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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.

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Some of the civil servants in Jefferson County, Ala., which has laid off hundreds of workers, can attest to what it has been like for those lucky enough to retain their jobs. For five months last year, the county, the state’s most populous, reduced hourly workers’ time by 20 percent.

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“Some cannot manage it, some have lost their homes, been foreclosed, lost vehicles, and their credit is shot,” says Cheryl Hoskins, treasurer of the Jefferson County Employees Association. “And, they were still over the limit (in income) to get public assistance.”

Eventually, the county went back to full-time work. But, then it began a “reduction in force” program where more senior employees could take the jobs of less senior workers. One county employee lost $40,000 in salary after he got bumped and then had to take a job in a lower pay grade. He subsequently resigned.

However, no community has cut wages quite like Scranton, which has a $16.8 million budget gap and which had, according to Mayor Doherty, just $305,000 cash on hand when he announced the pay cuts. According to a lawsuit filed on behalf of the city’s employees, some 390 public workers saw their hourly wages sliced from between $19 and $36 an hour to $7.25 an hour.

“That is really a very, very drastic step,” says Lee Adler, an adjunct professor at Cornell University’s School of Industrial and Labor Relations in Ithaca, N.Y. “I would be surprised if they have the right to abrogate collective bargaining agreements to minimum wage.”

According to Lackawanna County Judge Michael Barrasse, the city did not have that right. Last week, he issued a temporary injunction preventing them from unilaterally changing salaries. The city went ahead with paying the workers minimum wage.

On Tuesday, lawyers for the municipal unions filed a petition asking that the mayor be held in contempt of court.

Doherty could not be reached for comment. But, he told the Times-Tribune of Scranton, "What am I going to pay them with? We don't have the money."

Some worry about the effect of the wage cuts on the community.

“They do valuable services and critical services for the community,” says research economist Sylvia Allegretto at the Institute for Research on Labor & Employment at the University of California, Berkeley. “There are a lot of highly trained, skilled, and educated people.”

In addition, if the low pay rates were to continue, she says, it would probably result in some dire financial problems for the workers. “They buy houses based on the amount they are making,” she says. “I don’t know how they can make ends meet.”

Her concerns are real, says John J. Judge, a firefighter and head of Local 60 of the International Association of Fire Fighters in Scranton.

“All the guys in my union are married with children, the head of household. You can’t raise a family on $7.25 an hour,” says Mr. Judge. “I know some of my guys are divorced and their alimony payments come right out of their paycheck based on what they had been making. So, I know one guy got a check for $90 – you can’t even fill up your gas tank for $90.”

As more taxes have flowed into city coffers, Scranton’s bank balances have risen, says Judge, and are now out to $1.2 million. That’s enough money, he says, to go back to their regular pay and give the workers’ back pay.

“That’s what we hope,” says Judge, who thinks the pay cuts were not a union-city fight but part of a political war between the mayor and city council. “This was a cash flow problem.”

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