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The real status of NM’s government workforce and pensions
Paul Gessing
While New Mexico remains relatively quiet on the government worker protest front, the issue of unionized government workers and their compensation levels has exploded across the nation, particularly in Wisconsin, but also in Indiana and Ohio, with rumblings of reform bubbling up in other states.
The topic has been a point of some contention on this site between Carter Bundy, the head lobbyist for the Association of Federal State County and Municipal Employees (AFSCME), and me. The Rio Grande Foundation has released several studies here, here, and here that explain that New Mexico’s government workforce is too big and paid too well.
Bundy’s most recent response can be found here. His most recent assertion is that government workers do not make more than their private-sector colleagues.
If that is the truth, then I’m wondering why public employees are paying their dues to their unions in the first place. After all, if they are only making what is paid to workers in the private sector (more than 90 percent of whom are not unionized), they are wasting their money.
I’m also wondering, if government workers don’t earn any more than their private sector counterparts, why they are putting up such a fight over their benefits. Why did AFSCME feel the need to spend $592,300 in contributions from last April through the end of 2010 while the supposedly mighty oil and gas industry handed out a mere $183,000 (30 percent of what AFSCME spent).
Government workers are smart enough to know that they are benefitting tremendously in terms of pay and benefits. Otherwise they’d ask for their $600,000 in political contributions back!
New Mexico’s real problem
The fact is that New Mexico is in nearly as much trouble as states like Wisconsin and Ohio. New Mexico’s government employee pension obligations, as a percentage of state GDP, are the third highest in the nation (behind Wisconsin and Ohio).
According to our studies of the issue, over-employment in the public sector is New Mexico’s real problem when it comes to government workers. Reducing the number of state and local workers in New Mexico to the national average would save taxpayers in the state an astonishing $2.5 billion annually, while reducing compensation to the national average for those very same workers would save just under $700 million annually.
Neither of these amounts is trivial, but there can be no doubt that New Mexico’s real problem lies in having used government as an economic development for far too long.
Across the country – national data forms the basis of Bundy’s arguments – state and local workers are compensated 2.2 percent more than their private sector counterparts (doing the same jobs). This is not too far out of line, but New Mexico workers are indeed rather highly compensated with wages and benefits 11.5 percent higher than their private sector counterparts.
Curiously enough, in his most recent column, Bundy cited a study, “The Wage Penalty for State and Local Government Employees,” that largely reinforces our research showing that New Mexico indeed does have the 3rd-highest ratio of government workers per private sector workers. And, while Bundy asserts that geographic size and sparse population cause government employment to be bloated, according to this very same report, Colorado, Nevada, and Arizona all have government employment levels that are far below the national average (Colorado and Nevada are 3rd- and 4th-lowest among the states).
Solutions
As we’re seeing in Wisconsin, solving the government pension problem is not going to be easy or popular with the politically-powerful government employee unions. But, solutions do exist:
- First and foremost, New Mexico needs to significantly reduce government employment.
- Secondly, the system, especially for new government workers, must be transformed into a defined contribution and away from a defined contribution system.
- Thirdly, government employee contributions must be increased further.
- Lastly, New Mexico’s elected leaders must expand the private sector in order to pay the bills.
New Mexico’s pension system is in a uniquely poor condition. Before education, health care, and basic government services are reduced (or taxes are increased), the Legislature needs to address the issue with an eye to the solutions outlined above.
Gessing is the president of New Mexico’s Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.
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http://www.nytimes.com/2011/03/07/opinion/07krugman.html?partner=rssnyt&emc=rss
“The fact is that since 1990 or so the U.S. job market has been characterized not by a general rise in the demand for skill, but by “hollowing out”: both high-wage and low-wage employment have grown rapidly, but medium-wage jobs — the kinds of jobs we count on to support a strong middle class — have lagged behind. And the hole in the middle has been getting wider: many of the high-wage occupations that grew rapidly in the 1990s have seen much slower growth recently, even as growth in low-wage employment has accelerated.”
