The Streets Were Paved with Gold - Ken Auletta [174]
“How could it be that labor costs did not go down?” Edward Costikyan, at that time slated to be first deputy mayor for Koch, asked me in November 1977, revealing the memo. “It can’t be!” exclaimed Deputy City Comptroller Martin Ives when I called. After a day of computations, he called back to say it appeared to be so. Who was lying? In a sense, no one was. When union leaders refer to a “pay raise,” they’re talking about their pay rate or base salary. Pay rates were frozen. But the take-home pay of workers was not.
Here’s why: In the spring of 1974, the unions negotiated new citywide contracts calling for an 8 percent pay rate hike beginning July 1, 1974 (fiscal 1975) and another 6 percent hike for the year beginning July 1, 1975 (fiscal 1976). As an act of statesmanship, union leaders volunteered to defer this 6 percent increase for one year, beginning October 1975. But most workers did not defer the full 6 percent. Those who earned less than $10,000 were allowed to keep 4 percent, thus deferring only 2 percent; those earning between $10,000 and $15,000 got to keep 2 percent; only those workers whose base pay exceeded $15,000 actually deferred the full 6 percent. Since the deferral was for only one year, for two of the first three years of the crisis all workers got to keep their full 6 percent hike; and for that one year, the majority of workers received either 2 or 4 percent increases.
In addition, all city workers received annual cost-of-living bonuses. The first, called COLA I, was a carryover from the 1974 contract and provided annual payments averaging about $400 per employee. The second, called COLA II, was approved by the Control Board in 1976. It allowed further cost-of-living adjustments, provided that these were funded through increased productivity, “other savings” (budget cuts), or “other revenues” (increased state or federal aid). In the first year, 1976–77, COLA II added $199.50 to the paychecks of most city employees. In 1977–78, COLA II added another $672 per worker. To understand what this means, take the case of an accountant whose base salary was $11,550 in the spring of 1975. On July 1, 1975, the accountant was supposed to receive a 6 percent pay raise. Four percent of this raise was deferred for one year. Over the next three years, he or she received the full 6 percent, plus three COLA I payments ($1,200) and two COLA II payments ($872). By June 1978, the same accountant was receiving $13,413—a 14 percent increase from July 1975 to June 1978. Over the same period of time, the cost of living jumped 17.1 percent. Since cost-of-living adjustments were lump sums, the lower the pay of the worker, the greater the percentage jump in pay. According to the Office of Labor Relations, a senior clerk in the middle of the salary scale got a pay raise of 17.4 percent over this period; a higher-paid patrolman 1st grade went up 12.6 percent.
From this, four conclusions can be deduced: (1) there was a “pay freeze” in name only since workers were bringing home more money in 1978 than in 1975; (2) the pattern of previous years—trading reduced public services for increased employee compensation—continued; (3) higher-paid workers did not keep pace with the cost-of-living increases; (4) lower-paid workers about kept pace. When I reported this in my News column in December 1977, Victor Gotbaum lashed back, writing in the same paper that it was “absolutely not true” that city “salaries have kept up with the cost-of-living since 1975.” Three months later, in a March 16 interview with the respected publication The Fiscal Observer, the very same Gotbaum matter-of-factly said, “In real wages over the past five years, lower-economic workers have about broken even.”
From the worker’s point of view, the scorecard is incomplete. It does not count the 2 to 2.5 percent extra the state legislature now requires each employee to contribute to his or her pension