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Public entities have entitlement mindset

The problem for me has always been the mindset in the public arena compared to the private sector. Businesses make a product or provide a service that people want and are willing to pay for.  If consumers stop buying their product, the business doesn’t increase the price of the product or hand out raises. They lower their costs or they go out of business.

In bad economic times, private entities freeze salaries, actually freeze salaries, not just the base, while allowing steps and lanes or longevity (years of service) increases. Private employees must take cuts in pay. The price of the product is lowered to increase demand. Wages are frozen for as long as it takes for the economy or for the company’s sales to improve.

Public entities, on the other hand, provide services that we all pay for with taxes, whether we want, need or use those services or not. The cost to the taxpayers remains the same, or even increases, regardless of the cuts made by the public entities. Even tax caps doesn’t help, since the public entities raise the tax rates, within legal limits, to get at least the same revenue as last year, plus inflation.

The feeling of entitlement is prevalent everywhere. Many times negotiations don’t even discuss longevity raises – those are simply taken for granted, and in most cases, longevity benefits are not considered a raise even though the pay increases.

Public entities are also entitled to a “living wage.” What constitutes a living wage? Doesn’t that depend on where you live. If I live in Santa Barbara, California versus Rockford, Illinois would a living wage be the same in both places? Which article and section of the Constitution guarantees a living wage? There’s something in there about freedom though.

The government has no money, except that which it takes from someone else. If someone is paid a “living wage” to provide a government service, regardless of its value to the taxpayer, the government entity takes the money from someone else and that person’s freedom is thereby reduced.

The mindset in the public venue is that raises, like entropy, should always increase regardless of the economic conditions, regardless of merit, and longevity increases are not even considered a raise. People in private industry do not receive a longevity increase for simply showing up for another year.

Elected officials and administrators of public entities would prefer to give raises to individuals on the basis of merit but cannot due to the contracts. Merit is not part of the public mindset. Raises are given across the board, regardless of performance, merit has no place in the public entity.

The journey to change this mindset has to start somewhere and it better start soon!

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20 Comments

  1. Curtis Newport

    Ted, I just gave $79.50 to this newspaper. I figure your contributions alone make it worth the asking price. I’d actually pay more for an applesauce-free version, but I digress.

    Now let me play devil’s advocate for a moment. You say “If consumers stop buying their product, the business doesn’t increase the price of the product or hand out raises.” This is true. But what government product have consumers stopped asking for? What government service has seen a decline in demand?

    To be fair, there are a few. Building inspectors, zoning departments and highway engineers have seen a drop in workload since the housing boom evaporated.

    Pretty much every other government service has seen an increase in demand since the economy tanked. Law enforcement and court systems are busier than ever. This includes state’s attorneys, public defenders, probation departments, court clerk’s offices, jails and prisons.

    Unemployment compensation, medicaid, county health services, school lunch programs … the list goes on. When people are hurting, they turn to the government for help.

    In the private sector, decreased revenues follow decreased demand, and the falling demand allows companies to survive with fewer employee hours. In government, revenue is not directly tied to output. Revenue and output often go in opposite directions.

    I have always been an advocate for applying business-based models in government to improve quality and efficiency. But governments cannot be run like businesses. A different approach to management is required.

  2. I think of government entitlements as similar to narcotic drugs: You get hooked, and you only want more. You should only used them as needed, and get off them as soon as possible, to stay healthy.

    Ted, I thought this article explains a lot about the economy:

    No Country Leans on Upper-Income Households as Much as U.S.

    by Scott A. Hodge

    During my recent testimony before the Senate Budget Committee (found here), I cited an OECD statistic that the U.S. has the most progressive income tax system among industrialized nations.[1] This prompted one Senator to point out that if the richest 10% of taxpayers earn the most of any OECD country, shouldn’t it make sense that they bear the largest tax burden of any country?

    The answer can be found in the OECD table below. This table shows the share of taxes paid by the richest 10 percent of households, the share of all market income earned by that group, and the ratio of what that 10 percent of households pays in taxes versus what they earn as a share of the nation’s income.

