Everyone should breathe a sigh of relief. Or should they?

Santa Clara County’s nurses, librarians, janitors, dispatchers, and assorted other workers belonging to SEIU Local 521 will not be going on strike after all. At least not yet. Late night negotiations have produced a deal that’s being sent back to the members.

The exact terms of this latest deal are not clear. But according to sources at the San Jose Mercury, the level of pay and benefits was only one of the issues being negotiated. Another key issue was work conditions – in particular, excessive overtime and excessive workloads.

The issue of pay and benefits is directly connected to the issue of overtime and workload, of course, because when employees are paid more than the budget can accommodate, it is impossible to hire more employees. Here is a look at how much key members of this union are making:

Santa Clara County Public Employees
Average Total Compensation by Select Job Title, 2013
20150630-UW-santaclaracomp1

Unfortunately, this data, which comes from the California Office of the State Controller’s “Government Compensation in California” database, has not been updated yet for 2014, so it is possible that the situation has changed. But using these numbers, a few things are immediately apparent:

(1)  These workers are very well paid. The average nurse collects a compensation package worth $183,822 per year. The average janitor collects a compensation package worth $76,309 per year. By comparison, according to the U.S. Census Bureau, the median annual earnings for a full-time, year-round civilian employed worker in Santa Clara County in 2013 was $68,586, one of the highest in the nation.

(2)  These workers are not working extreme amounts of overtime. The 2nd to last row on the above table is calculated based on overtime pay, divided by 1.5x (some overtime is paid at 2.0x so this is, if anything, understated), divided by base pay (some overtime rates are calculated on base pay plus other pay, so this is also understated). The group that works the most overtime are the dispatchers, who, in a 40 hour week, on average are turning in an extra 6.0 hours of work. That equates to 72 extra minutes a day, i.e., zilch from the perspective of any start-up entrepreneur.

(3) The cost of pay and benefits are making it difficult to hire more workers. These workers are typically receiving a 2.5% at 55 pension, meaning, for example, if the average nurse retired after 30 years making $128,117 (it would be more than that since that figure represents the average, not the final – again, we’re understating), at age 55 they would get a starting pension of 2.5% times 30 times $128,117 = $96,088, with annual cost-of-living increases, for the rest of their lives. The employer’s health insurance payments, over $15,000 per year, are roughly the same across job categories regardless of average income. This means the benefits overhead for the relatively low paid employees, the janitors, is a staggering 58%. In the case of the nurses, who are the highest paid among these four groups, it is still 28%. For dispatchers, who have to work a measurable amount of overtime, benefits overhead is 42%.

Without having more detailed knowledge of the situation in Santa Clara County, it isn’t fair to indulge in excessive editorializing on this specific case. But the unions who represent Santa Clara county workers, and all government workers, have become accustomed to comparing their rates of pay to each other. In Santa Clara County, the unions representing miscellaneous workers see how much money is going to unionized public safety employees and they become resentful. The public safety unions continuously identify cases where, somewhere, a local government agency is paying their police and firefighters more than they’re making, and they foment resentment that leads to politicians granting pay increases to achieve parity. And the circle goes round and round. And pay goes up and up.

Meanwhile, in the real world of private sector work, the idea of an employer paying $15,000 per year or more to cover an employee’s health insurance plan is almost unheard of. In the world of salaried employment, the idea of working a mere 40 hour week (and accruing 4+ weeks a year of paid vacation) is almost unheard of. And the idea of retiring at age 55 with a pension (with cost-of-living adjustments) that starts at 75% of one’s final year’s earnings is preposterous.

California’s government workers, especially those in the Silicon Valley, point to the wealth being created by start-up companies who make it big, minting dozens if not hundreds of multi-millionaires, and somehow they think that’s the norm. But it isn’t the norm. The norm is a median private sector worker income of $68,586 per year; a median household income of $91,702 per year. The norm is an employer paid benefits overhead of around 15% (9.0% Social Security and Medicare, at most another 6% for health insurance and a contributory 401K). Not 28%. Not 41%. Not 42%. Not 58%.

California’s government workers deplore the excessive cost of living, especially in the Silicon Valley. But instead of fighting for more wages and benefits for themselves, they might find the vision, the courage, and the selflessness to identify and fight for policies that would lower the cost of living for everyone. Nobody can afford a home, because environmentalists have successfully declared all open space to be sacred. Ordinary workers struggle to pay for gasoline, electricity and water, because development of these resources has been excessively restricted for decades. Across almost every critical household expense, add education and healthcare to the list, ordinary workers pay far more than they would have to in a more competitive economy.

The aspirations of unionized government workers are understandable; the rhetoric of their union leadership is compelling. But these government union leaders don’t live in the real world, and worse, they don’t appear to even care about the real world. Because unlike private sector unions, government unions negotiate with bosses they elect, for a share of taxes that are taken from citizens, not precariously earned by a private company. And they use their unique power to exempt themselves from the economic challenges facing the rest of the citizens they are supposed to serve.

