Wednesday, March 23, 2011

Why Didn't APWU Compensation Go Down?

Government Executive and Federal Times both reported today that the House Oversight and Government Reform Committee will be holding a hearing on April 5 on Postal Service pay.   It is clear from quotes attributed to Congressmen Darrell Issa and Dennis Ross that the Postal Service's witness is going to have a very unpleasant time. 

The Postal Service should expect a grilling from members of both parties in Congress.   Congress is the representative of the shareholder and the two largest creditors facing the prospect that their bills for over $5.5 billion will not be paid next fall and similar bills in future years may not be paid.  If the Postal Service takes actions that do not reduce the non-payment risk of those payments due next fall and ones due in future years than Congress is within its right to raise questions as to whether the current Board of Governors needs to be replaced and could even put the new Postmaster General and his management team at risk of replacement.  
The grilling that the Postal Service faces will likely ask one question repeatedly.  Why was the Postal Service willing to sign any contract that did not freeze or reduce the compensation of current APWU members if APWU members enjoy a significant wage premium?  

This will be the central question because testimony was presented by Michael Wachter in 2003 to the President's Commission that stated Postal Service employees enjoyed a 34.2% wage premium has been quoted by Representative Dennis Ross as the basis for his concern that the Postal Service was not tough enough in negotiating the APWU contract.  Dissapointment with the agreement was also expressed by Congressman Darrel Issa who stated "The union contract renewals are the best chance to find new savings. Unfortunately, this looks like a missed opportunity. The Postal Service must show Congress and the American people that it can pay its own way, because the numbers do not seem to add up."


These comments reflect real concern because it is not clear if the Postal Service will have the money to pay the wage increases to current employees in 2012 through the end of the contract.   However, it is not clear that going to arbitration would have produced a more favorable settlement for the Postal Service, even if it presented new testimony of Dr. Michael Wachter that continued to show a wage premium of a similar magnitude.  Having looked at the challenges of unionized firms facing the need to reduce compensation expenses in order to remain competitive found few firms that were able to do this outside of bankruptcy regardless of whether negotiations were conducted under the Railway Labor Act or the National Labor Relations Act.   Even firms without unions find it difficult to impose significant pay cuts on current employees, although it was not uncommon during the last recession for non-union firms to both increase the share of health care premiums paid by employees and eliminate the match to 401-K plans.   Many of these companies have restored these benefits as the recession ended. 
 
The House committee has two options in looking at the compensation question.  The easy way is to bash Postal Service management and grab headlines by focusing only on the wage premium issue.  A more constructive alternative would look at what would be required to bring compensation closer in line to market values.   To do that they need to look at the following questions:
  1. Update the Wachter study and include analyses that look at alternative alternative approaches to this question.  
  2. Update the Wachter study using the compensation of APWU members under various scenarios under which increasing proportions of APWU members are employed under the new compensation schedules, employee classifications and work rules.
  3. Examine the impact of the contract provisions that increase flexibility that allow the Postal Service to eliminate the cost of contracted services for work that an APWU member could do for 2 to 4 hours within a longer shift.  
  4. Similarly, what is the difference in cost between using an APWU member and the non-union employee that the Postal Service is planning to displace?
  5. Examine the options the Postal Service has to convince existing APWU members to retire.   A large share if not the majority of APWU members are at the highest pay step for the type of work that they do.   Replacing these employees that are earning the highest availalble salary with those who are new would significantly cut costs.   

    In particular, the committee needs to ask two questions here.  First, what proportion of APWU members, other postal unions, and management employees are eligible to retire now?  Second, what is the increase in the retirement rate if a VERA is introduced and for retirement incentives ranging between 5,000 and a half year's salary?  The answer to these questions would help illustrate the type of incentive necessary to increase the attrition rate to a level high enough to significantly cut compensation.
  6. Examine the arbitration process in order to determine the probability whether the Postal Service would have been generated a better result than what the Postal Service agreed to using either current law or changes suggested by Senator Susan Collins.  This examination should also determine whether alternative approaches allowed by the National Labor Relations Act or Railway Act could have produced a result that would have had frozen or reduced the compensation of APWU employees without the threat of barnkrutcy or liquidataion.
If the committee concludes after asking these questions that the APWU contract and similar negotiated contracts with other unions as well as contracts that arbitration would produce would still be unaffordable, then it must determine if the more drastic option only available to firms in bankruptcy should be pursued.   That would allow the Postal Service to break existing labor agreements and impose lower cost compensation schedules.  In doing so, the committee has to ask how much this option would disrupt the mail delivery system and the probability that the Postal Service will have a business that can generate the cash over the next thirty years to cover its payments on retirement liabilities.