    The first column shows that the top 10 percent of households in the U.S. pays 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. Italy is the only other country in which the top 10 percent of households pays more than 40 percent of the income tax burden (42.2%). Meanwhile, the average tax burden for the top decile of households in OECD countries is 31.6 percent.

    By contrast, column #2 shows that the richest decile in America earned 33.5 percent of the market income in the country in 2005 – the year in which this snapshot was taken, but little has changed since then. But, a few other countries do have a greater or similar concentration of income as does the U.S. For example, the OECD table shows that the wealthiest decile of households in Italy and Poland earn a greater share of their country’s market income than do our “rich” – 35.8 percent and 33.9 percent respectively – while the share of income earned by the top decile of households in the U.K. is about on par with those in the U.S. at 32.3 percent.

    Read the rest at: http://www.taxfoundation.org/blog/show/27134.html

  3. Tyrone Slothrop

    Mr. Biondo – while your argument has some merit in terms of private vs. pubic sector functions, its primary flaw is in its assumptions about the private sector. Your analysis is essentially true for small businesses but the data shows it is not true for large companies and corporations. Since 1980, wealth has been redistributed and concentrated to fewer and fewer entities and individuals in the private sector. Correspondingly, corporations and large firms have made up an increasing percentage of GDP and employment during this time period, especially in non-urban areas. Big business (like big government) is rarely accountable or subject to free market forces. Top management and shareholders are often rewarded for incompetence and diverting employment and wealth from domestic sources. They too, have a sense of “entitlement.” Government, like corporations, needs to be accountable and not self-sustaining. Reforms are needed in both the public and private sectors.

  4. A lot of what is affecting big business is called “crony capitalism”.
    This type of a business depends on an incestious relationship with government. A prime example is GE’s Jeffery Immelt, and Pres. Obama. Such dealings must be eliminated, or at least reduced significantly. The only people that seem to be fighting for this type of REAL “change”, are TEA Party members.

    On a related note, John Stossel has a program on Fox News called: “Freeloaders”, which explains a lot of this “entitlement” mentality. It will be replayed at 9PM and midnight Sunday (Eastern time), and will probably be on his website after that.
    See: http://stossel.blogs.foxbusiness.com/2011/03/26/i%e2%80%99m-a-freeloader-fox-news-special-re-airs-today-at-3pm-sunday-at-9pm-midnight-est/

  5. shawnnews

    You should tell the teachers, police officers, fire fighters that the have an entitlement mentality. In fact, you already have by speaking of “public entities” vaguely.
    Of course, since the unions in Wisconsin agreed to all Walker’s cuts, all that really going on is that he is punishing them for not endorsing his candidacy.
    So what if they don’t. My employer doesn’t have to endorse any of the candidates I do. He can spend his money how he wants if he’s earned it. So can unions and people in unions. Of course, this is all being done in the name of saving taxpayer money — like Walker’s other grab at rights when he defunded a non-Christian prison chaplaincy.
    http://en.wikipedia.org/wiki/Wisconsin_witch_hunt
    Although I had to vote for Bill Brady in good conscience, this crap would be going on in Illinois too if he had won. We would probably resume having innocent people on death row so a few guilty ones can die, and the gay people wouldn’t have any civil unions.

  6. I agree with the statement: “in the private sector, decreased revenues follow decreased demand, and the falling demand allows companies to survive with fewer employee hours. In government, revenue is not directly tied to output. Revenue and output often go in opposite directions.” I disagree with the statement “But governments cannot be run like businesses. A different approach to management is required.”

    If revenue goes down and output stays constant or even increases, then the processes that produce the output must become more efficient to keep pace with demand. We need to be able to do more with less. In the private sector, successful businesses are embracing improvement methodologies such as lean thinking, lean six sigma, theory of constraints, etc. to eliminate waste and improve their business processes. The days of increasing tax revenue to increase output are over. What is public sector doing to eliminate waste and improve the efficiency of their processes? What actions are they taking to do more with less?

  7. Ted Biondo

    Curtis, You make some very valid points. I agree that service requests have gone up in the county government while revenue has gone down. But with the leadership of Chairman Christiansen, the county is acting more like a business in that the county is getting more accomplished than before with 200 fewer workers.

