Mayor Orders Wage Hikes

Recently Pittsburgh’s Mayor issued an Executive Order to raise the minimum wage paid to all City workers to $15 per hour.  According to the Mayor’s news release, it will cover 300 employees currently paid less than $15 and will be phased in over five years, beginning in 2017, to comply with Act 47 oversight.  Furthermore, the Mayor is calling for City Council to pass legislation “early next year” to require all City contractors to follow suit, or “face penalties.”

 

There are many problems with this diktat.  First is whether the Mayor has the authority to issue an Executive Order to raise wages.  According to Pittsburgh’s Home Rule Charter, the duties of the Mayor are enumerated in Article 2, Section 204.  There are eight basic powers given to the Mayor including; “to inform council at least once a year concerning the finances and general conditions of the City; to provide council with information concerning the administration and conditions of the City as requested by council;” and to “submit proposed legislation to any member of council for introduction.”  Other powers revolve around a supervisory role, promoting intergovernmental relations and to defend and uphold the Charter itself.  This Executive Order, if not challenged, could establish a bad precedent.

 

The Mayor could have asked a member of City Council (many share his views on the subject) to introduce legislation imposing a wage mandate for City employees.  Keep in mind imposing a living wage has been tried twice before (2001 and 2010).  In 2001, a living wage passed City Council, but when Allegheny County Council failed to follow suit, the Mayor at the time shelved the idea.  In 2010 another try at a living wage expired in City Council.  At that time the City was grappling with the effects of the nationwide recession and subsequent sluggish recovery and, of course, the City was under the financial oversight of the Act 47 team and the Intergovernmental Cooperation Authority (ICA). Importantly, the City remains under their oversight.

 

The press release does not provide any detailed financial consequences the City will incur as a result of the higher wages—which will be of great interest to both financial overseers.  For example, assuming 300 workers are now at, say, $10 per hour, the increase to $15 per hour will cost the City an additional $3.12 million in wages per year and additional hundreds of thousands of dollars in higher benefits attendant to the higher wages.

 

And there are several other interesting questions.  With City employees being covered by a multitude of unions, how did these 300 slip through the cracks?  Or are these 300 part-time employees, not eligible for full-time pay and benefits?  If they are in a union, why is the Mayor demanding they be paid more than their collective bargaining unit is willing to accept?

 

And of course if these 300 employees in question receive wage boosts, this will undoubtedly have a “trickle-up effect” on the rest of pay rates within City government.  Employees and their unions will not be willing to see their substantially higher pay levels and the gap with the lower wage employees that reflect experience, productivity and bargaining gains over the years be greatly diminished without demanding major pay increases to maintain workplace wage hierarchy.  Otherwise there will be a great leveling of pay scales.

 

How much this will cost taxpayers cannot be known for sure until the process plays out, but it will be a lot of money.  If this Executive Order is successful, and not challenged and overturned by one or both of the oversight boards, the Mayor may well be creating a feel good policy that will come back to haunt the City in a big way in two or three years as the need for more revenue rises sharply.  In the meantime it’s a great vote buying gambit as far as City employees are concerned as they foresee getting higher pay with no additional work effort or union negotiations.

 

The second part of this Order, to seek legislation to impose the $15 minimum on City contractors or have them “face penalties”, is fraught with unintended problems.  The Mayor expects this to be taken up early in 2016.  In the first place, it is unlikely the City will be able to mandate higher than market driven wages paid by firms under existing contracts as forcing them to pay higher wages without being able to adjust to the new conditions, e.g., obtain a boost in the price of the contract or reduce the necessary amount of labor and possibly the amount work product to cover the higher costs, will likely be met with breach of contract lawsuits.

 

Thus, it will likely only apply to new contracts written after the mandate goes into effect.   This will allow bidders time to take the higher wages into account and make the necessary adjustments—either passing the increased cost to City taxpayers, reducing the number of workers or taking on a smaller amount of work per dollar of the contract. Contractors might choose to reduce non-wage compensation unless the ordinance precludes that as well.

