The Ontario government's plan to largely erase its record deficit by reining in public-sector wages is in tatters after an arbitrator's ruling awarded a pay hike to thousands of hospital workers.
The ruling could force the province's cash-strapped hospitals to make painful cuts to front-line patient care in order to reward employees with pay raises, say health-care experts and union leaders. The government has made it clear it won't provide one extra cent for wage increases over the next two years.
More broadly, however, the ruling all but ensures that the McGuinty government will not be able to balance its books on the backs of public-sector employees. Like the federal government and many provinces that are also battling deficits, Ontario is trying to restrain spending in the broader public service.
The government has urged Ontario's one million public-sector workers to take a two-year wage freeze to help restore the province's financial health and protect its vital social services. It has had some modest success with public-sector workers accepting wage freezes. But the arbitrator's award, released Tuesday, is the latest in a string of rulings in Ontario that side with workers and essentially attach no weight to government austerity measures not supported by legislation.
Last month, Martin Teplitsky, a prominent arbitrator and civil litigation lawyer, said in a decision involving U of T that he would appear to be a "minion of government" if he took into account the university's ability to pay. He awarded professors a 4.5-per-cent salary increase over two years. In September, an arbitrator awarded 17,000 workers in long-term care homes a 2-per-cent wage increase for this year.
Tom Closson, president of the Ontario Hospital Association, which represented hospitals in the latest arbitration case, said the only way the government can impose a two-year wage freeze on the province's 750,000 employees who bargain collectively is by introducing legislation.
"The plan failed," he said in an interview. "What we need is a new plan."
However, Premier Dalton McGuinty gave no indication on Tuesday that he is prepared to do anything that could antagonize doctors, nurses and teachers just a year before the next provincial election. He campaigned in the 2007 election on his track record for restoring labour peace in the province by hiring employees for hospitals and schools. After the global economic recession in 2008, he has used moral suasion to try to get the public sector to voluntarily agree to wage freezes.
"I just can't believe that we have a public sector that's not prepared to acknowledge that we need to do everything we can to maintain service levels," Mr. McGuinty told reporters.
But that's precisely what could happen. The inevitable result of arbitrated wage hikes will be that hospitals must cut elsewhere to reward employees, observers said.
In the ruling, arbitrator Kevin Burkett awarded 2-per-cent annual raises over two years to 16,000 workers in 38 hospitals. Labour leaders say they fully expect the ruling to set a pattern for the hospital sector as other workers, including registered nurses, also seek arbitration when their contracts expire.
If the ruling sets a precedent for the sector, Mr. Closson said, the province's 154 hospitals would have to find $280-million in savings this year alone to cover the cost of an across-the-board wage increase. Overall, wages account for about 70 per cent of a hospital's operating costs.
Sharleen Stewart, head of the Service Employees International Union (SEIU), which represented workers in the arbitration, said many hospitals already have a shortage of front-line workers. "They've been cut to the bone already," she said.
Progressive Conservative Leader Tim Hudak criticized the arbitration ruling.
"Arbitrators need to respect the taxpayer who pays the bills at the end of the day, but unfortunately we're not seeing that," he said.
New Democratic Party Leader Andrea Horwath said the restraint plan was poorly thought out and criticized the government for not looking for savings by reining in salaries of hospital executives. "We were always skeptical of this plan, and it's obviously unraveling before our eyes," she said.