kitchen table math, the sequel: what is the effect of the Triborough Amendment over the long-term?

Monday, March 7, 2011

what is the effect of the Triborough Amendment over the long-term?

I want to check my reasoning with all of you.

Yesterday the Times carried a long editorial on the subject of New York's public sector unions and the state's fiscal crisis, which included these two factoids:
In April 2009, private sector income was down 9%.
In April 2009, public sector employees were given a 4% raise.

and

Average salary for New York’s full-time state employees in 2009 (prior to April raises): $63,382
Average personal income in NY state: $46,957

State Workers and N.Y.’s Fiscal Crisis
New York Times
3/6/2011
I assume these two facts are connected by the Triborough Amendment, a statute that is apparently unique to New York state. Under the Triborough Amendment, when a public sector union contract expires, its terms remain in effect until a new contract is signed.

This means that raises negotiated in good times must be awarded in bad times, which explains the 4% raises paid out in April 2009. It also means that the union has little incentive to negotiate during an economic downturn.

From the Times:
Last April, in the midst of one of the worst financial crises that New York and the nation have ever faced, the state’s unionized workers got a 4 percent pay raise that cost $400 million. It came on top of 3 percent raises in each of the previous three years. These raises were negotiated long before the recession began, by a Legislature that routinely gave in to unions that remain among the biggest political contributors in Albany.

During the same period, many private-sector workers had their pay or hours cut. Private-sector wages in New York dropped nearly 9 percent in 2008. In 2009, Gov. David Paterson pleaded with the unions to give up the raises to help the state out of its crisis. Union leaders attacked him in corrosive television ads, and Mr. Paterson eventually caved, settling for an agreement that reduced pension payments to new employees. The deal wasn’t enough to address New York’s serious fiscal problems.
The Triborough Amendment was adopted in 1972.

Here is the line of reasoning I want to vet with you.

What is the likely effect of the Triborough Amendment over time?

To me, it seems that over time the relative position of public sector to private sector employees would change, with public sector employees moving ahead and private sector employees falling behind.

Over time, the gap between public and private sector income would grow larger. If private sector employees take income cuts while public sector employees receive raises (or, at a minimum, do not take freezes or cuts) -- then each time the economy recovers, hasn't the ratio of public sector to private sector compensation changed?

Then, when the next recession arrives, doesn't the ratio change again?

If so, is that why we see average salary of full-time public sector workers in New York state at $63,382 while average personal income is $46,957?

I realize this comparison isn't apples to apples, but given that public sector employee incomes are presumably included in the $46,957, the actual ratio of public sector to private sector income must be even larger.

What it looks like to me -- and please tell me if I'm not thinking this through correctly -- is a  decades-long redistribution of wealth from one segment of the middle class to another segment.

Or is that wrong?

Do the incomes of private sector workers somehow bounce back up to where they were before each recession while the incomes of public sector workers 'stand still' long enough for the ratio to return to what it was before the downturn?

36 comments:

Crimson Wife said...

You need to compare public and private sector workers with equal education levels, since public sector workers are far more likely to be college graduates (teachers, nurses, etc.) From a recent New York Times article on the subject (emphasis added):

"Less educated workers on state payrolls tend to do better than their counterparts in the private sector. The median wages of state workers without bachelor’s degrees are higher than those in the private sector in 30 states. California, New York, Connecticut and Nevada lead the way, each paying workers without degrees at least 25 percent more than the private sector pays those workers.

Certain states, however, are clearly more generous than others, at least relative to the private sector. California, Iowa, Nevada, New York and Rhode Island are at the upper end of the spectrum for both college-educated workers and those without college degrees."

lgm said...

The Economix Blog is interesting:
http://economix.blogs.nytimes.com/2011/03/04/the-struggles-of-men/

It would be interesting to compare compensation as well as salary.

gasstationwithoutpumps said...

Not only do you have to compare comparable education levels, you have to compare comparable work hours. Comparing full-time employees to all employees is always going to increase the gap, since part-time employees get little compensation.

Also, there is no guarantee that public-sector empolyees get raises in good times, so the disparity is not necessarily going to grow. In fact, most public sector negotiations are based on the notion of getting comparable compensation to similar jobs in the private sector. In many cases (university employees at all levels from janitors to faculty, for example), the public employees are consistently paid substantially less than private sectors employees in similar jobs.

Catherine Johnson said...

