Tuesday, 2 May 2017 - 8:30am

In a previous column I described a potential solution to a well-known problem in Canada — the fact that government employees tend to be paid far more than people doing similar work in the business and non-profit sectors.

As a solution, I suggested governments could negotiate new labour contracts that would have future hires paid less in compensation (bringing future employees’ pay and benefits more in line with the private sector).

This phased-in approach would allow governments to save billions nation-wide, without requiring politicians to have to ruffle the feathers of current government employees (something very few politicians are willing to do.)

Here are a few reasons why grandfathering in lower, more reasonable compensation levels for government employees makes a lot of sense for the Pallister government.

First, note that data from the Manitoba government shows that during the next five years, 23% of the provincial government’s workforce will be eligible to retire. In the next decade, that figure grows to 40%.

Thus, there’s a tremendous opportunity right now to begin replacing highly paid bureaucrats with less costly, more reasonably paid bureaucrats.

That brings us to the second reason why this approach makes sense — the savings could be used to fulfil election promises.

Recall, Premier Pallister has promised to erase the province’s massive $840 million per year deficit (left the former government) by 2024. In addition, he has also committed to reduce the sales tax back down to 7% cent by 2020 (a financial impact in the range of $300 million per year). Considering he has ruled out pay reductions for current employees, his government will likely need some major savings ideas if they’re going to keep their election promises.

If Premier Pallister scaled back wages and pension benefits for future hires by, say, 10%, he could easily save upwards of $150 million per year come 2021-2022. If he implemented a more significant compensation reduction — 20% — he could find himself with more than $300 million per year in savings.

Given Canadian Federation of Independent Business research that shows provincial employees in Manitoba earn about 20% more than their counterparts in business doing similar work, there’s certainly justification for a significant compensation reduction.

Make no mistake; the elite that run government employee unions in Manitoba would howl in protest to the aforementioned ideas to curtail compensation costs. By default, they oppose virtually everything the Pallister government does.

However, grassroots union members are a different story. It would be highly unlikely for current government employees to vote to go on strike, so that people who aren’t even hired yet receive a higher salary.

Perhaps most importantly, spending restraint could allow the premier to provide even more tax savings and balance the budget sooner. Both moves could help him appease those within his party’s base who are growing restless with his government’s cautious approach.

One thing should be clear, there are immense savings just waiting for Premier Pallister to tap into. Whether or not he chooses to unleash them is another question.

 

— Colin Craig works for the Manning Centre and is the author of The Government Wears Prada. 
This column was published by the Winnipeg Sun on May 2, 2017

Topic: 
Finance
Colin Craig
Director of Strategic Communication

Colin Craig is the Director of Strategic Communications for the Manning Centre and is the author of The Government Wears Prada. He has an MBA and a BA (Economics) from the University of Manitoba. Prior to joining the Manning Centre, Colin worked for the Canadian Taxpayers Federation in Winnipeg and was instrumental in shaping public policy decisions at the municipal, provincial and federal level.