2000 to $86,100 in 2009-10, Olson said.
Over the same period, the average personal income for individual Michigan residents grew 24.1 percent, the lowest of the 50 states, Olson said.
Snyder, who takes office Jan. 1, told AnnArbor.com in October that he "wouldn’t take away anything that’s already been earned by anyone."
But he said something needs to change.
"All the proposals that have gone before are all flawed in some fundamental fashion," Snyder said. "Let’s get a solution that’s going to work for 10 or 20 years. It’ll ask for shared sacrifice, but the question is, can we do a solution then that these people don’t need to be looking over their shoulder each and every year?"
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
AlphaAlpha
Wed, Dec 1, 2010 : 9:22 p.m.
"Compensation is set by Congress..." Many things are 'set' by Congress; typically based upon recommendations by lobbyists and other 'consultants'. Pay may ultimately be 'set' by Congress, but you can bet their decision is quite influenced by the public employee lobby, which in turn is a significant political donor. Ahhh, political 'cooperation'.
AlphaAlpha
Tue, Nov 30, 2010 : 10:37 p.m.
Waterdipper - Will keep your thoughts in mind. Regardless, the statistics speak for themselves: the disparity between federal worker pay and private sector pay for similar tasks is large enough to be of significant concern. BornnRaised - AAFD. Oh, wait. That's somebody else... But seriously, you might want to consider a new approach other than elucidating disparities between wages and total compensation. Total compensation is the key metric, and always has been; you know this; you've raised the question before. No matter. BLS et al track total compensation as well as many other metrics; most agree total compensation is the best metric. The grand total of wages, benefits, etc. If there is a different metric you'd like to see used, mention it; it may well be worth considering. Also, it's not a 25% cut to get from your average $104K total compensation to the US average of $57K; it would be a 45% reduction. It's unlikely we'd see that reduction all at once, but it is likely there will be reductions. The community is not quite as wealthy as it was just a few years ago, and wage reductions are just one aspect of the new age of austerity.
Waterdipper
Tue, Nov 30, 2010 : 9:08 p.m.
@ AlphaAlpha Compensation is set by Congress, not public sector employees, who (by the way) also don't have the right to collective bargaining. Further, education level does not determine a federal employee's pay, it only determines whether a person is eligible for the job as advertised, by having the minimum education specified for eligibility. A person with an MBA in a clerk GS-5 position will still be paid as a clerk GS-5, same as someone without an MBA, because the MBA is NOT required to perform the duties of a clerk. Thus your comment "public employees have created a compensation structure which rewards them for education 'level' even though this 'education' may be irrelevant to their job" is patently incorrect and reflects an ignorance of federal employment.
AlphaAlpha
Tue, Nov 30, 2010 : 6:25 p.m.
Waterdipper - "the education level of employees tend to be higher, on average, for the federal civilian workforce compared to the private-sector employees". It is true that many federal employees are overeducated for the jobs they do. The public employees have created a compensation structure which rewards them for education 'level' even though this 'education' may be irrelevant to their job. Thus, it's no wonder that many are overeducated. This needs to change. Here is a concept: reward for productivity, instead of resume padding.
AlphaAlpha
Tue, Nov 30, 2010 : 6:18 p.m.
stan - Your claims regarding underpaid federal workers are completely at odds with the facts. You may have followed an obscure path to the occupational and compensation statistics you cite (though, oddly, total compensation is unmentioned), but the fact is, most federal workers are earning disproportionately more than their private sector peers.
stan
Tue, Nov 30, 2010 : 2:45 p.m.
First of all let my set some facts straight. Most federal workers are vastly underpaid. I retired a therapist in a VA Medical center with almost 30 years of service. I have a BS degree from EMU and a grad degree for UM. My top salary was 44,000. Overpaid? I retirement under Civil Service Which I contributed much of the money. I receive about $2,000 permonth. My great benifit of health insurase cost my over $ 6,000 per year with no dental or vision. That cost extra. Subtract my taxes and I have about $1200 per month. In addition, even though I worked several jobs and paid social security I will not collect any money because it is off set by my VA retirement. Something that was changed years after my being hired. AS a retired ferderal worker I receive no raise last year and now will not for more yearss. As a tottally disable Vietnam combat vet my and other vets cost of living was frozen last year and this year as well. This is also true for those on social security. I went to work for the government to help other vets and could have made a great deal more money in the private sector. What this bandade will do is drive compitant people out of Federal jobs and allow more untrined, uncarining less qualified people in. I feel everone should sacrifice in these times. This means no large tax breaks for the wealthy top wage earners, no raises for the military and even the private sector. Americans tend to care about me first. Yes I am not happy about my pay freezes or high medical costs, but why do others still get theirs. Perhaps we should end the wastfuff wars we are in and actually save lives and enough money so all would benifit. That is except for some of the polititins and fat cats they look out for.
