Sunday, September 7, 2014

Robert Fellner: San Francisco Transit Workers Average $123K Per Year – Reject 11% Raise

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For unionized government workers receiving an average $123,000 per year, a more than 11 percent pay raise wasn’t enough. While taxpayers are seeing their own income stagnant, government workers will receive double digit raises, further increasing the burden on many taxpayers who are making considerably less.

Last year, San Francisco municipal transit workers received an average $123,000 compensation package, but this year, when presented with a proposed 10.3 – 11.3 percent wage increase over the next two years, they declined and instead held a three-day sickout in an effort to get more.

Caving to the unionized employees’ demands, the city proposed a 14.25 percent wage increase over three years, which was ultimately accepted. This wage increase included a 4.75 percent annual cost of living increase over three years, ostensibly designed to help offset the notoriously high cost of living for the Bay Area.

Unfortunately for the residents of San Francisco and the surrounding Bay Area, government-mandated wage increases to combat the increase in cost of living will be as effective as attempting to put out a fire by dousing it in gasoline.

Along with San Francisco’s housing shortages, worsened by government intervention, the reason employees earning $123,000 a year are claiming they are unable to afford to live in the city that pays them lavish compensation packages is the same reason why increases in their wages won’t alleviate the problem. A sustained increase in the standard of living can only be achieved through an increase in productivity, and the corresponding increased purchasing power it brings.

Said differently, the reason people desire an increase in money wages is not for the money itself, but rather the amount of goods it can be exchanged for. The prospect of being a millionaire sounds great, but not if you had to live in Zimbabwe, where at the peak of its inflation, even a billion dollars was not enough to survive.

Absent the corresponding increase in productivity that normally drives wages higher, the method of increasing wages via fiat will only result in bidding up the prices of goods that have not become any more abundant, like real estate, or efficiently produced, like a cup of coffee, that will eventually negate the advantages the artificially inflated wages initially offer.

It is true that if only a subset of the population is gifted with this artificial increase in wages — Muni workers in this case — they will enjoy an increased standard of living. This increase, however, comes at the expense of non-Muni workers and is inherently unsustainable in the long run. As opposed to the movement of wages in a market, where increases in wages are the result of an increase in productivity and value creation for society, an increase in wages through the political method results in a zero-sum outcome ­— the greater the wage increase for Muni workers, the less taxpayers have for themselves. Additionally, the long-term effect of increasing taxation discourages capital investment and business creation and results in an amplified cost significantly greater than the dollar amount of the increased tax bill.

Unless changed by projects like TransparentCalifornia.com, this cycle will continue until finally the taxpayers supporting it all collapse under the weight of the burden foisted upon them. This highlights the inherent contradiction of the unions’ efforts — it is not only non-union members who pay the cost for their members’ higher money wages, in the long term even members of the unions suffer.

As George Reisman writes in Capitalism,

“In sum, far from being responsible for improvements in the standard of living of the average worker, labor unions operate in more or less total ignorance of what actually raises the average worker’s standard of living, and are responsive for artificial inequalities in wage rates, for unemployment, and for holding down the average worker’s standard of living.”

On an individual basis, the goal to increase one’s wages is entirely rational and usually helps the economy as a whole, because individuals usually attempt to increase their money wages by increasing their productivity. An individual may obtain the education or skills necessary to obtain a job that pays higher wages or seek a raise from his employer by demonstrating his added value for the company. In both cases, the higher money wages are merely a reflection of the true cause of the subsequent increased purchasing power the higher wages brings him – the increased productivity gained while attempting to achieve higher money wages.

Labor unions operate in total ignorance of the productive theory of wages as outlined above. The harm comes not from their ignorance, but from the power they have to force money wages higher, as a result of receiving salaries funded by taxpayers who have no choice in the matter. While those fortunate enough to be members of the unions will receive benefits in the short term, the resulting artificial imbalance in wage rates will result in inflation, unemployment, and ultimately, a decreased standard of living for all.

(ModRobert Fellner is a research fellow with the California Policy Center and a transparency researcher for TransparentCalifornia.com. For more visit http://californiapolicycenter.org)

http://sierramadretattler.blogspot.com

21 comments:

  1. Hasn't even been a week since 'Labor' Day was celebrated..

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    1. Karl Marx must be spinning in his grave.

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  2. Politicians find it much easier to give away taxpayer money than stand up to government employees. I guess we're seen as being the weaker party. Good background as the city council this week will be considering employee compensation. Hopefully the $37,600 health care plan will be bright up and the guilty parties identified.

