Wednesday, June 11, 2014

Another bad idea from the Canadian Taxpayers Federation

The Edmonton Journal has published a new op-ed piece by the Canadian Taxpayers Federation about public-sector labour relations. At present, public-sector workers are precluded from striking. When collective bargaining reaches impasse, a neutral third party determines the settlement, typically by looking at comparable settlements.

In the CTF’s op-ed, Derek Fildebrandt argues that the government should amend the legislation governing public-sector labour relations to compel arbitrators to:
…to reflect the fiscal realities of the province. 
Arbiters in the private sector generally do not award raises when a company is hemorrhaging money or is unprofitable. Similarly, arbiters should be required to reduce pay or at least hold the line when the current revenue and spending framework is leading to a growing debt.
The problem with Fildebrandt’s prescription is that it obfuscates a fundamental difference between public- and private-sector employers.

In the private-sector, an employer’s ability to pay is (more or less) determined by revenue, something that is largely outside of the employer’s control. In short, ability to pay is a real and significant constraint on a final settlement in the private-sector.

The public-sector is different. In the public-sector, the employer’s ability to pay is determined by the employer when the employer decided what level of taxes to levy on individuals and corporations. In short, ability to pay is within the control of the employer.

Arbitrators are loathed to apply “ability to pay” in public-sector arbitrations because politicians have an electoral incentive to minimize taxes and maximize programming. They have their cake and eat it too only if they underpay their workers.

That is to say, accepting ability to pay arguments in the public sector would allow politicians to force public-sector workers to subsidize public services via substandard wages.

(Yes, yes, no one wants to pay more taxes. But, if taxpayers want adequate public-sector services, it stands to reason they have to pay for them, no?)

Externalizing costs via mandating substandard public-sector wages likely sounds good if your interest is minimizing corporate taxes. But, to fair-minded people, mandating public-sector arbitrators consider a government’s ability to pay (which is, in truth, unlimited) is simply another way to screw public-sector workers.

Attacking public-sector workers has (happily) proven to be political suicide for the Tories. No party with ambitions to actually form government is likely to adopt this strategem.

-- Bob Barnetson


  1. Good points, as usual. But you have addressed only the reasons why what Mr. Fildebrandt actually wants is unrealistic. You are almost certainly correct that what he and the public relations experts at Canadian Taxpayers Federation want is the Government to have the sole right to determine the rates of pay for its employees, by lowering taxes and claiming to be broke. Putting the “servant” back into the idea of public servant, so to speak.
    But let’s take a step back and assume that Mr. Fildebrandt was not being disingenuous, and really meant what he said. (Although experience would suggest that there is absolutely no reason to do so, other than the sheer mental exercise.)
    I am currently chief negotiator for a large public sector union currently in mediation.
    We are certainly most unlikely to end up at arbitration, but if somehow we did, would I want the arbitrator to be compelled to “ reflect the fiscal realities of the province” as Mr. Fildebrandt suggests they ought to be?

    I checked the most recent economic reviews, published by Alberta Treasury Board and Finance. What if an arbitrator had to consider this? What would they find?

    They would find that Alberta added 16,400 jobs last month, all full-time. The gain was the largest among the provinces. They would find that the unemployment rate fell. They would find that year‐over‐year job growth in Alberta leads all provinces. They would find that since May 2013, Alberta has added 71,200 jobs (+3.2%), accounting for a remarkable 83.3% of all jobs created in Canada over this period.

    They would find that Alberta investment in residential construction increased 16.9% annually. They would find that the total value of Alberta’s goods exports increased 26.2% annually and that energy products grew by 30.9%.

    They would find that business incorporations are up by 11.3%, and that corporate bankruptcies are down by 21.4%

    They would find that the increase in the cost of living in Alberta was about 2.7%. They would find that Average weekly earnings in Alberta rose by 4.9%. That’s right - the AVERAGE earnings in Alberta rose by 4.9%.

    They would find the fiscal realities of this province are wonderful!

    Now if an Arbitrator was forced to consider all that, is it likely he would award zeros, as the Government wishes, or financial rollback as the Canadian Taxpayer Federation and Alberta Health Services want?

    Hmmm, maybe we should think about arbitration. Think I could call Mr. Fildebrandt as a witness?

  2. Should UNA get a good deal, I will certainly be watching to see if Derek and the CTF remain keen on the logic of "fiscal realities" driving settlements.