Years of guzzling cola - and not the kind made with sugar - is bloating America and jeopardizing our economic health.
Cost of living adjustments (COLA) have been in wide use by the government and unions since 1975 to adjust everything from salaries to the price some government agencies charge for services. It is based on the consumer price index (CPI) determined by various federal districts across the country. Manteca happens to fall within the San Francisco district.
The monthly CPI is determined by shopping a specific list of goods each month. The government actually has employees who go out and do just that.
The concept was to provide a yard stick to judge the relative buying power of a consumer. The theory behind COLAs is they are granted to avoid employees or recipients from having erosion in buying power. The bottom line was supposed to be trying to protect a minimum standard of living.
But a funny thing happened in its application. The COLA was applied almost universally to every government employee paycheck and many in private sector unions and the management as well.
What was pitched back in the 1970s as a way to ensure people had basics has morphed into a way of keeping those better off in caviar so to speak, at the expense of everyone else.
If someone in management in government makes $150,000 and someone else on federal service makes $20,000 it means a 2 percent COLA would increase the pay of the management position by $3,000 and the worker bee by $400. This, by the way, is on top of longevity and step pay for most government jobs especially at the state and federal levels.
So do COLAs really help keep up with inflation on basic needs? Not exactly.
Someone who earns $150,000 a year is more than likely to spend a lot more on housing and vehicles. They probably eat steak a heck of a lot more than the guy making $20,000.
So what the COLA does in effect at a certain point is supporting a standard of living much higher than basic. It is the employee - not the government - that decides what is basic.
There are exceptions of course but it is doubtful that someone making $150,000 a year working for Uncle Sam is going to make buying a 20-pound bag of rice and such staples the building blocks of feeding their families each month.
The COLA was designed as an easy way to have wages keep pace with inflation. But over the course of 35 years you could make a case that COLAs and how they have been applied have actually fanned inflation.
To truly have been a way to “neutralize inflation” the COLA would have been applied evenly across the economy and not just in private sector union contracts and for public employees plus benefit recipients such as Social Security and welfare. There is no COLA for non-union private sector workers. And there is certainly no COLA for minimum wage earners.
So what you have essentially is the elevation of a growing segment of the work force - state and federal employees that also have access to generous step increases on pay scales based on longevity and other factors on the back of those who don’t have such a benefit.
It is why public sector compensation today has eclipsed much of the private sector.
Most business - read that Main Street and smaller manufacturers - could ill afford using COLAs each year to boost wages. Unlike the government, they couldn’t simply raise prices to generate funds to cover the COLAs. If they did they run the risk of losing customers to someone else. The government never has that worry.
That is why the number of federal workers earning six-figures has jumped since the start of the Great Recession going from 14 percent to 19 percent of the workforce.
In the federal Department of Transportation as an example, there was one person earning more than $170,000 a year at the start of the recession. Eighteen months later, 1,690 employees were making more than $170,000. And that doesn’t include overtime pay and bonuses.
Meanwhile during the federal employee boom 7.3 million private sector and local government workers lost their jobs.
COLAs are sweet - especially for the only group of workers guaranteed to get them regardless- federal employees.
Cost of living adjustments (COLA) have been in wide use by the government and unions since 1975 to adjust everything from salaries to the price some government agencies charge for services. It is based on the consumer price index (CPI) determined by various federal districts across the country. Manteca happens to fall within the San Francisco district.
The monthly CPI is determined by shopping a specific list of goods each month. The government actually has employees who go out and do just that.
The concept was to provide a yard stick to judge the relative buying power of a consumer. The theory behind COLAs is they are granted to avoid employees or recipients from having erosion in buying power. The bottom line was supposed to be trying to protect a minimum standard of living.
But a funny thing happened in its application. The COLA was applied almost universally to every government employee paycheck and many in private sector unions and the management as well.
What was pitched back in the 1970s as a way to ensure people had basics has morphed into a way of keeping those better off in caviar so to speak, at the expense of everyone else.
If someone in management in government makes $150,000 and someone else on federal service makes $20,000 it means a 2 percent COLA would increase the pay of the management position by $3,000 and the worker bee by $400. This, by the way, is on top of longevity and step pay for most government jobs especially at the state and federal levels.
So do COLAs really help keep up with inflation on basic needs? Not exactly.
Someone who earns $150,000 a year is more than likely to spend a lot more on housing and vehicles. They probably eat steak a heck of a lot more than the guy making $20,000.
So what the COLA does in effect at a certain point is supporting a standard of living much higher than basic. It is the employee - not the government - that decides what is basic.
There are exceptions of course but it is doubtful that someone making $150,000 a year working for Uncle Sam is going to make buying a 20-pound bag of rice and such staples the building blocks of feeding their families each month.
The COLA was designed as an easy way to have wages keep pace with inflation. But over the course of 35 years you could make a case that COLAs and how they have been applied have actually fanned inflation.
To truly have been a way to “neutralize inflation” the COLA would have been applied evenly across the economy and not just in private sector union contracts and for public employees plus benefit recipients such as Social Security and welfare. There is no COLA for non-union private sector workers. And there is certainly no COLA for minimum wage earners.
So what you have essentially is the elevation of a growing segment of the work force - state and federal employees that also have access to generous step increases on pay scales based on longevity and other factors on the back of those who don’t have such a benefit.
It is why public sector compensation today has eclipsed much of the private sector.
Most business - read that Main Street and smaller manufacturers - could ill afford using COLAs each year to boost wages. Unlike the government, they couldn’t simply raise prices to generate funds to cover the COLAs. If they did they run the risk of losing customers to someone else. The government never has that worry.
That is why the number of federal workers earning six-figures has jumped since the start of the Great Recession going from 14 percent to 19 percent of the workforce.
In the federal Department of Transportation as an example, there was one person earning more than $170,000 a year at the start of the recession. Eighteen months later, 1,690 employees were making more than $170,000. And that doesn’t include overtime pay and bonuses.
Meanwhile during the federal employee boom 7.3 million private sector and local government workers lost their jobs.
COLAs are sweet - especially for the only group of workers guaranteed to get them regardless- federal employees.
