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31 Comments

news

Liberal Government Announces Details of Wage-Freeze Legislation

Proposal calls for two-year wage freeze, gives government ability to set new collective agreements.

Finance Minister Dwight Duncan introducing the provincial budget in March 2012.

Ontario Minister of Finance Dwight Duncan laid out the details of much-anticipated wage-freeze legislation this morning, part of the minority Liberal government’s bid to eliminate a $15 billion budget deficit. The legislation would apply to nearly 500,000 public-sector workers, ranging from civil servants to college staff. It does not cover public-sector workers employed by municipalities, such as firefighters and police, nor does it cover doctors, who, like teachers, will have agreements negotiated separately.

The Protecting Public Services Act would freeze wages for two years (including performance pay for managers) and “introduce a permanent salary cap for new executives at no more than double the Premier’s salary.” Collective agreements will need to be vetted and approved by the finance minister, who would, if the legislation passes, be able to reject deals if they don’t meet the government’s budget goals. Also, summarizes the CBC, the legislation covers collective agreements “until 2017, so that workers who just signed agreements with wage hikes will still be hit with a two-year freeze in their next contract.”

Yesterday, the Ontario Federation of Labour announced that it will be convening an emergency meeting later today, “to draft province-wide plans to challenge Premier Dalton McGuinty’s recent attack on the Charter rights of workers.” The proposed legislation does not impose a strike ban, Duncan said today, but it does give the government the power to impose new collective agreements if none can be reached through negotiation. The government expects the legislation will wind up in court.

The legislation hasn’t yet been introduced formally, and can’t be until a current standoff over controversial power-plant closures concludes. If it passes, the government says, the act will save $2.8 billion over three years.

Comments

  • Anonymous

    On the one hand, this is a pretty egregious trampling of labor rights. On the other hand, the last time the government tried to push for something similar at the bargaining table, the unions caused a huge stink, the public got pissed off and the result was Mike Harris. I don’t know who to root for here.

    • Michael DiFrancesco

      Wait, you lost me – aren’t both of those arguments against the Liberals pulling this crap?

      • Anonymous

        Only if you believe the government should always capitulate at the bargaining table.

  • Anonymous

    Let’s all stop talking about those nasty power plant cancellation expenses, and change the channel. Looking out for your money!

  • Anonymous

    Was a teacher for 12 years. Honestly, teachers and public servants need to accept wage freezes for a while because the province is broke. It’s happening in the private sector, everyone should feel the pain. I don’t like that the legislation is being imposed either, but let’s be honest, the unions would never have accepted the wage freezes, and would have used their leverage with the public to get what they want and save face. Unions are good for a lot of things, but in this case they walked away from the table and forced the province to act. This would have been a long, nasty strike.

    • Michael DiFrancesco

      See, I just *hate* that argument. Provinces aren’t going broke – theoretically, I suppose it’s possible that they can, but that’s not what’s happening here. As with seemingly all governments everywhere since 2007, the problem isn’t that they’re “broke” or spending too much money, it’s that revenues have been utterly awful – thanks to the recession in the broad sense, and Ontario’s hollowing out of the manufacturing sector in the narrow. The province has the money to pay the typical increase, just like they have the money to do a lot of things they say they can’t do, but because government priorities these days seem to be concentrated around 1) balanced budgets! 2) lower taxes! and [federally] 3) inflation demons! we’re stuck in this rhetorical gridlock of never being able to do anything simply because spending money is assumed to be bad. And all this rhetoric really does is keep wages all over the place pretty stagnant over extended periods, which is what middle-class wages have been doing for thirty years now and it hasn’t helped government budgets anywhere but maybe just this one time it will…

      Anyway, semi-coherent rant over, but I’ll just never be able to stand arguments that amount to treating government budgets the same as a household’s. They’re just not the same thing.

      • Anonymous

        I’m in favor of balanced budgets and low inflation. Are you not?

        • Michael DiFrancesco

          Both balanced budgets and inflation are so over-emphasized these days that, as a guy with an Econ degree, it’s painful to watch. In short: no, inflation is not that important, and given the weak-to-non-existent growth in the province over the last five years, balanced budgets are even less so.

          I’ll take the balanced budgets angle first, since it’s the most important here: there is no economic reason why the province is trying to balance the budget now. None. Interest rates continue to be at historic lows, and despite the Bank of Canada’s musings, they just refuse to rise. That means it’s time for the government to borrow. And to continue borrowing, especially in this time of weak-ass demand. The government can balance the budget after the economy has actually recovered, using increased tax revenue thanks solely to economic growth. That time is not now. The government choosing to balance the budget now is a political decision entirely. The costs of this political decision are borne entirely by those of us who can’t borrow heavily just because interest rates are low – us.

          As for inflation, well, neoclassical Econ has all but shut the door on any debate in that area, but it’s not very important provided there is consistent growth in the economy – the 40s, 50s and 60s can attest to this.

