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Linda McQuaig Thaws Public-Sector Pay

Linda McQuaig puts the heat on Ontario’s public-sector compensation freeze in today’s Toronto Star.

Her excellent column begins by noting that the federal government has fended off proposed financial-sector taxes on the grounds that Canadian banks did not cause the global financial crisis. But Canadian public-sector workers, who are even less responsible for the crisis, are expected to make a monetary contribution to addressing its consequences.

McQuaig also notes that, right up until the financial crisis, Bay Street was lobbying for permission to operate more like Wall Street. In particular, she points to a C. D. Howe Institute paper that Travis flagged earlier this year.

The Howe, which peddled the deregulatory mantra that led to the crisis, should indeed be held to account. Its current publications provide almost no indication or acknowledgement that a crisis occurred. The Howe has reverted to simply assuming full employment in its approach to economic policy and worrying about egg marketing boards.

McQuaig cites me on the monetary value of Ontario’s proposed pay freeze. Of course, such an estimate depends on what public employees could otherwise negotiate.

The provincial government’s preferred set of figures indicate a recent annual average of 3% for public-sector wage settlements. It seems reasonable to assume that the recession and fiscal austerity would have knocked that average down to 2% even without an explicit two-year pay freeze.

If someone making $25,000 per year lost two 2% wage increases, his or her annual salary would be $1,000 lower. According to Statistics Canada, wages and salaries totalled $42.8 billion last year across the components of Ontario’s public sector subject to the freeze policy. Avoiding two 2% increases would save public-sector employers $1.7 billion annually (substantially less than the annual cost of provincial corporate tax cuts).

Comments

Comment from rcp
Time: September 7, 2010, 2:22 pm

I suggest that people take a look at Ontario Finance figures, especially Table 31 in this link.

Annual spending increases compound out at 6.4% over the period 2001-2002 to 2010-2011, while population growth compounds out at 1.2% over the same period. Ontario obviously has a severe spending problem and McGuinty has been afraid to address it for fear of the political consequences.

Comment from Erin Weir
Time: September 7, 2010, 3:39 pm

Why would you assume that public spending should increase only at the rate of population growth?

Comment from rcp
Time: September 7, 2010, 5:17 pm

I left some room for inflation – which has been averaging around 2% per year, as you can see at

(http://www.bankofcanada.ca/en/cpi.html)

Ontario government spending has been increasing faster (by about 3% per year) than the combined rate of population growth and inflation. If it had been restrained to that combined rate, there’d be no need for a wage freeze.

Comment from Rentier Fungicide
Time: September 7, 2010, 9:40 pm

RCP seems to have made his comparisons without any reflection on the huge costs of Mike Harris’s disinvestment in the Ontario economy, without any reflection on the need for stimulus funding, and without any consideration of the level of services and government investments required for good government in Ontario. More sophisticated commentators may wish to raise more pointed objections to RCP’s points, but even a neophyte commentator such as myself can see that his whole argument is meaningless without historical context or a broader discussion “the good” for Ontarians.

Comment from rcp
Time: September 8, 2010, 4:05 am

@ Rentier (nice name, btw):

If you consistently apply your logic to Linda McQuaig’s original article, you will find that it too is meaningless, so perhaps you’re being a bit too philosophical given the state of play.

But I’m curious – what do you see as counting as “the good” for Ontarians?

Comment from Alex Johnstone
Time: September 8, 2010, 9:49 am

What is the cost of annual provincial corporate tax cuts? Also, is there any Canadian studies on the number of jobs created [or not created] as a result of corporate tax cuts? In my search I have only located a US report indicating money saved from tax breaks is generally used to pay share holds or invested off shore. It is rarely used to create jobs as job creation is driven by market demand. I am interested in learning how Canadian corporations invest their tax breaks. This information would be useful to argue against further corporate tax cuts.

Comment from Erin Weir
Time: September 8, 2010, 11:53 am

For the cost of Ontario’s corporate tax cuts, see the second-last question here.

Comment from travis fast
Time: September 8, 2010, 2:47 pm

That would be: flagged and ridiculed.

Comment from Raissa
Time: September 9, 2010, 9:20 am

I am not part of a union but work for a non-profit that falls under the wage freeze guidelines. I understand that unionized workers have not been legislated to freeze wages but has it been ratified that non-union workers must have their pay frozen? I’m a looking for some insight here. I know the govt of Ontario has it in their budget but just b/c they say it in a speech doesn’t necessarily mean it is the law of the land. Isn’t there a process that govt has to follow before non-union workers feel the brunt?

Comment from Erin Weir
Time: September 9, 2010, 4:01 pm

The provincial government has, in fact, passed a law (Bill 16) that freezes compensation for public-sector employees without collective representation. This post provides further explanation. Of course, you could avoid this legislated freeze by joining a union.

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