Category Archives: Compensation

Rethinking the Role of the Profession on Public Sector Compensation

Source: Thom Reilly, Public Administration Review, Volume 73 Issue 1, January/February 2013
(subscription required)

…Instead of constantly defending postretirement benefits and arguing that public sector employees are paid less than their private sector counterparts, I would like to suggest that the public administration profession take the lead in reforming public pay and benefits. If public managers, along with elected officials and employee and union groups, do not comprehensively address this issue, fed-up citizens will head to the ballot box, and their remedies will likely be much more punitive and draconian than any legislation or policy changes. Our field has been slow to lead in this area.

The field of public administration should be at the forefront, driving the reform agenda and discussion. I suggest four areas in which we could move in this direction.

-Transparency. Our field must insist on transparency in the adoption of public pay and benefits, including an independent analysis of the current cost of any pay or benefit increase, as well as how future costs will be paid for and managed.

-Shared pension (and retiree health care) costs. Similar to Social Society and defined contribution plans, there should be equal employee/employer contribution. Allowing public employees to take reduced pay increases in lieu of sharing in the cost of pensions is problematic and allows for a good deal of gamesmanship. If the pension rate goes up 2 percent and the employee gets a 3 percent cost-of-living adjustment, does that mean he or she would otherwise have gotten 5 percent? The reality is that in many jurisdictions, the public employer has largely picked up employee contributions. Courts have generally held that existing pension benefits are protected, but increasing existing employees’ contributions is generally permissible, which can significantly address a portion of the current underfunding.

-Hybrid and cash-balance pension plans. Our field should take the lead in designing hybrid plans that combine elements of existing defined-benefit plans with a new 401(k)-style system in which money is invested on behalf of the retiree. The Federal Employee Retirement System has adopted such a model. Under cash-balance plans, workers get an individual retirement account to which both the employee and the employer contribute while the employer guarantees a minimum return. These plans have the potential to increase active participation of public employees in retirement planning while transferring some of the risk away from the taxpayer. Moving public employees to these type systems will also allow portability of these benefits so that they can follow workers if they choose to switch jobs and move to the private or nonprofit sector or to another public sector job.

-Retirement security for all. Our field can use the increased national attention on public employee benefits to expand the conversation on the need for retirement security for all Americans. According to data from the Federal Reserve, U.S. Census Bureau, and Internal Revenue Service, 25 percent of American families have no savings at all, and the average amount saved for retirement is $35,000. Our nation is not adequately prepared to deal with this retirement security crisis….

Compensation Matters: The Case of Teachers

Source: Alicia H. Munnell and Rebecca Cannon Fraenkel, Center for Retirement Research at Boston College, State and Local Pension Plans, SLP#28, January 2013

From the key findings:
• Many public sector pension plans have recently cut pension benefits for new hires, thereby reducing compensation.
• The analysis looks at how such cutbacks could affect the quality of teachers.
• One proxy for teacher quality is the average SAT score at a teacher’s undergraduate institution.
• The analysis finds that school districts with higher wages and/or higher pensions are able to hire teachers from institutions with higher SAT scores.
• These results suggest that cutting compensation for new teachers is not costless, as it will likely reduce applicant quality.

Receipt of Unemployment Insurance by Higher-Income Unemployed Workers (“Millionaires”)

Source: Donald Hirasuna, Congressional Research Service, CRS Report for Congress, R42643, January 23, 2013

…To inform the ongoing policy debate, this report provides information relevant to proposals that would restrict the payment of unemployment benefits to individuals with high incomes. Three primary areas that may be of interest to lawmakers are addressed: (1) the current U.S. Department of Labor (DOL) opinion on means-testing UI benefits; (2) the potential number of people who would be affected by such proposals; and (3) policy considerations such as the potential savings associated with such proposals, particularly in terms of federal expenditures. The latter two issues are discussed because a small percentage (approximately 0.02%) of tax filers receiving unemployment benefit income had AGI of $1 million or more in tax year 2009 based on Internal Revenue Service (IRS) data….

…This report addresses many of the questions that have arisen regarding such proposals, including the potential number of people who would be affected and the potential savings to federal and state governments. To place these proposals into context, the report provides a brief overview of the UI system and explains why receipt of UI benefits is not restricted based on income under current law. It then presents Internal Revenue Service (IRS) data on the distribution of household income and unemployment benefits for tax years 2008 and 2009 to shed light on the size of the group potentially affected by such proposals. The report raises policy considerations such as the potential impact of such proposals on federal expenditures, given the joint federal-state nature of unemployment programs. Finally, it summarizes relevant legislation in the 112th Congress…

Changing Sources of Income Among the Aged Population

Source: Barry P. Bosworth and Kathleen Burke, Center for Retirement Research at Boston College, Working Paper, WP#2012-27, November 2012