15crown00
Tue, Nov 30, 2010 : 1:38 p.m.
ALL government employees at every level should get their pay and benefits frozen for the next 5 yrs. at least.Lawmakers and Judges included as well as ALL political apointees. ONLY exception front line law enforcement officers.
Waterdipper
Tue, Nov 30, 2010 : 9:41 a.m.
For an interesting analysis of the federal vs private sector pay debate, see http://www.govexec.com/dailyfed/1110/110210an1.htm As at least most of us know, statistical information can be manipulated to support numerous different points of view, resulting in (as we're seeing) wide ranging claims of "facts" that often support opposite conclusions. The truth usually lies somewhere in between, IF it can be found. Other "facts" to check out that may have bearing: >>> Educational requirements and thus the education level of employees tend to be higher, on average, for the federal civilian workforce compared to the private-sector employees because the occupations used by the federal government tend to be more heavily in the professional categories. This is partly due to the following bullet: >>> Over the last (at least) twenty years there has been a shift in federal employment toward higher-skilled, higher-paid positions because lower-skilled (and lower-paid) positions have been contracted out to the private sector (Google "Circular A-76", first released in 1983). The private-sector workforce now includes a lower-paid and wider range of jobs (starting with minimum-wage positions all the way to highly compensated CEOs) than the federal workforce, and salary or compensation "averages" based on the private sector workforce pool would tend to be less. All this aside, there is no doubt that public sector employees can expect to be "sharing the pain" with everyone else, but they shouldn't be targeted based on politically or ideological steered "comparisons". If you want to lower the pay and benefits for public sector workforce it can, and certainly will, be done, BUT do so with excess and it may lose you more than you gain in terms of motivation and competency in the future.
Lets Get Real
Tue, Nov 30, 2010 : 8:10 a.m.
Let's Get Real about compensation and pay: Everyone looks at compensation through their own lens. Those in the public sector, much like the unions, want to hang on to what they have - no mater what the skew in pay and/or benefits. So, they justify their existence by claiming they work hard, have increased responsibilities due to reduced workforces, and become overly defensive about being sacrifical and behaving like martyrs. Those in the private sector want equity in pay and compensation for comparable work done. Everyone wants government to exhibit responsible spending of the tax dollars - not deficit spending or excessive spending or spending with the "we'll just ask for more" attitude. The solid business approach, when a new leader assumes his/her role, is to undertake a compensation comparison. Those who fear it, are those who believe they will lose something. Stakeholders support transparency and equity and want information on which to make good decisions. In a state, the stakeholders are us - the taxpayers - who crave a leader who will be a good stewart of our funds. I applaud the business approach to running our state. Let's Get Real - we need to see the same committment from the federal leadership rather than more and more entitlement programs that seduce people into an apathetic exsistence of reliance handing more and more power to bigger and bigger government. Encouraging businesses' productivity and profitability will result in increased resources (jobs, pay, benefits) for us as individuals and for the state's resources (tax revenue). Let's Get Real - we are all entitled to our dreams. But, because we dream, it doesn't mean we are entitled to them. To attain those dreams we need to do more than wish or expect results. Plan, set goals, establish objectives to meet those goals, and consistenly work hard toward those goals. Recognition and reward for work done is earned and needs to be equitable: man or woman, private or public sector. The answer - contribute to society, in a productive way; be proud of the work you do; live within your means; and don't measure your self worth based on your net worth.
Glen S.
Tue, Nov 30, 2010 : 6:39 a.m.
Again, the only thing that cutting pay and benefits for (state and federal) public-sector workers will accomplish is to lower AVERAGE wages and benefits for everyone. Lower wages = less disposable income = less money circulating in the economy to support existing businesses or to support new businesses. This false fight between "public" and "private" sector workers is exactly what the ultra-rich 1% wants to see. While we are busy tearing each other down, they are busy getting richer than ever.
AlphaAlpha
Tue, Nov 30, 2010 : 12:01 a.m.
"According to Bureau of Economic Analysis data, federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051."
stunhsif
Mon, Nov 29, 2010 : 10:24 p.m.
