## Hospital workers net record pay raise

Workers at Alameda Hospital are celebrating a new contract that gives them 18 percent across-the-board pay raises over the next three years – the highest in the hospital’s history, according to Service Employees International Union’s United Healthcare Workers West, which represents 180 of the hospital’s employees.

“Members cheered the new contract as a hard‐won protection at a time when more than 2 million Californians are out of work,” said a “Victory Bulletin” issued by the union Friday. The contract was ratified with more than 80 percent of the vote, it said.

The contract, which also includes improved retirement pay and scheduling improvements, is retroactive to April 2008, when the workers’ last contract expired. It was not clear who the union represents at the hospital, and a representative for the union did not return an e-mail seeking the information.

The board for the publicly funded hospital still needs to vote to approve the contract. The board’s next meeting is May 4.

I support union labor, but not knowing the details of this contract and having to deal with the fire fighters pushing to change the City charter over their hours while themselves having the world’s most generous benefits package, I am a little distressed to read this because of the hospital tax. I hate to sound like a libertarian crank because I am not, but this economy has lead to well over an 18% drop in my business and I am dependent on my spouse for health insurance because I am self employed.

Just curious as the how the precise language of the contract is spelled out.

For example, if the contract literally says 18% over three years and no more than 18%, then, taking into account compounding **leading up** to the 18 percent target, the annual percent increase between 2009-2010, 2010-2011, and 2011-2012 must be 5.672%. See the math directly below:

Year 0: hypothetical avg. wages: $70,000

Year 1: $70,000 X (1+.05672) = $73,971

Year 2: $73,971 X (1+.05672) = $78,166

Year 3: $78,166 X (1+.05672) = $82,600

CHECK: $82,600 = $70,000 X (1+.18)

But . . . suppose the phrase “18 percent across-the-board pay raises over the next three years” means 18 percent divided by three, or six percent a year. If this is the case, then the effective increase would be 19.102 percent because of compounding, not 18 percent. See the math below:

Year 0: hypothetical avg. wages: $70,000

Year 1: $70,000 X (1+.06) = $74,200

Year 2: $74,200 X (1+.06) = $78,652

Year 3: $78,166 X (1+.06) = $83,371

CHECK: ($83,371 – $70,000)/$70,000 = 19.102 percent

But further suppose the phrase means 18 percent divided by six, or three percent every six months. If this is the case, then the effective increase would be 19.405 percent . . . again because of compounding. See the math below:

Year 0: hypothetical avg. wages: $70,000

Year 1: June 30th: $70,000 X (1+.03) = $72,100

Year 1: Dec 31st: $72,100 X (1+.03) = $74,263

Year 2: June 30th: $74,263 X (1+.03) = $76,491

Year 2: Dec 31st: $76,491 X (1+.03) = $78,786

Year 3: June 30th: $78,786 X (1+.03) = $81,149

Year 3: Dec 31st: $81,149 X (1+.03) = $83,584

CHECK: ($83,584 – $70,000)/$70,000 = 19.405%

So, an interesting question might be: how is the agreement structured with regard to when wages are increased? Does this happen once a year over the next three years? Or, two times a year over the next three years?

In determining the rate increase that will be applied (once, twice or more) against wages, does the rate increase factor in compounding, or not? If the wage increase includes compounding, then the effective increase will be 18 percent. If not, then the effective increase will be 19.1 to 19.4 percent, depending on when rate increases are applied in a given year over three years.

. . . . But, let’s further put the numbers into context. Suppose compounding is NOT taken into account. And, further suppose, the hospital employs 250 workers, and will still employ 250 workers three years from now.

Year 0: 250 workers X $70,000 avg wage = $17,500,000 aggregate wages

Year 3 assuming 18 percent effective change:

250 workers X $82,600 avg wage = $20,650,000 aggregate wages

Year 3 assuming 19.1 percent effective change:

250 workers X $83,371 avg wage = $20,842,750 aggregate wages

Difference in aggregate wages comparing compounding and no compounding =

$192,750 = $20,842,750 – $20,650,000

Year 3 assuming 18 percent effective change:

250 workers X $82,600 avg wage = $20,650,000 aggregate wages

Year 3 assuming 19.4 percent effective change:

250 workers X $83,584 avg wage = $20,896,oo0 aggregate wages

Difference in aggregate wages comparing compounding and no compounding =

$246,000 = $20,896,000 – $20,650,000

In short, if the hospital takes into account compounding in how they program the rate increases, then the hospital will not be off by any amount with respect to their budget, when it comes to wages particularly.

