Public employee payroll: Can we afford it?;

              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
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