State Workers: Inflation vs COLA Year over Year

Year	Inflation %	CA State Employee COLA’s	% REAL Wage	CA Private Sector Wages	CA Private Sector % Change	% Change Real Wage
1999
2000	3.4	0.0	(3.40)	3.4
2001	1.6	0.0	(1.60)	37730	1.6
2002	2.4	0.0	(2.40)	39640	5.06
2003	1.9	0.0	(1.90)	40930	3.25
2004	3.3	0.0	(3.30)	41980	2.56
2005	3.4	0.0	(3.40)	42510	1.26
2006	2.5	3.5	1.00	44180	3.92
2007	4.1	3.4	(0.70)	45990	4.09
2008	0.1	0.0	(0.10)	48090	4.56
2009	2.7	0.0	(2.70)	49550	3.03
Total	25.4	6.9	(18.50)	32.73	7.33

The above data indicates the following:

I. California Private Sector Wages: Wages in California’s private sector increased 32.73% in nominal terms for the 10 year period 2000 – 2009. Inflation during this period was a modest 25.4%. Therefore, California Private Sector Wages increased 7.33% in REAL terms for the 10 year period ending 2009.

II. California Civil Service Wages: Wages for California Civil Service Employees increased only 6.9% in nominal terms for the 10 year period 2000 – 2009. After adjusting for inflation, California Civil Service Employees lost (18.5%) of their REAL wages for the 10 year period ending 2009.

Questions:

• Why have California State Worker’s accepted the largest REAL pay decreases (-18.5) for Civil Service employees since 1945?
• How low can State Worker’s go? Current contract negotiations will cut REAL pay by at least another (-15%).
• Are you looking forward to retirement? (Retirement payout is based on REAL wages)

Hypothesis: California Civil Service REAL wages have declined because of a weak labor market, (political) discrimination toward Civil Service Workers, decreased labor productivity for California State Workers, and because of California’s fiscal crisis.

Economic Analysis: The above data demonstrates that workers in California’s public sector (state employees) are willing to accept real wage decreases, while workers in California’s private sector have enjoyed real wage appreciation. Labor market wages are a function of many variables including labor productivity, supply/demand for labor, collective bargaining initiatives, and other variables endogenous and exogenous to the labor market:

A) Weak labor market: We reject the hypothesis of a weak labor market, because the above data clearly demonstrates a strong and robust labor market. Indeed, nominal private sector wages easily outpaced inflation for the 10 year period ending 2009.
B) Discrimination toward Civil Service Workers: There are two classes of Civil Service employees within California. 1) Municipal employees (city and county) within California have enjoyed wage increases equal, and in some cases better, than California’s private sector employees. 2) California State employees, who have received the largest REAL pay cuts ever levied against Civil Service employees since 1945. Based on the wage differential between Municipal and State civil service employees, we must reject the hypothesis that there is overt discrimination toward Civil Service Employees, because at least some classes of civil employees faired as well or better than similarly situated private sector employees.
C) Labor productivity has increased substantially for nearly every classification of skilled and non-skilled employees in the USA. Labor productivity increases have historically been met with appreciation in REAL incomes. Despite substantial increases in labor productivity for the 10 year period ending 2009, California State Worker wages have declined in nominal and real terms, even though California State Workers are ranked as the 4th most productive in the United States (based on the number of State Worker’s per capita). For these reasons, we must reject the hypothesis that declines in labor productivity explain the decline in REAL wages for California State Employees.
D) California’s fiscal crisis: Every state has experienced fluctuations in total revenue for the 10 year period ending 2009. However, temporary fluctuations in State revenues for other states did not lead to extreme cuts in REAL wages for civil employees in those states. And we must consider that nominal total REVENUE has increased 7 of the last 10 years in California. Indeed, the data shows that many other states have been harder hit. Therefore, we reject the hypothesis that California’s fiscal crisis is a major contributor to the reductions in Civil Service REAL wages.

CONCLUSION: Wage inequities between California’s public and private sector labor markets reflect the collective valuation of each participant’s individual opportunities, organizational inertia, and specific factors endogenous to California State Civil Service Employees.

Citations:
Bureau of Labor Statistics, www.bls.gov: Consumer Price Index; Wages; Productivity.
Bureau of Economic Analysis, www.bea.gov : State revenues and expenditures; Personal Incomes; State Employee data.
California State Controller’s Office, http://www.sco.ca.gov/ard_state_cash.html : California revenues and expenditures.
State Civil Service Rankings 2009, http://www.ccsce.com/PDF/Numbers-Dec09-Govt-Employees-Rank.pdf

{The above information and analysis is provided by SEIU Union Steward Richard Colter (B.S. and M.A. Economics, Ball State University). Please do not respond directly to Richard Colter; however, you are encouraged to take action, and become involved with SEIU. Please forward this message to all SEIU employees.}