“But there are things education can’t do. In particular, the notion that putting more kids through college can restore the middle-class society we used to have is wishful thinking. It’s no longer true that having a college degree guarantees that you’ll get a good job, and it’s becoming less true with each passing decade.
So if we want a society of broadly shared prosperity, education isn’t the answer — we’ll have to go about building that society directly. We need to restore the bargaining power that labor has lost over the last 30 years, so that ordinary workers as well as superstars have the power to bargain for good wages. We need to guarantee the essentials, above all health care, to every citizen.”
http://www.huffingtonpost.com/michael-moore/america-is-not-broke_b_832006.html
Dr. J:
You are exactly right in my opinion. The links that Paul put in his column are important reads, especially the work that former New Mexico AG, Hal Stratton, did on building a Powerpoint deck proving there is no such thing as collective bargaining in the public sector. The CEO of a private-sector company is a non-elective position; he or she does not need to court the block voters the unions promise an elected official if he or she gives the union what it is seeking. Just look at what former-mayor Martin Chavez gave away. The fact is, I am not anti-union. But the unions today (which I think only represent 15 percent of the total labor force in America) are exhibiting “budget autism.” They are disregarding the realities facing state budgets. Governors such as Scott Walker in Wisconsin and Chris Christie in New Jersey are simply sitting down with union negotiators and saying, “Work with me here. The state is broke.” Heck, even Democrat and career politician Jerry Brown in California is saying to the unions, “Hey, work with me here.”
I read an interesting Yale Law Review article yesterday, found via the Volokh Conspiracy.
http://volokh.com/2011/03/04/more-on-collective-bargaining-and-student-performance/
http://www.yalelawjournal.org/images/pdfs/951.pdf
Basically, mandatory collective bargaining agreements favor the rich (citizens). Because teachers are given so many choices and protection in regards to the school they teach at, it seems that the more experienced (and therefore higher paid) teachers chose to work in nicer areas (i.e., rich suburbs as opposed to the “ghetto”).
SAT scores go up, but high school graduation rates go down. So it’s a mixed bag.
Well said Mr. Molitor. In fact many distinguished Democrats were against public employee unions, including FDR. His words are as true today as they were when, in 1937, he dismissed public employee unions here:
“Meticulous attention should be paid to the special relations and obligations of public servants to the public itself and to the Government….The process of collective bargaining, as usually understood, cannot be transplanted into the public service.”. “…[a] strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable.”
And the reasons he knew this are quite well stated here in The Providence Journal by Mr. Achorn:
“In the private sector, management has a strong incentive to negotiate pragmatically — the need to maintain a profit to stay in business. Customers have a choice of buying cheaper products and services elsewhere.
In the public sector, such restraints disappear. The employees — through their campaign contributions and organizing activities — often get to determine who sits on the other side of the negotiating table from them.
When politicians who owe their power to public employees conduct so-called negotiations with them, taxpayers are left utterly defenseless. Since government is a monopoly, citizens are not permitted to shop around for another one that negotiates better contracts and provides cheaper services. No, citizens must simply pay, under the threat of arrest and imprisonment.
Thus, politicians can give away the store, bank on the unions’ support in the next election, and hand the bill over to someone else.
You.”
My take is that there’s nothing inherently wrong with the unions, as long as they are voluntary associations of people. It’s natural. Why not? But there are problems with the way unions exist in reality today, particularly when membership is made mandatory. That’s a violation of the human right to work. When you can’t work unless you join a union – it’s clear to me that the union is nothing short of a protection racket. It’s a fraud.
That doesn’t just harm the individual worker who may wish to enter a unionized field; it has broad economic consequences. When only union members can work, the union can set wages at whatever level they want. That makes the product or service in question more expensive for everyone in society.
In other words, unions don’t help the average working man or woman – they only help those who can get into unions. They hurt everybody else: non-union workers, employers, and consumers at large. And it gives union bosses extraordinary power.