But if the hospital didn’t take into account compounding, then they could be off budget anywhere from $192,750 to $246,000. In other words, in aggregate (using my $70,000 average), right now the hospital is shelling out in aggregate $17,500,000 in wages, and per the agreement expect to shell out $20,650,000 three years from now. But, **if** they failed to take into account compounding, and assuming the rate increases are programmed in once a year, then three years from now they will actually be shelling out $20,842,750 in aggregate wages, for a delta of $192,750.

If they failed to take into account compounding, and assuming rate increases are programmed in twice a year, then three years from now they will be shelling out $20,896,000 in aggregate wages, for a delta of $246,000.

CAUTION TO THE READER: everything above is hypothetical. The average wage I used — $70,000 — is hypothetical. As is the total number of workers, i.e. 250. The key question, simply put, is whether compounding is included in the rate increases.

The way the google alert I got in this read was that they’d get “across-the-board pay increases of 18 percent over three years.” If the hospital or union ever call back, I’ll see if I can get the to clarify that.

Thanks . . . a just a reminder: the calculations are all hypothetical. I can’t stress that enough. If we know what the average wage really is . . . and how many workers are actually going to benefit by the percentage increases, one could simply plug those numbers into the above formulas and then you’d get the delta or no delta. . . . Ok: lunch break over: back to work

HOLY SH*T!! With my tax payments in play I’m freaking gall struck by this news!! Who the hell negotiated this and what in heaven’s name is the rational?

Paying this much more we better have negotiated an easy way to dump any sandbags and be able to replace them with the best qualified workers. As a union worker since 1980 I started my first foray into the public sector in 2002. Since then I have been morally crushed by the realization that the highest % of unionized workforce is perhaps now in the public sector and instead of “union pride” – the best trained, the best workers as I saw in the private sector, I have mostly witnessed union scammers – the best protected lazy SOBs who are willing to put more effort into work avoidance and screwing with management than actually working.

I’ve been hoping all tax paid workers aren’t like this but more often I see signs of it even here in Mayberryville.

Only if the workforce somehow gave up protecting slackers could such an outrageously high pay raise be worthwhile. Even then it would be questionable because of the natural formation of symbiotic management/worker relationships whereby new or improved ideas are perceived as threatening to the status quo and slacking is the expectation.

Michelle,

Can you tell us who is on the hospital board?

They better be able to explain this because we can re-ballot the parcel tax and give it to schools instead.

In this economy, this really is an astounding victory for those workers, but it comes from the taxpayers – How could this be approved in this economic meltdown>? The workers are lucky to have their jobs. Just how many workers were leaving for ‘greener pastures’? Are there any statistics for workers quitting over the last few years available? What is the back-story of the negotiating teams? Just like the AFD contracts, when you get thousands of applicants for every job posting really made public, how necessary are the increased costs to the taxpayers?

I guess another question I have is, right now, again assuming the hypothetical average wage of $70,000 and assuming 250 workers, the site is expending an estimated $17,500,000 in aggregate wages. Three years from now, the site will spend anywhere between $20,650,000 and $20,896,000 in aggregate wages.

So, a question worth asking is, “From where will the site get the additional $3,150,000 (i.e. $20,650,000 – $17,500,000) to $3,396,000 (i.e. $20,896,000 – $17,500,000) to cover the 18% increase,” assuming the hypotheticals are somewhat correct?

Let me repeat a key point: the inputs above are hypotheticals. You can change the hypothetical inputs (i.e. wage and # of workers) but the conclusions with respect to the actual percentage increase (with or without compounding) will remain the same:

For example: suppose there are 180 workers making $55,000 on average instead of $70,000, and in the first scenario below negotiators factored in compounding. So, taking into account compounding, 18% over three years is 5.672% per year.

