Half the spending is public sector compensation

Toby Barrett MPP

Public servant labour costs now account for about half of all Ontario government program spending.  Today’s provincial budget sets government spending at $128 billion, which means roughly 64 billion taxpayer dollars are being spent this year just in public servant wages, pensions and other forms of compensation.  There are over one million public sector employees in the province – 70 per cent are unionized compared to 15 per cent in the private sector.  Total amount paid to civil sector workers in Ontario has jumped by 46 per cent since 2000.

But, it is vital Ontario get its finances in order, otherwise government will see no alternative but to cut government programs significantly which will inevitably lead to layoffs in the public sector and a lower level of government service to Ontarians.  As well, continued financial mismanagement will lead to increasing unemployment, increasing debt servicing costs and increasing taxation.

Since 2003, the annual deficit of the Province of Ontario has increased alarmingly and is projected to be $30.2 billion by 2017-2018, and the debt will be $411.4 billion.  The need to service this debt severely impairs the ability of the provincial government to function and has led to levels of taxation that are seriously impairing the ability of businesses to compete in Ontario and for individuals to survive financially.

One reason government spending has gotten so out of whack is that the process of determining wages in the public sector is markedly different from the private sector.  The public sector wage process is largely determined by political factors, while the process in the private sector is largely guided by market forces and profit constraints.  These differences are amplified by the monopoly environment in which the public sector operates versus the competitive environment of the private sector.

Since the public sector operates in a monopoly with no competitors, workers can threaten and undertake strikes that disrupt service with almost no fear of losing customers or a contract.  In stark contrast, in the private sector both employers and unions have an incentive to settle their differences quickly, especially under the increased competitive pressures from globalization.  Competition and the threat of competition characterize non-monopoly markets.  Unions know excessive wage demands will make the firm uncompetitive, which will likely result in reduced future employment.  Ultimately, the parties usually come up with a compromise acceptable to both.

In his 2012 report to the Ontario government, economist Don Drummond indicated “one recommendation that crosses all sectors is the need for prolonged moderation of growth in public-sector total compensation.”  To limit the need for extreme and harsh solutions like layoffs or program cuts, I feel the Government of Ontario must, indeed, act immediately to moderate compensation paid to employees in the public sector.  To restore confidence and to bring our province’s fiscal house in order, a viable longer-term plan is required in cooperation with our public sector to help maintain necessary government jobs and government programs.

Canada’s Fraser Institute stresses that before considering and comparing public and private sector compensation, it is necessary to include the different compensation components – wages, pensions, non-wage benefits and job security.  I feel one option is to mandate stricter criteria for public sector compensation awards by researching private versus public comparables to help shine the spotlight on unfair examples of public sector compensation.

Toby Barrett is a Progressive Conservative Member of the Legislative Assembly of Ontario representing the district of Haldimand—Norfolk and is the Official Opposition Critic to the Minister of Consumer Services.

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