I'm asking specifically about New York state and the long-term effects of the Triborough Amendment, not about the country as a whole.

Effectively, there is a guarantee that public sector workers will get raises during good times, too.

There is no obvious reason for a union to agree to a worse contract than the contract that has expired.

Now that is not necessarily the case given a wrinkle in step increases, which is that step increases end after X-many years.

After that, unions negotiate 'longevity increases' that for some reason **aren't** still in effect once a contract expires.

Thus in my district, teachers have been working without a contract for....maybe a couple of years now.

Younger teachers are all getting the raises that were negotiated during good times.

Middle-aged teachers aren't getting raises because they're out of steps and the longevity raises aren't built-in (for some reason.)

Point is: the Triborough Amendment does guarantee that raises will be given during good times, too, because the union does not have to agree to a new contract that does not include raises.

Raises during good times & raises during bad times: doesn't the logic of that open up a gap that grows wider over time?

Catherine Johnson said...

Apples to apples, we could compare public school teachers to private school teachers.

Triborough amendment means public schools teachers receive raises during recessions (or do not receive freezes or cuts).

Private school teachers have reduced raises or freezes or even cuts during recessions.

Does the gap grow larger over time?

Catherine Johnson said...

In fact, most public sector negotiations are based on the notion of getting comparable compensation to similar jobs in the private sector.

All of the negotiations I know about here in New York state are 'baseline' negotiations; they take current compensation as the baseline & negotiate percentage increases on top of that (or attempt to do so).

Catherine Johnson said...

Exactly two years ago, average teacher salary in my district (salary, not benefits or pension contribution) was roughly $90K.

Today, it's $95K.

There has been virtually no inflation during these two years, and we've seen deflation in home prices (and obviously in a lot of people's incomes).

The contract expired at the end of June 2009, but its terms are still in effect because of the Triborough amendment.

Crimson Wife said...

Apples to apples, we could compare public school teachers to private school teachers.

Except that private school teachers tend to have MUCH better working conditions. My FIL is a retired prep school teacher while my MIL is a retired PS teacher. She had better pay and benefits, but had to deal with all kinds of problems that he didn't.

By and large, the kids FIL taught were bright and motivated (admissions were competitive). If any of them were disruptive, he could get them removed from his class and if necessary, thrown out of the school entirely. He didn't have to deal with any micromanagement from bureaucrats across town, across the state, or in D.C. The school's facilities were country-club ritzy rather than prison-like and in need of major refurbishment.

If not apples vs. oranges, at least vine-ripened, organic heirloom tomatoes vs. the tasteless conventional ones.

Anonymous said...

"The school's facilities were country-club ritzy rather than prison-like and in need of major refurbishment."

And even if the facilities are pretty old (my Jesuit run high school when I attended), the work environment for the teachers can be relatively pleasant because of the dean of students. Whose presence mostly ensures that there are not discipline problems. I have stories ... and in spite of the all-powerful nature of the position, the dean was very popular with the students ... even the ones with hundreds of hours of detention.

Private schools don't *HAVE* to be like this. But they can. It is difficult to imagine public schools in today's America being like this.

I can imagine working at a well run private school. I have a hard time imagining myself working at a public school.

A better (but still flawed) way to get at whether a given group of people is overpaid is to try to find a way to answer the question: Can they be replaced for less money? This might involve hiring *more* people, but sufficiently cheaper people. Or it might involve hiring fewer, more highly paid people. Or automating all or part of the job. Off hand, I don't know how to answer this question with confidence.

-Mark Roulo

lgm said...

I think the Triborough Amendment just makes it difficult for teachers who are about to retire to bump their final salaries up higher. They still are getting their benefit raises even under no contract - the medical care package cost will go up and the increase wiill be paid for solely by the district/taxpayers. Everything else is going to be negotiated back in when the contract is settled...a retroactive pay increase will be given for the years that no grid increase occurred. If add'l medical is to be paid out of the salary, the salary will be raised by just over that amount.

We need to go with a state or nationwide plan with caps on max per position responsibilities and regional cost of living adjustments to stop the rat race. The race being that every district's unions want compensation equal or better than NYFD and the highest paying Westchester or LI schools.

I would say that most teachers are well compensated for their working conditions. Ever compare their salary and compensation package to that of a military officer? How about a principal to a general?

