Prevailing wage is price city must pay for other reforms, mayoral aides say

Chicago taxpayers will save $12 million a year by 2021, thanks to health care reforms and increased employee contributions tied to a new five-year agreement with unionized city employees.

Even with those savings, the agreement with unions representing motor truck drivers, plumbers, laborers and members of the building trades will cost the city $12.5 million this year and $57.8 million in the fifth and final year of the agreement.

In part, that’s because it guarantees those employees the prevailing wage paid to their counterparts in private industry. Of the 7,713 “full-time equivalent” employees covered by the agreement, 52 percent fall under the prevailing wage provision.

The new, five-year contract still must be ratified by the City Council and by 34 unions that are part of the Coalition of Unionized Public Employees.

Top mayoral aides tried Thursday to sell the agreement by comparing it to the widely-criticized 10-year agreement that former Mayor Richard M. Daley cut in 2007 to guarantee labor peace through the 2016 Summer Olympic Games — though ultimately, Chicago didn’t get the games.

Mayor Rahm Emanuel’s version is half as long. It includes an average wage hike of 2.1 percent a year, or 10.5 percent over the five-year life of the agreement; Daley’s deal had an annual raise of 2.6 percent, for 26 percent over ten years.

The new deal also includes a 1.5 percent increase in employee health insurance premiums by 2020 along with a $75 prescription deductible by 2021. And there’s a phased-in increase in the so-called “healthcare premium salary cap” from $90,000 to $130,000.

The cap is the portion of an employee’s annual salary to which the mandatory health care contribution applies. That contribution currently stands: at 1.29 percent or $43.88 every two weeks for single employees; 1.98 percent or $67.31 for couples and 2.48 percent or $83.95-per-paycheck for employees with family coverage.

It will rise to $94.64-per-paycheck for single employees; $118.14 for couples and $134.79-per-paycheck for families. That’s an increase that still pales by comparison to the skyrocketing contributions faced by private sector employees.

The city will also start contributing up to $250 in 2020 and $500 by 2022 to a deferred compensation plan that currently has no city contribution. That could set a costly precedent going forward.

In exchange for those increases, an additional $3 million in health care savings and several cost-saving work-rule changes, the city will continue to guarantee paying the prevailing wage to 4,010 employees.

Inspector General Joe Ferguson had urged Emanuel to seize a “generational moment” for taxpayers — by ending an “extremely costly” prevailing wage that no other major city pays. He noted that, unlike their private sector counterparts, public sector tradesmen “receive a guaranteed annual income.”

Even though the prevailing wage stays, Ferguson responded positively. He noted that collective bargaining agreements “traditionally require some give and take and both parties here gave and got in a way that reflect the interest of the taxpayer.”

Top mayoral aides defended the decision to “stay competitive” with the private sector by continuing a prevailing wage that has produced annual pay hikes as high as 3.27 percent in recent years.

They also maintained that, in the private sector, the prevailing wage covers pay, health care and pensions. In the city, the prevailing wage applies only to wages.

“There are years in the past when they’ve taken zeros by going with the prevailing wage. There are years when they’ve done well. … The way it averages out, it’s a fair wage,” said a top mayoral aide, who asked to remain anonymous.

Another city negotiator dismissed as an “existential conundrum” the question of whether the prevailing wage was the price Emanuel had to pay to avoid a strike — and guarantee labor peace through the 2019 mayoral election.

“We didn’t face it because we didn’t do it. … Did we have discussions about it? We certainly did. Did we make the unions appreciate the value of continuing this? We certainly did,” the negotiator said.

“Chicago has offered it for a long, long, long time. It was important to those unions and it was part of the reason why we were able to secure very significant health care savings, work-rule changes and a five-year agreement. It wouldn’t have happened but for our agreement to continue the prevailing wage.”

In 2011, Ferguson questioned why City Hall tolerated having 200 motor truck drivers “paid to do nothing” but drive crews to their work sites and wait in the vehicle until they finish, at an annual cost of $18 million.

At the time, the Teamsters Union contract prohibited the city from transferring certain driver responsibilities to other employees, except during emergencies. Nor was the city allowed to subcontract services in a way that would trigger driver layoffs.

“We changed that,” a top mayoral aide said, refusing to reveal specifics until the Teamsters ratification vote.

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