Chamber notebook: Pensions, public vs. private, and punishing pay policy
June 15, 2012Glenn Hamer
In this week’s edition of the
Chamber notebook, I take a look at how public pensions are faring in voters’ minds;
job growth in the private sector vs. the public sector; and the state of U.S.
teen employment.
Voter tension over pensions
The Arizona Chamber of Commerce
and Industry’s research foundation two years ago sounded the alarm over the toll public
sector pensions were taking on the state budget. Arizona is not alone in its
attempts to rein in these pensions, as evidenced by recent voter decisions in
San Jose and San Diego.
In San Jose, nearly 70 percent of
voters recently chose to require current city workers to either scale back
their pension benefits or pay more into the system. In San Diego, residents
have seen that city’s payments to its pension system rise to equal nearly 20
percent of the city’s operating budget. Voters there chose to require new
employees to enter into a 401(k) style system rather than a traditional defined
benefit system.
The desire to preserve the core
government functions that are being crowded out by the increasingly large piece
of the budget pie being taken up by pensions is not a partisan issue. While
Wisconsin Republican Gov. Scott Walker has gotten the bulk of the ink over
public sector pension reform (and rightly so considering the recent recall
battle he won), Democrats like Chicago Mayor Rahm Emanuel, New York Gov. Andrew Cuomo and Rhode Island State
Treasurer Gina Raimondo have all called for major
pension reforms.
Raimondo’s reform package passed
through the Rhode Island Legislature with 77 of 94 Democrats voting in favor
for it. She also happens to have the highest public approval rating of any
Rhode Island statewide official, proving that making tough decisions on pension
reform doesn’t always have to come with voter blowback.
Arizona in 2011 instituted major
public pension reforms, though lawmakers and the governor
should remain vigilant to ensure that pensions do not take up an outsized
portion of the state budget.
As Chicago Mayor Emanuel said in testimony before the Illinois
Legislature’s House Personnel and Pension Committee last month, “Our taxpayers
can’t afford to choose between pensions and police officers, pensions or paved
streets or pensions and public health. Without pension reform, we’ll be forced
to mortgage our children’s future to pay for our past.”
President’s call for public
sector jobs affects private sector
Perhaps the most disturbing
aspect of President Obama’s recent press conference where he declared that the
“private sector is doing fine,” is his apparent failure to appreciate that
there is a direct effect on the private sector that would result from his
desire to see a boost in public sector hiring.
A recent Arizona Republic editorial nailed it when the authors wrote
that, “…the wealth required to maintain a socially acceptable level of public
services is generated through taxes imposed on private industry.”
Minimum wage figures into
rotten teen employment rate
If your teenager is spending more
time on the couch this summer than in earning a few bucks at a part time job,
you’re not alone. A recent Associated Press headline reads, “Summer jobs wane for U.S. teens.”
An analysis just released by the Employment
Policies Institute finds that the teen unemployment rate is averaging above 25
percent in 18 states and the District of Columbia.
The overall economy plays a big
role in this, obviously, with older workers taking up the jobs requiring fewer
skills that would usually be filled by teens.
But your teenager can also lay
blame on minimum wage laws. Arizona’s minimum wage law, which calls for annual
automatic pay raises based on an increase in the cost of living, is bad news
for employers and job seekers. Not surprisingly, Arizona trails only the
District of Columbia in areas of the country with the highest numbers of teens
unable to find work. The automatic pay raise in Arizona's law is a piece of
public policy that deserves serious reconsideration.
On a national level, Iowa Sen.
Tom Harkin and Illinois Rep. Jesse Jackson, Jr. have introduced legislation to raise the federal minimum
wage rate to just under $10 per hour.
They should call their bill the Teen Unemployment Promotion Act.
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