Tuesday, November 01, 2005

Trading public employee raises for productivity improvements

From Otis White's Urban Notebook at Governing.com, which still doesn't have permalinks, so here's the whole thing:

Make Your Own Raises - The Productive Mayor

We don't endorse candidates, but there's a good reason for non-residents to wish another term for New York City Mayor Michael Bloomberg. He may show cities everywhere how to do the seemingly impossible: Raise city worker salaries, improve services and, in time, lower taxes.

Bloomberg's secret: productivity. In his negotiations with city workers during his first term, the mayor has made a simple, consistent demand: You can have the raises you create by doing your work faster, better and with less labor. "The mayor has always been very strong in saying that (city) workers should be paid more," one of Bloomberg's aides told the New York Times. "We just need to find ways to pay them more. Given the fiscal realities, the only way to do that is focus on productivity."

Example: Bloomberg recently agreed to a 17 percent raise for sanitation workers over the coming four years and three months, the handsomest raise New York has agreed to in years. But the union had to agree to use one-person trucks for some pickups and stretch out other routes so that crews hauled more garbage. "The trick of this contract," the head of the sanitation workers union told the Times, "was you had to generate your own wage increases."

Bloomberg has offered the same proposition to teachers, police officers and office workers: You can have the savings you create. (It is hoped that, in time, the taxpayers may enjoy some of these savings as well.) "Every deal that we have cut so far has had a productivity component with internal savings," another Bloomberg aide explained. "The message is clear from the mayor: If you're willing to come to the table and be flexible and creative and come up with some savings, you can get a terrific deal."

It helps, of course, that Bloomberg knows how to manage large, complex organizations. Before being elected mayor in 2001, he founded and managed a Fortune 500 corporation. As a result, this mayor came to office understanding the power of productivity: It allows companies to offer goods and services at lower prices, while paying higher salaries to employees and generating greater profits for shareholders.

But few other mayors grasp the power of productivity or are as determined in demanding it in labor negotiations. Many city officials start out requesting work changes but cave if the unions are willing to settle for lower raises. Not Bloomberg. He wants to give higher raises, but only if the unions help create them through labor savings.

Footnote: There are plenty of critics who think that, despite his emphasis on productivity, Bloomberg is settling for too little from the unions. And it's true that the contracts he has approved haven't always been paid entirely with savings. But the head of one city budget watchdog group remembers suggesting years ago that city raises should be financed with productivity savings. "People used to look at us like we're crazy for saying that," he told the Times. "Now it's accepted that that's how it's going to be."
Seems kind of obvious in retrospect, doesn't it? Surprising nobody's talked about it before now (at least nobody I'm aware of). Results might even be more impressive in a city like Houston with weaker unions. Anybody want to pass this on to Mayor White?

5 Comments:

At 8:02 AM, November 02, 2005, Anonymous John Sterling said...

Tory, you should check out this piece in the City Journal here on the inexorable creep of public sector unionized wages.

 
At 8:14 AM, November 02, 2005, Blogger kjb434 said...

^^^
Just more evidence that unions in the modern times are not necessarily needed.

It was important when working environments were deplorable. Now it's just a money grab.

I think Mayor White (a businessman himself) would be open to the concept.

 
At 8:10 PM, November 02, 2005, Anonymous Anonymous said...

Tory,

wonderful article. thanks for the reference.

yet another rice alum

 
At 9:48 PM, November 03, 2005, Blogger Adam said...

Tory,

Happy to report that the White administration has been after this one for quite some time. One of the first things that I worked on, going back to February 2004, was pay raises for City of Houston Solid Waste employees.

These folks cut their workers comp costs by almost 60%, as I recall, and had some of the lowest sick time and unscheduled leave statistics in the city. (And they'd gone years without a pay raise.) The department size had also dropped dramatically since Houston went to mechanized, one man trucks.

More skilled employees +
Increased productivity +
Managers smart enough to appreciate it =
Pay raise.

 
At 8:37 AM, November 04, 2005, Blogger Tory Gattis said...

Great to hear it!

 

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