As Canadian governments plan their return to fiscal surplus, they will have to tackle public-sector pay, no matter what their political persuasion. Ontario Finance Minister Dwight Duncan meets with union leaders today in an effort to persuade them of the merits of wage freezes. Mr. Duncan's approach, announcing the policy but being prepared to negotiate particulars, will not be greeted with enthusiasm. But if union leaders are realistic and both sides are inventive, public services will be made sustainable.
The need to tame costs is great; public-sector wage settlements have exceeded the private sector's for seven of the past nine years, and job protections lock them in. The recession has made deficits larger, but most provinces have underlying structural deficits that have little to do with the recession.
At first glance, the options appear limited. Public-sector pension plans are generous and create long-term obligations, while taxpayer demand for public services is growing.
Many provinces are looking to trim the number of workers they employ directly. Saskatchewan, for instance, announced a 10-per-cent cut over four years. This will help governments manage their spending, but it cannot be the whole answer; consultants or contractors often fill the void left by departing public employees.
Provincial wage levels themselves must be limited, including for the larger class of workers whose salaries are paid indirectly by government, through school boards, colleges and universities and health authorities.
Union leaders understandably have their backs up. But their members need to recognize that, barring concessions in their next collective agreement, the services themselves are at risk.
There are a few ways to bridge the gap between governments and unions without a resort to the picket lines.
Contracts could, for instance, freeze salaries and wages, with increases in exceptional circumstances. Quebec's recent agreement with its workers includes a wage top-up of up to 3.5 per cent, if the economy performs better than expected. While the specific numbers should vary by province, finance ministers and union leaders ought to entertain seriously the idea of "sharing the pain, but potentially sharing in the gain."
Ontario and B.C. are experimenting with provisions that peg the pay of senior public executives to the performance of their institutions. Provinces should be looking for ways to include more front-line workers in this endeavour.
Trimming growth in the public-sector pay bill is necessary to address provincial fiscal woes. If a less adversarial relationship emerges, Canada's public services can be maintained.Report Typo/Error
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