Richard Jenrette snagged his dream job right out of college — sportswriter for the N&O. A few 
years into it, though, he looked around and noticed that newspaper people didn’t make much money. He enrolled in Harvard Business School to learn a more lucrative trade.
Jenrette, the “J” in the enormously successful brokerage firm DLJ (Donaldson, Lufkin & Jenrette), figured out early on in his career that making lots of money mattered to him. Many people share that value. Few of them work for municipal governments.
Yet Town Council members who lobbied for the manager’s proposed 3% pay raise across all salary levels based their view on the notion that employees on the upper end of the pay scale would feel “disrespected” if they got a smaller percentage pay raise than those at the lower end. Those council members did not share any data to back their contention.
In a year in which the town manager proposed a 3-cent tax hike and council whittled it down to 2 cents by kicking the can down the road, a 3% salary increase for town executives seemed generous to a fault. Some council members thought a 2% increase would be a better fit in a tight budget year. But that would be a very small increase to those in the lower half of the pay scale. Last year, the median salary for the town’s 700-plus employees was in the $30,000s.
Because an even percentage pay hike across the board widens the wealth gap, I once again lobbied for a split percentage pay raise. Once again, a majority on council trots out the notion that people at the top would feel disgruntled if they got a lower percent raise than their more modestly paid colleagues.
We need to stop worrying about feelings and look at the economics. To keep our town running smoothly, we must show more respect to the modestly paid. Because we don’t have housing in town that lower-paid employees can afford, bus drivers, groundskeepers and clerical workers must commute in. As towns around us grow, they have other options for work.
As it is, we are having trouble recruiting and retaining bus drivers. Police officers and firefighters drive through multiple jurisdictions on their way to work in Chapel Hill. A 3% pay raise for those making at or below the Area Median Income (about $56,000) and a 2% increase for those earning more than the AMI would help retain those we have the hardest time attracting while still rewarding department heads who make two to four times the AMI.
Those below the AMI likely would spend their raise, pumping money back into the local economy. Those above the AMI would be more apt to save it.
We expect some turnover in the top ranks due to the longtime town manager retiring. I doubt a single bus driver will quit because a new town manager is coming in.
The time for haggling is past. We will vote on the budget Wednesday. Maybe we could include a note in the digital paychecks of the highest-paid employees to donate 1% of their pay raise (the differential between 3% and 2%) to a nonprofit. Or at the very least, treat a lower-paid colleague to lunch.
— Nancy Oates
Terri
/ June 11, 2018For 5 of my 6 years on the OWASA Board of Directors, I argued each year that pay raises should be flat figures, like $1500. If you do the math, over 4 years someone who started out at $32,000 would be making ~$4K more at a 3% annual raise while someone who started at $80,000 would be making $10K more at 3%. I don’t think that is equitable, but I was never able to sway the majority of my fellow BOD.
By contrast, those who earned $32,000 and $80,000 who received an annual $1500 increase would each be making $6,000 more after 4 years. Not surprisingly those on staff who were making the larger salaries felt like I was denigrating their contribution to the utility (as did those on the BOD who making higher salaries).
Paying percentage increases is a cultural norm. It is mathematically stacked to benefit the higher paid workers. But changing norms is always going to anger someone.
BTW, I would vote against different percentage increases for different staff too.
James Barrett
/ June 11, 2018Terri, I don’t disagree with you about the benefits of flat $s instead of percentage, but why would you vote against the 3%/2% mix which accomplishes a portion of that?
Nancy, there’s plenty of research which backs you up on this. It notes that higher earners are particularly less motivated by salary in terms of job satisfaction.
Terri
/ June 11, 2018James, Because 2% of $80K is still nearly $500 more than 3% of $32K. My argument has always been that base salary establishes the standard salary for a job position. After that performance increases should be treated equitably. In other words, if someone who makes $32000 did a good job for the organization, that ‘good job’ was worth as much as the ‘good job’ the person at the $80K salary provided.
Don Evans
/ June 11, 2018An article headlined “Hitting pay dirt” in the May 26-June 1 edition of The Economist provides some perspective on the pay raise issue. Here’s an excerpt:
“Plato argued that the richest members of society should earn no more than four times the pay of the poorest. John Pierpont Morgan . . . reckoned that bosses should earn at most 20 times the pay of their underlings. . . . According to new filings submitted to the Securities and Exchange Commission, America’s largest publicly listed firms (those worth at least $1bn) on average paid their chief executives 130 times more than their typical workers in 2017.”
Chapel Hill’s town manager, Roger Stancil, is paid more than $200,000 a year. A number of staff managers and assistant directors have achieved six-figure salaries. Contrast those numbers with what a facility supervisor makes — about $21,000 a year — while the typical transit worker or library assistant is paid around $27,000 a year.
While the Chapel Hill pay disparity among town staff doesn’t come close to the obscenity that has become common in corporate America, it is becoming an embarrassment in a community that prides itself on its progressive attitudes.
plurimus
/ June 11, 2018Why is it “either/or”? Most 21st century corporations pay a “market rate” for talent calculated in comparison the the local market. That usually goes up a small amount each year, again depending on how easy (or not) it is to hire and retain.
Employees are then also rewarded individually with bonuses depending on individual performance+how well the revenues are looking. Some add in additional incentives for “customer facing” groups, if feedback is good or for, budget saving ideas, or outstanding performance etc.
I personally think that cross the board increases are bad. They tend to demotivate excellence. Pro rated bonuses again they tend to minimize overall performance.
I would look at what surrounding municipalities do and look for ones that are not trying to make everyone the same in a misguided notion of “fairness”. Different people are motivated differently you may find that increased benefit choices, more time off or opportunities for advancement are what some folks really want.
George C
/ June 11, 2018Nancy,
“Maybe we could include a note in the digital paychecks of the highest-paid employees to donate 1% of their pay raise (the differential between 3% and 2%) to a nonprofit.”
How do you know that they don’t?
David
/ June 14, 2018George,
Nancy doesn’t know how much our highest paid employees donate to charity, and you don’t either. But research on income tax filings suggests that, whatever the highest paid employees donate, it’s probably a lower percentage of their total income than the amount donated by the lowest paid town staff.
“Data from the IRS’s 2011 Statistics of Income (SOI) file on individuals who itemize on their tax return shows a U-shaped relationship between total adjusted gross income (AGI) and charitable giving as a percentage of AGI. In other words, those at either the high end or low end of the income distribution tend to give a higher percentage of their income as contributions than those in the middle.
In broad strokes, those with income between $100,000 and $200,000 contribute, on average, 2.6 percent of their income, which is lower compared to those with income either below $100,000 (3.6 percent) or above $200,000 (3.1 percent).”
http://nccs.urban.org/data-statistics/charitable-giving-america-some-facts-and-figures
Given that lower paid employees are statistically more generous than higher paid employees, if we are going to justify pay raises based on assumptions about charitable giving, lower paid staff should receive higher pay raises.
Nancy
/ June 17, 2018George, I would be surprised if there weren’t town staff who give 1% or much more to nonprofits. Likely there are some upper-echelon staff who would not view a pay raise as an opportunity to increase their philanthropy. My aim is to present the idea to those who might not have thought about it.