Wednesday, January 23, 2013

Public-sector wage freeze? Not likely.

The Edmonton Journal has a story this morning examining the notion that public sector wage freezes might be one option for the Alberta as it attempts to balance its budget.  The Fraser institute is for it, the Alberta Union of Provincial Employees is against it, and the government is non-committal. Missing from the story are three good reasons why public sector workers will likely resist a wage freeze. 

The first two centre on members appetites for a wage freeze (which are basically zero). First, even a modest increase foregone today has significant lifetime effects. For example, if a worker forgoes a $2000 wage increase today, the worker will be missing that $2000 from her wage package every year for the rest of her career. Further, future increases will compound on a lower number. Over a career, the aggregated lost-wages for a worker can equal an entire year of pay. Nobody is going to agree to that to help out a government that has spent 40 years screwing workers.

Second, a wage freeze doesn’t resolve what is basically a failure in the government’s business model. It simply allows the government to put off addressing this problem. Come next year, the same problem will still exist and the government will be back looking for another wage freeze. This is a bit like buying someone with an addiction to low taxes alcohol a bottle "just this one time".

The third reason is contextual. It will be very difficult for the government to force a wage freeze on unions. The basic principles of arbitration, recent Charter decision around government interference in collective bargaining, the political implications of layoffs for an allegedly centerist government that needs to maintain services to maintain political support, and the government turning down a province-wide wage-freeze offer in teacher bargaining (a pretty stupid move) seems to limit both the ability and the will of the government to force a wage freeze.

EDIT: After some more thought and discussion, there are a couple of more reasons unions won't be doing this. First, many unions already gave wage freezes and even took wage furloughs over the past few years (AUPE, UNA, my own union...). And government managers just had two years of hard freezes--no cost-of-living increases and no progression of the salary schedule. Clearly freezes haven't resolved the problem. More freezes simply aren't going to help.

Second, freezes turn public-sector employers into a special class of taxpayer. Not only do public servant bear the same tax increases or service cuts as every other taxpayer, but they also bear special costs through foregone income. In this way, wage freezes are a special form of taxation saved just fir public servants.

-- Bob Barnetson

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