          • Anonymous

            “provided there is consistent growth in the economy” — but that is the problem, isn’t it? Ontario’s economy is changing and it’s not obvious where the growth is going to come from, going forward. That was the whole point of the Drummond report. If this is the new normal, and not a temporary slump, then the government should not be borrowing to sustain the old model, right? IANA economist.

          • Michael DiFrancesco

            That was the point of the Drummond report, yes. And frankly, I hated it. The province’s manufacturing sector was languishing before the crisis, but the government was handed a golden opportunity – with low interest rates, it could literally shovel money at infrastructure and industrial projects guaranteed to stimulate growth in, if nothing else, construction industries which employ many of the same people first to be laid off after the recession hit. Even if there were no fabled “growth industries”, employing those construction workers would keep them employed. Keep them with a stable income. Importantly, keep them buying things. And that’s what this recession more than any other since that big one has been a failure of – a failure of demand, of people and businesses being unwilling or unable to buy things. Then, as the country as a whole recovers, and as Ontario companies, who are still experiencing solid demand, continue to buy from Western primary industries, we would still experience good growth, nationally and provincially. Maybe not huge. But certainly enough to balance out the budget.

            That was the rationale behind the Action Plan etc. And two years into this, the governments at all levels just… gave up. Threw in the towel. Decided they didn’t think the province was going to be any good anymore so, what the hell, might as well just cut it off now. Stop the bleeding. Balance the budgets.

            You see a similar attitude in the UK, with similar consequences: any pretence of a recovery has stalled. Governments are cutting wages, benefits, and welfare from the very people who need it most to stimulate the economy. Shades of 1935 abound.

            tl;dr: We’ve been down this road before and it just doesn’t end well. And getting into wedge politics about it – cutting out this union, clawing pay back from that one, curbing entitlements here, benefits there – they won’t help any recovery, much as they might make us feel better about our own relative positions.

          • Anonymous

            You are pretty much right. I just think if we are going to get bad financial leadership, it should be spread around. But, to be fair, I teach basic math, not economics, so nuts to me ;)

          • Anonymous

            So your assumption is that manufacturing will come back with sufficient government intervention. That’s unlikely, because (as you note) the manufacturing sector was in trouble before the crisis. If the problems with Ontario manufacturing are structural, not transient, then the massive intervention that you suggest will distort the market and delay a painful restructuring.

          • Michael DiFrancesco

            It’s an implicit assumption in my analysis, but one that’s not required. If manufacturing is, in fact, dying in Ontario (which is debatable) and is coupled with a wider downturn, then we’re going to have a lot of people out of work who are fully capable of working. This has an effect on aggregate demand – those people aren’t buying things they otherwise would, because their unemployment means money is tight. That cascades over other sectors in the economy: businesses aren’t selling as much, profits go down, and sectors which are perfectly healthy, like services and primary industries, are suddenly losing money, laying off workers, and further complicating the chain reaction.

            Enter intervention: the government (as we saw) announces infrastructure plans financed by massive borrowing against an historically low interest rate – a zero-percent interest rate, in fact. That boost to infrastructure spending means that the construction industry (one which is pretty liquid as far as hiring and firing is concerned) has a sudden need for workers, filled by those same unemployed workers with a skillset construction needs. That’s a stop-gap measure against the fall in demand; but it puts a halt to the spiral which is crucial.

            Finally, the recovery: If the manufacturing losses were structural, the infrastructure spending – which, if properly applied, doesn’t just *stop* but winds down – allows the economy some breathing room, to sort out structural unemployment over a longer period thus saving us a ton of pain. If the manufacturing losses were NOT structural, but rather the result of some other factors (a shock to primary income prices, some trade issue, you name it), then the measures keep demand high, supply (the sector itself) returns to stable levels over the long run, and workers find there are jobs out there as the projects close – that seems to be more the 1945 model.

            Either way, intervention in this case is important. The important point in all of this – especially as it pertains to our particular recession – is that recovery need not be painful, and as Britons might let you know, a painful recovery is not synonymous with a successful one.

          • Anonymous

            You’re nuts. You want to put us in a debt death spiral. From what I’ve read, manufacturing losses in Ontario due to foreign labour competition had more or less stabilized. The thing that will kill off manufacturing in this province are higher taxes and higher energy costs, both of which have been a the main accomplishments of the Liberals for the past decade. What you advocate sets us up for a long and painful decline; a fake economy that dries up the instant the subsidies run out.

            The 1945 model was to pay off the war debt. Otherwise, public spending per GDP was a mere FRACTION of what it is today. If I were to advocate 1950s public spending, you’d call me some far right fringe lunatic.

          • Anonymous

            You are a far right lunatic. There, I said it.

