Sunday, February 27, 2011

Silly Debates

I've been looking for an excuse to post something on the Wisconsin Workers' Revolt, and fortunately, the excuse came gift wrapped to my door this morning.  (Okay, not gift-wrapped so much as folded into a plastic sleeve.)  On the front page of the New York Times this morning, there was an article comparing Indiana Governor Mitch Daniels' successful stripping of collective-bargaining rights to the current push by Wisconsin Governor Scott Walker's attempt to do the same.  The comparison of two Midwestern states' policy initiatives seemed apt for this blog, and the article highlights why I've wanted to comment.  Kudos, New York Times!  You are making this girl very happy.

Plenty has been said about the Wisconsin budget, how much of it is not budget related, but rather an attempt to give assistance to big business at the expense (and often detriment) of state services, so I don't really have much to add.  Gov. Walker is always consistent about defending the anti-union portions of the budget.  He is not removing collective bargaining rights for unions - just their rights to have input on their benefits.  They can still bargain for wages.

This is a giant pile of cow manure (something that Wisconsinites should know a lot about).  The idea that one could think wages and benefits are completely different is, at best moronic, and at worst, blatantly deceptive.  Anyone who has worked even one minute in Human Resources knows that when budgeting for a new hire, the TOTAL COMPENSATION PACKAGE has to be considered.  I seriously doubt that Gov. Walker has never heard of this term.  Browsing around the State of Wisconsin website, public benefits are pretty modest, especially when compared to the Federal Government.  (Moment of disclosure: my father spent 30 years with the Army... his motto was that they may not pay him well, but they will pay him long.)  What you see is a combination of insurance, retirement (5% of income to a pension), and paid time off.  Would you expect anyone with a Bachelor's degree to accept anything less?

What gets lost in this is the way public compensation packages are tabulated in contrast to private compensation packages.  In the private sector, a $60K compensation package will be doled out as salary, and then contributions to insurance, retirement, etc are taken out of the salary pre-tax.  So, one's take home pay is closer to $40K.  For public employees, a $60K compensation package starts with a $40K take-home, and then $20K in benefits are given.  So, someone making $38,000 in the State of Wisconsin gets $2000 added to a retirement account, $6000 paid out in health insurance, $4000 to add family coverage, another $4000 in miscellaneous insurance, $2000 in tuition assistance, etc. and has a total compensation package of $54,000.  The problem here is that Walker is trying to deny that this is the case, insisting that the person making $38,000 now pay for all of the benefits, which means that the $38,000 salary is reduced by the benefit package ($16K in the above example), and the employee sees a take-home wage of $22,000.

You try living in Milwaukee on less than $2,000 per month.

The Times article pointed out a real problem in divorcing wages from benefits.  In the Times article examining Gov. Daniels' policy in Indiana, they show:
"For state workers in Indiana, the end of collective bargaining also meant a pay freeze in 2009 and 2010 and higher health insurance payments. Several state employees said they now paid $5,200 a year in premiums, $3,400 more than when Mr. Daniels took office"
So, no raises, and an increase in premiums.  For our state worker making $38,000 per year, Gov. Daniels policy led to an almost 10% DECREASE in take-home pay.  A report by the Economic Policy Institute found that when total compensation packages are compared, Indiana State employees are undercompensated by 7.5% when compared to their private sector counterparts.  Way to go, Mitch.  Way to go.  In fact, the difference is already pronounced in Wisconsin, where the differential is already 11%.  The question is, Why is the governor spending so much of his time and effort trying to curb benefits to state workers, when he should be increasing them to stay competitive in his state's labor market?

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