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THE PUBLIC EMPLOYEE PAYROLL Can we afford it? / Given the growing enthusiasm for taxpayer revolt, the stage is set for a crisis in local government. The crisis is that we may not be able to afford the payroll bill of our public employees. It will occur as a result of two separate movements approaching from different directions but meeting on the public compensation system battleground. One of these movements is very old, dating back to the turn of the century. It is the organized labor movement. While the percentage of the labor force that is unionized in the United States has declined steadily from 30 percent in 1958 to 22 percent in 1978, the unionization of government workers has soared. The American Federation of State, County, and Municipal Employees has increased its membership from 297,000 in 1967 to more than 1 million. The American Federation of Teachers has increased from 125,000 to 420,000. The strength of such groups is demonstrated by newspaper bulletins from major cities: Cleveland: Teachers strike; students sent home. Philadelphia: 19,000 municipal employees go on strike. Memphis: Police and firemen return to work after 8-day strike. A comparison of hourly wages among three different types of employees is shown in the accompanying box. Federal employees' average hourly earnings, it can be seen, have increased at a greater pace than have those in the private business sector. by LARRY L. KEHLER / Partner, St. Louis Municipal hourly earnings are close to the private sector in earning growth over the last 10 years. The second movement approaching the public payroll battleground is the demand by taxpayers to reduce the cost of government. These demands are just beginning, the first being the passage of Proposition 13 in California. Comparison of Hourly Wages (Average Hourly Earnings) Consumer Fire- 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 Price Index 100.0 104.2 109.8 116.3 121.3 125.3 133.1 147.7 161.2 170.5 181.5 Private fighters Business & Police* 100.0 107.6 115.1 123.3 131.5 138.9 150.3 164.3 180.2 196.5 213.6 100.0 107.0 117.0 12.8.0 135.0 145.0 157.0 168.0 180.0 193.0 203.0 Federal Executive Branch 100.0 106.5 115.7 128.9 139.5 150.0 161.1 199.5 *Data not available t Cities with 100,000 inhabitants or more Source: Bureau of Labor Statistics The government reaction to tax cuts is likely to be reduced work forces and salary freezes. That was the action planned in California after passage of Proposition 13. The employee reaction was a strike threat and job action. Fortunately no showdown occurred, but the threat of organized public employees closing down our cities is real. Clearly, what is needed is a thorough review of existing civil service and employee compensation systems. The Typical Compensation Program To satisfy the requirements of most civil service laws and to minimize the administrative effort, most public compensation programs are based on a salary structure comprised of fixed grades and fixed pay rate steps within each grade. The number of individual steps per grade ranges from 5 to 10, with salary difference between steps averaging 5 percent. Such a structure requires comparatively little administrative effort, because jobs are assigned to their respective grades by a classification program, and rules are established for all employee movement between steps. Such a structure is, of course, a basic minimum; on top of that must be built a full compensation program tailored to local conditions. Too often, it is not. With inflation ranging as high as 10 percent in recent years, it is obvious that fixed salary structures require overall adjustments to compensate for this increase. Many administrators respond by advancing each employee up one or two salary steps. While this solution is easy, it creates many problems. Employees who are already at the top of their salary grade have no new salary step to move up to. After several years, all but new employees will be at the highest step of their grade. Proper administration requires a periodic review of jobs to determine if grades or steps should be adjusted 55
Public employee payroll: Can we afford it?
Kehler, Larry L.
Municipal officials and employees -- Salaries, etc.
Local officials and employees -- Salaries, etc.
Touche Ross. St. Louis Office
Tempo, Vol. 25, no. 1 (1979), p. 55-56
|Source||Originally published by: Touche Ross, & Co.|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|