Wisconsin is emerging as the political fault line that might decide the outcome of the 2012 elections. In a lot of ways, Governor Walker has miscalculated, as we have written, mobilizing groups of people who sat by dispassionately in the just-completed elections.
To put it in Machiavellian terms, he has unified his enemies while dividing his allies, who are arguing whether his policies have gone too far.
Mr. Crane, as you may or may not be aware, is a Democrat who worked as an adviser to Gov. Arnold Schwarzenegger and now lectures on public policy at Stanford University. He also serves on the UC Board of Regents.
He argues that the battle in Wisconsin is not over collective bargaining rights per se, “but rather the appropriateness of those rights in the public sector.”
He writes, “In the private sector, collective bargaining is used to equalize the power of employees and employers.”
He pointed out that even strong union supporters like President Franklin Roosevelt, and George Meany who headed up the AFL-CIO (American Federation of Labor and Congress of Industrial Organizations), opposed the right to collectively bargain in the public sector.
Unlike in the private sector, public sector employees already had protections against dismissal, based on laws like the Civil Service Act.
Mr. Crane continues, “because state employees already had civil service protections, collective bargaining wasn’t needed to equalize their power with employers’ power. As a result, collective bargaining for public employees in California changed the balance of power and – most importantly – gave public employees power over their compensation and benefits.”
The critical point that he sees, “In the private sector, compensation and benefits are determined through negotiations conducted by unions representing employees and management representing shareholders. Neither side has influence over the other, and there is a healthy tension as each side works to increase its share of the pie.”
On the other hand, “In the public sector, no such healthy tension exists because unions can use campaign contributions to gain control of “management,” which in California’s state government means the 120 legislators and the governor who together determine employee compensation and benefits.”
Instead, he sees “a result of the focused power of the unionized public-sector workforce, management (i.e., legislators and governors) can end up being more responsive to public employees than to ‘shareholders,’ that is, citizens benefiting from public services (e.g., students paying tuition at state colleges, parents taking kids to state parks, private-sector union workers building bridges, etc.) and taxpayers paying the bills.”
David Crane makes an interesting point, but one that I think in the end is flawed.
First of all, the fundamental problem that he fails to understand is that this is not a debate about collective bargaining at all, this is a tool designed to destroy unions, and along with them weaken the Democratic Party by severing a key source of campaign funds.
Nevertheless, he does have a strong point. In the City of Davis in particular, we see how the power that one particularly strong union was able to wield, to shape a decade’s worth of public policy by the council.
However, observe closely some unique factors in Davis. First, there is a strict $100 limitation on contributions.
Second, there is the ability of the union and its members to effectively circumvent that system by collectivizing their activities so that instead of making a $100 contribution, they bundled their contributions to, in effect, make it a $4000 contribution.
But even that is not enough. So, they utilized their unlimited soft-money exemption and launched a $12,000 to $20,000 independent expenditure campaign which utilized not just their resources, but their name.
They were able to successfully elect the councilmembers that would support their policies, and held up their contributions as a reminder to make sure the council held the line.
The problem here is one of influence peddling. But it is difficult to see how the problem goes away if we get rid of collective bargaining. It would simply shift the stage from one location to another.
In other words, they could get rid of collective bargaining tomorrow in California, and you still have the influence of unions and their membership on elected public officials.
That is why in Davis we never sought to do away with collective bargaining, and instead put the focus on electing public officials who were not co-opted by the unions, for which they had to directly make decisions regarding their contracts.
David Crane’s argument, therefore, should focus on the way in which candidates need to get elected, rather than the collective bargaining process.
Moreover, unlike in Davis, other forces align to counterbalance the influence of one pressure group. Corporate interests have been successful in Wisconsin in electing the Governor. In California it took a two-thirds vote of the legislature and approval from the Governor to pass these new contracts, which generally meant that wage increases were not generally forthcoming.
While Mr. Crane cites the increased wages and benefits to public employees in California, that was in the legislature that occurred during a time of economic boom, after a number of years of no increases. In a lot of ways it was a perfect storm, but it was also the only real wage increase at the state level in the past couple of decades.
I was reading some of the comments in the Sacramento Bee on the Wisconsin situation, and one individual in particular made the comment that it made no sense to have unions in the public sector because the government was management, and therefore somehow benevolent to workers.
The problem is, as I have witnessed with my wife working as a labor representative in the public sector, just because the governor is the employer does not mean that the supervisors do not have all sorts of problems.
As difficult as it may be to imagine, there are all sorts of problems in the public sector workplace that necessitate union representation. The individual is probably right that that should not be the case, but unfortunately we are still dealing with very human interactions that unfortunately result in disputes and need conflict resolution.
In the end, while I think David Crane brings up important considerations, the chief problem is on the end of the financing of elections rather than collective bargaining.
—David M. Greenwald reporting
[quote]”In the public sector, no such healthy tension exists because unions can use campaign contributions to gain control of “management,” which in California’s state government means the 120 legislators and the governor who together determine employee compensation and benefits.”[/quote]
David: You are correct that collective bargaining is only part of the issue, but it is an important part and a part that can be changed most easily.
I don’t like the political grandstanding in Wisconsin (on either side) or the fact that the governor has conveniently left out police and some other “public safety” employees.
But its hard to argue that PEUs are not part of the problem. THey are. At this point I don’t think eliminating collective bargain matters, but I think PEUs have abused the process and we have to take the public cookie jar away from them.
