A bad deal for lower paid Government workers

It’s eerie the way that lower-paid Government employees have been inveigled into the flat rate 4.6% ‘one-day-off-a-month’ apparent solution to the hundreds of millions of spending reductions that Government must eventually — and soon — achieve.

Eerily, it seems like hundreds of people are walking, zombie-like, into a graveyard where they will get buried.

Recently, union ‘bosses’ were on radio justifying the flat rate across-the-board cut. They said that it was fair. Intellectually, it is. Mathematically and economically, it is neither fair nor reasonable.

On the radio, the ‘bosses’ talked about the need for the $204,775 a year people to maintain lifestyles. A reduction of only 4.6% will help maintain their lifestyles because their weekly pay will only go down from $3,938 to $3,757. 

Family of four

Feeding a family of four costs them the same $400 a week as everybody else. They’ll have gone from affording 9.9 lots of groceries down to affording 9.4 lots of groceries. That’s not much change in lifestyle. After the 4.6% cut and after buying groceries, they’ll still have $3,357 a week left over. 

At the bottom, groceries for four cost the same. But a person on $50,000 a year only gets $962 a week. With groceries costing the same $400 a week, that person can only afford 2.4 lots of groceries.

Cut $962 a week by 4.6%.  You end up with $918 a week. That buys 2.3 lots of groceries. But this person will now have only $518 left after buying one lot of groceries. Contrast that with the $3,357 that’s left after the top-paid person has bought groceries.

Rich or poor, the same basic cost provides the same basic food supply. Billionaires like Warren Buffet and Bill Gates don’t actually eat more than the rest of us. They may consume more wine, caviar, lobster, and truffles; but they don’t gobble up three loaves of bread at each meal just because they can spend more on groceries.

The union ‘bosses’ are in step with the $3,938 a week people. The ‘bosses’ are out of step with the $962 a week people. 

Top earners

To achieve the hundreds of millions of savings required, the best real world answer is a tiered or layered personnel cost cut where top-earners are cut as much as 30% and bottom earners get cut a maximum of 5%.

Layered cuts may seem unfair. Intellectually, they are. But number problems do not respond to intellect.  Numbers respond only to the law of numbers. 

If number problems could be handled intellectually, all the Government would need to do is hire some intellectual who has two or three PhD’s, and get him to write one thesis. After that our huge Debt - which is what’s causing the problem – would go Whooosh!  

Three other critical issues: ONE — the union ‘bosses’ agreed that pay cuts were unlikely to be restored in the following year. TWO — they agreed that the total savings from this 4.6% pay cut would be something between $22 million and $30 million in 2013/14 and thereafter. THREE — the Civil Servants negotiating for the Government side are the Civil Servants who are earning $204,775 a year. 

Let’s address each point in more detail.
ONE — Unless and until Government revenue gets up to and above the $1,200,000,000 ($1.2bn) level, no Government employee should expect any pay increase whatsoever. Someone - the union ‘bosses’? — needs to speak that truth. In my writings, I have consistently shown and explained that. The reality is that all Government employees are facing at least four to five years of more cuts in personnel costs.

TWO — The anticipated $22m — $30m anticipated ‘savings’ will completely disappear next year when the Government starts paying the annual $27,000,000 ($27m) annual cost for that KEMH PPP deal. This brand new KEMH quasi-debt of $27m immediately eats up the $22m — $30m possible savings from the just agreed 4.6% pay cut. So additional personnel cost cuts will be needed in 2014/15 and beyond.

Until revenue reaches $1.2bn, Government must keep cutting hundreds of millions from its spending.  So more cuts must and will come.

THREE — Self-interested and personally financially involved Civil Service negotiators earning $204,775 a year are quite the wrong people to use as negotiators.  

Honestly and simply, I see a big screw being turned. The people on the receiving end are those hundreds of lower paid Government employees. The screw is not turning by itself. People’s hands are turning that screw. 

Right now, the people receiving the screw are keeping quiet. Are they enjoying it? n