          • Michael DiFrancesco

            You picked a bad time to make the taxation argument, when Forbes (via KPMG) outright says that Canada is the second-most tax-friendly country on the planet, and Toronto the 5th-friendliest city: http://www.forbes.com/sites/kellyphillipserb/2012/09/25/the-most-tax-friendly-country-in-the-world-is-spoiler-alert-its-not-the-u-s/

            You’re also going to need to explain how the provincial Liberals are responsible for higher oil prices in Alberta, Venezuela, and the Middle-East – unless you mean hydro costs! Because I know why that’s more expensive: we decided to privatize it.

          • Anonymous

            Wow, are you ever uninformed. And dishonest. ONTARIO’s taxes have gone up. Ontario’s energy costs have gone way up, not because of privatization but because of the tens of billions McGuinty has chucked into the wind, and all the money we’re obligated to spend on dumping wind power when we can’t actually use it. The only reason all of this hasn’t hit industry all that hard yet is because you and I are subsidizing the outrageous costs with our taxes (and at the expense of other social programs.) Meanwhile, all those windmills are making our CO2 emissions go up.

          • Michael DiFrancesco

            Well, I tried. Taxes are down. Business taxes, especially, are down thanks to the HST, which was a business-friendly proposal that we in our Finance department loved greatly for all the new money we were saving. But you’d rather your conspiracy theories, and believing that the Liberal government, that Liberal government that continues privatizing whatever it can get its hands on, that just up there at the top of this page is going after public sector workers for the umpteenth time, is some kind of socialist party. Okay. You go right on thinking that. Anyway, the Toronto Sun comments section is thataway.

          • Anonymous

            Look. You want to know why the provincial government is broke? It’s because they blew their wad on wind power and various renewable energy subsidy schemes, which have turned out to be an unmitigated disaster. We are talking about A LOT OF FRIGGIN MONEY.

            Why doesn’t he just raise taxes on businesses and the rich like a good Marxist should? Because if capital flight starts happening here, he’s going to be so screwed that a bunch of angry teachers with an entitlement complex will be the least of his worries.

          • Anonymous

            By the way, oil prices aren’t all that high right now.

          • Michael DiFrancesco

            Holy hell that was a frickin’ book. Sorry if it makes you glaze over.

      • Anonymous

        Fair enough argument, and “broke” was a bad choice of words. I guess it’s, for me, the fact that the province is going to try and balance the budget regardless of whether it is a good idea or not. Teachers, myself included, have not had stagnant salaries, benefits or take-home pay in the last 10 years. The money for increases is going to come on

        • Anonymous

          Bleh phone. On the backs of others. The boards are already cutting TAs, which hurts teachers more than a wage freeze. Right or not, balancing the budget is going to be the goal.

        • Michael DiFrancesco

          I guess my biggest takeaway from this article (my predispositions aside) is, from the standpoint of balancing the budget, capping and/or cutting the wages of 500,000 people amounts to an estimated 6% of the current budget deficit through to 2015. I mean, I’m a lefty so I can’t exactly care about people making twice the Premier’s salary (what’s that, like, $250k/yr? I think they can handle themselves fine). It’s more the fact that all those people’s livelihoods – particularly the young teachers, professors, and social workers, just starting out, not making a whole lot of money and with questionable benefits – will be just that much worse over the next five years just to make a mostly inconsequential dent in the deficit.

          Because keep in mind that a 2% year-over-year increase in salaries IS a wage freeze in real terms, if inflation is also at 2%/yr. A nominal wage freeze is really a wage cut – 30k in 2017 isn’t going to be worth as much as 30k in 2012, thanks again to inflation.

          So much for so little.

        • Michael DiFrancesco

          Oh, and apologies for going all ranty on you there. Been reading too many newspaper comment sections lately, had that little piece bottled up.

          • Anonymous

            I know what you mean about comment. I think I’m just grumbly because I left for adult education,took a massive pay cut, lost my fab benefits and pension, and all my friends are whining about 2% of a considerable ammount of money.

  • CaligulaJones

    Folks, just read (or re-read if necessary) “Boom, Bust and Echo”. So much of this is plain and simple demographics. Its simple math, and it ain’t going away. The fact is, the Baby Boomers still want their gold plated everything. The Bust generation want what’s left, and the Echos and Millenialls will get what’s left of what’s left.

  • Matt

    Does Ontario have region-specific wage levels?

    A junior policy analyst with six years of education, 4+ years of interning making $55,000 a year in expensive TO doesn’t seem lucrative.

    But if someone is making that at the Ministry of Natural Resources ofice in Peterborough, you could argue that the cost-of-living in the region would make that wage relatively high.

  • Guest

    @google-6feaee8c8917f48a9c6733157bf3e906:disqus You rock! Thanks for adding your analysis to these pages. We need to hear this more.

  • Tracey Mollins

    @google-6feaee8c8917f48a9c6733157bf3e906:disqus You rock! Thanks for adding your analysis here. We need to hear this more – are you listening MSM!

  • Tracey Mollins

    Micheal DiFrancesco: You rock! Thanks for adding your analysis here. We need to hear this more – are you listening MSM!