Public Sector Workers – The Recession’s Next Victims?

I fear that Tom Walkom of the Toronto Star is bang on when he argues that the next victims of the recession will be public sector workers.


http://www.thestar.com/news/canada/article/722505–walkom-recession-s-next-victim-will-be-public-sector

As he writes:

“The federal government has already signalled plans to get tough with its workers. In Ontario, Premier Dalton McGuinty gave notice this week that the province’s public sector – including nurses, doctors, teachers, police officers and judges – will no longer be “sheltered” from recession.

New Brunswick plans to cut 700 civil service jobs, while Alberta’s provincial government is asking its teachers and health-care workers to accept wage rollbacks.

….  the biggest target promises to be the unionized public sector. Approximately 70 per cent of Canada’s 3.3 million public sector workers are unionized.

Here, the hammer will again be the deficit. Governments, faced with declining tax revenue and on the hook for so-called stimulus spending, are already announcing plans to cut back. With few social programs left to slash, expect them to directly attack unionized public sector wage bills.

It will be mean and bloody-minded. Given the fact that almost everyone else in the country has already been whacked, it will also be darkly popular.”

While Walkom is probably correct that the right will not find it too hard to whip up sentiments against supposedly “cocooned” public sector workers, we should be careful not to buy into the idea that, as he puts it, “almost everyone else in the country has already been whacked.”

True, the private sector has borne the brunt of the recession, but much of the job loss impact was felt in manufacturing, resources and construction as opposed to private services.  While private sector payroll employment fell by 449,000 or by 4.1% over the past year (October to October), over three quarters of the job losses were in the goods sector.  While some private sector workers have obviously been hammered, the fact remains that well over 90% of private workers have probably not been directly impacted.  Thanks to very low inflation caused by the crisis, average hourly pay has actually risen significantly for the great majority of workers who have kept their jobs. The stock market recovery already has the high rollers on Bay Street proclaiming the end of the recession, for them.

Meanwhile, it is something of a myth that the public sector has been completely unscathed. Between October and October, public sector employment fell by 54,500 or 1.6%.

And the growth of deficits has almost nothing to do with public sector workers. The major increases in spending have – appropriately- been on  EI benefits and on various stimulus packages directed to sustaining private sector jobs, especially in construction.

There are tons of misinformation being spread around by the likes of the CFIB about the superior pay and benefits of public sector workers.  Controlling for education and skills – which are, on average, higher among public sector workers -  there is only a small pay gap. And it is attributable to more equal pay for women compared to men in public services.  Women in lower paid, lower skilled occupations do better in the public than in the private sector, and that is a good thing.   At the high end of the pay spectrum,  the public sector pays less, often far less.

Over the past decade 1999 through 2008 , public sector union members averaged pay settlements of 2.9 percent per year, slightly ahead of 2.6 percent in private sector, and only slightly ahead of inflation.  However, private settlements were bigger every year in the decade 1989 to 1999, as well as in 2004 and 2005. Over the past two decades, public and private sector pay settlements have come out just about equal.
Pension coverage is much higher in the public sector. But those pensions are financed by worker and employer contributions comparable to those for large private sector plans, with shortfalls generally resulting in higher contributions or reduced benefits (ask Ontario Teachers.)  It is a myth that taxpayers are on the hook to pay huge unfunded liabilities.  To the contrary, some governments – including the federal government  – have scooped up public sector pension plan surpluses.

None of which is to say that the right and some private sector employers will not target public sector pay and benefits, as Walkom argues. But, amke no mistake,  the true target is the wages and benefits of all workers.

5 comments

  • It will be that much more important than for us as progressive economists to push this as far into the spotlight as possible. Cutting public sector will be nothing but making this whole recovery that much more tenuous,

    Sadly the ideology out there and is now being promoted by the like of the CFIB, is wrongheaded and when you think about how it could easily through the countries small seed of a recovery off the rails, is only hurting the country and small business. I surely don’t see how the likes of the CFIB promoting such nonsense- given that a lot of there members will be hurt by such cuts- yes it will not be directly in all cases – but indirectly the linkages between small business success (any size really but I would say small business in particular) and public spending are highly correlated.

    So how is it we prevent this further back slide. If we start seeing drops in the puyblic sector employment or cuts in purchasing power to pay of public sector employment that only increase the drag.

    I really scratch my head over the policy makers in this country. They go to meetings such as the G20 in St.Andrews and everybody is talking stimulus. You come back home and everybody is talking cutting deficits. Same thing on the environment.

    Now that is real leadership for a country that is supposed to be respected in the international community. We have weathered the storm alright a little better than most (that is if you believe that story), but when it comes to sharing the immense wealth we have in this country- wow watch out. I think the international community is figuring out how our pockets are so full and it surely is not from preserving our reputation.

    pt

  • I hope that policy makers might be knowledgeable enough to connect the dots between stimulus spending and attacking public sector workers employment and wages are polar opposites.

    Can we at least make that leap in logic with policy makers or am I being naively optimistic?

    If so then public sector workers may have just been given a boost or reprieve in the face of growing threats.

    The IMF centered out Canada today and recommended that it is quite important for them to continue on with Stimulus based polices. Citing the high dollar and weaker than expected growth.

    Hello Feds and provinces- BC, Ontario- deficits are still good for the country, we need stimulus not cut backs.

    http://www.theglobeandmail.com/report-on-business/maintain-stimulus-imf-tells-ottawa/article1360754/

  • Naomi Klein makes a useful point in the Shock Doctrine where she points out that public servants (especially those in uniform) became much revered after 9-11 in a massive reversal of the ususal Republican scorn for highly paid unionized workers. The new and current brigade of unionized higher paid workers that actually hold the ready shovels in the service of stimulus could be similarly recast as an important answer to our economic woes. The problem is the imagery of complacent bureaucrats as opposed to busy workers even though the latter is the real face of the modern public sector work force. Some of them are even regulators keeping our water safe and health workers administering flu shots!

  • The problem is, practically none of the politicians talking stimulus and in positions of power from which they can create stimulus actually believe in stimulating the economy. It’s window dressing so they can say they did something, with maybe a side bonus of throwing some dollars to cronies who own construction companies.
    So of course it’s obvious that if you want to stimulate the economy, throwing people out of work is a poor way to proceed. But since they don’t want to stimulate the economy and don’t believe in stimulating the economy, that doesn’t matter to them. As long as the news media don’t bother to point out the obvious contradiction, they can say “look, I’m stimulating the economy” with one press release and “look, I’m containing the budget by bashing those nasty government workers who probably make more money than you (even if they don’t really)” with the next and people will buy it and vote for it.

  • Yup. Here’s an opinion piece by Jeffrey Simpson in today’s Globe and Mail in which he argues that public sector workers are overpaid and foresees “labour trouble ahead.” http://www.theglobeandmail.com/news/opinions/tough-times-for-public-institutions/article1401510/

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