Wednesday, October 03, 2007

State Employee Pay & Benefits

Gov Otter is going to "push like the devil" for pay raises for state employees, per the Statesman. According to the story, the Gov wants decent pay raises over three years or so so catch state employees up with the private sector. 5% for 3 years would make up the 15% gap currently between state employees and their counterparts it the private sector.

With this, though, the Gov wants to trim benefits to state workers. The net result will be some increase in state expenses, but the benefits savings will offset much of the pay raises. It looks to me like the end result is where employees would be if they get the usual 1-2% and benefits aren't changed.

If there isn't much change, why do it? Well, the Gov says that younger workers aren't so much interested in benefits, so higher salaries and lower benefits will attract younger workers. Young workers tend to make less, so perhaps overall the state's employee costs will decline proportionally over time as older workers are replaced by younger ones. Also, it seems in keeping with the Gov's philosophy of running government like business.

Other leaders have worked that philosophy, and it can work, to an extent. Some risks lurk in the Gov's plan. If state agencies become populated by younger workers, they will be at risk of high turnover; young workers tend to change jobs more than older ones. Also, if the state falls on hard times and doesn't give raises for a year or two, as has happened every few years, a young worker will be more likely to bail out.

Good benefits are a key to keeping state workers, especially when the pay lags. If you don't get a raise for two years, but your benefits are good, you'll probably hang on. If you don't get a raise for two years and your benefits are mediocre to weak, you'll probably bail. The benefits serve as a form of golden handcuffs.

The state employs lots of low wage workers, in the $10 an hour range. Many of them are older workers who are working primarily for the benefits. I know many whose spouses have poor or no benefits, so the state employee stays employed for the benefits. If the benefits go, the workers will have no incentive to stay.

Admittedly, these older workers have higher use of the health care system which drives much of the cost of the health insurance. Rather than shift expense to state workers, I'd prefer to see the Gov pursue two changes that would save money. One, join with Oregon and Washington in a pharmacy benefit plan. The three states would buy pharmaceuticals together, and negotiate discounts. This is done by the Veterans Administration, and the Dept of Defense, and it works. Drug costs are much lower.

Two, build incentives into the health insurance. Charge more to smokers and people who exceed X body mass index, since smoking and excess weight cause so many health issues. I'd also like to see the Gov require that every state building contain showers, to encourage exercising for state workers.

I'm happy the Gov is trying to bring state worker pay into parity with the private sector. I hope he doesn't overlook opportunities to reduce the costs of benefits, rather than just shifting them to state workers.


Anonymous said...

"Younger workers aren't much interested in benefits." Hmm. Sounds like age discrimination. After all, it's well used, often used, and somehow legal. Just lay off all workers over 40 and there is no problem with benefits. Especially since so few younger workers use as many benefits as older workers.

Alan said...

Yep. A fairly common practice in business. Get rid of the expensive older workers, hire cheap young ones. Makes the bottom line look good in the short run, but the loss of expertise and institutional memory can hurt.