 

It is a virtual certainty that cost of contracted services will rise. This amount cannot be known without having information on contracts, the number of workers employed by contractors and their wage rates. It can be assumed the Mayor believes some contractors are paying less than $15, otherwise why ask for the legislation?  In that case, costs for contract services will rise.

 

The bottom line is that this policy and Executive Order cannot be put into place without costing the City a lot more money.  Pittsburgh is still operating under financial oversight from Act 47 and the ICA.  Pledging to spend more money than approved in the five year plan might be another argument for keeping the City under such oversight.  For sure, it is unlikely the Mayor will offer other offsetting cost reductions for these inevitable spending increases.  Perhaps one of the oversight groups will challenge the Mayor’s authority to issue the wage edict in the first place—or maybe a concerned taxpayer organization will do so.

 

This Executive Order is arbitrary income redistribution by government edict. Does anyone believe that unearned pay increases will make the City’s work force more productive?

Pittsburgh’s Second Bill of Rights Proclamation

Never has so much inanity, ignorance and denial of reality been on display as the Pittsburgh City Council’s proclamation calling for the Federal government to enact a second Bill of Rights to protect the middle class. The proclamation would have the new Bill of Rights include a living wage, education rights and full participation in the electoral process.

How fascinating that Pittsburgh’s City Council would be the promoters of a Bill of Rights which have in effect already been implemented in the City. Are they not happy with Pittsburgh’s results? Has the City’s living wage bill not worked to grow the middle class’ income? Apparently not. Has spending over $20,000 per pupil, having a Promise scholarship program that guarantees money for Pittsburgh school graduates and adopting every politically correct education strategy and gimmick coming down the pike improved education in City schools? Absolutely not. What new educational rights could possibly do more than is already being done? And how likely are they to achieve better results than are already occurring? History says they will be a counterproductive waste of time.

The nation has long since had a minimum wage and a labor policy that gives great power to unions. Look at the industries the unions have decimated through their demands. The nation and the state have had prevailing wage laws for decades. Pennsylvania has labor laws that give public sector unions enormous bargaining advantages over the elected officials representing the taxpayers. And given the incestuous, mutual back scratching relationship between elected officials and public sector unions taxpayers end up getting short shrift. Those laws enrich the government employees but have pushed 26 municipalities in the state into distressed status, including Pittsburgh.

Which of these policies, along with business strangling environmental policies, have been helpful in promoting private sector activity and creating sustainable high paying jobs? Look at the deep blue cities all around the country such as Philadelphia, Detroit, Buffalo, Cleveland, San Bernardino, Scranton, and Harrisburg. Where is the evidence that all the "progressive" programs in those cities have protected the middle class?

The unwillingness to recognize the damage being done to our economy and financial system by progressive programs is to be in complete denial. Model cities ring a bell? How did the Civic Arena work out for the Hill District? Have progressive education policies improved education? Look at academic achievement in Chicago, Atlanta and many other cities across the country where the lack of discipline and kowtowing to teacher unions have held sway for years.

Finally, how can a City that has been totally under the control of one party for 80 years in a country that has been under the control of the same party for much of the same time and is in a country which has a voting rights act have concerns about electoral participation? Where has their party been? The same party that has a very checkered history when it comes to electoral malfeasance. Philly Black Panthers ring a bell anyone? ACORN shenanigans? Then there is the candidate for Congress in Maryland who has had to drop out for voting in both Florida and Maryland in the same election season. Does full participation in the electoral process include being able to cheat?

Rights cannot specify outcomes as the Council apparently believe they can. Rights should ensure freedom to work, start a business or any other pursuit of happiness an individual chooses with minimum of interference and then only to protect the same rights of other people. Rights should ensure the sanctity of life, the ability to own and dispose of private property and the right of free speech, the freedom of the press and religion. In fact, the founding documents including the Bill of Rights and other amendments already do these things as long as politicians and judges do not subvert them. And therein lies the rub for the Council’s proclamation. They are unhappy with the tried and true way the country has guaranteed our rights and produced the greatest prosperity the world has ever seen.