Automating the job - the union has started that here. Teachers usually complain about workload in correcting papers, but they don't admit that they have an inclusion teacher is several of those sections...here they have a clerk to run tests through the scantron and the inclusion teacher will split the load. What they have not done here (and are doing in Arlington) is share their teaching materials and resources...they hoard knowledge so they can be more effective than the next guy, which impacts student learning greatly. No free open source sharing here. Since they won't cooperate with each other, I can only see telecasts in the future for those who want to learn. The rest are going to be probation officers/social workers/drug counselors at the high school level.

lgm said...

Sorry, not telecasts. Distance learning or even worse, someone playing Regents Review live in the auditorium.

Costs are similar for a small religious private school or distance learning via JHU-CTY and a public school for a nonclassified child. As soon as the dollars move with the child, those who want an education in NY but aren't wealthy will move their child out of public school. Why take a gen ed class in a mainstreaming situation with security guards needed when your child can do middle or high school on line at the honors level?

Scott said...

The gap cited here is actually understated by a dramatic amount, because public school teachers have fairly remarkable benefits, plus they get paid every time they lift a finger. In private schools, for instance, teachers are expected to pitch in with things like school plays and coaching. In public schools, you get paid. In my district, for instance, you make $1339 for overseeing the juggling club. The union contract is stuffed to the gills with this stuff. It's all backdoor comp so it appears that a teacher is "only" making 95k when it's really much more.

Then there's the big enchilada, fixed pensions and health for your family for life. No one in the private sector gets this anymore. I did the calculation for a typical retiring teacher in my district, and the present value of this income stream (assuming 25 yr retirement and a 4% discount rate) is a whopping $1.6 million.

There is NO difference between this and having an IRA with $1.6 million, except no one funds our IRAs and NY State will tax them when we draw them down (teachers aren't taxed by law).

So, in effect, most public school teachers are millionaires. They are perhaps the most overpaid professionals (relative to market) on the planet.

Catherine Johnson said...

Public school teachers in NY state are extremely well compensated.

I taught at my local college for essentially minimum wage last fall, and I had kids who were homeless, one brain-injured veteran who died during the semester (probably of an overdose), students who were in the emergency room with parents who had collapsed, etc.

I was paid far, far, far less than teachers in my public school, who deal with nothing on that order.

In any event, that's not the question.

My question isn't: are public sector workers overpaid?

My question isn't: are public sector workers underpaid?

My question is mathematical.

I just want to know whether my mathematical reasoning is correct!

What is the effect of the Triborough Amendment over the long-term?

Off-list, I've had at least one person confirm that I'm reasoning correctly.

Here are the 'parameters' of the question, if that's the right term.

Public sector unions here in NY state opt for lay-offs rather than compensation cuts.

So: let's assume for the sake of argument that that has always been true. (I don't know whether it's always been true. I'm making an assumption.)

The Triborough Amendment means that during recessions the raises negotiated during a strong economy continue to be paid.

At the end of each recession, private sector workers as a whole have lost wages; public sector employees have gained wages.

That is what happened in April 2009.

Private sector employees in New York state lost 9% of income; public sector employees were given a 4% raise.

Over time, logically, don't you see a change in the relative status of public sector employees to private sector employees?

Catherine Johnson said...

That's all I'm asking!

It's a math question!

Not a personal values question!

Catherine Johnson said...

Scott is right about the $1.6 million retirement accounts.

Robyne Camp and I wrote an article about Irvington's financial situation for the River Journal.

Here's the relevant passage:

[C]onsider the case of a teacher who retires at 55 earning a salary of $120,000: he or she receives a guaranteed pension of $72,000 per year for life. To receive the same $72,000/year without a state pension, you would have to save over $1 million during your working years and earn a guaranteed return of 4% on that million after you retired. In effect, we are funding million-dollar, guaranteed-interest retirement accounts for school district employees.

Catherine Johnson said...

TRIBOROUGH AMENDMENT

Catherine Johnson said...

Just wanted to put that out there again.

New York state is the only state in the country that has it.

Catherine Johnson said...

lgm -

I wish I understood budgeting & finance a **lot** better than I do...but might it be a better idea to have union compensation somehow indexed to....inflation?

Then you don't have the problem of the govt establishing caps (that get overturned every five seconds as Medicare caps apparently do) -- and you do have some kind of built-in correction during economic downturns....

The revelation to me, during this recession, has been that in NY the idea of a "recession proof" job means not just that you keep your job while others lose theirs, but that you continue to receive raises.

