The Real Income Inequality

catherine swift

In a move guaranteed to pump up the volume of public sector union caterwauling  – if that is even possible at this point – this week the Ford government decreed that core public sector wages would be capped for the next three years with a maximum increase of one per cent.  During last year’s election campaign, the Conservatives spoke in generalities about the need to constrain the growing cost of government as an essential part of any strategy to get the province’s financial affairs back into balance.  What they meant by that just got real this week.

It is well known that the size and cost of the Ontario government grew like topsy under the McGuinty/Wynne Liberals.  The rate of employment increase outstripped that of the private sector for many years, which is absurd considering that private sector taxes are the principal source (excluding debt) of government revenues.  Such a phenomenon is clearly inequitable and unsustainable, and it is long past time for a correction.  But you sure wouldn’t be aware of any of that if you listen to the perpetual whiners in the public sector unions.  Indeed, even despite the fact that the Liberals gave the unions almost everything they wanted, they still complained and demanded more under that regime.

Average Ontarians, and Canadians in general,  are increasingly aware of the fact that the real income inequality in our society is not between the rich and the poor but rather between the privileged public sector worker and their private sector counterpart.  For decades, research has consistently shown that a government employee enjoys a wage and benefit premium ranging from 25 to 40 per cent over a private sector employee in a comparable job.  Employees in the public sector also enjoy a shorter work week, take more days off “sick” and for other purposes, retire earlier and have much greater job security.  And those guaranteed, defined benefit, inflation indexed pensions are to die for.

Decades ago, prior to the widespread unionization of government in Canada, it was normal for a government worker to earn less in income than a similar private sector worker, but have better job security, benefits and pensions.  That was deemed to be a reasonable trade off by all concerned.  The foolish move of permitting government to be unionized has produced today’s ridiculous reality of government employees retaining all of the previous advantages but with the added benefit of higher wages as well.  Something’s gotta give, and recent years have seen Canadians elect governments that promise, among other things, to get a grip on this growing problem before we find ourselves effectively bankrupt.  Excessive tax revenues being consumed by the government sector is also a drag on the economy in general, as fewer resources are available to promote investment and job creation in the productive part of the economy, the private sector.

But electing a government which will take action on this issue is only one part of the solution.  In previous decades, public sector unions have been all too successful in convincing our judicial system, right up to the Supreme Court, that union rights supersede those of the rest of us.  Ontario’s government unions are already talking about taking the legal route to oppose the latest move of the Ford government.  If that should happen, it is time that our courts realize that the rights of the majority of taxpayers must prevail over those of our privileged government union brethren, and rule accordingly.  The decades-long practice of government unions repeatedly holding the rest of us to ransom must end.

Moves such as capping public sector wages for a few years are not, however, at all sufficient to resolve this problem in a lasting way.  Things like public sector pensions, most of which are seriously underfunded, much also be transformed into a more sustainable model, in a gradual way to be fair to government workers.  As life expectancy continues to increase, there is absolutely no sensible reason that government employees should retire on average several years earlier than the rest of us who remain working in part so we can pay for these early retirements. There is also no reason public sector workers should take more time off than private sector workers other than the fact that unions protect and sometimes even encourage such irresponsible practices.  Getting a grip on all of these issues will end up in cumulative savings of billions of dollars each and every year.  All things considered, despite the anticipated union blowback and the inevitable screams of unfairness, in reality a one per cent cap on wages is merely a good start.


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