Should state employees get automatic raises?

If the annual increases are a cost-of-living adjustment, should they be tied to an inflationary index? At first blush it might seem like a good idea, if they are meant to protect state workers from an erosion of the purchasing power of their paycheck.

RALEIGH (May 5, 2015) – For decades, annual salary adjustments for state employees have been included in most budgets. Known in state human resource terms as “legislative increases,” the raises are essentially meant to be a cost-of-living adjustment, a way to ensure that workers are protected from falling real salaries.

For 17 of the past 23 years, state budgets have included straight dollar-amount raises, straight percentage raises, or a combination of both. Six budgets provided no raise. When raises are included, they are usually across-the-board raises that apply to each state-funded employee. Some budgets have also included extra paid time off in the form of “bonus” or “special” leave.

Fiscal Year Cost of living increase Bonus/other
2005 the greater of $850 or 2% 5 days bonus leave
2006 5.5% 0
2007 4% 0
2008 the greater of $1,100 or 2.75%
2009 0 0
2010 0 0
2011 0 0
2012 1.2% 5 days special leave
2013 0 5 days special leave
2014 $1,000 flat increase 5 days bonus leave
Source: 2015 Compensation & Benefits Report, N.C. Office of State Human Resources.

As far as we can tell, state employee raises have never been explicitly tied to an inflation measure such as the Consumer Price Index. At least not as far back as fiscal year 1992.

If the annual increases are a cost-of-living adjustment, should they be tied to an inflationary index? At first blush it might seem like a good idea, if they are meant to protect state workers from an erosion of the purchasing power of their paycheck.

But there is a good reason not to index across-the-board raises to inflation. Tying government salaries to the CPI would mean that as North Carolina families struggle during hard times, the public servants they employ through taxes might continue to see raises every year.

Comparison_CPI_LI

Consider the recession years of 2009-2011. If a CPI-tied increase had been in place, state employees would have seen an overall increase of 7.4 percent even while many of the taxpayers who pay those salaries were being laid off or forced to take jobs for fewer hours and less pay than they would have liked.

And then there is this year. Depending on which CPI measure is chosen and when, the CPI for 2015 has been largely deflationary, having ventured into negative territory several times due mostly to falling energy prices. Would state employees be willing to take a nominal pay cut this year?

Overall it is wiser to make the decision on raises each legislative session rather than indexing them to inflation. State workers’ jobs and paychecks are already much more secure than their fellow citizens in the private sector. They should not be unreasonably protected from the economic swings that affect all North Carolinians.