That is a new idea to me: I had never thought of "recession-proof" as meaning above-inflation raises during hard times.

SteveH said...

I know that continuing existing contracts is a issue in our state, although I don't know the details. Our school committee has fought (along with other districts) against this sort of thing, but I don't think anything like the Triborough Amendment has passed. One would think that it balances out because districts could be tougher when times are good. However, it does seem like the only direction it would go is up.

Is part of the problem due to wimpy negotiating skills? Our little town school committee has to go against not just the teachers in our town, but their whole state union. Some have specifically complained about this firepower difference. It's too easy to whip up local support with the mantra more money = better schools. The problem is that many just want to spend less money and they don't care about the schools. It's a tough position to take that you can have better schools with less money. I see a need to separate out the save money discussion from the better schools discussion.


There was some talk about combining the negotiating power of several districts or the state, but I think towns don't want to lose their individual control.


As for public school teaching demand, it is very high in our area. There is also a big differential between public and private teaching positions in salary and benefits. At the private K-8 school my son went to, there was a high turnover rate. At our public schools, it hardly ever happens. Few retire early.

Catherine Johnson said...

Hey Steve -

Our board president was explaining to me last fall that....(I've probably got the details wrong by now)....local school boards aren't allowed to work together, while local unions do receive support and direction from state (& presumably national) union leadership.

Take that with a grain of salt, but I've probably got the jist right.

He was involved in some kind of effort to get 'permission' or a waiver to allow local boards to coordinate strategy.

Another board member once told me directly - I'm paraphrasing - "We're parents. We can't negotiate with the union."

Catherine Johnson said...

I see a need to separate out the save money discussion from the better schools discussion.

I've seen the opposite -- but that could be idiosyncratic to my town.

In my town, the people who want better schools are often the same people who want lower spending.

My district doubled spending in 10 years with no measurable gains in student achievement, and that reality has made an impression.

Moreover, the district has now told us directly that administrators don't raise achievement - AND that the district wants to hire more administrators.

We're hiring a new curriculum director in the wake of being told, by the administration and school board, that the director of curriculum will not cause student achievement to rise.

At this point, the rationale for the position is that Race to the Top brings with it many new mandates and reporting requirements, so we need a $225K administrator to handle that. ($225K = total compensation)

Essentially, "curriculum director" means "compliance officer."

Catherine Johnson said...

We have hundreds of applicants for teaching jobs -- 200 applicants last year for a one-year leave replacement.

SteveH said...

We're coming up to the 100th anniversary of the Triangle Shirtwaist Factory fire. Now, many issues are covered by law. It's a different world.

Catherine Johnson said...

Civil service law is specific to public sector workers, right?

ChemProf said...

Your logic is right. It doesn't have to be -- in theory, a school board could not give raises in good times, but in practice in the kinds of states that have things like the Triborough Amendment (or in California, the Dill Act) tend to give raises in good times that then can't be taken away in bad times.

http://city-journal.org/2011/eon0306sm.html

Grace Nunez said...

This link shows that private comp has been lagging behind gov't comp since the early 1980s. Just by eyeballing, it appears that the gap keeps widening, except for a 6-year period starting in about 2000.

The issue of private sector salaries rebounding sufficiently in good times is a debatable point, but they apparently have not caught up over the last 30 years. And I don't see them catching up any time soon.

Public Sector Unions and the Rising Costs of Employee Compensation, page 89
http://www.intellectualtakeout.org/library/public-employees/public-vs-private-pay/chart-graph/historical-comparison-public-and-private-sector-compensation-levels

SteveH said...

In the private sector, companies find ways to lay off those near the top of the pay scale when there is a need to cut back. Salary increases (percent-wise) decrease over time. At the first place I worked, they had years where a certain percent of workers would receive no increase. The salary increases (or not) were subjectively applied, worker-by-worker. As your salary went up, you often heard the comment that at higher salary ranges, it is the dollar amount, not the percent increase, that matters. If you didn't like it, you got another job.

In schools, the layoffs come only at the bottom. Salary increases are contracturally mandated for all and always seem to be based on percent, no matter where you are on the salary scale. There is little that forces schools to reflect supply and demand.


As Catherine said:

"We have hundreds of applicants for teaching jobs -- 200 applicants last year for a one-year leave replacement. "

Catherine Johnson said...

Grace - haven't looked at the data yet - but that is national?

