Private-Public Wage Disparities

Commentary, Public Sector, Frontier Centre

Years ago, I told my sister once people realized how much they were paying public servants such as her, there would be a full scale revolt. Factoring in the short work days, thrice annual long vacations, professional development days, retirement at age 55, and wildly generous pensions, no one of comparable education makes nearly as much on an hourly basis.

Although not specific to teachers, that prediction has been realized. Canadian taxpayers are nearing full scale revolt against the outrage public sector remuneration has become. It makes little sense that the employees make significantly more than their taxpayer employers do for the same jobs.

According to a CFIB 2008 study, taxpayers would save $19-billion a year if publicsector wages were equalized with private-sector ones. And that only includes those civil servants with direct private sector equivalents -in other words, no police, firefighters, etc. were included.

How did this situation arise? When I negotiate collective agreements, I find a distinct difference between the instructions I receive from entrepreneurs -large or small -who are spending their own money compared to professional managers. The former are almost invariably more parsimonious and do not succumb to collective agreement "creep" wherein, in each round of bargaining, more and more is given, until the collective agreement can be weighed in pounds, each clause providing another impediment or cost.

Voters have paid scant attention to the salary increases awarded in the public sector, and even less to the Byzantine non-monetary provisions that they barely understand and never hear about. By the time these give-aways reach the ears of the credulous public, the politicians are long gone, either from office or, at least, that portfolio.

The recent Canada Post and Air Canada strikes -with pensions at the heart of both labour disputes -were terribly mishandled. In both cases, the employers could have won with public support. In Air Canada’s case, the largely unskilled positions were easily filled. In Canada Post’s, most Canadians now have easy alternatives: If you don’t already have an email account, any Internet carrier will be happy to oblige for free. Why would these employers want government intervention when they could win the strikes, reduce the union’s power and their collective bargaining goals? There was no constituency for a forced return to work except the tremulous employers themselves.

The illusion management is being tough by asking the government to order their employees back to work is a hoax on the public. The City of Windsor understood that and pleaded with the McGuinty government to not order its striking workers back. Doing so is an admission of failure because ordering the workers back means an arbitrator will decide their remuneration and the history of arbitrators’ decisions has created the very wage boondoggle the public is decrying. What arbitrators will not do is remove union members’ pensions or create lower wages for new employees. By submitting their union disputes to binding arbitration, the McGuinty government has knowingly forsaken the very salary freezes they have been publicly demanding.

What should government and public sector employers do?

First, fire the advisors and lawyers who have brought us to this precipice and are comfortable with conceding.

Second, take tough positions at the bargaining table and, if the union strikes (which they are less likely to if they believe this will occur), make sure the cost of the strike is taken out of the employees future salaries and benefits before the strike is settled. With one not-for-profit client I negotiated for, we told the team-sters every time our offer was rejected, the next would be less. On the third offer, they believed us and accepted the reduced offer. The next time they didn’t strike.

Third, the government should pass legislation requiring arbitrators to make comparable salary and benefits in the private sector their main criteria. Couple that with provisions requiring them to adjust wages up or down to accomplish that. If that occurred, ordering workers back to work would have teeth.

If this was implemented, there would be few strikes and the public-private sector remuneration disparity would become a thing of the past.