Sunday, February 27, 2011

Divide and conquer - With Prequel

UPDATE NOTE: This following story is related enough to the subject of this post as to mention here rather than a new post, and serves better to introduce this post than Post Script it:

Plutocracy Now: What Wisconsin Is Really About
Income inequality has grown dramatically since the mid-'70s -- the bulk of our growing inequality has been a product of skyrocketing incomes among the richest 1 percent and—even more dramatically—among the top 0.1 percent. It has, in other words, been CEOs and Wall Street traders at the very tippy-top who are hoovering up vast sums of money from everyone, even those who by ordinary standards are pretty well off.

American politicians don't care much about voters with moderate incomes. relentless concentration of wealth and power among the rich is deeply corrosive in a democracy, and this makes it a profoundly political problem as well.

How did we get here? In the past, after all, liberal politicians did make it their business to advocate for the working and middle classes, and they worked that advocacy through the Democratic Party. But they largely stopped doing this in the '70s, leaving the interests of corporations and the wealthy nearly unopposed.

it's not that the working class has abandoned Democrats. It's just the opposite: The Democratic Party has largely abandoned the working class.

because politicians don't respond to the concerns of voters, they respond to the organized muscle of institutions that represent them. With labor in decline, both parties now respond strongly to the interests of the rich—whose institutional representation is deep and energetic—and barely at all to the interests of the working and middle classes.

This has produced three decades of commercial and financial deregulation that started during the administration of a Democrat, Jimmy Carter, gained steam throughout the Reagan era, and continued under Bill Clinton. There were a lot of ways America could have responded to the twin challenges of '70s-era stagflation and the globalization of finance, but the policies we chose almost invariably ignored the stagnating wages of the middle class and instead catered to the desires of the superrich

Income volatility has risen dramatically over the past 30 years. The odds of experiencing a 50 percent drop in family income have more than doubled since 1970, and this volatility has increased for both high school and college grads. At the same time, traditional pensions have almost completely disappeared

This didn't all happen thanks to a sinister 30-year plan hatched in a smoke-filled room, and it can't be reined in merely by exposing it to the light. It's a story about power. It's about the loss of a countervailing power robust enough to stand up to the influence of business interests and the rich on equal terms. With that gone, the response to every new crisis and every new change in the economic landscape has inevitably pointed in the same direction. And after three decades, the cumulative effect of all those individual responses is an economy focused almost exclusively on the demands of business and finance.

For this to change, America needs a countervailing power as big, crude, and uncompromising as organized labor used to be.

But what?

Over the past 40 years, the American left has built an enormous institutional infrastructure dedicated to mobilizing money, votes, and public opinion on social issues, and this has paid off with huge strides in civil rights, feminism, gay rights, environmental policy, and more. But the past two years have demonstrated that that isn't enough. If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we've ignored for too long. Figuring out how to do that is the central task of the new decade.

Now back to the original post:

Guambat is unimpressed with the tempest in Wisconsin, and elsewhere. Unimpressed with the base cynicism of it. It's a classic case of the big money guys playing around with a divide and conquer tactic. Don't fall for it.

The pitch is being made that state and local governments just cannot afford the overly paid workers on their payroll. It's a pitch aimed to divide middle class, many of who are tea sippers, many of whom are laid off, many of whom are in uninspiring government employment.

And the cynical little game is getting some traction, based on this article:

GOP governors gambling on challenge to public-sector unions
Michael Wernick, 61, a longtime body and fender man, says his financial fortunes have gone nowhere but down over the past decade. His salary is stagnant, and his 401(k) has shrunk, derailing his retirement plans.

So as he watches Gov. Scott Walker (R) take on the public-employee unions by not only demanding steep reductions in their pension and health-care benefits but by also insisting they give up many of their collective-bargaining rights, Wernick is quietly cheering him on.

"Maybe there is a little bit of jealousy here, but public workers have what I don't have."

But do public workers really have what private sectors don't have? Maybe in individual cases, but across the board, it's hardly a clear story.

For instance, The Business Insider, hardly a screaming socialist union voice, has this:

For Anyone Who Thinks Wisconsin State Workers Are Overpaid...
Paul Ryan and everyone else freaking out at the Wisconsin's striking state employees keep getting one fact wrong.

Wisconsin's public sector workers get paid LESS than the private sector.

You can see this in a couple of charts from economist Menzie Chinn. First, national compensation by education level. Public workers earn less at every level except for high school dropouts.

Second, here's how this breaks down in Wisconsin. Real annual compensation is 4.8% lower for public sector workers.

Read more:

And this perspective:

Comparing Public and Private Sector Compensation over 20 Years, April 2010
The current recession and the resulting fiscal difficulties faced by state and local governments have renewed interest in the compensation of the public workforce in regard to pay, pensions, and other benefits. In this report we examine the extent to which state and local government compensation in the United States is comparable to compensation in the private sector.