From the abstract:
This paper focuses on an explanation for the large shift over the past two decades in the composition of the income of the aged (65+), increasing the role of earned income and reducing the importance of income from their own assets. We find that the pattern of change is consistently reported in all of the major household surveys. The increase in the importance of labor income can be attributed to delayed exit from the labor force by workers at older ages. We attribute the increase in work time to a rise in the proportion of more educated workers who choose to continue working, changes within the pension system that previously encouraged early retirement, and a decline in the availability of retiree health insurance. The increase in work time is concentrated among the highest income groups and those with the most education, suggesting that it is largely voluntary. The fall in asset income can be traced to lower interest rates and a reduced propensity for the aged to convert their wealth to annuities. It does not reflect reduced wealth at older ages. A measure of the annuity equivalent of their wealth holdings suggests that there has been no decline for aged units. We also find only a weak relationship between changes in asset income and the decision to remain in the workforce.
See also:
Executive Summary

The Wages of Peace and Justice

Source: RoadMap, DataCenter and the National Organizers Alliance, July 2012
(purchase required)

Retaining and developing talented staff is vital to building strong, sustainable, and high-impact organizations. Yet compensation policies in small to mid-sized social justice organizations have been largely unexamined until now. In collaboration with DataCenter and the National Organizers Alliance, RoadMap has produced The Wages of Peace and Justice, a 2012 National Compensation Survey of Social Justice Organizations. This survey provides invaluable information about salary and benefit trends among community organizing and advocacy organizations and the extent to which these compensation policies reflect social justice values. DataCenter’s researchers alongside with DataCenter interns designed the survey, collected the responses, and analyzed the data to produce the comprehensive report. …
See also:
Executive Summary

Earnings of the Top 1.0 Percent Rebound Strongly in the Recovery

Source: Lawrence Mishel and Nicholas Finio, Economic Policy Institute, Issue Brief #347, January 23, 2013

From the summary:
There has been some discussion over the last year or so that the growth of income inequality—especially the trends favoring the top 1.0 percent—had been reversed in the recent downturn and, therefore, policymakers need not focus on the overall increase in income inequality since the late 1970s.

Newly available data on the labor earnings of the very highest earners are the first indicators available for 2011 enabling a determination as to whether this is indeed the case. These data allow an assessment of how wages grew for the various wage segments of the workforce, including the top 1.0 percent, during the recent downturn and the recovery through 2011. The data also allow us to update our analysis in The State of Working America, 12th Edition (Mishel et al. 2012) of wage growth since 1947—and especially since 1979, when wage inequality began to rise. The data cover annual earnings because they are drawn from the wage records in the Social Security system. Since these data are for annual wages and salaries, the trends identified reflect both changes in hourly wages and changes in annual hours worked (based on changes in weekly hours and weeks worked per year). …

Public-Private Pay Comparisons: An Analysis of Florida

Source: Robert E. Lee, Andrew M. Thompson, Compensation Benefits Review, Vol. 44 no. 5, September/October 2012
(subscription required)

From that abstract:
As state and local governments attempt to manage fiscal stress created by the Great Recession, the level of compensation received by public sector workers has become an increasingly debated policy issue. A significant amount of research exists that addresses national public sector compensation trends, but relatively few state-level studies have been performed. This analysis provides a preliminary analysis of public and private sector compensation in Florida. Using data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau, sector-level comparisons are made between public and private sector workers within the state with regard to compensation, age and education. This sector-level comparison is then supplemented by an occupational analysis of career fields found in both sectors. The sector-level analysis suggests public sector workers in Florida are, on average, not only better compensated than those in the private sector in aggregate but are also considerably more educated and older. The occupational analysis suggests that public sector workers in Florida are in general less well-compensated than private sector workers employed in the same field, even when older and more highly educated on average.

Vital Signs 2012: A National Nursing Attitudes & Outlook Report

Source: Jackson Healthcare and Jackson Nurse Professionals, 2012

From the summary:
According to our year-end 2012 national survey, nurses throughout the country give high marks to their jobs but anticipate challenges within the coming years.

Topics surveyed and included in this report:
– Employment demographics, including compensation
– Career and retirement plans
– Overall job satisfaction and drivers of satisfaction
– Preferred work environment
– Threats to job satisfaction
– Preferences for advanced practitioners

State Chart Book on Wages for Personal and Home Care Aides 2001-2011

Source: Paraprofessional Healthcare Institute (PHI), October 2012

From the abstract:
Provides a state-by-state look at trends in wages for PCAs, the fourth fastest-growing occupation in the country, and a key job title within the direct-care workforce. Prepared as a resource guide on wages for advocates and policymakers concerned with the direct-care workforce, the data underscore the problem of low wages for PCAs, factors which contribute to workforce instability and near-poverty incomes for this high-demand workforce.

Compensation of Foreign and Domestic Nurses in the US

Source: Richard McGregory, James Peoples, Journal of Labor Research, December 2012
(subscription required)

From the abstract:
This study tests the union skill homogeneity hypothesis by examining whether the erosion of foreign-domestic wage differentials reported in past studies varies by union status. We argue that the common practice of unions negotiating standardized wages promotes skill homogeneity that allows high credential-low unmeasured skill foreign nurses the opportunity to receive wages that match high credential domestic nurses without foreign nurses relying heavily on their labor mobility. Findings show returns to domestic experience accrue faster for foreign nurses belonging to a union compared to returns for non-union foreign nurses. In general, findings on pension coverage indicate foreign nurses also benefit from belonging to a union, while findings on employer sponsored health care benefits indicate a lack of any notable differences in the receipt of this compensation by foreign and union status.