Get it going Rickster, quit wasting the taxpayers time pronto!!!! I just got my Social Security yearly statement. For the first time ever I took a good look at it. My gross income from 2005 to 2009 is down 11.5%. I just about got sick over this. I used to get an increase of around 2.5% a year ( from 1999 through 2005) but I have been going backward ever since. If I were a government employee I would state that this was a 20% paycut over the past 5 years. Sucks to be me but they get healthcare and a fat pension when they retire. I get a swift kick out the door. What really twists my spine is I pay for their fat benefits and I take it up the ying-yang. Good Day No Luck Needed
Jay Thomas
Mon, Nov 29, 2010 : 7:50 p.m.
Public workers have suffered? You've got to be joking...
DonBee
Mon, Nov 29, 2010 : 7:30 p.m.
In the Federal System there are several ways to get pay raises: 1) Cost of Living 2) Merit 3) Promotion 4) Time in Grade Not every federal employee has access to all of them. Many do not have access to either Merit or Time in Grade pay raises. The Cost of Living raises (the part frozen by the President) is the smallest of raises if you are working hard, and have access to either promotions or merit raises. No one in the Federal Government is in danger of taking an actual pay cut right now, not the President, the Congress, or the Custodians. What G.E. Snyder said is that they need to sit down and review the pay versus the private sector. I would if I felt that I was underpaid, want this review. The big question right now is how will the pay and benefits be evaluated and what is a "comparable" job? Some suggestions that should be considered: 1) Moving people from high stress jobs like Police Officer to a lower stress job in the Government, rather than offering retirement at 55. These people know a lot about how their communities and the government work. Maybe they become social service investigators or child welfare advocates or... I am not smart enough to know what the right jobs are, but letting talented people go at 55 or even 62 because the cannot physically perform the job they were in, but they are capable of doing other jobs seems wrong. The State has to pay them retirement, but they are fully capable of doing work the State needs done. Seems to me that this would be a change that would be good for all involved and cut the overall cost of government, while keeping service levels up.
Glen S.
Mon, Nov 29, 2010 : 7:18 p.m.
@ northside I agree 100%. Tearing down public sector workers and bashing unions does nothing to create jobs or create private-sector opportunities -- all it does it accelerate Michigan's decades-long slide toward lower wages, less education, and fewer opportunities. As long as Michigan workers continue thinking of themselves as "private-sector," "public-sector," "union," "non-union," etc. -- all in competition for a limited and shrinking pie -- then we all continue to lose. Instead, we should all agree that EVERYONE who is willing to work hard and play by the rules deserves a fair wage, decent benefits, a safe workplace, and a secure retirement -- and then work together to demand better conditions, and more opportunities, for ALL Michigan workers.
northside
Mon, Nov 29, 2010 : 6:49 p.m.
Meanwhile corporate profits are at an all-time high. Shouldn't public and private sector employees be working together to regain wages and benefits that have been cut? Instead we're seeing animosity toward public sector employees of the "my wages/benefits were cut so let's get yours" variety. Those at the top of the private sector, the true culprits behind our current mess, must be laughing at our lower-level infighting all the way to the bank.
packman
Mon, Nov 29, 2010 : 6:33 p.m.
Obama and many other ideologue politicians have not learned the difference between "being good" and "looking good"...and they won't...we are in for an interesting ride.
Speechless
Mon, Nov 29, 2010 : 6:08 p.m.
It would seem that mainstream politicians like Snyder or Obama will gladly throw public employees under a bus when they, or their handlers, think there is political mileage to be gained from doing that. It's so much easier to beat up on the politically weak rather than adopt a more socially responsible approach which challenges corporate perks as well as the unethically low taxation rates on wealthier incomes. They'll place financial burdens on the middle class and poor, so as not to inconvenience the well-off and powerful.
Buster W.
Mon, Nov 29, 2010 : 5:07 p.m.
@BornNRaised...I agree. Thanks for clarifying.
LocalYokel
Mon, Nov 29, 2010 : 4:59 p.m.
I'm not sure what's taking the State of Michigan and the Federal Government so long. I work for a local government and I haven't had a wage increase for three years - not even a cost of living bump. That's in addition to a 10% increase in my health insurance contribution. I'm working harder than ever becuase our staff has been wittled down to bare bones. Don't get me wrong - I don't mind working hard and I do it every day. But three years without an increase (or with a decrease if you consider the insurance costs) is hard to swallow. Local governments have borne the brunt of this financial crisis for years. It's time the state and feds cut the size of government - services, programs, facilities - everything should be re-evaluated and the "non-essential" stuff should be cut.
