Who will be left to underwrite charmed life of state workers?
Connecticut’s privileged state employees and its downtrodden private sector workers might as well occupy different planets.
Hundreds of thousands private sector workers lost their jobs during the pandemic. State workers have enjoyed a decade-long no-layoff guarantee, so not one was thrown out of work.
While private sector workers struggled to get by during the pandemic, state workers got two 5.5% pay raises, one eight months before and the second four months into the pandemic.
Local police and firefighters and, predominantly, private-sector health care workers manned the frontline jobs during the pandemic, as did essential retail workers – in grocery stores, pharmacies, etc.
Apart from our brave state police, corrections officers in prisons, staff at UConn Health Center, transportation workers and some other areas not readily apparent, many, if not most, state workers did not face the public. They worked remotely or not at all. Now they don’t want to go back.
In June, the union sued the state for non-public facing employees to have the right to work from home 100% of the time (at their own discretion), rather than the 50% in the contract. On Monday, Gov. Lamont caved to the union demand.
Meanwhile, business has been calling its remote workers back into offices.
Now, let’s look at the decade before the pandemic. There were five studies of state employee compensation in Connecticut. The first was a Connecticut state commission’s study in 2010. Yankee Institute commissioned studies of Connecticut in 2015 and again in 2020. Finally, the American Enterprise Institute carried out two studies comparing all 50 states, first in 2014 and, then, in 2019 (covering both state and municipal employees).
The studies compared state employee compensation to private sector compensation. In all five, Connecticut state employees earned from 30% to over 40% more than comparable private-sector workers, the highest premium of any state.
The benefits side of this compensation is grossly underfunded. The state employee pension is less than 50% funded. It is amongst the five worst funded in the nation. Retiree health care is barely funded at all.
Overgenerous compensation places an unsustainable burden on the state budget to support even current funding levels.
Now, consider present circumstances. Connecticut has the highest unemployment rate in the nation, 7.9%, which translates into 140,000 workers on the unemployment rolls.
Before the pandemic, about 1,850,000 Connecticut workers were employed. Now, only about 1,625,000 are employed, reflecting a drop of about 225,000, or 12%, the biggest decline in the nation.
Let’s parse those aggregate numbers into their public and private sector components.
Employment in Connecticut’s government sector (state, municipal and federal) was about 235,000 in February 2020. Now it is about 225,000, down 10,000, or 4.25%.
In contrast, pre-pandemic private sector employment was about 1,610,000 (1,850,000 less 235,000). Now it is about 1,400,000, down roughly 210,000, or 13% — about three times the percentage drop in the government sector. That’s a stark contrast, and even starker when compared to zero unemployment among state workers, courtesy of their no-layoff guarantee.
So, when state employee union leaders talk about the sacrifices made by state employees — turn a deaf ear. When those leaders and their chief negotiator, Dan Livingston, describe state workers as members of the working class — turn a deaf ear. When they classify most state employees as frontline workers…well, you get the point.
State workers lead a charmed life, surrounded by a world that is collapsing — a world that has been supporting their privileged existence, but, soon, will no longer be able to do so.
It is simple economics. An economy which loses 13% of its labor component will contract 13%. That implies a 13% reduction in tax revenue, which, in turn, spells financial crisis, once pandemic aid from Washington D.C. is exhausted.
Rank-and-file union members should ignore the alternating happy talk and defiant class warfare rants of their leaders and negotiators. They should demand discussion of real givebacks while there is still time for such reforms to alter the suicide course on which they and the state are headed.
The pain of pay and benefit reductions can be moderated, if shared across the more than 100,000 active and retired state employees. The pain can be spread over several years, as it was in neighboring Rhode Island, where state employees accepted a suspension of cost-of-living increases until the state pension fund reached a reasonable funding level.
State employees should watch the jobs numbers. Wednesday, ADP reported that national private sector job growth plummeted 50% in July from June, portending dismal numbers for Connecticut when state jobs statistics for July are released in a couple of weeks.
The slice of tax paying, private-sector workers keeps shrinking. State union members should worry — a lot.
Red Jahncke (Twitter: @RedJahncke) is president of The Townsend Group Intl. LLC, a Connecticut business consulting firm, and a contributing Day columnist.