The real underlying problem w out of control public employee wages/benefits is the conflict of interest that exists between the two parties at the collective bargaining table. There is not an arms length transaction with an independent negotiator. Instead, the side that is supposed to be representing the taxpayer is in some way connected to the other side, either by campaign contributions, incestuous cozy relationships, etc. Negotiators who are supposed to be representing taxpayers are essentially representing both sides at the same time – a clear conflict of interest. It makes the collective bargaining process ripe for abuse, which is exactly what has occurred. And public unions have used these conflicts of interest to the hilt, to squeeze as much out of the taxpayers as possible – w public unions feeding at the public trough w impunity, to the point where public union wages/benefits are unsustainable. In short, public unions got too greedy, in exploiting their unfair advantages.
Those unfair advantages will remain as long as their is collective bargaining in the public sector. Even if effective campaign finance reform could be enacted (which is a big fat “if” and highly doubtful), it would not do away with the cozy incestuous relationships that exist between the assigned negotiators and unions. Public unions need to begin being more reasonable in their demands, if they want to survive this latest onslaught against them. And make no mistake, this is mostly about the survival of the Democratic Party, who get huge campaign contributions from public unions, especially in CA, e.g. prison guards.
Walker’s solution may be drastic (and his solution was not completely altruistic since he left firefighters/police unions to which he was beholden out of the equation, both of which are some of the biggest abusers of the collective bargaining system), but w/o his suggested draconian measures, my suspicion is the public unions would have not made the concessions they have needed to make for quite some time. Sometimes it takes extreme measures to bring important issues to light, and get some real reform going. Either the public unions start getting more reasonable and make substantive concessions, or they will find themselves 1) out of jobs; 2) facing serious pension reforms like what is being comtemplated in Wisconsin. It is as simple as that.
Collective bargaining has turned into political bargaining or what I like to call bribery. What kind of collective bargaining can we have when union leaders sit on both sides of the table?
Just a few years ago, the voter narrative was that working for the State was for suckers when so much more money could be made elseware. Now, envy and vilification of public workers appear to be the public’s mood. The need to retain collective-bargaining rights rather than depending upon the “benevolence” of the voters as reflected in “public management” is clearly necessary to counter the fickle nature of voter sentiment.
Perhaps my first political thought as I was coming of age was that it was irrational for public employees to have such power over the citizens in the form of collective bargaining rights. David Crane has hit the nail on the head with his statements “In the private sector, collective bargaining is used to equalize the power of employees and employers.” and “…collective bargaining for public employees in California changed the balance of power and – most importantly – gave public employees power over their compensation and benefits.” Why would/have the citizens voluntarily transferred power to a group which then turns around and wields the power against the citizens?
The citizens have a two-fold relationship with the PEUs: we are their paymasters, and we are the consumers of their services. If I go to a barber shop and don’t like the service they provide or the rates they charge, I can refuse them my business. There is no such option with PEUs short of leaving the community, the State, or emigrating from the country. Why would I give my barber a monopoly, let him advocate for laws requiring a barber shop visit at least once a month, and give him an automatic debit on my bank account that can only be revoked upon my death?
Government and governmental services in the U.S. were intended for the benefit of the citizens and no one else. We start running into trouble when we lose sight of this simple fact. Government and governmental services were not intended to benefit the politicians, the unions, and the corporations. It’s for our benefit, not theirs. Every other consideration is secondary, if not entirely irrelevant.
To davisite2: Then the public unions had better start becoming more reasonable in their demands and start making serious concessions if they want to save their collective bargaining rights…
AS a practical matter PEU’s power is rapidly waning with or w/o collective bargaining.
The only think that surprises me is how rapidly this is changing. These issue have been percolating for years, but now all of a sudden the public’s attention is focused.
Is some of this the right looking for a scapegoat ? (Perhaps so people won’t notice that Republicans have been at least as fiscally irresponsible as Democrats.) Yes.
But the fact is PEU’s have worked hard to earn our distrust …
and they are stuck with it for a very very long time.
Dr. Wu, it’s the politicians who have earned our distrust. They have advanced their political interests at the expense of the public interest to an obscene degree. We are stuck with the effects of imprudent fiscal and economic policies for a “very very long time.”
Explain to me again why it is wrong for public employees to get the best deal that they can but OK for management to write their own severance ticket and come back for more as consultants, if they weren’t far sighted enough to get an offer from vendors they met on the job?
The unions and the workers aren’t the problem. If the view that seems to prevail here is that pensions and benefits are too great, blame the people that approved them.
“…Perhaps my first political thought as I was coming of age was that it was irrational for public employees to have such power over the citizens in the form of collective bargaining rights.”
News Flash!
WE ARE CITIZENS !
[i]”Explain to me again why it is wrong for public employees to get the best deal that they can …”[/i]
That would be perfectly okay if the PEUs were negotiating with people on the other side of the table who 1) were themselves not public employees; and 2) were doing everything they could in the negotiations to strike the best deal possible for the taxpayers; and 3) the unions did not try to stack the deck in their favor by negotiating with people whom they had corrupted with both campaign contributions and with non-monetary campaign work, including get out the vote drives and the like.
Because 1) the people on the other side of the table are themselves usually public employees who benefit from the lax work rules and rich amounts of time off given away in “negotiations” and because those “management” employees don’t lose any money if they give away too much and because those management employees jobs are made easier by having a workforce which is happy with the deals they give up, there really is not a fair negotiation ever going on.
