A coast-to-coast spring of labour unrest is poised to escalate next week as Ontario and Ottawa deliver budgets that aim to save billions by shedding thousands of government jobs.
Many Canadians are already feeling the effects of public-sector labour disputes involving Halifax bus drivers, Toronto librarians and B.C. teachers. Next week's budgets from Queen's Park and Parliament Hill are expected to heighten the tension that ensues when governments cut back.
Public servants were largely shielded from the recession as governments boosted spending and ran up debt to prop up the faltering economy starting in late 2008. While Ontario has enjoyed relative labour peace until now, there is little love between federal unions and the Conservative government.
Ottawa is clearly expecting that many Canadians will have little sympathy when cuts are made to the federal public service, which is viewed by some as coddled and overcompensated.
"You've got the civil service versus the rest of private-sector working Canadians – one with better pension plans and salaries than the other, but not eager to participate in this [austerity]exercise," said George Vasic, equity strategist and chief economist at UBS Securities Canada in Toronto.
The challenge of tackling the recessionary deficits is made even harder by demographics, as governments face rising costs tied to growing elderly populations. Yet Canada's demographics – reflected in the ranks of civil servants – could make this round of government cuts less painful than when Ottawa and the provinces last slashed spending in the mid-1990s.
The big question in Ottawa is how quickly federal staff cuts will be phased in. A tight deadline will mean more layoffs, while a longer target increases the odds that attrition through retirement could lessen the disruption dramatically.
"If it were to be a three-year period, then attrition could be a great, great help," said Claude Poirier, president of the Canadian Association of Professional Employees. Mr. Poirier's union has estimated that federal cuts at the high end of Ottawa's $4-billion-to-$8-billion target range would translate into more than 50,000 lost federal jobs and over 100,000 lost jobs economy-wide.
Mr. Flaherty has dismissed those estimates but has not hinted at how many jobs will be lost. The minister's claims that he is not preparing an "austerity" budget is being met with skepticism by federal unions.
Both budgets – Ontario's on March 27, followed by Ottawa's two days later – are expected to trigger major structural changes to the way departments work and deliver services to Canadians.
While the cuts will likely produce headlines about how many tens of thousands will be affected, it could be more than a year before the public knows whether there are any actual layoffs rather than attrition.
Federal public servants are expecting months of upheaval as tens of thousands of workers will face tough choices about whether to retire early, accept term work or hunt for jobs in other departments. As divisions are shrunk, some public servants will likely have to reapply for their own jobs in competition with their colleagues.
In B.C., the provincial government is threatening to freeze the pay of teachers and other public-sector workers. Ontario, Canada's largest and most indebted province, is also preparing to take an axe to spending in the coming months. Add in the prospect of tens of thousands of jobs eliminated at the federal level, and the public sector is facing the recession it never had in 2008 and 2009.
Across the country, governments have their own employees in the cross-hairs as they desperately search for savings without jeopardizing services that Canadians hold dear, such as health and education.
"It's a brave new world out there," acknowledged David Gray, a labour economist at the University of Ottawa.
Until now, public-sector workers have largely been immune to the "economic duress" that most other Canadians have experienced since recession, Mr. Gray said.Mr. Gray suggested most Canadians would support layoffs, wage freezes and pension rollbacks if that would help preserve services. "Governments don't have the money they had two and three years ago," he said. "Public-sector workers would do well to look south of the border, where it's been much worse. We have a bed of roses compared to them."
Many economists are already bracing for cuts in next federal week's budget that are at the upper end of expectations – possibly in excess of $8-billion – as Ottawa looks to eliminate the deficit as early as 2014-15.
Douglas Porter, Bank of Montreal's deputy chief economist, predicts a couple of rough years on the labour front.
"I have no doubt that we are going to see quite a bit of labour unrest over the next year or two," he warned. "What's going on with the B.C. teachers is the thin edge of the wedge.… That's going to be repeated in a number of different jurisdictions and at different levels, and it's going to be with some real blowback."
The timing of the cuts will not only affect the degree of unrest, but also the impact on the economy at large. Several private-sector economists have warned Ottawa not to put the economic recovery at risk with excessive federal cuts piled on top of provincial cuts.
At the same time, global economic conditions appear to be slowly improving, giving Ottawa a rare opportunity to put its fiscal house in order. And at home, the economy is continuing to grow slowly, but steadily.
"There's never a perfect time for restraint," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank. "It's a challenging process. Nobody likes to do it."