Living Wage: In-Sourcing City Temps

At their March 15, 2010 meeting, the Ann Arbor city councilmembers heard an update from city administrator Roger Fraser during his regular report to them: The staffing of temporary positions administered by Manpower, a temporary staffing agency, would be be brought back in-house.

And two months later, attached to the city council’s May 3, 2010 agenda was a communication about Health and Human Services guidelines for poverty levels – there was no change this year. That means there’s no change to the minimum compensation required under the city’s living wage ordinance.

How does the living wage ordinance relate to the approximately 35-40 temporary employees who are transitioning from Manpower to the city’s payroll? It doesn’t. The city itself is not required to pay its own workers at the level stipulated by the living wage ordinance – it applies to outside contractors with the city, like Manpower.

But the majority (with some exceptions) of the transitioned workers won’t see a drop in their wages – and that’s viewed as a positive outcome by the city. On the other hand, there’s no health insurance benefits through the city for those workers – Manpower had offered a health insurance option. And a hoped-for increase in temporary workers’ wages – a move supported by some city supervisors – did not materialize, foundering on an overall budget climate that made talk of wage cuts easier than a discussion of increases.

The recent move away from the use of Manpower as an agency to staff temporary city positions provides a good excuse to review the living wage ordinance itself, and its less-than-obvious connection to the upcoming Ann Arbor Summer Festival and to the city’s recycling program. In the case of the recycling program, the city is spending several hundred thousand dollars over a 10-year period to ensure that workers for a private company operating the city’s materials recovery facility are paid in compliance with the living wage ordinance.

Transition from Manpower: No Wage Increase

During council meetings, city administrator Roger Fraser has a slot on the agenda for providing communications to the council. The Chronicle’s report of the March 15, 2010 meeting included this description:

Fraser announced that the city has reduced its number of temporary workers to the point that it is no longer cost-effective to have Manpower administer that operation. This will be brought back in-house.

In response to a question from Sandi Smith (Ward 1), Fraser explained that some, but not all of the temporary workers would be brought on as city employees.

The Manpower temporary workers applied for the city jobs through the city’s regular hiring process. From a staff memo sent out in late March:

Effective May 3, 2010, the city will no longer be using Manpower Staffing Inc. as a temporary staffing vendor. HRSU will be moving most of the current active Manpower temporary staff to city payroll by the end of April 2010.

A “hiring fair” is scheduled at Cobblestone Farms on April 26, 2010, from 4 to 7 p.m. for those Manpower temporary staff transitioning to city payroll. In addition, HRSU will be holding two training sessions for those managers and supervisors that need a refresher course in hiring temporary staff with the city. More details on this training will be forthcoming in the next issue of the HRSU In the Know newsletter.

The application that workers were asked to complete was the regular application for city employment. [.doc file of application]

Based on a May 3, 2010 email sent to Fraser by Robyn Wilkerson, the city’s human resource director, there were some instances of workers who transitioned to the city’s payroll system from Manpower who will be making $.06 an hour less working for the city than they did through Manpower. Based on a 40-hour week and 50 weeks of work a year, that translates into $120 less a year.

The majority of the 35-40 employees who have moved into the city’s payroll system, however, will earn the same wage. For example, workers in the city’s natural area and preservation program (NAP) who were earning $12.25 an hour through Manpower will continue to earn that amount through the city.

But there had been some hope that the wage rates in NAP would increase in connection with the transition. Supervisors in NAP wanted to make a case for higher wages, but ultimately were not successful in convincing city administrators. Dave Borneman, manager of the city’s NAP program, conveyed the disappointing news and his appreciation for NAP workers in a May 24, 2010 email:

From: Borneman, Dave
Sent: Mon 24-May-10 17:21
To: Adopt-A-Park, NAP [...]

You may have heard that JT [Jason Tallant], JF [Jason Frenzel], LTS [Lara Treemore-Spears], and I were hoping that we could use this transition from Manpower as a time to make some “positive adjustments” to temp pay rates. We pleaded our case, or at least started to, when this “clarifying” email (below) came through from Roger Fraser, City Administrator, via Sue McCormick, Public Service Administrator (and Craig’s boss). I chose to not share it at the time because I was not even sure then if we would be able to avoid any pay CUTS during this transition. But with the passage of the budget last week, and then scrambling to get everyone into the City Payroll system, it appears that we have preserved all the previous pay rates for each position.

I know some of you were hoping for a pay increase, and I am sorry that this will not be the year for that to happen. For what it’s worth (nothing, financially, I realize!) I do appreciate all that you do for us here at NAP. You make this a fun place to work, and an enjoyable, satisfying place to spend my work life. Thank you for your dedication to NAP, and to the City. -dave

David Borneman
Natural Area Preservation Manager

The email from McCormick that Borneman appended to his message made clear that maintaining the same wage level was seen as a positive by the city [emphasis added].