Because 2) the deals are always struck in private and the taxpayers are never at the table or even kept abreast of what is happening until a deal is struck and because the taxpayers only have a general interest in these contracts while the unions have narrow and complete interest,* the contracts are not designed to serve the public interest. They are designed for the narrow interest. A good example is how the fire union in Davis got the taxpayers to pay them for their “union bank hours.” They use those hours, not working, but paid fully by the taxpayers, to learn how to screw over the taxpayers even more.
And finally because 3) most unions in our state, and many at the local level, do engage in politicking. It is their legal right, of course. But doing so stacks the deck in their favor when they get their people elected. If an elected official won’t go along with their program, then they will do everything they can to maintain the status quo and work to get rid of the person objecting to their demands. As the collective action problem suggests, the elected officials have almost nothing to gain by fighting back against the union and almost everything to lose. So even those who understand that giving into union demands does not serve the public interest will generally just shut up and go along in order to not earn their wrath. (It is only in times of crisis when the public is truly fed up with overspending and underservicing that some public officials will fight back against the public employee unions.)
*A narrow and complete interest means one in which the outcome is of great importance to some but of little specific importance to most. An example of this is with welfare payments to rice farmers. That welfare means millions of dollars in the pocket of a handful of rice farmers, but only a few dollars each out of the pockets of the rest of us. It is similar with most labor contracts, especially when revenues into government are rising. The best explanation of this is Mancur Olsen’s brilliant book, “The Logic of Collective Action ([url]http://en.wikipedia.org/wiki/The_Logic_of_Collective_Action[/url]).
[i]… but OK for management to write their own severance ticket and come back for more as consultants, if they weren’t far sighted enough to get an offer from vendors they met on the job? [/i]
I’m sorry, but who was it who said this was okay or justified?
Your argument contradicts itself if you think it is wrong for public employee “managers” to abuse the public trust but okay if the abuse is done by the “workers.” Both are wrong. And to some extent, both follow the unfortunate logic of collective action.
[i]”The unions and the workers aren’t the problem. If the view that seems to prevail here is that pensions and benefits are too great, blame the people that approved them.”[/i]
I think this is right. But as noted fully above, the people who approved them lack enough incentive to fight for the public interest and, wherever possible, the unions do whatever they can to corrupt the people who are supposed to be on the other side.
“News Flash! WE ARE CITIZENS!”
What a ridiculous argument. Anybody or any group can make the same argument. We’re all citizens, but sometimes the narrow interests of subgroups conflict with the interest of the larger group. The public employees are a subgroup of the larger group, the citizenry. Why would the larger group, the vast majority of whom are not public employees, voluntarily hand over negotiating power to a subgroup unnecessarily? Why would the citizens voluntarily hand over negotiating power to the CA Board of Realtors or to any other trade association? To AYSO or any other sporting association? To any public utility? It would make no sense to voluntarily and unnecessarily hand over negotiating power to PG&E, why would we do it for the PEUs? It makes no sense for the citizens to have done so and it makes no sense for them to continue doing so.
“Government and governmental services in the U.S. were intended for the benefit of the citizens and no one else. We start running into trouble when we lose sight of this simple fact. Government and governmental services were not intended to benefit the politicians, the unions, and the corporations. It’s for our benefit, not theirs. Every other consideration is secondary, if not entirely irrelevant. “
It is a bit ironic because civil service and later unions arose out of the need to form protections for government employees against patronage, the use of government service and the provisions thereof to benefit private power brokering politicians.
Rich:
I could swear that you had previous said that the problem is not the demands that union members make, everyone ought to seek their best interest, the problem are those who acquiesce to those demands. To me that is on the voters and the officeholders.
I also do not think all government employees are the same. The firefighters and public safety get extreme benefits, that I think need to be rolled back.
Local government likewise have given the typical employee pensions at 2.5 or 2.7 percent at a retirement age of 55. Upper management in many cases makes far too much.
But state jobs are very different. The typical person that my wife used to represent with SEIU made less than $30,000 per year and earned a pension of 2% at 60. That is not outrageous. CSEA represents the next tier up and those people make generally less than $70,000 year.
The state workers who make ridiculous salaries are actually non-unionized upper managers and political appointees. The exception again are public safety employees, particularly those in corrections. but that’s a relatively small chunk of people and money.
Along the same lines teachers and professors do not make the kind of compensation that firefighters and public safety workers.
I think we make a huge mistake painting all employees with one brush. Most people who work for the government are not making a huge amount of money, but those who are, we need to cut back on.
Caught this today as well:
[quote]David Rhode is a paramedic in Middleton, Wis. He works 56 hours a week, mostly in 24-hour shifts, frequently carrying wheezy patients up and down flights of stairs. He said he earns about $43,000 a year. [/quote]
LINK ([url]http://www.huffingtonpost.com/2011/02/25/wisconsin-workers-overpaid_n_828077.html[/url])
D. GREENWALD[i]”I could swear that you had previously said that the problem is not the demands that union members make, that everyone ought to seek their best interest; the problem is those who acquiesce to those demands.”[/i]
I still say that. See above: [quote]BIDD: [b]”The unions and the workers aren’t the problem. If the view that seems to prevail here is that pensions and benefits are too great, blame the people that approved them.”[/b]
RIF: [i]”I think this is right.”[/i] [/quote] But, as I stressed above, the acquiescence you have identified does not happen in a vacuum. Unions work extremely hard to corrupt the process to make the other side pliant; and as you know, public employee “managers” have an incentive to be corrupted and lack an incentive to fight for the taxpayers.
