Rebalance Public/Private Sector Pay

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Public pay and pensions are much in the news. Unions representing BC teachers, municipal workers, and most provincial employees are out looking for more. The more that they want is from the pockets of taxpayers and from governments facing tight budgets.

Here in B.C. prudence is the key approach to the fiscal challenges – curtailing spending today to return to balanced budgets tomorrow – and avoid sinking back into a vicious debt cycle.

Greece and some other European countries are reaping the whirlwind of uncontrolled spending. They face depressed growth, loss of global competitiveness, and a reduced standard of living. They are paying today for what they overspent yesterday.

Think a similar crisis can’t happen here? The recently released Commission on the Reform of Ontario’s Public Services tells a different story. In the absence of wide-ranging changes, it projects provincial debt of more than $400 billion. That’s more than half the size of the entire provincial economy – the goods and services produced by every business in Ontario.

Here in British Columbia, our debt is much lower – around 18 per cent of the economy. But we still need to move our budget solidly into the black and we need to find ways to shrink, rather than hold the line, on government spending. If we fail, we could easily slide down the easy path to the hard reality of Greece.

Where can we save? Exactly where the BC’s labour leaders are looking for extra spending – wages and benefits at the provincial and municipal levels. The harsh reality for taxpayers is that public sector labour costs are far out of line with the private-sector. Taxpayers facing belt-tightening and economic uncertainty are being asked to make sure public sector pay gets richer.

Research shows that public servants in Canada get pay and benefits that are 30 per cent higher than people doing the same work in the private sector. Yet right now we’re witnessing demands from public sector unions for compensation increases that are disconnected from reality.

What can we do to rein in the public sector gravy train – and give overburdened taxpayers a break?

Simple. The time has come for a British Columbia Compensation Equity Act. Its intent would be to put BC’s provincial and municipal workers on a more equal footing with the rest of us, thus ending an odd situation where one segment of the population is compensated at a higher level thanks to the taxes paid by the people receiving less.

A Compensation Equity Act would accomplish this in two ways.

First, it would set up a market-based model to guide future wage rates and compensation packages in the public sector. Over time this would address the significant existing disparity, and bring compensation for the public sector in line with private sector workers in the same jobs.

Second, it would start phasing out the recklessly unaffordable defined-benefit pension entitlements in the public sector. Equity is certainly a consideration here as well, since private sector workers are assuming more and more responsibility for planning and financing their own retirements. Think group RRSPs instead of taxpayer guaranteed pensions for life.

Neither of these objectives is small or simple. The legislative framework to make this happen will take time. But it’s a worthwhile investment. A Compensation Equity Act is precisely the type of tough and potentially transformative measure our cities, our province, and our future needs at a time when our future prosperity is at risk.
- post by Philip Hochstein

About the author: Philip Hochstein is executive director of the Independent Contractors and Businesses Association of B.C. Previously, he managed membership services for the Mechanical Contractors Association of B.C.

The above article appeared in City Caucus on March 10,2012.