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    1. Is there any reason why the employee compensation question has been pushed to the very end of the meeting?

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    2. Easy. Our Mayor is in the pocket of the union run LA County political machine. No big union bennies, no political career.

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  3. One of the City Council’s objectives under the three-year goal “Attract, Develop, and Retain Quality Staff” is to “bring to the City Council for consideration a plan to minimize salary compaction in light of the new minimum wage standards”. Two of the other objectives under the same three-year goal are to “develop and present to the City Council for consideration alternate organizational structures” and to “develop and present to the City Council a Customer Service and Communication Enhancement Plan”. It became apparent that the three objectives were best addressed together in order to effectively and efficiently meet all three objectives in a cost-effective manner.
    Specifically, the plans proposed in this report work in conjunction with one another to achieve the following goals:
     Create an efficient organizational structure,
     Create an organizational structure that provides various options to prepare for the
    sun-setting of the utility users tax,
     Limit supervisors’ span of control to five direct reports,
     Address wage (under-market salaries) and benefit (health insurance cost)
    concerns,
     Increase the ability to recruit quality employees,
     Increase the likelihood of retaining quality employees,
     Increase opportunities for internal recruitment, for an employee to “work their way
    up the ranks”,
     Increase customer service levels including:
    o Increasing the open hours of City Hall,
    o Streamliningservices,and
     Minimize financial impacts.
    Staff and the Subcommittee on Compensation (comprised of Council Members Arizmendi and Delmar) recommend the City Council adopt Resolution 14-63 Adopting the 2014 Employee Compensation Plan, Adopting the Terms & Conditions for Employment for Exempt Employees, and Amending the City of Sierra Madre Classification Plan and Salary Matrix; approve the alternate organizational structure; approve the Customer Service and Communication Enhancement Plan; and adopt Resolution 14-64 Increasing the Service Hours at City Hall.

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    1. This is all well and good, I guess. Seems to be a lot of rhetoric with no changes in one of the most expensive benefit packages around. So, you want to keep employees. Where would the high end payroll people go to get a better job? You want people to work up into higher position when available, I guess. Will the powers that be allow that to happen? If so, how? There are under wage employees? All of this info is vague. I'm sorry, but it doesn't give enough info to be able to see what might be implemented. High have great respect for ms. Arizmindi and Ms. Delmar. But I think this is another train wreck trying to get through our empty water tunnels.

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    2. It is kind of a mother and infant thing. There will be lots of comforting noises, but when it is over the special water knob turner will still have his $37,600 health care plan.

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  4. Hey, Mod! What's with the banner changes? The focus seems to be on unhappy, agitated old gents... Readying us for an upheaval of some sort?

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    1. I dunno. Just kind of messing around with it. I will have another one in a couple of minutes.

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  5. Mod, your Sierra Madre post card is lovely, showing the Rose Parade, the Colorado St. bridge and the County Courthouse, all iconic Pasadena images. The huge crowds of tourists in town won't notice the difference...

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    1. Thanks for pointing that out. I took that off of Google Images. Apparently that post card was being sold at one point as being a Sierra Madre card. Obviously whoever did it had no idea what they were doing. Glad to see somebody finally got that.

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  6. This article makes it seem as though "us taxpayers" are shouldering the complete financial burden of public sector employees and unions. It would be appropriate, I think, to note that neither unions nor public sector employees are not exempt from paying taxes. They are part of the "us taxpayers" as well.

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    1. You are saying that a guy who sits in the cab of a computerized choo choo deserves to make about 8 times the wage of a fast food worker? And that we should be paying for that?

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    2. As long as they contribute millions to the California State Democratic Party, they'll continue to be protected. You, on the other hand, are not really someone they're too concerned about.

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  7. This comment has been removed by a blog administrator.

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    1. Calling someone a moron is unkind, but the adjective was worse.

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  8. I called our former mayor a Moran!

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    1. And you are, perhaps, a fly?

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  9. We really need to get the Sierra Madre employee salaries in alignment with the size of the city and the large scale blue collar segment that has made up a good portion of the city for decades. One employee, Venita Singh, who used to work for Karen Schnaider, let her position a while back, but let's look at her profile for a minute. She graduated from La Puente high school, didn't go to college, but did work for Sears for a couple of years before getting her first government job. Then, by the time she was in her mid 30's, she was making just under $100k per year (total compensation) as Karen's assistant. Where could someone with this anemic of a resume and education status make that kind of money in the "real world". Ahhhhh, the sweet sound of silence.

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