Public employement contracts which result are thus not the product of a fair “collective bargaining” process, as you would find when say a hotel is being built and the IBEW negotiates its terms with the developer of the hotel for its electrical work. They are the product of unions working vigorously to corrupt the system.
One side of the so-called bargain is avaricious and the other side is magnanimous with the taxpayers’ money. The unions forever want more, more more. And they put in place “management” which says yes, yes, yes.
OK… let’s see if I get the gist of what we can take away from various comments…
First… no collective bargaining for public employees. Each employee would meet individually with the City’s designated ‘negotiator’, to have a change in wages/other compensation be considered, whether that is to keep up with increases in medical costs, CPI, etc.
Second… the City’s negotiator would be a professional negotiator en-charged with making the “best possible deal for the City”. So if an employee asks for an increase of say $65/month in medical benefits to cover premium increases, the negotiator should start out asking for 50% higher productivity, a 15% wage decrease, and a decrease of 5 days of vacation/sick leave/holiday leave or face layoff. Oh, and no increase in medical. If the employee says I’ll quit, negotiator can either say “fine” (for the marginal employee), or back off slightly from the concessions until the employee agrees to stay (for the higher performing employees only)
Third… to ensure that the citizens/taxpayers are involved, the employee would pay for a ballot measure to be placed before the voters, who could: affirm the concessions obtained by the negotiator, or if they believe that the concessions did not go far enough, demand that the negotiator go back to the table for more.
Fourth… to ensure “transparency” of the process, all meetings/correspondence between the negotiator and the employee would be taped and placed on the City web site for at least six weeks before the vote.
sounds fair to me… NOT.
The real culprits that are responsible for our economic situation are ,
1. Wall street , Enron , AIG , and the rest of those cronies !!!!
Pretty lame to be saying that everyday folks have caused this economic situation .
Common sense doesn’t rule this blog , as it should …
[quote]David Rhode is a paramedic in Middleton, Wis. He works 56 hours a week, mostly in 24-hour shifts, frequently carrying wheezy patients up and down flights of stairs. He said he earns about $43,000 a year.[/quote]
David: Once upon a time you were a graduate student. You know that arguments by anecdote don’t work (and shame on Huffington for running that sleazy piece). You yourself ran a blog piece a while ago indicating that tree-trimmers make something like $76k in Davis–more than many if not most UC and CSU professors!
Avatar: Yes Wall Street has been bailed out by our federal govt. No arguments there. So should we also bail out PEUs? Let the Vanguard have a piece on Wall Street bailouts and we can all chime in but that doesn’t justify what PEU’s have done. Between Wall Street and PEU’s we’re in bad shape. We need to reform both. We can vote on who is slimier. I’d vote for Wall Street but it doesn’t matter.
As discussed, public employees do not have a “right” to collectively bargain. Public employees were granted the opportunity to collectively bargain via both state and federal statute. As Wisconsin is demonstrating, that opportunity can be altered or even taken away utterly.
Many, many factors mitigate against allowing public employees to collectively bargain. As is painfully apparent, public employees can use collective bargaining to essentially take over the governments they work for and virtually enslaving the electorate/tax payers by shunting tax revenues from public works, services and infrastructure to exclusively pay salaries, benefits and retirement for public employees. That is what Davis is facing. Anyone who disagrees either is a public employee hoping to benefit from this system, someone closely connected to such an employee, or someone who isn’t paying attention.
Here is what we are facing here in Davis: the Unions will drag out the negotiations process. This isn’t a criticism – it is a time honored tactic. If I were representing the City’s labor unions, I would do exactly the same thing. During the delay, the City will attempt to address financial shortfalls by cutting a little service here, a little infrastructure maintenance there, but in the meantime, the unfunded mandate doesn’t change. In the end our parks will be closed, our roads will be in ruin, and our tax dollars will stream out of our pockets and into the bank accounts of our retired city workers – with the City acting only as a conduit.
Development will stop. The ability of the City to aid our schools will disappear, without which our school system will deteriorate. We are headed towards a two-tiered public education system. State financing is slowly disappearing, and one day will all but end, leaving the responsibility to finance local schools up to each local community. This means the quality of any school district will depend on the amount of tax dollars provided directly by the local electorate. But the unfunded liabilities Davis faces means neither the City nor our local tax payers will be able to fund our school district. And when that happens, people will leave Davis. Property values dropping due to the loss of infrastructure and already high taxes will further drop, resulting in an even greater loss in tax revenues.
Eventually the system will shatter. Many, many local agencies will dissolve or attempt to go bankrupt. But, that is years off, and our unions’ goal is to get as many workers retired and keep the payments coming for as long as possible. Everyone knows that eventually a bleeding beast will bleed dry and die, but the goal is to keep it on its feet producing blood as long as possible.
Now, back to the point. How did this happen? Simple: unions are very, very good at working within the collective bargaining structure to constantly stretch their advantage, while most small local agencies either use in-house amateurs who simply cannot negotiate effectively because they don’t know what they are doing, allowing labor union negotiators to take advantage of their inexperience and ignorance.