    So I tend to agree with Dave M. – welcome to the blog, Dave – when he says that governments can be run like a business, The management model as you said Curtis was changed in the county – it can work and has with Christiansen running the “Business.” So the management style did change and the county became a lot more efficient.

  8. Ted Biondo

    Tyrone – I can’t disagree with what you say – there are some very similar characteristics with large corporations and government.

    If you think about it, even as unions get larger, they become more like their adversary corporations each day and just as protective of their power.

  9. Ted Biondo

    Shawnnews, at last someone I can disagree with. Your concept of “all that really going on is that he is punishing them for not endorsing his candidacy.” How did you arrive at that conclusion?

    Then you go off on a tangent about contributions to candidates like Walker. It isn’t just being done in the name of saving taxpayers money it is saving taxpayer money. One union in Wisconsin has already agreed to freeze their wages, take cuts in benefits and are now going to pay what everyone else does for their health insurance.

    Tha package will save taxpayers in the area $15M – sounds good to me!

    Then you wrote if Brady got elected in Illinois – “We would probably resume having innocent people on death row so a few guilty ones can die, and the gay people wouldn’t have any civil unions”

    You got me.

  10. curt, rezoning requests for -new- development are likely down for most govt-s, but zoning enforcement (and affliated service calls) is most likely up for many govt-s. many of those who have been laid off are getting creative for cash, and some of which are doing temporary work at their home in residential districts (where vast majority of businesses are not permitted) creating more zoning violations / service calls for inspection of illegal use. there also tends to be more property maintenace service calls as well (i.e., lawn too long, etc.) since there is less cash going around to clean up properties and/or because of abandoned foreclosure properties. in the booming days, the reverse trend is typically seen. in summary, service demand for said is not necessarily down, it is just redistributed to the other side of field.

  11. Ted Biondo

    Welcome to the blog – Joe2

  12. Ted,

    I found these remarks quite interesting, but it does seem some part of a big picture is missing somewhere. A Supreme Court justice is paid little or nothing compared to what he / she could make in the private sector, given their typical resume. Everyone knows that. So, the question quickly becomes, “Why even take the job?” With some understanding of human nature (and economics), the Founding Fathers provided some incentives. The U.S. Constitution does not allow their salaries to be reduced. Not even in bad times. Not even when Congress is irresponsible, fails to prioritize and does not plan well. And, of course, the Justices have life tenure, even when someone thinks their performance is less than excellent. I would be the first to admit there have been some seemingly negative consequences of this framework. But every serious scholar I have ever heard of agrees that the consequences of removing the Founders’ incentives would be positively disastrous.

    Similarly, I could take my statistical skills into the private sphere, or work my media contacts and make triple what I make teaching freshmen and sophomores at RVC. Why am I there? There are incentives (and, no, proximity to Magic Waters is not one of them). While my salary is low and locked into ridiculous “lanes,” it is stable, and predictable. And, the health benefits have been attractive.

    Accuse people like me of having and an entitlement-like mentality, reduce my already low wage and chop into my benefits and, well, I know of no theory (economic or sociological) that would suggest anything good will come of that.

    best,

    • Ted Biondo

      Welcome to the blog, P.S. Rickman, Jr. I reread the post and what I wrote applies to many of the people I have dealt with in 19 years of being on various boards and the behavior everyone observed in Wisconsin during the demonstrations by educators and public workers against Gov. Walker, and many more instances around the country.

      Many professionals make decisions to move all over the country, finally settling in a job,as their final choice. There are always exceptions to the rule, like yourself, but being in an association, sometimes dilutes individual achievement which is seldomly rewarded on it’s own merit.

  13. Well, no, I certainly have no interest in justifying the behavior of individuals in the Wisconsin episode. But, again, as a matter of general theory, I would tend to side with the understanding of the Framers of the Constitution, who might very well distinguish between reciprocity (or the very reasonable expectation of reciprocity) and a sense of “entitlement.” The Constitution, again, may not guarantee a “living wage.” But it does disallow reduction in the salary of Supreme Court justices, regardless of market forces in the private sector or poor planning by the Department of Justice. And with good reason.

