I have a modest proposal for Bloomberg. That is Bloomberg LLC, the business media company. I propose that it implement a huge pension enhancement for existing staff and those already retired. Huge enough to push pension costs up to 25 percent of wages, force it to dramatically increase what it charges its customers, and cut back on some services. Then, since its labor costs would be high, I suggest that the company drastically reduce starting salaries for all new hires, and their benefits, to the point where virtually everyone else in their industry in the New York area pays more to those they are recruiting.
How do you think that would affect the quality of service at Bloomberg after a few years, when enough of the existing staff has taken advantage of the enhanced retirement benefits, and the company has hired whoever it could get to replace them? How do you think it would affect the stock price?
Well Bloomberg LLC is unlikely to implement such a proposal. Like most private companies, it knows that it is the future employees it will need to hire who must be attracted for the company to continue to function. So most private companies practice age discrimination, if at all, the old fashioned way – against existing employees. Some have been eliminating health benefits for retirees, and trying to shift to cash value pensions to screw those within a decade of retirement, while structuring their compensation to benefit the young.
It is the City and State of New York, under Republicans and Democrats alike, that stick it to the young by pushing through even richer pensions for those cashing in and moving out whenever the stock market is up (as in 2000), and then cutting pay and benefits for new hires soon thereafter (as in the latest round of city labor contracts), over and over again. It’s yet another way the unions, and our elected officials, sell out the future.
I had hoped Mayor Bloomberg would know better. But pension costs are soaring as a result of the enhancement passed by the state legislature without a single “no” vote in 2000, and Giuliani-era contracts handing out benefits to those with seniority — with the costs deferred until the next administration. So the current Mayor has played the same game, cutting the pay of most new public employees by 15 percent and police and fire by 40 percent, and giving new teachers lower pay (but agreeing to look into having existing teachers retire earlier). I was going to vote for the Mayor’s re-election, but after those deals I voted against him, and encouraged others to do the same.
At the rate staff turns over, any negative effect on the quality of policing, fire protection, teaching, and other services as a result of less qualified and less motivated new hires won’t hit until he is out of office, and then who cares? Not him, it seems. But then again, he has private security in a doorman building and sent his kids to private schools in any event, and he has houses elsewhere if crime gets out of hand.
Just this week I read that he is trying to convince DC37 to accept higher wages (and thus pensions) for existing employees in exchange for another cut in compensation for new hires, though yet another lower-benefit pension tier (the fifth! Actually the sixth – post 1995 hires pay more into the pensions than those hired earlier in Tier IV). Yet another generational inequity.
Now I agree that if people are living longer, they should work longer, and there needs to be some equity between the private sector, where virtually no one gets defined benefit pensions anymore and half get no retirement plan at all, and the public sector. Because the right to be paid for nothing in the not too far off future doesn’t pay the rent today, rich pensions combined with low starting salaries have left the public sector with both a less qualified and motivated labor force and high labor costs. But why should the savings from a cheaper pension for new employees go to existing employees, and not solely to those same new employees in higher cash pay? Especially since the new hires are getting 15 percent less as it is (40 percent for police and fire)? In fact, why shouldn’t all the money available for new contracts go to offset past injustices and equalize total compensation for those hired at different times, regardless of how it is to be split between current pay and pensions?
It is the unions, which couldn’t care less about public services – because their best paid members live in the suburbs and have one foot in Florida – that should be trying to talk Bloomberg into such deals, not the other way around. Especially since the city seizes money from the paychecks of those disadvantaged new hires, and turns it over the unions, whether they like it or not.
I was working in budget at New York City Transit when the last DC37 contract, with the 15 percent cut for new hires, when though. It was the first recent atrocity, though others would follow. I showed the union rep articles on private companies whose unions agreed to cut or eliminate health insurance for retirees in exchange for bigger raises or more job security for themselves, and said that it what should happen to them in the future, when they were retired. And then what would those in older generations, who benefited at the expense of new hires, say? It isn’t fair? I also encouraged my boss to privatize and hire more consultants, now that NYCT is offering less competitive salaries for new engineers. Finally, I wish someone (Eliot Spitzer perhaps?) would sue the unions for breaching their fiduciary duty to new hires, and get them exempted from union dues. Of course the unions could argue that the new hires accepted the lower compensation, and are doing less work in exchange, so it’s fair to them (if not to those receiving public services).
I actually would like to see Bloomberg LLC implement my modest proposal. But I want the company to do it now – before Mayor Bloomberg sells his holdings. And then I want to be able to invest in its competitors. It’s easier do that than move to a competing state which has lower taxes, better services, and more competitively paid (while they are working, not once they stop) public servants.