So, should public employees be allowed to collectively bargain? No, not as the collective bargaining system is structured today. If nothing changes, collective bargaining will destroy towns, cities, school districts, fire districts – every local agency that is required by law to collectively bargain.
However, collective bargaining – especially in California – isn’t going to change in any meaningful way any time soon. So we are stuck and have to work within the existing structure. So the only way for Davis to go forward is to make sure the City’s bargaining team is the best money can buy, because making sure of that is money well spent. Davis cannot afford to be penny wise but pound foolish in this instance.
Dr. Wu: “The only think that surprises me is how rapidly this is changing. These issue have been percolating for years, but now all of a sudden the public’s attention is focused.”
I think this WSJ article from Peggy Noonan explains it well: [url]http://online.wsj.com/article/declarations.html [/url]
The real culprits that are responsible for our economic situation are ,
1. Wall street , Enron , AIG , and the rest of those cronies !!!!
Pretty lame to be saying that everyday folks have caused this economic situation .
Common sense doesn’t rule this blog , as it should …
True, wall street et al, inflated our economy for a period of time, and masked the symptoms of what was happening with pensions and benefits. The PEUs, no doubt, used the compensation in the private sector as a basis for negotiations for their own comp and benefits, taking advantage of special relationships with govt officials they put in office. The true facts of the economy however, were revealed and non union workers and wall street took a huge beating, multiple firms filed bk, and lots of folks were fired from WS and other places. The only thing left standing are the PEUs and inflated pension plans and benefits, and their protagonists proclaming how unfair it is for them to have to contribute.
Avatar, common sense will prevail, and that is why the PEUs will not.
Just to be clear, I have intentionally not weighed in on whether public employees are over or underpaid. I have merely pointed out that it is absurd for the citizens to grant PEUs collective bargaining rights. From a negotiating perspective, it makes no sense to voluntarily concede such power. I have yet to see anyone convincingly counter the argument.
“Each employee would meet individually with the City’s designated ‘negotiator’, to have a change in wages/other compensation be considered, whether that is to keep up with increases in medical costs, CPI, etc.” hpierce, I wonder which privileged planet you have been living on. What you have ridiculed is exactly how most employees negotiate their compensation packages and how ALL small businesses negotiate their contracts and prices. In any negotiation, if you don’t like what is being offered, don’t accept it. Basta.
When the economy was “hot”, 401K’s were all the rage as well as other investing opportunities that promised upwards of 20% annual growth. Savings and prudent long-term investments were shunned.Public employees were seen to be suckers and losers, without the “ambition” to jump into the overheated economic game that was the private sector . Rage against public employees who now appear to be more protected against the vagaries of the private sector(the factor that for most was what they sought when choosing public employment)suggests a self-absorbed voter “thought” process,vainly searching for the “other” who are the culprits for their economic misfortunes.
“….vainly searching for the “other” who are the culprits for their economic misfortunes.”
“We have met the enemy and they are us”
davisite2, huh? It’s not clear to me how your generalized comments address any of the specific arguments for or against collective bargaining that have been made in this thread.
[quote]David: Once upon a time you were a graduate student. You know that arguments by anecdote don’t work (and shame on Huffington for running that sleazy piece). You yourself ran a blog piece a while ago indicating that tree-trimmers make something like $76k in Davis–more than many if not most UC and CSU professors! [/quote]
Sorry, I didn’t make the point I was attempting to make, I got a call from my wife as I was posting it and hit send without adding my comment which was how much less public employees in Wisconsin make than ones in California. I know the cost of living is high here, but my guess is the average income in California is not 2.5 times that of Wisconsin across the board.
DTBusinessman… you picked on the one portion of my inquiry of what is being proposed that quite arguably IS fair. But is it practical for 400 employees to each “bargain” for any adjustment in any aspect of compensation each year?
Just as a point of reference, some states do not have collective bargaining for their public employees, and seem to be doing just fine (e.g. Indiana).
I frankly do not understand the argument that without collective bargaining all hell will break loose. As DT Businessman points out it is common practice to negotiate with a boss for compensation. Remember that a small fraction of employees are unionized. You union people are the freaks! (Sorry, I couldn’t resist…)
Here is a bit of a primer on current practices for establishing compensation in the private sector:
I assume that people only having experience working in the public don’t understand the function of human resource management (HR). In a private-sector company it works much like the old civil service process was designed. HR will design an inventory of job-roles. They will also design a pay-grade step inventory. Each pay-grade step is usually broken into “quartiles”; four sub-steps within a grade-step.
HR will subscribe to some national report of market compensation by role. The studies that back these are refreshed annually and are quite detailed and comprehensive. The data is separated by industry and by geographic locations (to account for cost of living adjustments). Each role is also defined by a summary job description.
In addition, jobs are grouped in job families to help develop career paths. For example: 1-Accounting Clerk I, 2-Accounting Clerk-II, 3-Accounting Specialist I, 4-Accounting Specialist II, 5-Accounting Analyst I, 6-Accounting Analyst II, 7-Accounting Analyst-III, 8-Accounting Manager I and 9-Accounting Manager II. The pay-grades for these nine roles would increase as the job responsibility increased. They would typically overlap too. Say for example your business had very complex financials, and you needed a top-shelf analyst (Analyst III). However, you just hired a less experienced Accounting Manager (Manager I). In this case, the analyst’s pay might be 4th quartile, and the manager might be 1st quartile and the analyst would be making more.
