Municipal health insurance costs are creating an unsupportable squeeze on municipal budgets. Over a year ago, I took a position favoring change in municipal employee health insurance — click here to read that post. In a nutshell, under current collective bargaining rules, it is so unwieldy for municipalities to negotiate changes in municipal health care plans that many municipal health care plans have become very expensive, even compared to the state’s plan (the contrast is even starker compared to private plans).
The challenge for managers wanting to make any change in health care plans for their employees is that they must simultaneously negotiate with many unions to bring them all to the same place — health care plans must by law be identical for all employees in a community and most communities’ employees are divided among many distinct unions. I basically favor the approach proposed by the Massachusetts Municipal Association, which gives municipal managers the power to make plan design changes without collective bargaining. I would give municipal managers the ability to make changes, but within a structure defined by comparison to the state’s plan, to protect employees from arbitrary decisions, and would put in place a formula to assure that employees share in the benefits of cost-savings.
The major municipal unions, notably the teachers and the firefighters union have come out strongly against change. Responding to their concerns, while trying to make progress on the issue, some Senators have been advocating a complex approach which would involve arbitration if municipal managers couldn’t reach agreement with unions on plan design changes. In my view, and in the opinion of most municipal managers, this proposal is not workable. Complex arbitration procedures will only create business for lawyers and consultants. The legislature’s municipalities committee recently proposed a set of municipal relief measures that omitted any change in health care bargaining rules — this reflects the political stalemate between unions and municipal managers.
The legislature is most comfortable acting when opposing parties have reached some kind of agreement. In 2007, for example, an agreement was reached to make modest changes to municipal health insurance law. The teachers unions supported the agreement and, although the firefighters did not, that was enough to get the deal done and the bill passed. At the time, I expressed reservations that it might not go far enough, but embraced the bill. Those changes have proved to be far too limited and have resulted in little cost-saving.
The Boston Globe has embraced the management perspective on this issue and recently highlighted the issue in a series of recent articles and columns, for example, click here. The Globe story reflects a public relations campaign for change that joins groups from diverse perspectives — the Boston Foundation, Stand for Children, the Massachusetts Municipal Association, the Massachusetts Taxpayers Foundation. That campaign is having an effect. The legislature is really beginning to focus on making something happen and I am starting to be hopeful that we’ll have a bill this spring.
Each year, it seems like public sector benefits are become more and more lucrative compared to those given us in the private sector. In some cases, benefits like lifetime health insurance for the most part don’t even exist in the private sector. So when as a voter we are asked to vote for overrides, provide additional revenue for towns imploding financially, its frustrating. Its doubly frustrating to realize that those generous plans – with no caps, minimal co-pays, etc, are part of the reason for the rapid inflation in health care costs – so much to the point that they are taxed as Cadillac plans by the President’s health plan. Moving to a state plan, with economies of scale and purchasing power, makes too much sense.. to see the unions refusing to budge, well, should point out that perhaps public sector unions have too much influence and power in local politics..
In reference to grant.cook’s comments, I would like to see some real data on just how many people have these generous plans. I work in the public sector (as a teacher) in a reasonably well-off suburban town and my health and dental benefits are definitely more restrictive than either the ones I offered my own employees as a private sector employer when I did that, or those I had more recently through my wife’s non-profit private-sector employer. And my union just agreed this year to some changes (e.g. higher co-pays) — a move I supported — in order to reduce costs to the town and save some jobs.
The restrictions / coverage limits I face compared to what I had from the private sector are not onerous — i.e. I’m not complaining — I’m just using my own experience as an example. It really bothers me to hear this constant drumbeat of how well we public employees are doing. I do not know a single person who receives these much-maligned high-end benefits, yet to read coverage in the paper and some of the comments here you’d think they were the norm.
My guess would be that most municipalities do not offer “cadillac” plans, incredibly low co-pays, lifetime coverage, etc., but rather that these are relatively rare practices that are convenient to attack but are not representative. Does anyone have data on how many cities and towns offer such high benefits for union employees? How about the number that offer them to elected officials?
I really wish that people would stop demonizing unions. Unions are there to protect individuals from the power that can be weilded by a corporation or a government entity. It makes the individual as strong as the corporation or government entity. Whether a union negotiated a deal or an individual did, a contract was agreed and if the individual or the union members have delivered their end of the deal, then they’ve kept their end of the bargain. Individuals do not have a fair say on their own whether they work for municipalities or for coporations or, as is highly likely these days, are forced to work as independent contractors.
