Province's Deal Sets Expensive Precedent
Howard Levitt, Financial Post · Wednesday, Nov. 3, 2010
Weak politicians appeasing unionized civil servants with Canadians' tax dollars is not the preserve of municipal governments. There is a scandal of provincial proportion that has not, before today, been told.
It began with great promise and clarion purpose. Recognizing Ontario's financial crisis, Finance Minister Dwight Duncan, in his March, 2010 Budget, promised to freeze Ontario civil servants' salaries for two years. He even introduced legislation freezing the compensation of nonunion employees. On July 20, 2010, Duncan went further, acknowledging that, for the first several years of the Mc-Guinty government, "the average annual wage increases for the Ontario public sector had been consistently higher than in the private sector."
With the global recession hitting Ontario "particulary hard, real GDP had declined 4.7% and government taxation revenues had fallen 12.2%." Duncan confirmed the majority of government spending went to paying the civil service and if Ontario's deficit was to be managed, that must be dealt with. He reminded the unions that in California, New York and Europe public sector wages were significantly reduced as governments "moved to get their fiscal houses in order."
Just as many private sector employees in Ontario "have seen their salaries frozen and counted themselves lucky to have a job," he said, announcing the government would ask the unions, not to to roll back the excessive wage increases he admitted his government had previously granted, but to accept "a minimum of a two year wage freeze when their existing collective agreements expired."
Duncan said government officials would discuss any freeze with the unions prior to imposing one as the Supreme Court of Canada in BC Health held that they must do so.
Unions representing the entire public sector; government workers, hospitals, police, universities, etc. were summoned to Toronto's Royal York Hotel in August and September 2010 to meet with the government. Separate tables were set up for each sector. The unions begrudgingly attended. It would be political suicide to do otherwise--if they refused the government might simply legislate wage freezes.
So, how did the government fare? Well, the unions didn't change their stripes and the provincial government caved.
Of the hundreds of agreements at stake, only two were reached: the Ontario Provincial Police and the Crown Attorneys, already two of the province's highest paid public sector workers.
The Ontario Provincial Police Association negotiated a 5.075% increase in the first year, a freeze for the next two and a guarantee that at the end of the three years its members wages rise dramatically to match whatever the highest police wages in the province would be at the time.
By itself, a 5.075% increase over three years is equivalent to most recent private sector unionized wage gains. But the real cost to taxpayers is a lot higher than that: In addition to the initial increase, the OPP will continue to receive grid increases based on years of service, etc. Yet that cost pales compared to guaranteeing the force the highest wages in the province at the end of three years. In doing so, McGuinty effectively passed on the costs to the next government and institutionalized a dramatically worse deficit in three years.
The deal with the Crown Attorneys is no better: They obtained a two year freeze followed by guaranteed interest arbitration for the next 47 years. The Crowns had long sought interest arbitration to level an historical pay inequity between them and lawyers in private practise. However, Crowns receive very generous pensions, benefits, better wording conditions, guaranteed wages (without the risk of a bad year) and, for most, significantly lower hours and a better work-life balance in compensation. That is why many lawyers go into that line of work.
Through interest arbitration, they will now reduce the income disparity at the taxpayers' expense. Since there is arbitration case-law ruling that interest arbitrators should consider private sector lawyers' salaries in determining public sector ones, this agreement guarantees a massive increase over time. Again, the McGuinty government is punting this increase to its successor.
I asked for comment on these agreements but the government said the parties had agreed to confidentiality. However, a quick call to Carl Walsh, president of the OPPA, revealed otherwise. He crowed about the deal he had struck. Well, he should.
Now that the government has awarded two of its already highest paid employees such massive increases, what possibility remains that unions would agree to any less for its lower-paid public servants? The government now can neither legislate a freeze, as Duncan's statement seemed to suggest, nor can it expect the unions to accept anything less for its other members. If they try to bargain hard, they will surely be met with a strike. And if they impose interest arbitration, the most recent comparators are the Crown Attorneys and OPP. The government, sounding tough in its pronouncements, has sold out its taxpayers.