    Stability in salary and attractive health benefits at a community college are clearly meant to be reciprocal benefits, in exchange for low, barely fluctuating salaries, zero bonuses, little or no chance for meaningful “promotion,” low occupational prestige and the like … you know, all those goodies they have (and sometimes expect) in the private sector.

    best,

  14. Erin Fisher

    I’m always fascinated by the term “entitlement” when it is used to malign those working in the public sector, especially when I think about how no one questions stockholders’ entitlement to share in the profits of a successful corporation, or employees receiving bonuses when their company has had an exceptional year. In other words, those who have a stake and play a pivotal role in the success of a business rightly expect to be duly rewarded. And yet the term “entitlement” is never used to describe these situations, even though it is far more accurate, and certainly, no one ever blames them for asking for it. Let’s compare the right to experience a reward from success of a private business to reward for success in a public institutions, such as education.

    As a Rock Valley College professor, I actually have ZERO chance to experience an increase in salary or a bonus no matter how successful my students are. No faculty or staff at RVC does, even though our students have traditionally been far more successful upon transfer than any other community college students in the state (and in some cases, more successful after transfer than a university’s native student population). It doesn’t matter if our students maintain higher GPAs than other students, or acquire more “successful” careers, or go on to become the kind of alumni that colleges desire. Even though we most certainly played AT LEAST somewhat of a role in their success, our salaries remain for the most part fixed, we receive no bonuses, and have given up things like merit pay and retirement incentives and have experienced health care costs over the last two contract periods. Most of us work well beyond the required hours, sacrificing family time and leisure time because we care deeply about the Rockford community and know (and value) the importance of the role we play in maintaining Rockford as a community that is not only inviting to new business, but is able to supply to a workforce that those businesses need.

    Continuing to pit non-public employees against public-employees will only destroy us both. Private corporations rely on the graduates we educate in order to keep their business working. When we continue to promote the idea that public-sector employees, especially teachers, are nothing but feeders at a trough with an undeserved sense of entitlement, you decrease the number of bright and caring individuals who want to pursue that career. The economic success of any community is tied directly to the success of its educational institutions, and the success of an educational institution is tied to its ability to attract and keep the best and the brightest teachers. I can only hope those in the Rockford community who have benefited from the amazing talent at RVC will consider this.

    • Ted Biondo

      Welcome to the blog. Professor Fisher. I agree with a lot of your points, especially the part of individual achievement not being able to be recognized. I am especially concerned with that component of your comment. But in my position I can not comment further.

      Also, most employed in both public and private sectors have “experienced” health care cost increases and that is to be expected, unless there is thoughts that health care cost increases should not be passed on to public employees, like it is in private business.

      Many salaries in Rockford in private industry haven’t experienced bonuses either, regardless of the employee’s contribution. Their salaries haven’t even remained constant, they have been cut through furloughs of 2 or 3 weeks a year, 4-6% pay cuts.

      Merit pools are seldom properly implemented; there should be a Gaussian distribution of merit, but it is always flatlined in both public and private businesses. I personally think that the staff at RVC does a tremendous job , as do most who pay for the benefit of your services. Everyone deserves to be recognized.

  15. Charles Berthold

    Perhaps it’s a matter of semantics or perspective? Public sector employees are accused of acting “entitled” to receiving miniscule raises, stable benefits packages, pensions and, horror of horrors, tenure! All the while we hear frequently how CEO’s and VP’s in the private sector “have earned” or “deserve” or “merit” salaries 20-50 times the average employee in that corporation, multimillion dollar bonuses and stock options, and golden parachutes on departure.

  16. Ted,

    I have to admit, I am still baffled by what seems to be a “one sized hammer for every nail” approach. We all know the waters are rough, but when it comes time to start tossing things overboard, we might very well distinguish between those in the ocean liner and those in the jolly boats. Your analysis seems to miss that the aspects of her job that Prof. Fisher describes were true before the storm, and will remain true afterward. Even now, I suspect among the “many salaries” that have taken a hit in the area are plenty who get time-and-half for “overtime.” No such concept on the planet where Prof. Fisher and I work. No meaningful chance for promotions either, EVER. And no opportunity for salary increases (based on merit, excellence, productivity or excellence). To top it off, we start with modest salaries to begin with!

