Monday, December 26, 2005

Unions and public attitudes

Kevin Drum, mainstream liberal though he may be, isn't shedding any tears for the New York City's striking transit workers, given their relatively robust wages and benefits:
An average salary of $55,000 a year? That's fine. Sure, it's pretty good money, but my guess is that most people are OK with it anyway. But retiring at age 55, with 25 years on the job, at half salary? I support unions and I support the notion that Americans work too much, but even so that strikes me as indefensible. After all, most people have working lives of 40-50 years, and it's hard to imagine that they have a lot of sympathy for a deal like that. I have to confess that I don't.
One commenter objects to Drum's reservations about the generosity of the workers' retirement program, saying:
Holy Cow! 25 years on a job with a $27,000 a year pension is indefensible? Do you think ANYONE can live on $27K in New York City? Yeah, you're supposed to save, too, but at $55K with two kids in New York that's not so easy.
I basically agree with the commenter that 27 grand is not a lot of money in New York City. But someone who retires at 55 presumably doesn't need to live only on that $27k. Most people of that age are healthy enough to continue to work, at least part time. Indeed, if one has two kids, the decision to stop working itself looks pretty questionable. Moreover, substantial percentages of 55-year old New York City transit workers will undoubtedly be married to spouses who work, too.

I think one item that needs to be mentioned in discussions of cost of living -- especially with respect to expensive blue state cities like New York -- is one's housing situation. The 55 year-old who purchased his home at age 30 (and has since managed to resist the temptation to tap into home equity) is in a far better position to retire early than the person who purchased his home in 2002. Housing is really the dominant factor in the cost of living of expensive metro areas. The difference in the cost of living for the average (say) Brooklynite who purchased his home in 1985 with a $120k mortgage, and his cousin in Queens who bought a home in 2002 with a $385k mortgage, is huge. The former can live not much more expensively than somebody in Little Rock or San Antonio. The latter cannot.

Ultimately, discussions about public sector pay should probably focus on how much the taxpayers (or farepayers) need to pay to attract and keep highly qualified people. The public sector shouldn't overpay any more than private firms should. But if they underpay, service could suffer, and indeed, so could public safety.

I think to a great extent what we're seeing in New York is the effects of the increasing fraying of the employer-provided safety net, and its spillover effects into the public sector. Simply put, what NYC transit employees get from their employer, especially in terms of job security, doesn't look like such a bad deal, even to private sector workers who make a lot more money (but who are subject to a layoff notice at the whim of a board meeting). The job security premium that many public sector workers enjoy is itself worth a lot of money, and in brutal market terms probably means their services can be had these days for less cash and benefits than would otherwise be the case.

Think the NYC transit authority would really have much trouble finding 20 or 30 thousand qualified workers in this day and age, especially in a labor market as vast as that of the tri-state area? It's pretty doubtful, and the union knows it. Everybody knows it. These jobs have long waiting lists of people who would kill to be hired. And that -- and not the threat of judicial fines -- is really why this strike failed


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