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%.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.
In April 2009, public sector employees were given a 4% raise.
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
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.The Triborough Amendment was adopted in 1972.
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.
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?