    KEY POINT: When the economy gets better, it will all STILL be the same for all of us.

    Bad times may very well impact public sector and private sector employees. But to suggest everyone is hit equally, and to imply that “everyone” is similarly situated, and then argue, therefore, everyone has identical burdens and responsibilities seems callous. I trust your understanding runs much deeper than what come across in this very limited environment.

    Yes, you can ask persons in the life boats to toss over their clothes and kids, to be “fair,” so every one has “skin in the game” (as the President says). But, when the storm clears, it only makes perfect sense to expect a world of demoralization and resentment. I can assure you, RVC has not attracted the outstanding faculty and staff that it has, to date, accidentally. But that accomplishment can very easily be dismantled systematically.

    Your praise is well appreciated, but your protection would be even more appreciated.

    best,

  17. Colin Grennan

    I likely won’t be able to express my comments and concerns as well as some already have on here, but I do think it’s worth a try.

    First off, I think any rational human being can agree that running things more efficiently, whether it’s within the private sector or the public one, should always be a goal. Waste is never a good thing. But I don’t think that’s really the heart of the matter here, so let’s stop pretending that gutting public employees is being done in the best interest of the pubic.

    I second the previous comments about government services having to be viewed differently than those in the private sector. In the private sector, a service or product is provided, and the success of the business depends on the quality of the product and the demand for it. Therefore it makes sense that the pay model would be reward-based, given the natural fluctuations in the market. However, social services exist because of the recognized need, and the perceived benefits (both direct and indirect) for all of the individuals within the serviced area. It is next to impossible to accurately quantify the benefits that social services can provide for a community, and usually when someone tries, it is estimated at a hefty dollar sum.

    Maybe you can see where this is going. Public employees, as it has already been noted, accept lower salaries, due to the fact that they are publicly funded. We all know you don’t go into public service to get rich, and that’s fine. But again, as it has been noted previous, the trade-off for public employees is stability. After all, they work for the community in which they live. Shouldn’t they then be able to have the stability and protection that they help to ensure for the community itself?

    In addition, if you take jobs and services that exist to increase and sustain the health of the community, and you cut funding and demoralize them, what then should you expect to happen to the community?

    I believe that public sector jobs are different, and should be treated differently. They shouldn’t be subject to the same types of “rules” as the private sector, because they are designed to exist independently of the market; they exist to benefit the community in good times AND bad. To say that this equates to sense of entitlement is absurd. If the members of a community expect (or hope), even in the slightest bit, their community to stay economically viable, educated, and protected, then they are just as guilty of this sense of “entitlement” of which you speak. We all are. So let’s not take out our frustrations about the economy on those who serve the community every day.

  18. Charles Berthold

    As a retired professor at RVC, I see matters there with perhaps more distance than my former colleagues, Professors Ruckman and Fisher. Also I have no “dog in the hunt.” Although I have doubts about the attempted application of a business model at educational institutions (totally ahistorical), let’s look at RVC from the analytic perspective of revenue and cost centers.

    What is RVC’s product? Education and training of residents of the district.
    Which area is primarily responsible for this essential task? The faculty.

    Faculty is unique as both a cost (salaries and benefits) center, but also a revenue center in the sense that without their efforts at R&D of a product (courses) and the delivery of same, NO revenue would come in, either directly, from tuition or indirectly, from district taxes and state aid.

    In spite if this, in recent years at RVC and other institutions, much necessary cost-cutting and cost flat-lining (nearly stagnant salaries) has been applied primarily to the faculty, while other areas which are largely cost-only centers, such as the multi-layered administration, have seen growth in both numbers and large salary increases. From a business perspective, that makes little sense.

    Additional observations:

    Ted, your comment on the misapplication of self-esteem devices in education is correct, if somewhat out of date. Also, what evidence do you have that merit has a Gaussian distribution (usually termed the normal distribution)?

    Peter Ruckman stated quite eloquently how faculty at RVC aren’t there primarily for the money. Those of us with skill sets that allow additional sources of revenue often do so. As I am a licensed clinical psychologist, I maintained a part time practice to permit me to have an income level more congruent with my level of education. He also pointed out how by the nature of the “business” there is little opportunity for promotion.

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