Scranton mayor slashes pay for all city workers to Minimum Wage

[Jamie B]

http://news.yahoo.com/blogs/lookout/scranton-minimum-wage-city-police-firemen-140229063.html

Last week, Mayor Doherty abruptly cut pay for all 398 city employees to $7.25 per hour, saying it was the only way to keep Scranton solvent.

According to the paper, Scranton—which faces a $16.8 million budget deficit—had $133,000 in cash on hand as of Monday, but owed $3.4 million in various vendor bills, including health insurance.

Evidentialy a result of a budget dispute between the Mayor and the City Council.

While the new wages are a creative solution, it will probably not survive the union lawsuits.

[zxcvbob]

His own pay too?

[Perd Hapley]

They'll all get jobs selling paper.

[Jamisjockey]

The wages aren't usually the problem. It's the ridiculous benefits and retirements many of these city workers get after sometimes as little as 10 years of service.

[cassandra and sara's daddy]

its a democrat mayor too

[makattak]

its a democrat mayor too

Who wants to raise taxes. When you add that part, it all makes sense.

[Jamie B]

The wages aren't usually the problem. It's the ridiculous benefits and retirements many of these city workers get after sometimes as little as 10 years of service.

Bingo!

[Fitz]

Sounds like a good way to quickly lose some skilled folks. IT people, for example

[Tallpine]

Figuring out which services really are essential would be too hard, I suppose ...   

[Azrael256]

Minimum wage is $7.25 an hour?!?!

[MechAg94]

Minimum wage is $7.25 an hour?!?!

I thought it was higher than that in a lot of places. 

http://www.latimes.com/news/local/la-me-san-bernardino-bankruptcy-20120712,0,2433019.story
Looking at this article about San Bernadino, they could solve some of their money issues by moving out of that fancy building and putting it up for lease. 

[HankB]

The wages aren't usually the problem. It's the ridiculous benefits and retirements many of these city workers get after sometimes as little as 10 years of service.

Wrong - it's Bush's fault.

California's union contracts that allow government workers to retire at age 50 and continue to collect 90% of their pay for life (with annual cost-of-living adjustments!) have NOTHING WHATSOEVER to do with the fiscal difficulties being faced in that state.

[mtnbkr]

Looking at this article about San Bernadino, they could solve some of their money issues by moving out of that fancy building and putting it up for lease. 

Only if there's someone who'll lease it from them.  Hell, it may cost the govt more to move out of that building and into something else than to remain there because the alternatives may not be much cheaper and there's the cost of moving and setting things up to meet your needs.  It's not as easy as just moving people into new digs.

Chris

[roo_ster]

Only if there's someone who'll lease it from them.  Hell, it may cost the govt more to move out of that building and into something else than to remain there because the alternatives may not be much cheaper and there's the cost of moving and setting things up to meet your needs.  It's not as easy as just moving people into new digs.

Chris

IOW, "sunk costs are sunk."

[RoadKingLarry]

The dominoes are starting to fall. First the cities, then the states.

[mtnbkr]

IOW, "sunk costs are sunk."

I don't believe this qualifies as a sunk cost per se.  Only if the building is owned and fully paid-for (ie no lien) by the govt would the cost of the current residence be a sunk cost.  Even then, it's not the cost of that building that would keep them from moving, but the amortized expense of moving combined with the recurring cost (a lease) of the new location minus any income realized by leasing or selling the current property.

The bottom line is that, given the current economic climate, it probably isn't possible for them to vacate that property and improve their bottom line in the near term.

Chris

[RevDisk]

I would not be pay if my pay was substantially cut with no notice for work already performed. If I have a contract for $X per hour or X salary, I expect to be paid for work performed. I would certainly not stay, and I would try to sue for unpaid wages. 

A businessman once told me, "Never mess with a man's money, and never mess with his wife."  Sound advice.

[HankB]

The dominoes are starting to fall. First the cities, then the states.

The problem is that government's sheer size is unsustainable by taxes on the private sector. I remember seeing an economic analysis that said the practical limit of government's size (or cost) is about 19% of the total gross national product; we're well above that now.

And much of it is not really needed; I was living in Minnesota a couple of decades ago when most unionized state workers went on strike.

Virtually nobody noticed outside of some college students who had longer lines to stand in during registration. Lights and water stayed on, police, firefighters, and paramedics kept working, roads were repaired, planes continued to fly, garbage was picked up . . .

This said a lot about how much of government is really essential.

[brimic]

The wages aren't usually the problem. It's the ridiculous benefits and retirements many of these city workers get after sometimes as little as 10 years of service

Yes.
This is the issue that gave or Gov Scott Walker his meteoric political rise.
He exposed the Milwaukee county pension system where the county board was creating schemes with huge payouts to retirees- often times multi-million dollar lump sum payouts.
The scheme was that a worker had to work X number of years and was paid Y based on their salary in the last year of employment. Politically connected workers would slog away for the requisite number of years to be 'promoted' to a very high paying position in their last year of employment. County board members simply just voted themselves bigger salaries for their part time jobs.
I'm too cynical to think that Milwaukee politicritters were smart or creative enough to come up with this scheme independently of what other cities in the country are/were doing.

[Nick1911]

The problem is that government's sheer size is unsustainable by taxes on the private sector. I remember seeing an economic analysis that said the practical limit of government's size (or cost) is about 19% of the total gross national product; we're well above that now.

That's interesting - do you have a cite for these?

[HankB]

That's interesting - do you have a cite for these?

I don't have the exact article before me, but I think it was in context of the Rahn Curve. The premise was that a certain about of government taxation and spending are beneficial to economic growth, since government provides for the common defense, establishes a monetary system, the rule of law, etc., the basic functions of government. As taxation increases, further improvements in economic growth become incrementally smaller. Additional taxation increases actually decrease growth.

There's some debate as to what the slopes and inflection points are, but the bottom line is that the private sector will only financially support so much government.

[slingshot]

That 19% fits right in with some economists that feel the government expenditures should not exceed 20% of GNP except during extordinary times such as a world war where it is a do or die scenario.

I do believe it is the benefit packages that are paid.  But part of that were the assumptions about the growth of retirement investment funds.  For the most part, there has been little growth for the last 5 years.  It started in the last year or so of Bush's presidency and continued through the entire Obama presidency.

My brother is a teacher.  He's retired now and very dependant on getting his teachers pension.  If the state or counties run out of money, they will have to cut pension costs unless there is sufficient growth.  But the growth generally has been pretty anemic for the last 5 years or so for most regions.  The South is rising and has been rising mostly because the unions aren't well organized in the South.  Folks in the South know they will eventually loose it the unions control costs.

[seeker_two]

Wonder how much city property will be acquired by employees as "compensation" for the pay cut?....

[HankB]

Wonder how much city property will be acquired by employees as "compensation" for the pay cut?....

And how much city property tax they'll be expected to pay on their compensation . . .

[AZRedhawk44]

And how much city property tax they'll be expected to pay on their compensation . . .

I think by "property" he was thinking more about laptops, lawn mowers, and other non real estate components of property.  Gas siphoned from government cars.  Private vehicle maintenance done in government auto shops.  Tools disappearing from worksites.  Things like that.