Year 0: hypothetical avg. wages: $55,000

Year 1: $55,000 X (1+.05672) = $58,120

Year 2: $58,120 X (1+.05672) = $61,416

Year 3: $61,416 X (1+.05672) = $64,900

CHECK: $64,900 = $55,000 X (1+.18)

Scenario where compounding isn’t factored in and pay increases once a year:

Year 0: hypothetical avg. wages: $55,000

Year 1: $55,000 X (1+.06) = $58,300

Year 2: $58,300 X (1+.06) = $61,798

Year 3: $61,798 X (1+.06) = $65,506

CHECK: ($65,506 – $55,000)/$55,000 = 19.102 percent

Scenario where compounding isn’t taking in account and increases occur twice a year:

Year 0: hypothetical avg. wages: $55,000

Year 1: June 30th: $55,000 X (1+.03) = $56,650

Year 1: Dec 31st: $56,650 X (1+.03) = $58,350

Year 2: June 30th: $58,350 X (1+.03) = $60,100

Year 2: Dec 31st: $60,100 X (1+.03) = $61,903

Year 3: June 30th: $61,903 X (1+.03) = $63,760

Year 3: Dec 31st: $63,760 X (1+.03) = $65,673

CHECK: ($65,673 – $55,000)/$55,000 = 19.405%

In terms of aggregate change, the replacement of one hypothetical input, say 250 workers, with another, say 180 workers, multiplied against the new (albeit lower) hypothetical average wage of $55,000, leads to an estimate which places aggregate wages right now at $9,900,000.

So, if in three years the average wage increases from $55,000 to either $64,900, $65,506, or $65,673, then, in aggregate terms, in three years, aggregate wages will range from $11,682,000 to $11,821,118.

Again: how does the hospital intend to cover the difference between the current aggregate wage and aggregate wage three years hence? In this conservative meta analysis (conservative with respect to the inputs), you’re looking at a need for an additional $1,782,000 to $1,921,118 to cover the 18 percent wage increase.

($1,782,000 = $11,682,000 – $9,900,000)

($1,921,118 = 11,821,118 – $9,900,000)

So, the legitimate question, simply put, is how does the hospital intend to cover the 18% increase in wages, which, conservatively, will require $1.7 to $1.9 million but, in the worse-case scenario, could require $3.2 to $3.4 million in the next three years?

Cutting back on the workforce probably is not sustainable because that would mean reduction in force amounting to 32 to 35 workers in the conservative case (i.e. 32 = $1.7 million divided by $55,000, or, 35 = $1.9 million divided by $55,000). Cutting back a workforce of, say, 180 by 32 to 35 FTEs amounts to a 18 to 19 percent reduction, which more than likely would significantly impact service delivery hence the hospital’s current revenue generating capabilities.

So, another very basic question worth asking is, “How sustainable is the 18 percent increase over three years?” What mixture of staffing cuts and new revenue-generating ideas does the hospital have in place to finance the 18% increase?

Doesn’t Alameda Hospital have to close in 2013 anyway due to its lack of seismic upgrades conflicting with the laws that require those upgrades?

Wasn’t the hospital required to have submitted a plan of action to the State for the seismic condition over two years ago?

What is the plan?

Who is responsible for the future of the hospital – the hospital management or the hospital board?

I have heard that as it currently stands; the hospital parcel tax will still be charged to homeowners even after the hospital is closed.

– Is the city planning on making a fund transfer to grab that parcel tax money?

Are there negotiations with the VA for the city to share in the new proposed VA hospital site?

If the Hospital Board gives this wage and benefit gift to the workforce, as Tony asked; How can it be sustained, the hospital had operated in a deficit for so long… Did they play with the books or make errors like what happened with our city budget and related funds?

Could that wage package better be used to negotiate a new hospital site?

Since Kaiser has been leasing a portion of the hospital, do those funds belong to the hospital board to play with, or are they part of the city or should they be dividends to credit the taxpayers?

So many questions…

Who has time to find the truth?