May 29, 2006
RALEIGH – North Carolina rewards its state employees for longevity, not productivity, a new John Locke Foundation Spotlight report finds. That’s not a payment system that attracts or keeps motivated and productive workers.
Flat-rate, across-the-board pay hikes have been the norm for years for state employees in North Carolina, writes Joseph Coletti, JLF fiscal policy analyst. The General Assembly froze merit pay increases for state employees in 1982, and the last merit pay increase was in 1990. In 1996 the General Assembly allowed 2-percent “career growth” raises for state employees with good performance appraisals, but even those ended in 2000.
The state’s compensation system is geared toward rewarding employees just for sticking around, Coletti said. Combined with the state’s defined-benefit pension system and its traditional health insurance benefits, this system appeals more to workers who are interested in a stable paycheck and benefits than in being singled out and rewarded for greater productivity.
“Across the board pay raises, whether 4 percent or 8 percent, are not going to keep the top people from leaving,” Coletti said. The private sector offers those people greater opportunity for being rewarded for their merits as employees.
“The average state employee earns more than the average worker in the private sector,” Coletti said. “The difference is the state rewards poor performers and the private sector rewards its top performers.”
State employee turnover for all causes, including retirement, is on average 43 percent lower than voluntary turnover in the private sector, Coletti noted. “While the state may not be able to retain its best employees, most state employees clearly are comfortable working for state government.”
Compensation based on performance rewards the best employees and has the potential to save state government money, Coletti said. The current compensation model doesn’t encourage innovation and good service practices. Good state employees should be acknowledged for their abilities and their efforts, so that the state can ensure it has the right person in the right seat.
“Mike Easley does not have to become [former General Electric CEO] Jack Welch and eliminate the bottom 10 percent of employees each year,” Coletti said, “but he and the General Assembly need to find a better way to reward the state’s best performers.”
Joseph Coletti’s Spotlight paper, “How to Pay State Employees: Compensation Model Cannot Keep Good State Employees,” is at the Locke Foundation’s web site. For more information, please contact Joseph Coletti at (919) 828-3876 or [email protected]. To arrange an interview, contact JLF communications director Mitch Kokai at (919) 306-8736 or [email protected].