I suspect Carter Bundy has experienced that power first hand.
http://www.huffingtonpost.com/robert-reich/the-real-news-on-jobs_b_831493.html
“But to get to the most important trend you have to dig under the job numbers and look at what kind of new jobs are being created. That’s where the big problem lies.
The National Employment Law Project did just that. Its new data brief shows that most of the new jobs created since February 2010 (about 1.26 million) pay significantly lower wages than the jobs lost (8.4 million) between January 2008 and February 2010.
While the biggest losses were higher-wage jobs paying an average of $19.05 to $31.40 an hour, the biggest gains have been lower-wage jobs paying an average of $9.03 to $12.91 an hour.
In other words, the big news isn’t jobs. It’s wages.
For several years now, conservative economists have blamed high unemployment on the purported fact that many Americans have priced themselves out of the global/high-tech jobs market.
So if we want more jobs, they say, we’ll need to take pay and benefit cuts.
And that’s exactly what Americans have been doing.
Employers have demanded wage and benefit concessions from their unionized workers and often got them. Detroit is creating auto jobs again — but new hires are getting about half the pay that auto workers were getting before. Airline workers are taking home 30 to 50 percent less than they did years ago. And so on.
Conservatives say it’s not enough. That’s why unions have to be busted — and why some governors are seeking to abolish laws requiring workers to become dues-paying union members in order to get certain jobs. Hence, the fights brewing in the Midwest.
Meanwhile, millions of non-union workers have accepted cuts in pay and benefits just to keep their jobs. Health benefits have been slashed, pension contributions from employers dramatically cut, wages dropped or “frozen.”
Millions of private-sector workers have been fired and then re-hired as contract workers to do almost exactly what they were doing before, but without any benefits or job security.
The current attack on public-sector workers should be seen in this light. The charge is they now take home more generous pay and benefit packages than private-sector workers. It’s not true on the wage side if you control for level of education, but it wasn’t even true on the benefits side until private-sector benefits fell off a cliff. Meanwhile, across America, public-sector workers have been “furloughed,” which is a nice word for not collecting any pay for weeks at a time.
At this rate, the unemployment rate will continue to decline. But so will the pay and benefits of most Americans.
Conservative economists have it wrong. The underlying problem isn’t that so many Americans have priced themselves out of the global/high-tech labor market. It’s that they’re getting a smaller and smaller share of the pie.”
http://www.sea-cwa.org/news.php?id=269
http://www.sea-cwa.org/news.php?id=268
http://www.allbusiness.com/government/government-bodies-offices-regional-local/12558550-1.html
I am a state employee.
I have worked hard throughout my career.
But I would have been able to retire at age 47.
That is obscene.
Should your taxes rise to pay for me to retire at 47?
Should New Mexico’s unemployed go longer without jobs because tax rates make NM unattractive for employers so that I can retire at 47?
Government should be out of the retirement business.
When governments are in the retirement biz, the money builds up and govs can’t keep their hands off of it:
witness the Social Security (UN)trust fund and El Diablo’s pay to play shenanigans here in NM.
And when governments are in the retirement biz, people have reason to believe the promise
and dis-incentive to save for themselves.
When governments are in the retirement biz, current generations can steal their retirement funds from future generations. (until the Chinese stop lending us money to pay retirements with).
Make Social Security a flat subsistence check ( livable but flat ) so that it is sustainable for today’s generation
of future retirees.
Make state retirements defined contribution plans.
Get government out of the retirement business!
I am astounded that intelligent humans continue thinking that servants have the same rights and deserve the same income as those within the private sector.
Maybe, hopefully soon “The People” or The Employers of the public servants will begin demanding that all servants in the public sectors be paid servant wages/benefits before America becomes a totally broke socialistic nation-state.