Douglas
Mon, Nov 29, 2010 : 4:44 p.m.
It is good thinking to have wages comparable for private sector work. But, with some of the degrees these people have, I would believe that their pay would go up. Or, agency headsd being paid in comparison to CEO's who get 15 to 100 million per year. Could be expensive. Paying 65% plus from factory floor level, like in the private sector, which is only 2.6 million per year is even low by private sector standards.
Cash
Mon, Nov 29, 2010 : 4:25 p.m.
BornNRaised, Perfect!! Until the new gov starts talking about salary of folks like Mary Sue, etc....he doesn't want to make real change, he wants to slap the workers on the lower end of the scale.
Rita
Mon, Nov 29, 2010 : 3:46 p.m.
A caller on a radio talk show today stated he was a Federal Government employee. He stated they will receive their regular annual salary increase, and that his increase will amount to $10K-$12K. He stated what they are NOT receiving is the increase for inflation....which sounded like the cost of living adjustment which was suspended. If this is true, it was just a political public relations stunt to announce that gov't employees would not get a raise in pay.
Buster W.
Mon, Nov 29, 2010 : 3:05 p.m.
@BornNRaised..."Republicans bashing employees?" Senate Democrats don't get this 100% wages & benefits perk? Really?
Buster W.
Mon, Nov 29, 2010 : 2:04 p.m.
@Nancy...I'm not suggesting across the board cuts. But when I hear of municipalities allowing workers to "bank" their vacation days, sick days, birthdays!, holidays, etc. all to goose their final years' compensation to calc pensions???? How can you justify someone who makes an annual salary of $70-80k and then their pension becomes $120k+??? That's nonsense! It's unsustainable. We need more accountability in the public sector. Period. And don't even bring up the State Police and their Taj Mahal in Lansing.
Nancy
Mon, Nov 29, 2010 : 1:43 p.m.
Fact is, they've been reducing the state workforce for awhile now, so those left have to do more and more and more. Now you want to cut their pay and benefits? People scream when a child dies from abuse - "CPS doesn't do anything" they say... "Foster care workers don't do enough" they say... NOBODY goes into that line of work because they want to sit on their butt and make great money. They have a heart for kids - those are the hardest jobs in social work! You want to cut the pay for State Police and see them take their training and experience to other states where they are appropriately compensated? Freeze their pay for 2 years, MAYBE - BUT DO NOT CUT THEIR PAY AND BENEFITS. It is a big mistake.
Buster W.
Mon, Nov 29, 2010 : 1:02 p.m.
Salary is just one component...the focus should be on Total Compensation & Benefits. Let's look at cutting pensions, Cadillac health plans, etc. that public employees take for granted. ALL of these should be comparable with the private sector.
Woman in Ypsilanti
Mon, Nov 29, 2010 : 1:01 p.m.
I used to work for a large corporation that decided to freeze wages. Morale went way down and without the incentive of a pay increase, people worked less hard than they otherwise would have and a lot less work got done. I don't think this was a very good decision at all.
Townie
Mon, Nov 29, 2010 : 12:31 p.m.
Still waiting to see a decent, peer reviewed study on private vs public compensation in Michigan. Got any Nathan? Otherwise this is just more anecdotal based bashing. I've worked with the public employees of a variety of states and looking at their job wouldn't wish it on anyone. Most are stuck in the job -- with too much time invested in their pension to leave and also realize everyone thinks public employees are lazy, etc.
runbum03
Mon, Nov 29, 2010 : 12:02 p.m.
Pay freeze? Like 2/3s of federal workers don't get phat cash bonuses? LOL. Tell me another - brother. No one has ever "cut" government spending - and no one ever will. Ever. Spending has two speeds: fast and faster and no "off" button. If they can't borrow more money, then they will just print more. Why else did George Soros just buy 16 TON of GOLD? He likes Glenn Beck? LOL.
loves_fall
Mon, Nov 29, 2010 : 11:48 a.m.
These polls are always pretty horrible. I think some public employees probably make more than they should, and others less than they would earn in the private sector. Seems like there should be a fair way to structure compensation. Also, I find it sort of ironic that Snyder wants to cut public employee expenses but can't be bothered to move to Lansing. He should foot the cost of securing his house out of pocket.
Rizzle
Mon, Nov 29, 2010 : 11:43 a.m.
...Is Michigan Next? Answer: Hopefully.