From: McCormick, Sue
Sent: Monday, May 03, 2010 2:09 PM
To: Bahl, Sumedh; Cariano, Robert; Hupy, Craig; Kenzie, Earl; Kulhanek, Matthew; Pirooz, Homayoon; Praschan, Marti; Welser, Wendy; Wheeler, William
Subject: FW: temps

Managers,

Please share this with your hiring supervisors. If there are any
outstanding questions, please let me know. As we are constrained to
such a great degree on revenues that we are asking for concessions
from all City employees and as the world around us in many cases is
rolling back wages, maintaining pay scales for our temps should be
considered a positive action.

Earlier on the morning of May 3, Robyn Wilkerson had sought clarification from Fraser on the possibility of temporary employees receiving an increase:

From: Wilkerson, Robyn
Sent: Monday, May 03, 2010 11:14 AM
To: Fraser, Roger
Subject: temps

I assume that we are NOT giving our temporary employees an increase this year. [...] Can you please confirm? [...]

Fraser’s response to Wilkerson was unambiguous:

From: Fraser, Roger
Sent: Monday, May 03, 2010 11:24 AM
To: Wilkerson, Robyn
Subject: RE: temps

No raises.

Roger

Transition from Manpower: Why Think of a Wage Increase?

The overall climate in which NAP supervisors had hoped for an increase in temporary workers’ wages was one in which the city council had spent several months discussing cuts to various aspects of the city’s budget.

In December 2009, Stephen Rapundalo (Ward 2) had spoken of the need to “amputate part of the institution.” In January 2010, some city councilmembers announced they were giving back 3% of their salaries – they’d voted to approve a 3% increase in their own salaries back in 2007. Subsequently, they passed a resolution directing the city administrator to reduce compensation of non-union city staff by 3%. That context might help explain the efficiency of Fraser’s two-word email.

And in that context, why would anyone contemplate a wage increase in connection with the transition from Manpower?

First, the transition meant that Manpower workers no longer had access to health insurance from their employer. With Manpower, workers could purchase insurance ranging from $19.24 to $41.85 a week for an individual, depending on the level of coverage, and from $44.28 to $105.33 a week for a family. The city offers no benefits to temporary workers in positions that last no longer than 10 months.

Second, while the city’s living wage ordinance does not apply to the city itself, the wage levels the ordinance sets are seen as a standard against which city wages can be measured. And temporary workers in many cases do not earn the minimum stipulated by the city’s living wage ordinance.

The living wage ordinance specifies a minimum $11.71 for those employers paying health insurance and $13.06 for those employers not paying health insurance. With no health insurance or other benefits, a $12.25 temporary city employee falls $0.81 short of the living wage standard that applies to the city’s outside contractors.

This year, there was no increase to the wages set by the living wage ordinance, which is calibrated to federal Health and Human Services guidelines. Passed in 2001, the city’s living wage ordinance stipulated in that year that workers for vendors who held contracts with the city had to be paid a minimum of $8.70 an hour if the contractor provides employee health care and $10.20 if not.

The ordinance, which is contained in Chapter 23 of the city code and is available online in its entirety via the Ann Arbor city clerk’s city code gateway, provides in its “Findings” section a rationale for the $8.70 figure:

According to the U.S. Department of Housing and Urban Development, the fair market rent for a two bedroom apartment in Ann Arbor Metropolitan Statistical Area for 2000 was $717.00 a month, and the fair market rent for a three-bedroom apartment was $940.00 a month. This means that a family of three requires at least $18,246.00 a year to meet a minimal needs budget in the Ann Arbor area, not including health care. This converts to an hourly wage of $8.77 for a full-time, full-year employee

And the rationale for higher wages in general is also included in the ordinance language:

According to economic research summarized in the Economic Policy Institute’s August 2000 issue guide, “Higher Wages Lead to More Efficient Service Provision,” payment of higher wages is associated with greater business investment in employee training, higher productivity, and lower employee turnover, [...]

In the near decade since it was first passed, the wages have been adjusted upward to $11.71 per hour for employers offering health insurance and $13.06 per hour for those who don’t offer health insurance. That upward adjustment is based on federal poverty guidelines and was stipulated as part of the original ordinance. This year, a communication from the city’s financial services unit, attached to the May 3, 2010 city council agenda, indicated that there would be no change in the living wage levels.

On April 1, Health and Human Services was contacted to inquire about the new guidelines. We were instructed to contact the State of Michigan who informed us that the 2009 guidelines will be extended at least through March 31, 2011. Therefore, there is no increase in the Living Wage hourly rates for the period April 29, 2010 through April 29, 2011. Any vendor who currently has Living Wage approval has had their approval extended in the database.

So through April 29, 2011, the living wage will remain at $11.71 per hour for employers offering health insurance and $13.06 per hour for those who don’t.

