Cost-of-labor approach can be complicated

Local union for city workers doesn't agree with approach.


WALLA WALLA - The city's current switch from cost of living to cost of labor does have its merits, said labor analyst and practice leader James Stoeckmann of WorldatWork.

"I think municipalities are more inclined to become enlightened to that approach, and you do want to be enlightened in that approach," Stoeckmann said.

Cost of labor, he added, is not for every organization and is still not the norm in the public sector.

Supporters of cost of labor often tout that the federal government uses it, but that is not entirely correct, Stoeckmann said. He said the federal government has an extremely complicated formula that uses "many different layers of analysis."

In addition to being complicated, cost of labor can also be costly, he added.

The city of Walla Walla paid $80,000 to Milliman, Inc., to do its initial cost-of-labor study in 2009.

The study showed that city directors and a number of other higher paid professionals were underpaid, which led to more costs to make up the salary deficiencies.

City officials found themselves doling out 5-7 percent increases in 2010 and 2011 to underpaid non-represented employees.

Those were also budget strapped years where library hours and the Pioneer Park Aviary were threatened, and all city departments saw cuts roughly between 5-10 percent.

Now that the city is moving to the cost-of-labor methodology, a number of questions remain.

Will the studies be conducted every biennium?

What will be the scope of those studies?

What will be they cost?

Another issue the city will have to contend with centers on collective bargaining.

In 2009, when the city was negotiating a two-year contract with city union employees, it asked the union to consider using cost of labor.

"Arbitrary" and "capricious" were how representatives of Local 1191-W defined the Milliman study and why they stuck with the traditional cost-of-living adjustments.

Stoeckmann said the union's response doesn't surprise him. The only unions he knows of that use cost of labor would be professional sports unions.

"I think it is because it (cost of living) is just a very mechanical number; it ensure that their number is always going to be kept abreast," he said.

Stoeckmann also said that before a city can use cost of labor, it has to have knowledge of where it is hiring employees from and where it is losing them to.

"That is what it should be based on when you are using cost of labor. It makes no sense for Phoenix to compare itself to a New York City or San Francisco," he said.

In spite of the difficulties of implementing a cost-of-labor system, Stoeckmann was supportive of government agencies that are moving away from the traditional cost-of-living adjustment.

"You are paying taxpayer dollars for those salaries, but you want to make sure you are paying appropriately," Stoeckmann said. "You don't want to underpay either, because part of the HR (Human Resources) department is to make sure you can attract and motivate and retain employees."


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