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As you well know, Premier Wynne, most of your core businesses – for example, health care, education, the justice system and so forth – are labour intensive services. Accordingly, their cost structure is dominated by employee compensation.
The provincial auditor general reported in 2011 over 50 percent of program costs are for compensation.
You also know, Premier Wynne, Ontario’s fiscal plan for a balanced budget by 2017-18 depends vitally on a heroic effort to rein in the growth of program expenditure.
That heroic effort can take the form of dramatic productivity improvements in public service delivery and/or by compensation restraint, perhaps even real wage decline in some areas.
Many believe there is ample opportunity for productivity improvement in health care and education, in part utilizing new technologies or eliminating superfluous activities. This will allow a decline in the growth in public service jobs. It is not likely, however, to lead to large scale lay-offs as it has in the private manufacturing sector.
And, of course, on closer inspection it might also turn out “productivity gain” is simply code for more tightly rationed access to public services - longer wait times for medical services, fewer justice system services per person, bigger classrooms and lecture halls and so forth.
In short, more individuals, households and communities will simply face a “do it yourself” reality, except for the most highly specialized of public services.
In this scenario, employees in the broader public sector will have very good compensation, although they will not necessarily have fun jobs. And many will feel compelled to stay, even if they might wish to leave.
They will have “golden handcuffs” because their compensation and risk in working for government are better than the alternative. They will know there is a vast pool of highly qualified people looking and waiting for these “good” jobs – witness teachers.
This is the new reality. In the globalized economy, most citizens now find their real wages highly constrained by low wage foreign competition as well as technological change that has eliminated vast numbers of private sector jobs.
Public servants, on the other hand, are still sheltered from direct foreign competition and their job security is largely protected by heavy unionization and the deep pockets of taxpayers and ratepayers.
This can’t last, of course. High cost government services, after the borrowing is exhausted, must inevitably mean higher taxes or reduced services. You can’t make the rich or the corporations pay. They’ll just exit. You can’t make the poor pay. They don’t have enough left to give.
That leaves the middle class. You can tax them more and exclude them from more services, but sooner or later they will revolt. When they do, the “slash and burn” people will take over the government. And when this happens, those who refused to address the matter of what is “fair compensation” for a public servant will reap the whirlwind. The “thinkers” will be shoved aside and the “doers” will go to work.
But perhaps Premier Wynne, this scenario of waiting until the day of reckoning and the slash and burn style of government doesn’t have to happen. Be bold enough to recognize and address directly the elephant in the room – what is “fair compensation” for public servants.
Get all the facts on total compensation (that is, including benefits such as pensions and job security) for anyone receiving compensation (or fee for service) from a provincial or municipal government and their emanations. Publish total compensation facts on a regular basis.
Start at the top by asking the questions: “Is it fair that a physician, even a highly skilled specialist, be paid a million dollars a year for as long as they work.” Is it fair to pay a deputy minister, considering total compensation, half a million dollars a year? What about a hospital administrator, policeman or fireman?
These questions lead directly to: “How should we determine what is “fair”? What should we consider?
Some economists, although certainly not all, will be horrified by this idea. They will say wages should be determined by the labour market. I agree in part; but it is clear this is not currently the case, and the question remains whether it can ever be the case given the nature of government.
Our current circumstances are not only the hangover from a down business cycle. We are facing profound structural problems. Our current systems for determining compensation aren’t working, with major implications for the future.
Many will want to assert the idea of the government’s “ability to pay”. But that has proved a nebulous concept leading to an endless and sterile debate.
So, Premier Wynne, let’s start from a different question: “What is a fair compensation for a public servant and what factors should we be required to consider when determining it?”
This approach would surely take account not only of specific labour market conditions and returns on investment in education, but also the broader circumstances of the working people of Ontario.
And please do not take your answers solely from the private corporate sector. Corporations and their employees are encouraged to be mobile, including geographically mobile.
But Queen’s Park and Ontario aren’t moving anywhere. This is our home and our government. We want employees who are loyal to this place as their home as well as their place of employment.
Convene a Commission of truly independent and thoughtful people to give us some answers on a fair compensation policy for the broader public sector.
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It’s about fair compensation

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