So, let’s say I am a hiring manager in Sacramento looking for an Accounting Manager (a standard role, typically having industry-standard responsibilities). Working with my HR rep, I design a job posting that includes a range of compensation (low-to-high). The goal is to shop for someone that meets the requirements of the job compensated in the low-median quartile. This then provides me capacity to provide future merit increases while keeping within the assigned pay grade for the job/role. The low quartile would be used, for example, if I am promoting someone from within that lacks experience, but has demonstrated promise having the capacity to develop into the role.
Let’s say that I get a more experienced candidate that I really like. Her previous job paid her more, and her salary requirements are higher than the median. I can make a case that she is worth it, but I am concerned that she would top out too soon and hence I would run out of merit incentive capacity. In this case, I might work with HR to develop a career path that would include a potential promotion to a higher level of responsibility. Given that the candidate has the juice and experience, I might make this case.
Similarly, let’s say I interview a candidate with less experience than needed, but I really like him and think he will develop quickly. In that case I would develop a career path from a lower set of responsibilities to the role I was hiring for.
Now, after these people are hired, they can come to me at any time and attempt to negotiate a merit raise. For me, the justification of that raise would always be based on an objective analysis of the demonstrated past performance compared to the level of responsibility within a role compared to what the market pays. In general, the more responsibility a person can take on, the higher pay they would earn. All employees should continue to grow and develop capability to justify increased pay.
Separate from that is the performance bonus. The performance bonus is based on the accomplishment of performance goal targets. This is where employees can make “out of the box” compensation. For example, let’s say you are that accounting manager, and the company has a goal to implement a new accounting system. The regular accounting work must be done, but now there is this additional temporary responsibility to implement the new accounting system by a certain date, for a budget not to exceed. The project requires the accounting manager to work late many days for the nine-month project to make sure the new system meets the requirements of the business. Her performance goals at the beginning of the year include this responsibility. If at the end of the year she has met this requirement, the bonus calculation would factor this accomplishment.
The bonus would also factor team and company performance goals for customer service, and company and/or subsidiary financial performance. A larger percentage of the total bonus for a more senior employee would generally be based on the company financial performance. For example, it might be 100% for the CEO. Lower level employees would tend to have less of their bonus tied directly to financial performance (since they have less direct control of this), but would have things like project goals, and customer service results tied to their bonus.
Elaine – Good point re Indiana.
If California, or Wisconsin, or any state repeals collective bargaining for public employees, Federal law will still apply when it comes to basic labor/employment/fairness issues. This is a well-thought out and extensive body of law that works very well. The primary difference is that employees who feel aggrieved by how their employer is treating them must file a complaint through federal agencies and then file a lawsuit in their local federal district court.
Three guys are sitting at a table. One is the CEO of a large corporation, one is a Vanguard blog responder who may or may not have a job and the other is a public employee (who may or may not be unionized). In the middle of the table is a dozen cookies on a plate. The CEO reaches over and grabs 11 cookies and says to the Vanguard blog responder “Hey, that public employee wants part of your cookie.”
davehart: LOL. You forgot to add that the CEO ate one of the cookies, and used the other ten to invest in another business that eventually employed a great number of people that then purchased their own cookies and paid their taxes.
Marx would be proud of your spin!
Public employee unions are “too powerful” and “have abused the process” by having their hands “in the cookie jar” through “cozy incestuous relationships that exist between the assigned negotiators and unions”. Obviously none on this blog has sat at the table and engaged in contract negotiations. It sure doesn’t feel cozy to those who go through what I can only call torture. I always felt, on the union side, that I had left more behind than management due to a lack of power. Management can be patient and wait because the management side has the power of the purse. Distrust is the main impediment to getting a contract. I don’t have experience with safety (fire and police) employees. I’m talking about the people that are commonly the object of derision who do the repetitive ugly work that we all expect to be done for nothing, done well and done with a smile. DMV, EDD, Franchise Tax, Board of Equalization, etc. There is nothing about these people’s compensation package that is excessive. Can you get what they do for less? Of course. Will the quality be the same? Well, have you ever heard people make the statement “Whaddya want for minimum wage?” How do you measure the “Give a damn” quotient in a public employee?
It is true that unionized workers, private or public sector, are paid better than non-unionized counter parts. It’s also true that local economies are more robust in withstanding the ups and downs of regular business cycles in areas where there is a unionized workforce. Is the real estate market in Davis as badly impacted as it is in Woodland or West Sacramento? Does the fact that so many public employees whose wages are a result of a union contract and the stability that implies have anything to do with propping up prices in Davis. Conversely, do downtown businesses believe that taking more money out of the hands of public employees in Davis will improve spending in town? A statistic I’d like to know is how many households in Davis have at least one person in a public sector job? Another statistic might be what is the combined spending power versus the savings rate of all public employees in Davis?
Finally, it is interesting to me that none on this blog seems to think there is any problem with the private sector lobbying that goes on in Sacramento, Madison or Washington D.C. I am expected to believe that union spending overshadows private sector spending on lobbying and campaign contributions. Well, news flash. Unions are outspent every day in every way. What do you all think the Citizens United case was about? Corporations will always be able to outspend you and me and any union.
Where else can people who depend on a wage or salary turn for an organized voice? What other forum is there? Individual contributions, individual negotiations? That is an ideal solution if you want people to be helpless and voiceless.
