Nations from Greece to the U.S. are facing unprecedented fiscal challenges largely driven by unsustainable government spending on public-sector wages and benefits that outstrip those in the private sector.
Think Canada is immune? Think again. Our economy is in relatively good shape, but we have the same fiscal challenges federally, provincially and locally.
In the federal public service, wages and benefits are about 40 per cent more than they are for equivalent jobs in the private sector. The last federal budget took a tentative step in the right direction by eliminating a provision that federal employees get severance pay for quitting their jobs.
Other benefits are so generous that the phrase, “Come for the maternity leave, stay for the pension” is jokingly used as a recruiting slogan among federal employees. The joke, of course, is on private-sector taxpayers who work longer hours for more years to pay for these generous benefits.
The provincial scene is just as bleak.
The B.C. Teachers’ Federation thinks it’s reasonable to demand a year’s pay as a “bonus” for retiring veteran teachers, two sick days a month that can be saved up and double-digit wage hikes. They are threatening to strike if they don’t get what they want.
The local level of government is also out of control with wages and benefits that outstrip those for equivalent jobs in the private sector by a whopping 35 per cent.
Crazy benefits have been larded into contracts. In Vancouver, employees get a “gratuity day” for each four-month period that they are not away sick.
The mother of all compensation inequities is public-sector pensions. With massive looming retirements and longer life expectancies, it’s becoming clear that in many cases, current contributions to public-sector pensions are inadequate to fund future liabilities.
The C.D. Howe Institute estimates that the federal government has a $208-billion unfunded pension liability. It’s hard to estimate how large the unfunded liabilities are at other levels of government, as there is no common measurement of liabilities.
Public-sector unions are in deep denial about the unsustainable nature of the course we are on. Canada will have a day of reckoning unless we insist that governments confront these challenges sooner rather than later.
It’s time to bring public-sector compensation, including pensions, back in line with the private sector for the sake of our country and our children.
Laura Jones is the senior vice-president research, economics and Western Canada with the Canadian Federation of Independent Business.