May 7, 2014.

This commentary by FPI’s James Parrott on the new New York City labor contracts was requested by CUNY’s Joseph S. Murphy Institute and appears on their new blog.

For the first time in nearly five years, major labor agreements were recently reached covering public sector workers in New York City. On April 17, Transport Workers Union (TWU) Local 100 concluded a new 5-year contract dating from January 2012 covering 34,000 workers at the Metropolitan Transportation Authority (MTA), most of whom work for the subway and bus system in New York City. Two weeks later on May 1, the United Federation of Teachers (UFT) reached a 9-year agreement with the City of New York stretching back to November 2009 that affects over 100,000 public school teachers and support staff.

Both contracts represented a breakthrough in ending managements’ demands for a 3-year wage freeze that had grown out of a counter-productive post-Great Recession conservative infatuation with public sector austerity, or more precisely, a mindset that held that workers had to sacrifice to help clean up the economic mess caused by financial sector excesses.

Despite incessant pleas of budgetary poverty in recent years, both the MTA and the City acknowledged that the new contracts fit within multi-year financial plans. One difference, of course, is that Bill de Blasio became Mayor of New York City in 2014. For a discussion of his predecessor’s municipal labor bargaining approach and on the broader question of City’s financial situation, see the on-line debate I recently had with Chuck Brecher of the Citizens Budget Commission on the topic, “New York’s Unsettled Contracts: What can the City Afford?”

The MTA’s “3-zeroes” position dates from 2011 and followed the major state contracts settled that spring under Governor Andrew Cuomo.

Executive boards of both Local 100 and the UFT have approved the contracts; at this writing, both contracts are being voted on by the unions’ respective memberships.

The Local 100 5-year contract provides for one-percent wage increases in January 2012 and 2013, followed by three annual two-percent wage increases in what could become a pattern applied to other subway and bus workers at MTA, but not necessarily to workers at the commuter railroads, Long Island Railroad and Metro-North. The MTA agreed to pay the retroactive increases in 2014.

The UFT agreement extends two four-percent wage increases from the last City bargaining round dating from 2008-2010 to the teachers, provides for a $1,000 bonus on ratification in lieu of a wage increase for an 18-month period from late 2011 to May 2013, followed by six annual wage increases of 1-3 percent from May 2013 to May 2018 that total 10 percent. The contract stretches out the application of the two four-percent increases from the last pattern over four years (2015-18) in two-percent increments, and makes lump-sum payments for the retroactive increases covering 2009-2014 over the 2015-2020 period.

The City hopes that the $1,000 bonus and the six years of wage increases totaling 10 percent in the UFT contract becomes the current pattern in new contracts with all other municipal unions.

As part of the new agreements, Local 100 agreed to increase its members’ health care premiums from 1.5 to two percent, and the UFT agreed to identify over $1 billion in health care savings over four years. Since municipal employee health care is negotiated by the Municipal Labor Committee (MLC), the umbrella group representing most City unions, the MLC signed off May 2 on a commitment to seek $3.4 billion citywide in employee health care savings. If cumulative health care savings of $3.765 billion citywide are achieved by June 2018, city union members will receive an additional one percent bonus, according to the Wall Street Journal. The City’s annual budget for employee health care is about $5 billion.

Settling the UFT contract also meant that a host of educational policy issues were resolved and a new spirit of partnership has emerged between the City and the teachers that will positively affect the quality of public school education. To encourage teacher retention and enhance quality, teachers in “hard-to-staff” schools will receive supplemental pay, and teacher leadership positions will be established under which experienced teachers selected by the Chancellor would mentor other teachers and receive additional compensation of $7,500 to $20,000 per year.

The TWU Local 100 contract restored funding for an apprenticeship and training system, provides for two weeks of fully paid maternity or paternity leave upon the birth of a child, and enhanced some health and other fringe benefits.

While the wage increases are modest and close to the inflation rate, it is very positive that the logjam has been broken and that public sector bargaining that affects nearly 400,000 workers in New York City has been put back on track. The lack of wage increases for middle income workers is one of the reasons the economic recovery has been so lop-sided, with almost all of the income gains accruing to the very top of the income spectrum. It is also encouraging that 32BJSEIU recently reached a new 4-year contract in its residential division that provided for three percent annual wage and benefit improvements for 30,000 workers.

Some important long-unsettled contracts remain, namely those between the City’s Health and Hospital Corporation and New York State Nurses Association and 1199SEIU, between the City and School Principals, and between the MTA and unions representing Long Island Railroad workers.

One of the key lessons of recent years for public sector labor is clear—it needs to lend its muscle to lift up other workers as well. Public sector unions would then be less isolated when their pay and benefits come under fire, and the potential for antagonistic forces to drive a wedge between low-wage workers and municipal workers would diminish.A new mayor and progressive leadership in the City Council mean that New York City labor, public and private, has an opportunity to help forge and advance a broader agenda of raising wages and restoring hope for all workers, including those not currently represented by unions.