20 comments:

Anonymous said...

I am so sick and tired of people telling me I am overpaid. If you are so jealous, get a job at USPS. You will find out you will earn every dime. The postal work environment can be a very hostile place. You will find out that we put up with stuff in our workplace that would never happen in the private sector. I have worked for the USPS for 23 years, after retiring from the US Army on disability. I don't feel overpaid one bit. Quit whining.

Jeff said...

Here it is again an attempt to destroy middle class America. Let people in congress work for my salary and see if it is still to much.
Illegals in our country are bringing wages down for most blue collar work. It starts at the bottom and works up. But congress seems to have no control on this issue.
The more the middle and lower classes get squezzed the better for the big dogs to take advantage of us. Do I think are senators and congrssmen work to hard, or have no perks, do a good job,do not game the system? You decide.

Anonymous said...

If this contract is ratified, pay will essentially go down. 50percent of the positions will be for the "New Full Time" 30 vs current 40 hour per week emplopyee... a 25 percent pay cut. A new wage scale for new employees, who will not top out at the same rate as todays experienced workers. A change in the pension plan....no federal annuity only a 401 plan...that has yet to be developed. 20 percent of workers will be 360 day employees with no guarantee of ever becoming a career employee. It may not be a wage cut as in a dollar per hour cut...but it sure is an income cut when your work hours a decreased by 25 percent.

Anonymous said...

If the well off have to pay the middle and lower class too much, they can not have .44 cent mail or pay to get their repairs done, go out and eat etc.
Illegals in our country seem to be fine with congress. They bring wages down across the board for blue collar workers. They wash their cars clean their homes fix their food watch their kids even.
So review the wages of postal workers, maybe I will win the lottery and feel like one of them.

Anonymous said...

Is it time to vote yet?

Anonymous said...

Why is it that People in Congress like Mr. Issa are so adamant about getting "tough" with blue collar workers, but not with huge, irresponsible organizations that we bailed out? IGA gets 108 billion tax dollars, and no strings attached to it, and so continues to dole out astronomical bonuses...to the ones who messed it up to begin with.
No tax dollars go to the USPS, quite the reverse. Give us 77 billion back, we'll be fine. Cut our ridiculous 5.5 billion pre-pay requirements (thanks, Postal Accountability and Enhancement Act!) and we'd be fine, yet again. I bet Mr. Issa will enjoy a bigger raise, and he won't send it back.

Anonymous said...

I doesn't quite qualify as a pay raise if they permanently cut your hours from 40 to 30 a week, and consider that a full time regular employee. I think that is truely a 25% cut in pay.

New pay scales for new hires, that will never reach the same level as current career employees.

A third tier of retirement benefits...that excludes government CSRS and FERS, and amounts only to what the employee is able to save on their own, at their new reduced hours and payscale.

30 hours at 13.47 per hour is essentially 10.10 per hour in actual wages. Not exactly the over paid employee that the inquest wants to make them out to be.

This math is no different than the overpayment the USPS has made, that the government now oonsiders to be a bail out if they (the governemt) is forced to pay back.

Anonymous said...

The real pay cut needs to be for Congress and Senate.They live High on Tax payers $$$.USPS uses no tax payer $. And most are in fact totally incompetent and have no clue as to what it is like to work for A living.

Anonymous said...

We all know that the Postal Service is suffering. The truth is that many employees milk the system. Management is so poor that they would be fired if they worked at a fast food company. Start at the top and work down. If the USPS treated thier workers like people the problem would be solved. Management needs the power to deal with abusive employees, but they also need the brains to do so effectively.

