Paying our public servants

November 9, 2005

The season of public sector bargaining is upon us.  While the teachers’ strike is over, bargaining now starts in earnest for the vast majority of public sector workers, leaving British Columbians to wonder if there are more labour disruptions to come.  The answer will, of course, depend on the negotiating positions of both public sector unions and the provincial government, and the ability of both parties to reach agreement on what are fair and practical pay increases.

In recent years, the province has taken a confrontational approach to public sector negotiations.  When the 2002 budget was released, the government announced wage guidelines of 0% for three years.  Claiming that public employees were already well paid, then-Finance Minister Gary Collins said he saw no reason to increase their salaries.

This is a strange assertion, given the provincial government’s stated desire to mirror the private sector’s ways of doing business.  When it comes to wage increases, there are well-established norms of behavior in the private sector, and indeed among all major employers.

Private sector employers are reluctant to spend more on pay increases than is the norm in the broader labour market. However, they also know they cannot spend too little without risking higher employee turnover.  High turnover can increase staffing and training costs, and can cause operational disruption, lost productivity, and low morale.

In addition, private sector employers with unionized workforces do not have the option of foreclosing on collective bargaining through legislation, something the provincial government has done repeatedly in recent years.  As a result, private sector employers assume that the only collective agreement they will achieve is one negotiated through bargaining, knowing that if their offers are unreasonable they face the threat of a strike. 

Major employers tend to have formal compensation systems that closely track wage trends. They pay close attention to the reports of human resources consulting firms (such as Hay and Mercer) that regularly survey major employers to determine the market rate for pay increases.  These consulting firms recently released surveys that predict national 2006 pay increases of about 3.3%. This is similar to past years, when pay increases among major employers have averaged about 3.3%.  Over the three-year period of provincial public sector wage freezes, employees at other major employers have received nominal increases close to 10%.

The numbers are a little different when we look at unionized workplaces only.  From 2002-2005 inclusive, public sector employees in British Columbia saw their wages increase by a total of 2.2% (a figure that includes municipal employees and others not affected by the wage freeze).  During that time unionized employees in the BC private sector achieved increases of 7.2%, and the public sector across Canada achieved increases of 9.8%. 

The state of provincial finances makes it difficult for the government to claim the cupboard is bare.  It is anticipating official surpluses of $1.6 billion for 2005/2006, $1.2 billion for 2006/07, and $1.3 billion for 2007/08.  Given the conservative assumptions in the budget, the final numbers are likely to be even higher. A 1% increase in compensation for provincial public sector workers is estimated to cost $160 million per year. A 2% increase in base pay would cost approximately $320 million; and a 3% increase in base pay would cost approximately $480 million.

These numbers provide some context about the realities of the broader labour market that should at least inform the provincial government’s thinking about what an appropriate negotiating position in coming rounds of bargaining might be.  Finance Minister Taylor, to her credit, has acknowledged that she will need to budget for some pay increases.

In future, the government needs to respect the collective bargaining process, instead of bypassing it by legislative writ. Such behaviour was strongly condemned in 2003 by the International Labour Organization (ILO) as violating principles of freedom of association.  Effectively, this is a reprimand from an international human rights body for our failure to protect fundamental democratic rights.

The government is early in its new mandate, and can still choose a path that is based on fair and reasonable practices that are consistent with and respond to labour market trends, strengthen human rights, and ensure sound management practices.  Otherwise, we run the risk of becoming a society that is both short on human rights and beset by recruitment and retention problems and poor morale in the public service.

Stuart Murray is the Public Interest Researcher at the Canadian Centre for Policy Alternatives in BC and the author of "Paying Our Public Servants: The Dollars and Sense of BC and National Wage Trends." He has ten years of experience doing labour market analysis, including four years in the private sector as a compensation analyst.