What would it cost the city to meet the living wage standard for its temporary employees? Part of the answer was provided to The Chronicle by Karen Lancaster, accounting services manager with the city. She provided figures for the non-Manpower temporary staff the city hired directly in FY 2009. [While some of the the city's temporary staffing was provided through Manpower, the city also did some direct hires of temporary staff as well – mainly for parks staff like lifeguards, cashiers, and the like. Now it's all direct hire.]

For those direct hires in FY 2009, it would have cost the city $198,000 more to bring temporary employees to the level of the living wage ordinance with health insurance, or $315,000 more for the level without health insurance.

Living Wage and The Summer Festival

The living wage ordinance applies to the wages that must be paid by companies who have contracts with the city worth more than $10,000. It does not apply to entities with contracts under $10,000. In the spring of 2008, the city amended the ordinance so that it also did not apply to entities that are funded out of the city’s community events budget, like the Ann Arbor Summer Festival.

But until the spring of 2008, it was important for the city to stay under the $10,000 threshold in its support for the Ann Arbor Summer Festival, an annual performing arts and outdoor entertainment event, now in its 27th season. The AASF does not pay many of its workers at the level that would be required by the city’s ordinance.

The city contributed $9,900 to the festival in 2007, which did not stack up to the $30,000 contributed by the University of Michigan, which partners with the city to help support the festival.

According to an April 8, 2008  Ann Arbor News article by Judy McGovern, the festival would have needed to pay its workers an aggregated additional $19,000 in order to comply with the city’s living wage ordinance. That meant that if the city contributed more than $10,000 but less than $29,000, the festival would not see any additional cash benefit from the increased funding.

So after postponing a measure from its March 3, 2008 and March 17, 2008 meetings, the city council voted unanimously at its April 7, 2008 meeting to amend the scope of the ordinance so that it would not apply to  entities funded through the city’s community events budget, like the Ann Arbor Summer Festival [emphasis added]:

1:813.  Definitions.
For purposes of this Chapter, the following definitions shall apply:
(1)   Contractor/vendor is a person or entity that has a contract with the City primarily for the furnishing of services where the total amount of the contract or contracts with the City exceeds $10,000.00 for any 12-month period.

“Contractor/vendor” does not include:
(a)   A person or entity that has a contract with the City primarily for the purchase of goods or property, or for the lease of goods or property to or from the City; or
(b)   A person or entity that has a contract with the city funded by the community events budget.

From McGovern’s News article:

City Council Member Chris Easthope, who’s promoted the change, argues that the festival’s seasonal employees – almost all students – are not the kind of workers the wage law was meant to protect.

“This isn’t an attempt to drop people below living wage levels, but to recognize there are some short-term events that struggle. I don’t think that, when it was adopted, the living wage was meant to have that effect on a one-month event.”

On Jan. 20, 2009, the council allocated $15,000 to the Summer Festival. And on Sept. 8, 2009 the council allocated $25,000 for this year’s event. The festival’s Top of the Park series begins June 18 and runs through July 11 at Ingalls Mall, on the UM campus.

Living Wage and Recycling

A few years earlier, the city council had faced another situation where the requirements of the living wage ordinance posed a dilemma. In September 2004, the council reopened a contract with FCR Casella, the operator of the city’s materials recovery facility (MRF), in order to undertake a $5.6 million expansion of Ann Arbor’s recycling facilities. The contract with FCR – which extends to 2015 – had originally been signed before the adoption of the living wage ordinance in 2001 and FCR’s wages did not comply with the city’s living wage ordinance.

A May 18, 2005 Ann Arbor News article by Tom Gantert quotes then-councilmember Bob Johnson saying that FCR would not bring its workers’ wages to the levels required by the city’s living wage ordinance:

Johnson said FCR Casella was not willing to pay the living wage at its own expense.

“They are not going to take it out of their profits,” Johnson said. “We are going to have to make up the difference.”

And at the council’s May 16, 2005 meeting the council voted – with dissent from then-councilmember Mike Reid – to make up that difference. Specifically, it voted to make available $165,000 from the solid waste fund’s FY 2006 budget to subsidize FCR workers who would otherwise be paid less than the city’s living wage ordinance requires.

Then in November 2005, the council passed a resolution to amend the contract with FCR through 2015, providing an extra $48,000 to FCR for the remainder of FY 2006 and approximately $89,000 in FY 2007. The resolution passed on Nov. 10, 2005 stipulated that for the remainder of the contract through 2015, the city would make up the differential between standard FCR wages and the wages that workers would need to be paid to comply with the living wage ordinance. The funding would be, according the to resolution language, “through the dedicated solid waste millage and annual operating budget as approved by City Council.”

The contract with FCR was recently amended again to accomodate the city’s new single-stream recycling program. In reply to an emailed question, Tom McMurtrie, the city’s solid waste coordinator, wrote to The Chronicle that the newly amended contract with FCR keeps in place the provision under which the city pays the wage differential.