If people have kept their end of the deal, then a way must be found to be equitable. Abrogating contracts does not strike me as a good way to do it.
Unions protect the workers from the Government? The average Federal worker earns $67,700 in wages plus $40,800 in benefits compared to the average private sector worker who earns $60,000 in wages and $9,900 in benefits. Both USA Today and the CATO institute have similar numbers. How about State workers vs. Private Sector? Turns out that around 1968 State workers started outearning private sector workers and today the gap is approaching 18% excluding benefits.
The problem is Unions have too much influence with Politicians. Businesses also have influence and they share the blame as they outsource jobs overseas helping to depress private sector wages
Point being is the private sector can’t subsidize the public sector anywhere near these levels so either you reign in benefits which the Union would never agree to at the level needed or you cut staff. If you have a better solution I am all ears.
For my analysis of state and local compensation levels, click here.
Bottom line: Public sector employees may or may not make more than private sector employees with the same skill levels, but they definitely make more than the average taxpayer.
I looked at your earlier note and did a bunch of online research on this. Here is what I found:
– As your note sort of acknowledges, comparing *average* compensation in public vs. private employment is relatively meaningless. It’s not so different from saying “The average salary at Goldman Sachs is dramatically more than the average salary at Wal-Mart.” Of course it is — the work is different and the structures we have compensate it differently (not saying that’s good or bad, just noting it). I suspect the same is true of the public and private sectors — that is, the work is different so the averages are different — though of course the difference is not so dramatic.
– Many online references seem to support this by saying some form of “everyone says public sector compensation is greater than in the private sector but when you compare similar jobs the two sectors generally show comparable compensation”. However, I could not find any current reference that looked at this dispassionately.
– Many other online references claim public sector compensation is much higher, but 100% of the sites I could find which made this claim were run by or connected to politically conservative activists or bloggers, and most seemed to cite each other and/or cite the same few sources (including CATO institute and USA Today as were cited here). (This happens in other areas. In general this kind of thing — a few folks with a shared view all citing each other — has the effect of creating the appearance of much more “data” and a much greater consensus than actually exists.)
So the way this looks to me is, (a) as usual, the reality is way more complex than the rhetoric and news coverage makes it look, (b) there seems to be no useful, current, dispassionate look at that reality that breaks the comparison down by job type / skill level, and (c) all or virtually all of the claims about the supposed huge and growing differential in public sector compensation seem to come originally from a relatively small group of politically conservative interpreters of the data, who have succeeded at the PR task of presenting their views as accepted fact when really they are a specific interpretation written to support a specific political viewpoint.
This does not negate the fact that municipal health care costs are a critical issue, nor that union flexibility is important. I’d agree on both points. But I keep seeing the debate about what’s behind the problem as based much more in rhetoric than in clear facts.
I think that you are right that there is no apples-to-apples comparison out there; the experts seem to agree on that lack. Actually, I think there never will be. How do you compare roles like soldier or policeman or teacher or firefighter — which carry unique burdens, risks, rewards, and larger sacred meanings — with roles like accountant or tradesman? You might be able to define comparability based on hazards and academic preparation, but those really are a fraction of the story. So, I think discussions will tend to come back to absolute compensation levels and that picture is simple — public sector workers are not the richest workers in society by any stretch, but most of them are better off overall than the average taxpayer. That reality will continue to create tension.
My point was that if people have agreed to a contract and have delivered their end of the bargain, then abrogating the contract is unjunst whether the contract was negotiated by an government entity or corporation and an individual or whether the agreement took place between two individuals. That is true regardless of the level of compensation or benefits. Why should anyone keep their end of a contract if it can be cancelled?
The reason that unions first started was that corporations were far more powerful than individuals – there were no wages and hours laws nor any equal compensation or any of the rest of it. It’s no different than the outcry over the recent Supreme Court decision which lets business – with their huge fianncial resources – be regarded as equal to any individual in terms of election contributions.
I am not saying that some action is not needed. I am saying that some care has to be taken to be fair to people who kept their end of the contract – whether they are uniion members or not.
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