Smart private-sector companies are aggressively slashing white-collar pay and benefits to get costs under control amid slumping revenues. New York’s public sector, by contrast, has no such clear, assertive plan, even though the state* and the MTA together have more than 13,000 workers earning six-figure salaries.
In the past week, heavy-equipment firm Caterpillar and delivery firm FedEx have both announced aggressive white-collar pay cuts in an effort to cut costs. CAT will cut senior pay by up to half and other management and administrative pay by 5 to 35 percent. FedEx will cut its CEO’s pay by 20 percent, its other senior execs’ pay by 7.5 to 10 percent, and the pay of other salaried personnel by 5 percent, beyond eliminating scheduled raises for next year.
Caterpillar, FedEx and others are making such moves for a few reasons.
First, they need to get top pay down in line with revenues, which FedEx expects to fall and Caterpillar expects to remain flat.
Second, these firms know that they don’t have to do much, financially, to retain workers in this market.
Third, executives are worried that if they lay off workers en masse, it will be hard to rehire qualified workers if they are wrong about the economic outlook and demand picks up soon.
Fourth, unilaterally cutting executive pay sets a good example at the top, as these firms likely think about asking unionized and other blue-collar labor to make concessions or suffer big layoffs.
New York should adopt some of this reasoning, which largely applies to us, too.
First, tax revenues at the city, state, and the MTA are falling.
Second, New York doesn’t have to do much to keep workers happy in this market. For example, four years ago, when investment banks were spending heavily on information technology, the city or the MTA might credibly have argued that it had to pay IT workers high salaries to attract the best people. Today, not so much.
The third reason doesn’t much apply, since the state never seems to have a problem enlarging its workforce.
But the fourth certainly does. New York has to ask its labor unions for more than it already has. And it would said a good tone for elected leaders and their best-paid staff to do the same at the top.
So far, though, New York hasn’t made similar unilateral announcements with its own best-paid segment of the workforce (and requests of those among the best-paid who are covered by contracts), even as Gov. Paterson has asked state unions to eliminate a raise and make other modest contributions. (Mayor Bloomberg is going in his own direction altogether, giving unionized labor nice raises.)
There’s got to be opportunity here, though. The state (not including the MTA) has 11,216 workers who earn six-figure salaries annually, or nearly five percent of the workforce. The MTA has another 2,000 workers who earn six-figure salaries, accounting for $238 million annually.
And while $238 million is only six percent of the payroll at the MTA, meaning that the authority can’t solve its billion-dollar-plus problems here, a 10 percent pay cut would save real money.
More importantly, it would give the MTA more moral authority, in the eyes of politicans and the union-sympathetic parts of the public, to ask its own unionized labor force for big givebacks as its biggest contract, with the Transport Workers Union, expires in the next few weeks.
*Refers to executive branch of the state only (that is, the judicial and legislative branches are left out).