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It's being heralded by Dalton McGuinty's government as a template for labour agreements with Ontario's other three big teachers' unions. And when it comes to the province's short-term fiscal needs, the memorandum of understanding with the Ontario English Catholic Teachers Association that was unveiled on Thursday – subject to adoption by regional school boards miffed at being bypassed in negotiations – looks like a pretty good one.

Beyond a freeze to cost-of-living increases, the two-year deal includes a 1.5 per cent pay cut in the form of unpaid professional development days, and ends the practice of banking sick days and cashing them out on retirement. If equivalent contracts are signed with the other three unions, and that's a big if, it will help nearly flat-line education spending through 2013-14.

But for a government facing a $15-billion deficit, the name of the game is supposed to be structural reforms that bring a return to balance by 2017-18, and some degree of stability thereafter. And on negotiations with the teachers, much the same as in the government's ongoing fight with doctors, the jury is still very much out.

While the sick-days change is a strong step, it's been clear ever since Mr. McGuinty signalled his intent to take a hard run at teachers despite a heretofore symbiotic relationship that the biggest test of his seriousness would be whether he tackled the "salary grid" – a scale that increases teachers' salaries five or six per cent in each of their first 10 years of service, with additional automatic increases in return for job training.

That system is often criticized not only for driving up costs, but for failing to reward merit. Privately, even some provincial officials are known to gripe that teachers can cumulatively double their salaries just by showing up for work.

Heading into this year's negotiations, the government called for a two-year freeze on the grid while its overhaul was plotted. And sources say that, in the recent talks with the Catholic teachers' association, OECTA, there was discussion of spreading it over 15 years rather than 10, which would slow the rate at which teachers reach the highest pay level.

Neither of those measures is part of the agreement. In their place are the unpaid days – a strictly temporary measure that was not part of the government's original demands, but was offered by OECTA as a substitute.

The good news, from the long-term perspective, is that the memorandum of understanding does promise a comprehensive review of the grid "with a view to future sustainability." On Thursday, officials seemed confident that will pave the way both to slow the rate at which teachers climb the ladder, and change how much they get at each step.

But rarely will unions be more vulnerable than they are now, when there's public awareness of the need for austerity measures and a provincial opposition leader promising a war on organized labour if Mr. McGuinty proves not up to the job. The slew of cost-cutting measures in the OECTA deal reflect that reality, but the absence of any meaningful concessions on the grid underscore just how hard that kind of structural reform is to achieve.

If it's tough to get there with OECTA, the most consensus-oriented of the teachers' unions, it will be even harder with the rest. There is a legitimate chance that the Elementary Teachers Federation of Ontario, the biggest and most militant of the four, would rather take job action than accept what OECTA did – let alone any more than that.

Mr. McGuinty has already gone further than many observers thought he could when it comes to getting tough with his old allies in the name of sorting out his government's messy finances. But it will still be a couple of years, if he remains on the job that long, before we know if he's passed the test.