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Sunday, January 22, 2017

Embattled New Jersey governor Chris Christie has come out foursquare for wage theft.

As reported Sunday by Karen Tumulty of The Washington Post, Christie met with 200 citizens at the Jersey shore last week and, regarding state worker retirement benefits, declared: “Promises were made that can’t be kept… Welcome to the real world, folks.”

Tumulty and other first-rate political reporters are covering Christie’s not-fully-specified plans to cut post-retirement health care benefits and/or pensions as a political story: Reformist GOP governor championing taxpayer interests takes on greedy, Democratic-allied public worker unions.

Nothing better illustrates why policy reporters, not politics reporters, should be covering these issues. Politics can be entertaining, but that entertainment often comes at the expense of ignoring the heart of serious matters like Christie’s declared support for stealing from state employees so he can spend their money elsewhere.

And to be clear, it’s not the taxpayers’ money, but the workers’. The state gets their labor as compensation for the work they do. No moral principle supports paying workers less than was agreed.

Christie is winning plaudits from many people who fail to grasp the principle that all compensation is earned and failing to pay in full is theft. These plaudits would be far less likely if he ran a company instead of a government.

If you have trouble grasping this, just imagine opening your next paycheck to find that only some of the money is there — and when asked about this, your employer says, “promises were made that can’t be kept… Welcome to the real world, folks.”

Christie’s position is also astonishing given his frequent statements that he always acts in accordance with the law. He articulated that standard repeatedly in connection with the closing of four lanes on the George Washington Bridge, an apparent political payback scheme that is the subject of federal criminal and legislative investigations.

Because journalists have done such a poor job of explaining the principles of compensation, politicians like Christie, Governor Scott Walker of Wisconsin, and others have successfully obscured their plots to steal from public employees in a wrapper of anti-tax rhetoric.

This column is not an argument that New Jersey is paying too much or too little in pensions and post-retirement health benefits. It is also not an argument about how much public-sector workers are paid. And it is not an argument against the state negotiating with public employee unions to reduce future compensation, including health care benefits in retirement and pensions.

This column is about paying in full what was already earned. It is about paying bills as they come due. It is about principles and moral duty.

To be clear, I am foursquare against cheating in any form, and since 1967 my work has exposed a vast array of corrupt schemes by politicians, executives and charity leaders.

And this column is not a defense of practices by which workers cheat — the most common form being “pension spiking,” in which workers pile on overtime and other pay during their last year or even day to artificially pump up pension payments. I wrote an exposé of this practice more than 20 years ago. If Christie wants to stop such games, I am with him — and you should be, too.

But because public debate about retiree health benefits and pensions is so ill informed, let me offer a brief primer on compensation principles.

Pensions are not gifts. Pensions are earned. Ditto post-retirement health care benefits that new hires were told they would earn.

Declaring that any compensation that was earned will not be paid is to engage in deliberate and calculated theft.

The gross salary on your paycheck is not the entire cost of your labor. Employers, including the State of New Jersey, budget based on “all-in costs,” which for most large employers are typically a third higher than wages alone. The “all-in” cost is your total compensation.

New Jersey public sector workers — especially those with unions — could have demanded that all of their compensation be paid in cash. Instead these workers negotiated to take part of their pay in cash, and used the rest of their earnings to purchase health care, vacations, sick leave and other benefits including that monthly stream of payments in old age that we call pensions.

Every payday, employers — corporate and government — are supposed to set aside the portion of compensation needed to pay for pension benefits. But unlike health insurance companies, which demand payment on time to keep policies in force, the pension law is riddled with loopholes enabling theft through less-than-full payment.

The state should also be reserving, as the accountants say, for the future costs of medical coverage for workers after they retire since that was part of their compensation package.

New Jersey did a reasonable, though imperfect, job of properly funding its pensions — until the election of another Republican governor, Christine Todd Whitman, who took office in January 1994.

To burnish her image as a tax cutter, Whitman decided to not put the billions of dollars public workers earned, but deferred, into their pension plan. In reality, all Whitman did was increase the future costs New Jersey taxpayers would face because those billions of dollars were not invested in the market, earning returns.

