Cities going broke: Can Scranton's minimum wage plan work? (+video)
A judge told Scranton's mayor he couldn't break the contracts. Pennsylvania told him he couldn't declare bankruptcy. But he didn't have the money to pay more than minimum wage. Unions sued.
The mayor of Scranton, Pa., faced with the city’s swiftly diminishing bank account, last Friday paid the federal minimum wage of $7.25 an hour to all municipal workers – firemen, police, even himself.Skip to next paragraph
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Whether Mayor Chris Doherty’s plan remains in place is doubtful, however. A judge has already ruled that he cannot unilaterally abrogate municipal contracts.
But, under state law, he also cannot declare bankruptcy. And, the city council has dug in its feet over Mayor Doherty’s plan to raise property taxes by almost 80 percent. So, despite lawsuits, the city paid its workers less money than they could earn working at the local McDonald’s.
With an increasing number of municipalities on the brink of bankruptcy – and some even throwing in the towel – is minimum wage for civil servants a solution to budget woes?
So far, blue-collar Scranton is alone in proposing such a draconian solution. But the financially strapped cities of Stockton, Calif., and Vallejo, Calif. – both bankrupt – have reduced wages and benefits. Jefferson County, Ala., also bankrupt, cut non-salaried employees’ hours by 20 percent.
Many public sector employees already have seen their wage growth slow or grind to a halt – even fall after adjusting for inflation.
In Arizona, for example, state workers have not had any pay raises in five years; Florida state employees have had their pay frozen for six. And, in California, where there were no pay raises for two years, Gov. Jerry Brown is seeking a temporary 5 percent pay cut this year from public sector workers. Next July some of the Golden State workers may be eligible for a 3 percent raise.
In November of 2009 President Obama, in an effort to show he was doing something about the budget deficit, froze the pay of federal employees for FY 2011 and 2012. However, federal employees could still earn “within-grade” or “step” pay raises that are linked to years of service.
But not everyone is sympathetic to the plight of public employees.
Bill Beach, the director of the Center for Data Analysis at the conservative Heritage Foundation, says that despite the recent austerity there is evidence, which he acknowledges is “heavily disputed,” that government workers make more than if they worked in the private sector, which also has had to tighten its belt because of the slow economy.
“We argue there is a wage premium that state and federal employees receive largely through their generous pensions and the guarantee of job security,” he says.
The media relations department at the American Federation of State, County and Municipal Employees did not comment.
Meanwhile, according to the Bureau of Labor Statistics, the government sector has lost 633,000 jobs since January of 2009. The bulk of those – some 511,000 – have been local government employees.