But progressives are never happy. And they have enacted idiotic laws such as those that led to the subprime mortgage debacle that nearly destroyed our financial system. They have worked to choke off the country’s ability to exploit its own resources and to hamstring the ability of entrepreneurs to build and grow businesses. The drafting of the proclamation demonstrates the inability of progressives to be open minded enough to question whether or not all they have done before is doing what they promised? Or will they ever they recognize the unintended consequences of their policies and beliefs? They would choke the goose that lays the golden eggs and expect the goose to keep producing the eggs.

Councilwoman Puts Economics Ignorance on Display

Pittsburgh and Allegheny County are planning to revisit the issue of whether some large non-profit organizations in the City should have their property tax exempt status repealed. It is an argument that has been around awhile and a thorough discussion of the pros and cons is worth having. But as is invariably the case some politician will sally forth with an irrelevant, disturbing and illogical argument.

Enter a City Councilwoman saying that UPMC pays virtually no property taxes and commenting in a news report, "Additionally, many service workers at UPMC are not making family-sustaining wages", and continuing, "Roughly half of the service workers at UPMC make less than $12 per hour…while the living wage to support a family of four in Pittsburgh is $25.40 per hour."

First of all, when did a living wage reach $53,000 per year? That’s well above the regional average wage rate. Second, even if $53,000 a year is the family of four sustaining income, where is it written that everyone working at UPMC is the sole provider for a family of four? Third, if the skill levels of "service workers" can command no more than $12 per hour in the market place why is it the government’s job to artificially boost their wage rates? If UPMC is forced to pay higher wages, how will they make those payments? Charge more for services, offer less free health care, hire fewer workers, reduce the benefit packages for all employees?

If UPMC loses its non-profit status and has to pay millions in property taxes, where does it take the money from? Wages, benefits, free health care?

Whether UPMC should have all or parts its organization lose non-profit status is something to be debated and will probably either end up in court or require more legislation before tax exempt status is taken away. But that decision should not take into account the fact some workers do not earn $53,000. There are many non-profits with employees who do not earn that much. It is an irrelevant argument.

Brookings Tells Us Nothing New About Pittsburgh Economy

Since 2008, the Allegheny Institute has commented many times on the slow arriving recession and its relatively moderate negative impact on the region’s economy.  With no housing or general real estate boom there was no bust in the region-a major factor in the severity of the downturn in many fast growing cities such as Las Vegas, Phoenix and states such as Florida.

 

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Pittsburgh’s Financial Watchdogs Lose Their Bark

Pittsburgh City Council recently enacted a prevailing wage bill and is now considering a living wage bill.  Both measures will almost certainly increase City spending either directly, by raising the wage rates of its employees, or indirectly, as contractors push the costs back to the City through higher bids.  The question that cries out for an answer is; where are the Act 47 coordinator and the Intergovernmental Cooperation Authority (the oversight board)? Why are they silent about these legislative efforts?

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The Drip, Drip, Drip of Government Acid on the Economy

While the local economy struggles to recover from a long running recession, the City and County governments seem intent on further undermining what’s left of the free market for labor in Pittsburgh and Allegheny County. The recent assault comes in the form of prevailing wage laws that will require artificial above market wages for employees working at firms who have received or are benefiting from "economic development" help from the City and County.

Proponents of the new wage laws argue there will be little impact on jobs and therefore using the strong arm of government to mandate higher wages is acceptable and justified. This argument fails to understand the cumulative impact of the government’s meddling in the economy and the role that meddling has played in holding down private sector job growth in the region for decades. Absent the health care and post secondary education jobs gains, the City, County and region have seen no net private employment gains for the last ten years and have averaged far slower than national growth for several decades.

Labor laws that are grossly unfavorable to businesses and taxpayers have already taken a terrible toll on the state and region. Prevailing wages in construction, public safety unions with labor favoring binding arbitration regulations, and teacher and transit unions with the right to strike have created an overly expensive and unfriendly climate for companies and high taxes for residents.

