Mayor Michael Nutter interrupted his vacation to come home and announce a labor agreement with the city's largest municipal union. The leadership of AFSCME DC 33 has approved a one-year deal for more than 9,000 blue-collar employees. The proposal keeps the members' at their current pay rate and makes no major alterations to their healthcare or pensions.
DC 33's blue-collar workers will be given a $1,100 signing bonus instead of a pay increase. That represents a significant long-term savings for the city because the payment will only be made once-- for a total cost of $6.3 million.
There is a big difference between a pay raise and a bonus. Bonuses are only awarded once. Pay raises have a reverberating impact. A worker who receives a pay raise half the size of the bonus make a lot more money in the long run.
Let's look at two workers who make the same amount and see how both are impacted by bonuses and raises. Below shows the impact on a municipal employee making $46,000 dollar a year. That's the average salary of DC 33's membership.
Worker who received $1,100 bonus ( 2.3% of salary)
Y1: $47,100
Y2: $46,000
Y3: $46,000
Y4: $46,000
Y5: $46,000
Total earned: $231,100
Worker who received 1.15% pay raise
Y1: $47,529
Y2: $47,529
Y3: $47,529
Y4: $47,529
Y5: $47,529
Total earned: $237,645
Difference: $6,545
So, as shown by this scenario, a worker will make more in the long-term from a raise than a bonus. However, this assumes two things: first, that a worker will keep the same job for five years. Second, nothing will change during that period.
Many of the previous contracts between the city and AFSCME contained a bonus in the first year instead of a raise. Raises followed. The current deal only lasts for one year. If DC 33 can negotiate raises for subsequent years, the contract will look very similar to previous agreements.
Negotiating new contracts was touted as one of the first big challenges facing the Nutter Administration, We are already halfway through the process. Binding arbitration is expected to begin soon for firefighters and AFSCME DC 47 is currently in negotiations. However, the short length of the contracts already signed indicates we will watch this dance again fairly soon.