If raises in public sector have consistently exceeded raises in private sector, then that trend would have to be exaggerated in NY ---

Catherine Johnson said...

fyi: all the years I've spent teaching myself math have sensitized me to the 'simple' arithmetic of annual above-inflation spending increases.

Before I spent so much time studying & thinking about math, I thought of spending numbers as discrete entities, separated out from a long-term trend -- which is exactly how some members of our school board have always discussed spending.

We'll hear from board members things like "$225K is nothing in a $50million budget."

"nothing"

We hear this kind of thing all the time (even from frugal BOE members).

DK once answered that by saying, "By that reasoning, my taxes are a drop in the bucket, so I think I won't pay them."

The other point is: even granting that $225K is 'nothing' today, given above-inflation annual increases and underfunded pensions, it's gonna be 'something' tomorrow.

Catherine Johnson said...

Can't remember if I posted this already, but a former teacher here in town remembers when LIFO became law in NY.

The reason it became law was that schools laid off older teachers first during hard times.

Catherine Johnson said...

chemprof- can't access your link - if you have a moment, could you re-post?

Catherine Johnson said...

Grace - that's terrifically helpful.

Thanks!

Anonymous said...

One of the problems with service-type jobs is that without specialization for the senior people, the senior people end up performing the same job as the junior people, just more expensively.

Hopefully, they perform it *better*, but still, it is pretty much the same job.

Teachers fall into this category. The senior teachers don't teach any more kids than the junior ones. The schools have no way to leverage the (hopefully) superior expertise of the senior teachers.

Again, hopefully, the more senior teachers teach more/better and their students have higher test scores (plus they learn more), but NO MORE STUDENTS GET TAUGHT.

*This*, I think, is why there is pressure (and thus the union contract) to lay off the more senior teachers in a down turn ... it is the only way to teach more students for less money.

Industry sometimes finds a way around this. The senior people can leverage themselves by doing more high level work (which is *critical* that it be done correctly, or else the entire project may fail) which is more valuable. In industry, the expensive senior people who are doing pretty much the same job as the junior people *ARE* in danger of being let go ... and in fact, the senior people with obsolete skills fit this description perfectly and *ARE* the ones at the highest risk.

If schools had a way to leverage the senior teachers, I don't think we would have this problem ... when the 2x more expensive teacher is doing 2x more "teaching" (however we define it), then there is no advantage to laying off this teacher versus 2 of the 1x expensive teachers. When the 2x more expensive teacher is only doing 1.5x more teaching, the rational thing to do during a downturn is to eliminate that teacher.

-Mark Roulo

lgm said...

In theory, the senior teacher is mentoring the junior teacher and increasing that person's efficiency.

In reality, that is not the case in many districts.

Consider, we pay $5K extra to each dept chair (whether it is a dept of 2 or 10) and set aside time (which is compensated for a weekly departmental meeting. What is the return on that investment in terms of student learning? Frankly, I'm not getting a warm fuzzy that pedagogy is being discussed. It sounds like the major issues are ejecting disruptors, and getting them to pass to keep the drop out rate down. I can understand that since that is a pressure from the top, but I can't see dropping the rest of the issues that need to be discussed. Perhaps compensation tied to team results needs to be part of a teacher's package as well as management's.

lgm said...

In most jobs, there is a cap on the total amount that can be earned for the position. If the person wants more, he has to go up a skill level and find a position with increased responsibilities. Or he can wait until the entire grid is raised. Not the case in teaching.

Catherine Johnson said...

Can't remember if I ever got around to posting about the David Steiner talk my BOE member friend & I attended.

I should do that.

In any event, when asked about merit pay he said that the research is showing no effects for individual merit pay but **some** effects for group merit pay (or team pay - I guess you would call it).

The effects aren't huge, but they do exist & do show up in at least some of the research.

I don't think money is going to make any difference at all one way or another. Generally speaking - this is a broad generalization, but I believe it's true - the kind of person who goes into teaching isn't **hugely** motivated by money. (I don't say this as either a criticism or as praise - & fyi: I'm in the not-hugely-motivated-by-money category myself.)

Plus I'm 99% sure we have quite a bit of research showing that working conditions are more important to teachers than money in terms of whether they stay or leave.

When Richard DuFour invented professional learning communities at Adlai Stevenson High School, he didn't have an extra dime of money to spend.

Because PLCs did involve extra time, he bartered with his union to trade back some duties so that teachers took up the new duties.