Monday, July 5, 2010

The Cost of Living

Union members forgoing raises, cost-of-living increases
Across the state and nation, more school boards and unions are settling on one- to two-year contracts with cost-of-living increases from zero to 1.5 percent, officials say.
--Dispatch Politics June 7, 2010

In case the school board doesn't read much beyond those scintillating memos and articles provided by Tim Culver that would not possibly be slanted in any particular direction, perhaps we should look at how good our employees have had it.

We continually hear that teachers' salaries are not keeping up with the cost of living.
We hear about how those that are retiring started out making only $10,000 per year, and therefore are justified to be retiring--under the pretty sweet Wisconsin Retirement System--on a salary of $75-80,000 per year.

Horse puckey!
You've heard the unsubstantiated and well spun claims. Now get the facts. Become educated. As we've said countless times, we don't want you to get your information from the incredibly slanted school district...nor do we want you to trust us. We want you to GET THE FACTS and make an informed decision on your own.

Myth: Teachers salaries are not keeping pace with the cost of living.
Reality: Let's look at that teacher (or elementary school librarian!) who is retiring today at a salary of $70,000, $75,000, or even $80,000. Over the last 35 years, since the Social Security system based benefit payments on the COLA (Cost of Living Adjustment), the COLA has averaged 4.3% increase per year.

Now we've warned you about statistics. The mean (average) for any set of data can be skewed/biased heavily by erratic data. In these cases, the median, or middle value, represents a better estimate. The mean COLA since 1975 is 3.5%. Hmm...are you starting to get an idea where the old QEO figure of 3.8% might have originated?

If a teacher who started in 1975 at a salary of $10,000 received annual wage increases tied solely to the COLA, their salary at retirement in 2010 would have been $43,100.
Now that's a pretty far cry from $70-80,000. So clearly things aren't quite as dark as we sometimes hear.

Reaganomics 1978-1982
Love him or hate him, while Ronald Reagan was in office, from 1978-1982, the nation saw a phenomenal, statistics-defying increase to the COLA. Over those four years, the COLA increased by 9.9%, 14.3%, 11.2%, and 7.4%. Social Security payments increased a net 50% as a result of those increases. The closest single year increase we've seen since then was 5.8% in 2008, which, of course was followed by 0% in 2009.

Those four years contributed significantly to our 35-yr average COLA of 4.3%. In fact, if one breaks the COLA down into average increases:
Last 5 yrs 3.10% average increase
Last 10 yrs 2.78% average increase
Last 15 yrs 2.61% average increase
Last 20 yrs 2.84% average increase
Last 25 yrs 2.96% average increase
Last 30 yrs 3.80% average increase
Last 35 yrs 4.30% average increase

See how a couple of big numbers can skew a set of data?

Getting Back to That $10,000/yr Teacher
So let's look at that teacher who retired at a salary of $75-80,000, but who struggled so mightily initially with a salary of $10,000. First of all, a salary of $10,000 was (A) the going rate and (B) not shabby back in the early to mid-seventies. order to go from $10,000 to $75,000 or more over 35 years, the average increase (think average rate of return on your investments) would have to be 6.025%. That translates to an average raise that was 40% better than the average COLA, and 72% better than the median COLA.
That's not too shabby.

In fact, math folks have a term for the growth curve exhibited by teacher salaries in the graph above. It's called "exponential growth". Look it up.

Don't take our word for this stuff...check the data out for yourselves.