Pressure on Public Workers

By John Bebow | Published: February 25, 2009

We’ve warned repeatedly in this newsletter of a coming rift between public and private sector workers over differences in fringe benefits.

Consider:

  • Auto supplier Delphi this week received court permission to end health care benefits for 15,000 retirees. As noted in the Freep: Delphi’s bankruptcy lenders “have made it very clear that the company has a fiduciary duty to terminate the benefits,” Delphi’s lawyer, John Butler Jr., told the judge, according to Bloomberg News. “They simply will not support having discretionary liabilities of this magnitude on the reorganized balance sheet.”
  • After months of painful negotiations, county workers in Macomb County have conceded to wage freezes, increased health care costs, and some pension reforms. As reported in the Macomb Daily: “The president of the largest unionized group, the American Federation of State, County and Municipal Employees Local 411, said she was relieved that the grueling negotiating process was over. The givebacks, approved in exchange for the cancellation of layoffs, have caused high anxiety and anger among many rank-and-file members in all the unions. ‘I think the toughest part was probably the longevity (pay), and convincing people that this is not going to be permanent,’ said AFSCME Local 411 president Donna Cangemi. The new contract applies to 740 of Cangemi’s 900 members. In addition to a 3-year wage freeze, the new pact eliminates annual longevity pay that provided a bonus check ranging from $360 after five years to a maximum of $1,800 for those with 25 years or more of service. Some county commissioners argued the cuts didn’t go far enough… “Under the economic conditions that we’re in,” said commissioner Jim Carabelli. “I don’t think we should have employees at age 60, after eight years of working for the county, getting retirement and medical (benefits). There’s no place you can work where, after 25 years, you can retire with full benefits.” Even after the cuts, the county plans a millage increase to close a remaining deficit of $9 million — a price increase option that troubled companies like Delphi do not have.
  • A new study by a group called Health Care for America Now advocates a national health care solution ties together the pressures in the public and private sector. The study offers these sobering statistics: In Michigan, health care premiums are increasing 17 times faster than wages and “it’s impossible for businesses, governments, and families to keep up.” Nationwide family coverage sponsored by employees was $12,680 in 2008, with employers paying $3,354 of that out of pocket. From 2000 to 2007 in Michigan health care premiums increased 78 percent while wages rose by 4.6 percent. Short of a national health care solution, public sector employees continue to fare far better than private sector counterparts. The state employee health care family coverage costs $15,000 per year (almost 20 percent above the national average) while employee co-pays are 10 percent (less than half the national average).

    • “The private sector is moving in the other direction and government needs to get there quicker.”

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