If public servants don’t like what their bosses demand then they have the option of quitting, so they can have the same rights and compensation appropriate to their physical/intellectual skills within the private sector.
http://www.newmexicoliberty.com/forum/topics/putting-new-mexicos-government
wedum59, thank you for such a true and succinct summary of the issue.
Well said Mr. Gessing, and totally correct and fact based, unlike many of these comments. The fact is that nobody is talking about taking away collective bargaining “rights” from public employee unions that have them now. They are talking about limiting the items they can collectively bargain on, the unions still have dozens of bennies and salary to use to gain political and financial advantages over the citizens. And remember, federal employee don’t have these “rights” anyway, so are they really “rights”???? Having dealt with unions in the past, their code is “never go backward” in any negotiation. That clinging to the status quo ++++ and the complete refusal to understand shared sacrifies for the good of the country is what is behind all this. They are selfish and out-of-touch with where we are as a nation, and people are getting tired of this. Also, right to work should be the national law, you should never be forced to join any organization just to get a job. That is unAmerican and a violation of your civil rights. And the state should not have to bear the expense and time-consuming paperwork and administrivia demanded by public unions to have the government withhold for union dues. That is their problem and they should bear all costs and use their employees. And unions should never be certified for perpetuity, they should stand for re-certification votes every few years, that is democracy and the America way, but unions don’t want that.
“As we’re seeing in Wisconsin, solving the government pension problem is not going to be easy or popular with the politically-powerful government employee unions.”
This is a complete 100 percent lie.
The unions in Wisconsin have already said they will do everything the governor has proposed — except for give up their collective bargaining rights.
Note: Every major poll has shown that people support the unions’ rights to collective bargaining, no matter what the far-right think tanks would have you believe.
Gee, the entire union community managed to contribute about the same total to ALL candidates as Texas developer Perry contributed to the Martinez campaign, right? Perry contributed $450,000 initially, and as I recall later contributed another $100,000 (perhaps to the R “Governor’s Fund,” which was then funneled directly to Martinez?).
There’s lies, damn lies, then there’s statistics, and Gessing is playing that game. The millionaires don’t NEED an organization to gather together small contributions, they just pull a big chunk of change out of their own wallets.
Furthermore, the point is that ALL our American workers should be as well paid as government employees–who aren’t really paid all that well, but they get better benefits than private employees. See Stephen Jones’ article about Wisconsin. But greedy private corporations want to squeeze all the life out of their employees so they can pay bigger stock dividends and CEO bonuses.
Comments on Gessing’s four recommendations:
First and foremost, New Mexico needs to significantly reduce government employment. IDENTIFY THE AREAS OF CUTS BECAUSE THEY WILL DETERMINE THE SERVICES REDUCED. AM I THE ONLY PERSON TIRED OF STRONG TALK AND WEAK WALK?
Secondly, the system, especially for new government workers, must be transformed into a defined contribution and away from a defined contribution system. AM I MISSING SOMETHING, OR IS A TYPO INVOLVED?
Thirdly, government employee contributions must be increased further. OTHERS WILL HAVE TO DETERMINE THE ADVISABILITY OF THIS RECOMMENDATION AND, IF IT MAKES SENSE, HOW GREAT THE INCREASE SHOULD BE.
Lastly, New Mexico’s elected leaders must expand the private sector in order to pay the bills. GIVEN RTF’S MANTRA OF REDUCED CORPORATE TAXES, ETC., I ASSUME THAT RTF WANTS REDUCED CORPORATE TAXES OR INCREASED STATE-TRANSFERRED BENEFITS TO CORPORATIONS AS AN INCENTIVE AND THEN A COMPENSATING INCREASE IN INDIVIDUAL TAXES.
One final note. Unless the expansion of the private sector occurs largely in the no- or low-skilled fields–mining, ranching, framing, etc.–then educating a work force for an expansion of the private sector in high-skilled fields will be necessary. But RTF continues to advocate cutting investment in education, as if austerity is the basis of educational reform. RTF needs to gets its heads together to figure out the relationship between the state economy and state education.