February 25, 2009

Contract Steps: A Tutorial

Marc Comtois

When we here about 3% raises in union contracts, what does that mean? Seems obvious: people will make 3% more next year over this. But with union contracts, that's not the case. In most union contracts with which I'm familiar, each position has a defined table of step increases based on years served. When we here about 3% raises, for example, that 3% is being applied to the STEPS not to the people.

For municipal and teacher contracts (Police and Fire contracts can be different--going "up a step" doesn't occur yearly, for instance), that usually means pre-defined increases for the first ten steps (or years). After that, people are "frozen" at step 10 and continue to receive the annual step 10 escalation (which is basically the publicized % raise we always here about).

To a non-union member of the public, this can be confusing, which isn't helped by the way such pay increases are routinely reported.

Here's an example: This chart is for a generic municipal position (fyi: the numbers aren't real, just an example) based on the tentative agreement in Warwick, with the typical salary/step structure laid out for 2009->2012 based on current salary in 2009, 0% "raise" in 2010 and 2.25% raises in 2011 and 2012.


An actual, flesh-and-blood first year employee makes $30,000 in 2009, $32,500 in 2010, $35,788 in 2011 and $39,206 in 2012. Even if there were no "raises" in 2011 and 2012, that worker would still see raises ($35,000 in 2011 and $37,500 in 2012) as they progressed year-to-year. So, you see, the structure of the steps has a "hidden" raise built in.

Here's a real-world example. This is the step structure of an old teacher contract from a Rhode Island community.


As you can see, for the most part, the raises for each STEP were uniform ("Step Incr."). This is what gets reported as the % raise. So, you might hear that the teachers received, on average, a 3.6% raise from Year 1 to Year 2 and a 3.4% raise from Year 2 to Year 3.

But the actual teachers received raises much higher than that ("Real Incr."). Here's the same chart, but with the actual year-to-year career path of a sample "rookie" teacher highlighted.


So, moving from Year 1 to Year 2 doesn't result in the publicized 3.6% raise, but a 12.6% raise, thanks to the built-in Step increases. And so on.

Finally, those outside of the "stepladder" (people with over 10 year service, usually) are "frozen" at Step 10 and receive the % increase that is always publicized (in essence, these are the only employees to which the public number applies). Eventually, they also usually receive a longevity bonus every year, based on how many years they've served. As an example, from the same real world contract:


(Thanks to commenters "MikeinRI" and "Patrick" for helping me to clarify my thinking with this!)

ADDENDUM: Bill Felkner from OSPRI passes this along:

When we posted the teacher contracts we did a short analysis of each one, tallying up the step and “raise” – what we found is that the districts average about 10.5% per year. If you go to our fiscal database (http://www.oceanstatepolicy.org/transparency.php) and browse to each district, you will find a category for Contract Evaluation. Click on that and you will see the total step+raise for each one.

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I believe everything you write is true, except when you imply it is not the position but the person who is paid the raise after ten steps. Although only semantics perhaps, the 3% increases are always applied to the steps. Someone who has been teaching 20 years is on the tenth step, and therefore is paid the 3% increase applied to step 10.

Step 10 teachers may also see their salaries increase despite a negotiated 0% raise, as some contracts include longevity as well. This portion of a salary is indeed paid to the individual.

Posted by: mikeinRI at February 25, 2009 11:14 AM

Because teacher compensation is intentionally designed in a a la carte manner (to mask total compensation) - menu items such as steps, longevity pay, "degree" pay, etc. - the only accurate measure is Form W-2 unadjusted gross income.

Take the W-2 unadjusted gross income from the entire full-time teaching force, and from that one can determine average compensation, actual raises over the life of the preceding contract, etc.

Then prorate for a 180 day work year (less 20-ish "sick days", personal days, "professional development" days etc.).

Posted by: Tom W at February 25, 2009 9:54 PM

Tom, I did the math on my own local teachers contract and the "equivalent" when you figure out the hourly rate and multiply by a 52 week, 40 hour a week job, they start at $60,000 a year and top out at $107,000 with only a bachelor's degree. Of course with additional education and department chairmanships, that would be even higher.

And my school committee says they're going to "start" the negotiations at 0% raise. Yeah, great place to "start". How about a rollback, eh?

Posted by: Patrick at February 25, 2009 10:38 PM

>>I did the math on my own local teachers contract and the "equivalent" when you figure out the hourly rate and multiply by a 52 week, 40 hour a week job, they start at $60,000 a year and top out at $107,000 with only a bachelor's degree.

All this and humungous lifetime pensions and retiree health care. SWEET!

Posted by: Tom W at February 25, 2009 10:42 PM
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