When that is fixed, we may truly breathe a sigh of relief.

*   *   *

Ed Ring is the executive director of the California Policy Center.

10 Responses to Strike by Santa Clara County Workers Averted

  1. Tough Love says:

    Ed, the pension figures for the Nurses look wrong (too low) …clearly much lower (as a % of base pay) when compared to the other groups.

    Do nursed not have DB pensions ?

    Are they less generous than the other groups’ pensions?

    Actually, ALL of the pensions (as a % of base pay) look low, none being over 21%. The is no way even the level annual 21% of pay (+ ee contributions) would fully fund their promised pensions (with generous formula factors, young full/unreduced retirement ages, and post-retirement COLA-increases) over their working careers using reasonable/appropriate assumptions).

  2. BOPRN says:

    ED,

    First, happy 4th of July.

    I can address the ‘Nurse’ pay you speak of. The base pay of $128,117 comes to $61.60 per hour. This amount is the going rate in the greater S.F. area. The ‘other pay’ of $7,832 is actually on the low side, as nurses are often paid as much as $8/hour extra to take grave yard shifts (that could be as much as $17,000 year ‘other pay’). The ‘Overtime’ pay of $12,065 at an OT rate of (rounded) $90/hour is only 134 hours per year, or 2.5 hours a week. The health insurance offered is the same as what a RN working in any S.F. area hospital would make (that said, the RN who works at the hospital also enjoys no copays). Regarding the ‘retirement pension’ of $18,592 – that could be compared to a S.S. & 401k match. So, in the end, I’m a bit lost as to where the problem is. Can’t speak to the Librarians, Janitors, Dispatchers, as my experience was in law enforcement and medicine (sometimes together in the same job).

    The reason your ‘retirement pension’ is off is that you are using 2.5% @ 55, when these non-safety positions get 2% @ 65 (typically). That is also throwing TL’s analysis off.

    As always, enjoy being the counter-point to your hyperbole. That said, you have the best hyperbole of any pension basher.

    Feel free to email me, as I have a bit of scoop for you if you are interested.

    • Tough Love says:

      I’m guessing that the nurses get Social Security so to compare the $18,592/$128,117 = 14.5% of base pay in Taxpayer pension contributions to what a Private Sector workers gets (rarely more than 3-4% into a 401K Plan) is more than just disingenuous … it’s intentionally misleading.

      My point was that there is no way that a level annual 14.5% of pay (or even the 21% of pay for 2 of the 3 other groups) is large enough to fully fund these workers pension over their working careers. ….. not by a long shot. With the young full/unreduced retirement ages and COLA increases, a level TOTAL annual contribution of 40-50% is needed, so the Taxpayers are on the hook for that level annual 40-50% of pay LESS the workers own contributions, which are rarely even 10% of pay.

    • Robert Fellner says:

      I don’t spot any hyperbole in Ed’s post. Your comment is essentially that most nurses in the San Fran area make an average $185,000 a year in pay and benefits.

      Note: most nurses are public employees.

      I’m not sure how that refutes Ed’s claim that this is very good pay, and much more than the average private sector worker gets.

      Your comments on pensions are inaccurate.

      All, not some, not most, but all nurses in Santa Clara County are in the 2.5% @ 55 pension formula. As are all other non-safety employees. Safety employees are in the 3% @ 50 formula.

      This has been the case for ALL Santa Clara County employees for at least the past 25 years.

      Your claim of them being in a 2% @ 65 formula is wrong. Zero are. That formula does not exist.

      New non-safety employees hired after 2013 would be in a 2% @ 62 formula. Given Ed’s analysis is for the 2013 year, however, this is not a factor.

      TL’s comments on pension VALUE have been correct from the start. They have nothing to do with the pension formula but with how defined benefit plans work and how the value they provide is much greater than the employer’s annual cost.

      The numbers cited in Ed’s post are what Santa Clara County paid to CalPERS in 2013, which does not reflect the full value of a defined benefit plan, but is merely the annual required contribution for that year.

      I’m not going to get into the details of this, but an easy example to understand why this is wrong as a measure of compensation/value is to look at the University of California.

      From 1990-2010 UC employee Marvin Marcus and his employer contributed 0% towards his retirement. In 2011, he retired and began receiving a base $337k pension. I trust it is sufficiently obvious that if we did a analysis of pay and benefits on this – or any UC employee – it would be a pretty colossal mistake to value his $337k a year pension as worth 0% of wages.

      TL – this is exactly what that one Rutgers associate professor Keefe does, by the way. Probably why the SEIU continues to fund his work and why his entire CV is “[Insert State Name Here]’s Public Employee are NOT Overpaid.”

      • Tough Love says:

        I am aware of Keefe’s blatant “mistakes” as outline point by point by Jason Richwine here …. http://nepc.colorado.edu/files/Biggs%20Reply%20to%20Keefe%20review.pdf

        Keefe’s continued use of what public Sector entities “contribute’ in a given year as a proxy for the true value of that year’s accruals is so obviously wrong, disingenuous, and directionally biased that I directed one of my comments to his University employer, asking how far afield should Professorial freedom take us before the appropriateness of continued employment is reconsidered.