Jeff Boone: You can’t “invest” cookies. You can only eat them. In this case the CEO ate four or five as fast as he could before the other two could raise their voices, and stuffed the others in his pocket. He left the remaining cookie for you and the public employee to fight over which is what we’re happily doing on this blog spot.
David Koch and Scott Walker recognize this scenario and are much better at putting a spin on it than I.
“Unions are outspent every day in every way.”
That is not the case. It appears that unions, despite their cries against it, are exploiting Citizens United more than corporations.
“You can’t “invest” cookies. You can only eat them.”
Oh… I though you were using “cookies” as a metaphor for natural resources. So, you were talking about real cookies? Well that is different. I think the CEO would eat caviar and drink martinis and not care about cookies.
“Where else can people who depend on a wage or salary turn for an organized voice? What other forum is there? Individual contributions, individual negotiations? That is an ideal solution if you want people to be helpless and voiceless.”
BLS Stats:
[quote]
In 2010, the union membership rate–the percent of wage and salary workers who were members of a union–was 11.9 percent, down from 12.3 percent a year earlier
The union membership rate for public sector workers (36.2 percent) was substantially higher than the rate for private sector workers (6.9 percent). [/quote]
So, how do the other 88.1% of private-sector, and 63.8% of public-sector workers do this?
“Obviously none on this blog has sat at the table and engaged in contract negotiations.” davehart, that’s a fairly brave statement, not knowing the actual facts. You certainly have no reservation in making gross assumptions. I’m on this blog and I have personally negotiated every employment contract that I’ve ever had. I’d be interested to hear the others weigh-in.
I never had the pleasure of having someone else do this job for me. I think union employees like davehart must fear what they don’t understand, or don’t have experience doing. Certainly there can be strength in union numbers and solidarity, but nothing in the professional world is so individually empowering than knowing you can walk from one employer and successfully negotiate an equal or better arrangement with another. You get to this point developing marketable skills and credentials, and having developed a reputation for being valued in your field.
I think I might support some unionization for low-skilled private-sector workers; since they easily be exploited because they lack the power of alternatives. However, I would also make the case that all should be striving to gain marketable skills… so what better motivation than to feel the pain of low-skill labor exploitation?
As for the public-sector; union should be outlawed. There is a political and social conflict of interest that even FDR understood and argued against. We certainly see why today. FDR was wrong about a lot of things, but not this.
And of course, it’s not just FDR who understood this. This quote was taken from article written by George Meany, while he was president of the AFL-CIO
[i]Certain business leaders may consider “big government” or socialism more of an immediate threat to their interests than communism. Are they allowing themselves to be deluded by their own propaganda to the effect that organized labor in this country is in favor of big government or the nationalization of industry?
Nothing could be further from the truth. The main function of American trade unions is collective bargaining. It is impossible to bargain collectively with the government. Unions, as well as employers, would vastly prefer to have even Government regulation of labor-management relations reduced to a minimum consistent with the protection of the public welfare… [/i]
Interesting that with all the threats and violence coming from these union protesters across the country, the main media is not reporting on this at all. Quite a contrast to how they reported the Tea Party. Why are we not concerned about the threat of serious violence. The union thugs have a much more storied history of smashing people than do any Tea Partier.
I’m still waiting for Dave to come back and defend his statement, “Obviously none on this blog has sat at the table and engaged in contract negotiations.” Priceless!
He reminds me of that Cheech and Chong bit “Dave’s not Here”.
See here [url]http://www.cbsnews.com/stories/2011/02/28/politics/main20037491.shtml[/url] for their new left media propaganda tool. Read up and note how the questions lead to the survey results. It is a crap survey.
For example: [quote] If you HAD to choose ONE, which of the following would you be willing to do in order to reduce your STATE’S budget deficit 1. increase taxes, 2. decrease benefits of public employees like teachers or police officers, 3. decrease funding for roads and public transportation, OR 4. decrease funding for education?[/quote]How about asking it this way instead… [quote]Public-sector wages plus their healthcare and pension benefits have grown significantly higher than what people with similar jobs get in the private sector. Many states, counties and cities across the country cannot afford the obligations they have made to government employees. Left unchecked, these budget problems will require government programs to be cut, and less money will be available for schools. Which of the following would we be willing to do in order to reduce your state’s budget deficit. 1. increase taxes, 2. decrease benefits of public employees 3. decrease funding for roads and public transportation, OR 4. decrease funding for education?[/quote] Think the results may have been different?
[i]”If you HAD to choose ONE”
[/i]Odd question, since nearly every governor is doing at least 3 of the 4, and some are trying to do all 4 options. Having respondents rank their preferences would have made more sense.
Sorry to keep you waiting. I can see you’re salivating over the prospect of tearing me a new one. I was finishing “The Count of Monte Cristo” instead of wasting my life in cyberspace. I have sat on both sides of the table in collective bargaining. I’ve sat on the union side as a public employee and elected union representative and I have sat on the management side bargaining with a private sector union. I know full well the advantages of being on the management side. I’ve bargained pension increases and decreases. Truly, I would rather be a hammer than a nail, yes I would. Now, as a member of what union have either Mr. Boone or DT bargained a contract? Regardless of which side of the table I sat on it sure wasn’t cozy. The comments I’ve heard from Mr. Boone and DT don’t indicate to me that they have had the same experience.
