Magazine article Insight on the News

Michigan Uses Pay Stubs to 'Educate' Employees

Magazine article Insight on the News

Michigan Uses Pay Stubs to 'Educate' Employees

Article excerpt

The state hopes disclosure will reveal to workers the hidden costs of federal regulation. Some private firms have joined the test as well.

In May, the administration of Michigan Gov. John Engler, a Republican, issued an announcement that grabbed the attention of policy wonks in Washington and in state capitals across the nation.

Starting this summer, all 60,000 state employees will receive, along with their regular paychecks, pay stubs that show the "true" costs of keeping workers on the payroll. The so-caned "Right to Know Payroll [term" will list how much the state pays for each employee's Social Security taxes, health insurance and various regulatory measures in a format similar to that for withheld taxes on present stubs.

Workers will learn, upon seeing the reformatted pay stubs, that 25 percent of their paycheck is taken by taxes, Social Security and Medicare. But an even higher 33 percent is confiscated by programs required by the Americans With Disabilities Act, the Occupational Health and Safety Act, the Family and Medical Leave Act and the Equal Employment Opportunity Act.

"If I were an employee who saw this on his form, I would say: `My gosh! This is money the employer is paying to keep me, but which is not going to me,"' says Joseph Lehman, a spokesman for the Mackinac Center for Public Policy, a free-market think thank. "It is one thing to show the taxes. But it is quite another to show how much they cost."

Take, for example, employee John Doe, who earns a biweekly take-home pay of $686.67. Doe will be able to surmise from his pay stub that the total cost of keeping him on the job is $1,026.59 once the costs of tax administration, program administration and employer contributions to federal entitlement mandates are included. "Better-informed employees make better-informed decisions," noted Mark A. Murray, director of the Michigan Department of Management and Budget, in a May 14 letter to Lawrence Reed, president of the Mackinac Center, which originated the idea of detailed stubs.

Proponents of the pay stubs say the timing of the initiative is fortuitous, coming right after tax season when employees are grumbling about higher rates from the last Clinton tax measure. "Your efforts couldn't come at a better time," Murray wrote in his letter. …

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