You can feel sorry for Christie, who is faced with the obligations Whitman shirked, but that does not wipe out the legal and moral duty to pay workers in full.

Governor Jon Corzine, a Democrat, did not alleviate the huge and chronic underfunding problem in New Jersey, showing that the creation of the shortfall has become a bipartisan problem.

News reports are rich with assertions by Christie and others that they want public-sector workers to “pay more” or “contribute more” to their pensions, and for taxpayers to “contribute” less. That word “contribute” is deceptive.

There are only two sources of money in pension plans, corporate or government. One is the earnings the workers deferred. The other is investment returns.

Taxpayers, and investors, received in full what they sought — the labor of their employees. But unless all retirement benefits are paid in full, the workers get cheated out of part of their agreed-to compensation.

Failing to pay in full the retirement benefits workers earned is no different in principle from your employer, declaring that money was tight, shorting your paycheck this week.

It is one thing for an employer to say in advance that current compensation levels cannot be maintained and will be cut next week. That way, workers can decide to stay or quit before their pay is cut.  (Economic theory says that the best workers will go where they are better compensated, while those with less talent or options will stay.)

A reduction of benefits yet to be earned is not what Christie proposes. Read his language – “promises were made that can’t be kept.” He is proposing to not fully pay compensation already earned, and his actions show he is not setting aside the necessary funds to make those payments.

Christie’s declaration stands in sharp contrast to what other leaders say when their organizations are caught stealing from workers.

From mom-and-pop operations to Walmart and McDonald’s, in recent years many employers have been caught stealing current wages. They try to explain their way out of it, but none has declared that they will steal.

And when ordered by the courts to pay up, employers do.

Christie’s plan goes beyond just subtly stealing from workers. He wants to make sure they are in the dark about his plans to steal the full compensation they earned.

Wage theft is an endemic problem in the United States, according to Kim Bobo, executive director of Interfaith Justice in Chicago, which has fought to make sure workers are fully paid.

Bobo’s focus is on cash pay, but the principles she espouses apply to all compensation, from pension and post-retirement health care benefits to successful startup companies that dump workers just before their stock options vest.

“Unions are still the best and most effective vehicle for stopping wage theft,” Bobo wrote in the chapter she contributed to my new anthology on inequality, titled DIVIDED: The Perils of Power Growing Inequality.

Bobo says that’s because “unions train workers about their rights in the workplace. Basic laws protecting workers are confusing, and consequently most workers are unsure about their rights and where to turn for help. Unions train local leaders about their rights in the workplace. When workers know the laws and the rights, they are much more vigorous advocates on their own behalf.”

Christie wants to get rid of public-employee unions or, at the very least, weaken them. As Bobo notes, without unions it is easier to cheat workers out of the full compensation they earned.

Governor Christie’s declaration is also at odds with his own repeated promises to New Jersey voters. Upon taking office, he promoted a plan to increase pension plan funding by $600 million annually through fiscal year 2018. His office said that would pretty much close the gap between the pensions state workers have earned and the pool of funds to pay them.

But in his January State of the State address, Christie proposed a sharp reversal from his earlier promises.  And he had already cut pension funding in deceptive ways, according to NJSpotlight.com contributor Mark J. Magyar’s account of the January speech:

What Christie didn’t tell the Legislature or the public that day was that his Treasury Department had already instructed the actuaries responsible for calculating the state’s required pension payment to change the formula not only to cut the state’s pension payment for the upcoming year, but to do so retroactively for the current year.

If Christie succeeds, it means he will not only have engineered the theft of billions of dollars of compensation state workers earned in post-retirement health care and pension benefits. It will mean winning votes by using money that should be set aside now to fully compensate workers and diverting that to finance popular government services.

There is a word for not paying workers in full for what they earned: Theft. And people who steal, whether by threat of violence or slick political maneuver, are properly called thieves.

AFP Photo/Eric Thayer

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