One thing I have learned is that collective bargaining is a good way to set forth the terms and conditions of employment. While it can, at times, be a pain in the ass for management (believe me I understand this) it also sets the framework for mutual respect. I don’t deny it’s a challenge. Saying “no” can be done without being disrespectful. Saying yes can be done without being “cozy” or corrupt. It always forces both sides to think carefully about the future. It’s a good system and it’s because of collective bargaining that many non-union workplaces have rules and compensation plans that benefit workers and management. But an environment with no collective bargaining would return us to a previous era that was ugly to say the least. It would not take long. We would go through all the pain again as if we had learned nothing. Calls to outlaw collective bargaining for public employees is so wrong-headed and short-sighted that it will take the expenditure of vast sums as David Koch is now preparing to spend with Rupert Murdoch to come to your aid Jeff and DT and propagandize the population to see things your way. As it stands today, common sense prevailing in the absence of massive propaganda, the public doesn’t agree with you (NY Times poll today: 60% against eliminating collective bargaining for public employees). But you choose to ally yourselves with the big money, so you may get your wish yet. I guess you can always hope.
Oh, and night-night. I have a job that I have to be at tomorrow, bright-eyed and bushy-tailed as usual.
Now I’m allied with big business? daveheart, er, wrong again! I’m a small business person. Big business is another interest group that has been ceded far too much power. It’s strikingly odd that you refuse to make the effort of constructing a reasonable argument. You go on and on with the false assumptions and unfounded assertions.
I have not bargained for a union. I have bargained for myself every single year as an employee, generally as part of an annual review followed by a compensation negotiation. To use your terminology, I was the “nail”. Or maybe I was the “hammer”. Actually, I didn’t feel like either one. There were no hammers or nails at any of my negotiating sessions. The same is true since I’ve been an employer. As far as I know, that’s what the vast majority of the citizens have experienced. Your comments provide a fairly strong indication that you’re out of touch with the mainstream.
To recap, I have not taken a position on whether public employees are paid too much or too little. It makes no sense for the citizens to cede power to the public employees in the form of collective bargaining rights. We generally do not create monopolies for service providers and then cede tremendous bargaining power. It’s nonsensical. Private unions were given collective bargaining rights by 3rd parties, i.e. the citizens via governments, not by business. PEUs were given collective bargaining rights by their counterparties, the citizens via governments. It makes no sense for a counterparty to voluntarily cede such negotiating power. My guess is various politicians did it to serve their own narrow political purposes at the expense of the citizenry.
Since 450-500 public employees, many of whom live and shop in Davis, will soon be hitting the unemployment lines, DT Businessman and Jeff Boone may soon reap the bitter harvest for which they have prayed. From a practical point of view, those who are laid off should immediately cease paying their city utility bill(Let them get in line with the lenders), and drive to Sacramento or Vacaville to shop. Let the people who have taken your money all these years, while complaining about your wages and benefits eat the nutty brown for a while.
1)biddlin, what part of “I have not taken a position on whether public employees are paid too much or too little.” are you having difficulty understanding?
2)biddlin, you fail to state a compelling case, so now you’re going to start with the boycott threats?
3)biddlin, what the heck do the 450-500 UCD layoffs have to do with collective bargaining? Aren’t the layoffs occurring in spite of collective bargining rights?
Note to bidlin and davehart, I want to see public employee unions outlawed so we reduce the likelihood that 450-500 UCD employees need be laid off.
Don:[i]”every governor is doing at least 3 of the 4, and some are trying to do all 4 options”[/i]
Don: very good point
This seems a good time to bid you all adieu. I began reading this blog when I was preparing to retire from public employment and looking for an affordable, enlightened community near the medical services now required by my wife and I. I was familiar with the Davis of the early 1970s, having played guitar in the several popular venues and dated a most attractive veterinary student. I had heard of David’s blog from a friend and it seemed to have a broad range of views from the community. I have enjoyed it thoroughly ! I have decided to reside elsewhere because of the lack of affordable housing options and accessibility for disabled seniors and the hostile attitude portrayed here toward public employees and retirees.
I have been a business owner and an employee in the private sector. I am proud of the 25+ years that I served my fellow citizens in federal and municipal service. The people who teach your children, clean your parks and streets and keep the streetlights working, who shop, pay taxes and live in your community are your neighbors and deserving of your respect. Good Luck and Goodbye
Best of luck to you biddlin. Note that you can log in and post from anywhere you can get an Internet connection. As not all of David’s topics are local, you might still chime in from time to time. As many of us in the private sector will need to move to more affordable areas when we retire at age 75 or 80, it also would be good to get your perspective of life outside of the people’s republic.
Meanwhile we will keep debating ideas even though some attribute differences of opinion to hostility.
I fail to see how asking participant to justify their position in a policy debate is an act of hostility or disrespectful. I think some of the collective bargaining rights proponents are doing the community a disservice. I get that you want collective bargaining rights. What I fail to see is you even making an attempt at a reasoned argument as to why the citizens should support your cb rights. When asked to do so, the responses I’ve been reading are that you really, really want cb rights. It is not sufficient in public policy debates to simply say you want something. It is incumbent upon a proponent to state why instituting or retaining a particular policy is the right thing to do, in the best interest of the community, or some other reasonable justification. Unsubstantiated assertions or false assumptions is simply not sufficient.