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What If Government Was Run Like a Business?

03.03.18 02:20 PM – Andy McDonald
Back in the day, Mayor Clifford Kerby opposed hazardous duty retirement benefits for police and fire employees. Since then, state government neglect has rendered the public pension program into a dumpster fire.

We’ve heard the popular refrain that government should be run more like a business. So, let us imagine for a moment that local government could be run like a private enterprise, and for our purposes, that business is Berea Inc.

Berea Inc.’s board of directors (city council) and CEO (city administrator) are both facing a dilemma. Employees in Departments X and Y could have access to additional retirement benefits. Given the dangerous nature of their jobs, they feel it’s fair that they receive the same compensation available to employees in identical positions at neighboring companies.

On an emotional level, many folks are sympathetic. Do the specialists in Departments X and Y do a great job? Undeniably. Are they highly regarded by shareholders (citizens)? Without a doubt. Do they deserve to get more compensation than they currently receive? Most company shareholders would say absolutely. But then you get to the part of actually paying for it.

In a free market economy, to paraphrase a quote from a Clint Eastwood movie, sometimes deservin’s got nothing to do with it. Teachers deserve more than they are paid. Caregivers for children, the elderly and people with special needs are worth more than they are actually paid. In terms of their value to the community, street workers who keep the roads plowed in winter and the guys who keep the lights on are worth more than they are paid. But the hard truth is people in those positions are typically compensated according to what the market will bear. Not more.

If local government actually operated like a business, the responsibility of the board of directors of Berea Inc. would be to pay company employees only what the labor market will bear to ensure the smooth operation of the company. When it becomes clear that Berea Inc.’s compensation package is no longer competitive enough to retain employees, that is when the board would enhance the benefit package.

To be sure, Berea Inc.’s situation is delicate. Employees from Departments X and Y are valued members of the community. Many have been around so long that they are like family. As such, the board of directors has to weigh certain questions before deciding if or how to adjust the company’s compensation package:

1. Is the lack of certain benefits causing X and Y workers to leave Berea, Inc. for opportunities at other companies? What is the anecdotal evidence, and what do the statistics say?

2. Some suggest having younger workers in Departments X and Y enhances public safety. Is there one incident in which the public was endangered because an X or Y employee was physically unable to do their job? That’s information the board of directors should have.

3. Will enrolling X and Y workers in new benefits cause a cash crunch that limits Berea Inc.’s ability to carry out its many other functions? Some board members suggest enrolling could severely limit the company's future ability to invest in projects. Other board members doubt that is the case. Who is right, and what does that mean?

4. Has Berea Inc. thoroughly explored other options for compensating X and Y workers that don’t include the retirement benefit in question? After all, it’s possible that not all X and Y workers will stay in their fields for 25 years, so some might not want to have more money taken out of their paychecks for a plan that ultimately won’t benefit them much. They might welcome having other choices.

5. The chairman of the board of Berea Inc. (mayor) recently gave his annual report, warning that if the company enrolls Department X and Y employees in said benefits program, Berea Inc.’s personnel costs could spiral out of control. He added that could eventually lead the company to be swallowed up in a merger with a new corporation - Madison County/Richmond Inc. Is there evidence to suggest that is possible?

Board members of Berea Inc. should care about employees in Departments X and Y because they render an invaluable service to the company and its shareholders. They are absolutely essential to the success of our "company." But the questions above suggest there are more facts to gather before the best long-term decision can be made.

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