The analysis finds that:

• Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.

• Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.

• Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees.

• The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.

• Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector.

• State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.

On the other hand, the big boys have this to say,

Employee Compensation in State and Local Governments
State and local governments face large budget deficits
as revenues have stagnated and spending has remained at
high levels.

To reduce deficits, large savings can be found
in the generous compensation packages of the nation’s Fat Cat Finance and Industry Management
million state and local workers.

In 2008, wages and
benefits of $1.1 trillion accounted for half of total state and
local government spending. This bulletin examines state
and local compensation costs, with a focus on the lucrative
pensions enjoyed by public sector workers.

Public sector pay averaged $39.66 per hour in 2009, which
was 45 percent higher than the private sector average. The
public sector advantage was 34 percent in wages and 70
percent in benefits.

So, we all know that there are lies, damned lies and statistics, but what is the smoke and mirrors going on here?

Ezra Klein has sort of a bead on it:

Are Wisconsin's state and local workers overpaid?
Consider this analysis the Economic Policy Institute conducted comparing total compensation -- that is to say, wages and health-care benefits and pensions -- among public and private workers in Wisconsin. To get an apples-to-apples comparison, the study's author controlled for experience, organizational size, gender, race, ethnicity, citizenship and disability, and then sorted the results by education. Here's what he got:

"Wisconsin public-sector workers face an annual compensation penalty of 11%. Adjusting for the slightly fewer hours worked per week on average, these public workers still face a compensation penalty of 5% for choosing to work in the public sector."

The deal that unions, state government and -- by extension -- state residents have made to defer the compensation of public employees was a bad deal -- but it was a bad deal for the public employees, not for the state government.

State and local governments were able to hire better workers now by promising higher pay later. They essentially hired on an installment plan.

And now they might not follow through on it. The ones who got played here are the public employees, not the residents of the various states. The residents of the various states, when all is said and done, will probably have gotten the work at a steep discount. They'll force a renegotiation of the contracts and blame overprivileged public employees for resisting shared sacrifice.

State and local budgets are in bad shape. They'll need deep reforms across a variety of categories, from tax increases to service cuts to changes to employee compensation.

But the focus on public employees -- and the accompanying narrative that they're greedy and overcompensated -- obscures a lot of that: It makes it seem as if the decisions that have to be made are easy and costless and can be shunted onto an interest group that some of us, at least, don't like.

It's the Republican version of when liberals suggest we can balance the budget simply by increasing taxes on the rich. But it's not true.

Guambat begins to suspect this whole thing is an effort to shift focus from the big bucks the big guys make. Stir up a battle in the suburbs and who knows what's going on in the yacht harbor?

For instance, remember the publicity about the huge CEO and other highflyer pay packets? Well, now, if we can just pit the ex-body mechanic against the local teacher, they won't be paying much attention to that little item, which is steadily returning to business as usual

And this disparity of the big money at the top is most likely what is behind the lies being spread around as statistics, as in this:

Federal salaries fall behind private sector, panel says
Official numbers released by the government late last week show salaries of federal workers falling slightly farther behind their private-sector counterparts in the last year, by an average of 2.1 percent across the country.

The government's numbers also show that higher-paid, more senior employees tend to fall behind their counterparts at private companies, whereas lower-paid employees in government come out ahead.

The non-government jobs often include bonuses or incentive pay in financial services and other industries, which helps skew those salaries up,said Allan G. Hearne, pay expert with the Office of Personnel Management.

"The highest-paid federal employee makes $400,000 a year," said Philip M. Doyle, assistant commissioner for compensation for the Bureau of Labor Statistics, referring to the president.

"There's a cap on federal salaries that's going to keep the higher end from going too high."

This story was picked up by the Federal Computer Weekly, which noted such studies were being hotly contested by the usual suspects:

Federal vs. private pay: The latest take on who makes more
These numbers, compiled by the Bureau of Labor Statistics, are likely to be hotly contested. USA Today issued a report in March that said the typical federal worker is paid 20 percent more than a private-sector employee in the same occupation. Salary figures listed by USA Today did not include benefits such as health insurance and pensions.

The CATO Institute, a libertarian think tank, arrived at a similar conclusion, as did The Heritage Foundation, another conservative association, which also issued a report stating that federal employees earn 22 percent more in hourly wages than the private sector, reported FCW on July 26. Republicans had cited these earlier reports as examples of overspending in the government.

BLS’ report also found different pay disparities based on an employees’ level, with higher-paid executives experiencing a larger wage gap than lower-paid employees, who may earn more than those in the private sector, the Post states.

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