The City and County prevailing wage laws will add to the market disrupting forces already instituted and will require further interference later on as the unintended consequences multiply and insidiously stifle economic growth. More and larger taxpayer subsidies will be necessary to induce businesses to risk investing here to offset the higher wages that must be paid. These projects will have an even lower return for taxpayers than the ones currently receiving government aid-taxpayer assistance that was necessitated by the poor investment climate created by earlier misguided policies.

There is no way to recoup the enormous and rapidly accumulating deficit of jobs and income the City and County have already engendered by the anti-free market environment already in place. Unfortunately, those who live and vote for government officials in the City and County will pay the price for voting for candidates who choose to make things worse. Their children and grandchildren will poorer for those votes.

Councilman Pushes Job Killing Wage Bill

Councilman Burgess-along with his allies in the campaign for "living wage" bill-are still pushing hard for the legislation. In a comment filled with irony, the Councilman said at a hearing that it is unfair for "government to profit from the misery of the people who work for us."

Perhaps it has never dawned on the Councilman that the "miserable" City workers (if there are such folks) could always look for other employment that pays better. And perhaps the Councilman might consider the pain and misery his bill would cause already hard pressed City taxpayers who would have to reach deeper into their pockets to pay these "miserable" workers. Or maybe the City would have to layoff some workers or enter into fewer service contracts in order to save money to pay the higher wages of those workers fortunate to keep their jobs and other benefits. How miserable would the laid off workers be?

There is no free lunch Councilman. Where will you find the additional revenues or budget cuts to fund the living wage? In a City that is struggling to find money to meet its already enormous personnel legacy costs, plans to increase spending even more without any idea of where the money will come from are the last thing the City needs.

We ask again: Where are the oversight board and Act 47 coordinators? They should make it clear that this bill is a non-starter as far as they are concerned. The whole episode points to the lack of seriousness of City government and its overseers in solving the City’s problems.

Return of the Living Wage

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Pittsburgh City Council’s attempt to install a prevailing wage for employees at City-subsidized development projects has emboldened one Council member to take it a step further and revisit the idea of the living wage.  At a time when the nation is in recession,  the City and area are losing jobs, and governments at all levels are struggling to balance their budgets, resurrecting the living wage could not be more ill-conceived. Although hearings on the bill have been postponed for the moment, it will almost certainly be on Council’s agenda soon.

 

 

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Mandated Wage Mania in Allegheny County

Hard on the heels of the efforts of Pittsburgh to put together a “prevailing wage” law for workers on development projects that receive government financial assistance, now appears Allegheny County with its own plans to mandate wage levels for projects receiving County aid.   Very convenient for the City in view of the Mayor’s argument that the City should not impose a prevailing wage requirement unless the County enacts a similar law.

 

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Living Wage Returns

Pittsburgh City Councilman Ricky Burgess wants to resurrect the City’s dormant living wage law. His action follows quickly on the heels of prevailing wage legislation being reintroduced after being vetoed by the Mayor. The Councilman’s rationale is that if the prevailing wage for workers on City subsidized projects is justice, then "why not justice for everyone?"

The City’s living wage bill was made dormant by a provision that the County would need to enact a similar law. Since the County has not done so, coming to its senses back in 2001 when it came up for a vote, the City version never took effect.

So why not do justice for everyone? Well for starters that City cannot afford it. Keep in mind that this is the same City that is buckling under the weight of its legacy costs and has been under state-controlled financial oversight since 2005 with no end in sight. To keep its head above water the City recently went after the university community by threatening to levy a tuition tax on all college students within its borders. While this attempt was unsuccessful, it underscores just how precarious City finances are.

The living wage ordinance doesn’t cover just firms receiving City subsidies. It covers firms contracting with the City and City workers themselves. Imposing the living wage law will only put more strain on finances. Firms with contracts will adjust their bid to cover the increased wage costs and the City’s personnel costs and contracted services will increase.

Of course the taxpayers will end up paying for this version of "justice"-something they can do without.