Anonymous said...

The "NEW" Republibaggers have only one philosophy and that is SLASH AND BURN EVERYTHING associated with the Federal Workforce and the USPS. They want to interfere with the COLLECTIVE BARGAINING PROCESS OF UNIONS...EVERYWHERE IN AMERICA...look at what they are trying to do in state houses throughout America...quickly crafting laws to take worker's rights away where they DO EXIST.
In the Postal Service's case, they want a PERMANENT RADICAL CHANGE TO THE USPS STRUCTURE in addition to trying to IMPOSE A DRASTICALLY REDUCED WAGE AND "DE-UNIONIZING" the Postal workforce.
Look out America, NO ONE IS SAFE FROM THESE GOP "VIKING RAIDERS"...

Anonymous said...

Why did management get 3.5 - 5.o raises this year?

Anonymous said...

For one thing, I do not understand why Congress has to get involved with USPS issues. Not one penny of tax dollars supports the operations of the USPS nor pays the wages of its employees. If the customer believes they are not getting a good value for paying postage, let them go to UPS and FedEX and pay 300% more. Afterall, UPS and FedEx employees are paid far less than USPS employess. That's why they charge 300% over what you have to pay at the Post Office. I know that it dosen't much sense, however, try telling that to Issa or Ross. Lower wages should mean less cost for the consumer. In other words, is UPS and FedEx over charging their customers? Why isn't Issa and Ross looking into that issue?

Anonymous said...

Mr. Issa and Mr. Ross are looking to make "names" for themselves. Someone ought to be looking their backyards for the dirty laundry and trash.
We get paid signifcantly less than FedEx and UPS... UPS gets 7 weeks vacation and they are private sector jobs. I have worked for every benefit and stuck out the hostile atmosphere of the last 8 years. These men just want to look like they are fighting the middle class. What "class" do these gents come from? The most wealthy 10 % of Americans. Who is behind their campaign funding in this last election. Don't push the middle class around boys.

Alan said...

Most people think Postal employees are over paid...Well lets do this..do a trade a month...trade jobs for a month and see ...Postal employees work in a very hostile enviorment created by management...They can call you names..get in your face..it is a numbers game at the big facilities..the more mail processed the better bonus supervisors get...we lost big accounts like Amazon..LL Bean and many others because thier mail was not processed right and destroyed...but they got their numbers...if you only knew the numbers of violence on the work room floor created by management you would be surprised...but only craft people are held accountable..supervisors have a green light to intimadate employees

Anonymous said...

I have 31 years in the USPS. I make enough to afford a house, a car, food, but not much more. Compare our pay to Politicians who say we are paid too much. Compare our benefits to politicians who say we our overly benefitted. Their health care, their retirement benefits are far above ours! Let's see the facts and figures.

bigG said...

Why dosent Issa and his like work to bring the rest of the countries workers wages UP rather than cut the wages of those who have fought the good fight and together with management have brought the standard of living up for employees?? We do have recourse-
Elections will be coming around and we dont have to renew they're contracts either.

Anonymous said...

I would like to invite Issa to play undercover boss with me . I will train him on the window and then we will see how much more intelligent he will sound when speaking of Americans who work for a living at the USPS. How much does he pay his secretary that sits on her butt all day? I would bet it is more than we get paid. And BTW. Please compare us to people who do similar work at similar businesses, you have 2 choices, UPS or FED EX! I am also fed up with being compared to a McDonald's employee when it comes to my income, and sick of hearing ignorant people say that we have no skills or abilities.

Anonymous said...

Issa best be careful since it is the middle class who pays the taxes!!! Without enough of us, he is out of a job and retirement. Why does he alwAys sound so ignorant?

Anonymous said...

To Issa and Ross: vote to give us back the 75 billion.dollars in oveepayments to the civil service retirement. Prefunding our retirement is bad enough. Overfunding it is outrageous and if you have spent our money then this is enron federal style.

Anonymous said...

Anonymous : I would like to know if Issa and Ross, get all these comments, because no reason to get out our frustation for nothing. If not please make sure we can e-mail directly to them.