  3. S Moderation Douglas says:

    ” Without having more detailed knowledge of the situation in Santa Clara County, it isn’t fair to indulge in excessive editorializing on this specific case.”

    LOL!!
    Popular sit-com:

    Wife: “I hate to say this, but……………..”

    Husband interrupts: “Just how much do you have to “hate to say” something before you actually don’t say it?”
    —————————————-
    First, according to the BLS, the average wage in Santa Clara County is over $100,000 a year ($1,972 a week)

    http://www.bls.gov/regions/west/news-release/CountyEmploymentAndWages_California.htm
    ———————————————————-
    Ed Ring:

    “These workers are typically receiving a 2.5% at 55 pension,”

    “typically” may be misleading. Existing (pre 2013) nurses have that formula, but those hired after 2012 are all in the 2%@62 formula.

    Which means a nurse retiring at 55 with 30 years service would receive just under $50,000 a year (39%), not $96,000.

    Big deal? We won’t see any savings for 30 years?

    Maybe, or maybe the turnover rate is over 10% a year, so the number of nurses under the lower formula is growing rapidly, and most of the existing nurses under the previous formula will be long gone in ten years or less.
    —————————————
    BOPRN,

    I didn’t check all the contracts, but Ed is correct about the 2.5% @ 55 (for nurses, at least. I assume most other misc had the same deal)

    The county apparently opted out of Social Security in 1981. Typically that is where you see the richer formulas like 2.5%@55.

    It would be interesting to find out if many cities and counties now forced by PEPRA into 2% @ 62 will now go back into Social Security.

    • Robert Fellner says:

      Doug cited a statistic that is false; I am stunned.

      You’d think, given Ed links to the median combined household income of $90k, you’d at least give some pause to how the average wage could be higher than the combined household income.

      The BLS reports the median earnings for a full-time, year-round worker in Santa Clara was $68,586 in 2013. That link is also in Ed’s article.

      These are the relevant, comparable numbers.

      The data you cite is not.

      It simply adds up the total wages paid and divides them by total employees. That is not a good predictor of what the average worker receives.

      The BLS reporting the median earnings is a good predictor of what the average worker receives. This data comes from individual employees’ actual earnings. Not gross receipts that sum total wages paid in the county divided by total number of employees.

      Here’s an example of why.

      There is a 10 person firm. The CEO makes $1M and the 9 employees make $75k.

      The median earnings in this firm is $75k. That’s what most people make.

      The averages wages paid, however, would be $167,500. That’s not what most people make, and 90% of the firm would take objection to you acting like since they “already make, on average $167,500” are in no need of a raise.

      • S Moderation Douglas says:

        Thank you Robert,

        Have you heard any rumors or plans about how the mandated 2% @ 62 formula will affect those cities and counties not now in Social Security?

        I haven’t looked closely, but I understand some local governments have already switched to defined contribution systems, but are not now in SS. Under the section 218 agreements, will these local governments still be allowed to opt out of SS?

        • BOPRN says:

          The 2013 pension changes that Jerry Brown negotiated with various unions were something that was needed. Currently (as rumor has it [for legal reasons]), JB is negotiating ‘years forward’ with the largest safety class in the state. The change would be a move from 3%@50 to 2.5%@55. Might happen, might not, but will be interesting to watch over the next 2 or 3 weeks. The changes JB made in 2013 he received no credit for, just more bashing from the lunatics. If he manages to get the 3%@50 pension changed, there will be more bashing from the lunatics with proclamations of “not enough”. We will always have to hear about how a ‘Republican could do it better’. While I lean Republican, I have yet to see someone do a better job than JB is doing – but then I have a nice balcony seat to watch the action from, while the spouting lunatics are not even in the theater.

    • Tough Love says:

      Quoting S. Moderation Douglas ….

      ““typically” may be misleading. Existing (pre 2013) nurses have that formula, but those hired after 2012 are all in the 2%@62 formula. Which means a nurse retiring at 55 with 30 years service would receive just under $50,000 a year (39%), not $96,000. ”

      SURE …. so we should simply accept (for those hired BEFORE the 2013 pension formula change) that for all FUTURE years of service (which for some may be 30 more years) we will CONTINUE to grant pension accruals based on the 2.5%@55 formula that is undeniably unnecessary, unjust, unfair (to the Taxpayers) and very clearly unaffordable ???

      I don’t think so. California is in DIRE financial need of Constitutional changes to allow pension accrual rate reductions for the FUTURE Service of all CURRENT workers ….. just as is BOTH legal and routinely done in Private Sector pension Plans.

      Even YOU (the most one-sided and pro-Public-Sector commentator on this blog) know doing so is absurd, even though ….. “but they were promised”.

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