Welcome to real world economics! - Granite Grok

Welcome to real world economics!

From the Laconia Citizen:

County admins work to pay health costs

LACONIA — The Belknap County administration and department heads presented a working budget plan to commissioners on Thursday that, in many departments, takes money from wages to pay health care costs

Now, the rest of it is behind a paywall, so I’m not going to bother trying to get the rest of it.  Actually, don’t need to as they left the most important part up front (and bolded above).  Welcome to the private sector, boys & gals!  Every outfit that has a payroll knows that while you might pay a wage, the managers think “total compensation”  where wages are only one component.  Sure, every cost for an employee is divided up into separate General Ledger accounts but when someone is hired, it is the totality of the cost of that employee that is factored: wages, vacation, holiday, healthcare, other insurance, taxes, and other ancillary costs make up the whole cost.  One reason why wages have stagnated has been the rapid rise of healthcare – it’s like the carnival whack a mole game – when one comes up, another has to go down.  In a lot of cases, especially for smaller businesses, they can’t raise both wages & insurance costs.  So one takes from one part of the pie to pay for the other.  If healthcare costs are zooming, and the decision is made not to cut them, you end up with the same wage.  So the above bolded line is not surprising to those of us who have signed both the back and front of payroll checks.  Total compensation MAY indeed be going up – higher taxes paid, higher healthcare paid – just not wages.  Reality, dude. 

The problem is that this breaks down in the Public Sector – there is no profit model that keeps costs in line.  Instead, the Commissioners have been used to getting their own way and what is in the line item / GL budget is seen as “different” costs so the unrealistic outrage that item A must now be used for item B.  I’ve listened to the public employees say “a higher copay for healthcare stuff is a cut in pay! – they only see the wage component “loss” and not the higher compensation being paid for the healthcare component.

Now, the background is that the Belknap Commissioners are in a battle with the County Delegation over the budget – who gets to set what, who has power over the line items: the Delegation says the lines are fixed and can’t be touched and the Commissioners say that they can move the money in between the lines.  But even outside of this budget spat war, it illustrates that in the short term, it shows that total compensation is not your weekly check X 52.

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