“But,” he adds, “inevitably [in tough times] taxpayers are going to ask why they’re supporting workers earning above-market compensation, and we’ll get a cycle of political pressure and reaction.” Indeed, the first signs of that reaction may already be appearing, with a two-year public sector wage freeze underway in New Brunswick, rumours of a freeze in Alberta, and the Ontario government’s Nov. 6 launch of a wide-ranging expenditure review by a Treasury Board panel.
Jock Finlayson, executive vice-president of policy for the Business Council of British Columbia, laments missed opportunities to rein in spending before the crisis arrived. “I don’t see how one can justify the public-private disparity along the dimensions of job security and pensions and benefits,” he says. “But the ultimate question is, do you have the tax base? Alberta has very expensive government, but depending on the outlook for oil, Alberta may be able to afford it. It’s less easy to explain why Ontario boosted spending when it faced an inevitable downturn and an industrial restructuring. There’s a danger during good economic times of building services, programs, and institutions that can only be financed at the peak of the business cycle.”
As most economists acknowledge, there’s a hypothetical quasi-Keynesian rationale for protecting public sector workers at the outset of a recession. Unlike most U.S. states, Canadian provinces have the constitutional power to run deficits. This means our governments can act counter-cyclically, waiting until the private sector is strong enough to absorb laid-off government workers, instead of pro-cyclically worsening local recessions, as states such as California have had to. But limits on U.S. state debt powers have also given the states incentives for fast-paced innovation. And the Canadian ability to dampen the business cycle doesn’t mean much if you don’t limit growth in government during the good times, as most jurisdictions failed to do.
Tony Dean, former head of the Ontario public service and now a fellow of the University of Toronto’s School of Public Policy and Governance, counters that the Ontario civil service still hasn’t rebounded to its 1995 pre-Common Sense Revolution size. “And the federal government reduced staff by 45,000 between 1994 and 1997,” he adds. Prime ministers Chrétien and Martin “didn’t exactly leave federal public servants feeling that they had safe jobs for life.” Though there may be envy of civil servants, in many ways he thinks they are still doing more with less than in the days before world-changing texts like David Osborne and Ted Gaebler’s Reinventing Government (1993).
“Not long ago,” he notes, “when you had a new baby, you had to go to the town hall to register the birth, apply to the province for a birth certificate, and ask Ottawa for a social insurance number. Three offices, three separate trips. Today, in many places, you can do this all in one step through an online portal.” We tend to take such changes for granted, he says, and forget the savings they have yielded for the treasury—and the clerical workers who don’t have to be hired to shuffle those papers anymore. (Though whether the real workers were laid off when the rationale for their employment disappeared is another question.)
What seems certain is that the pain will ultimately spread to the public sector. How fast and how viciously depends on political will. Infiniti dealer Giacomin is watching the gathering storm, monitoring the political and economic winds with an expert’s eye. “Up until now,” he says, “governments haven’t worried about deficits; they’ve been concerned with the immediate economic emergency. The next phase is coming soon, and when governments begin to adjust their spending, it will probably have harsh impacts on public employment, or on the employees’ purchasing power. That’s going to have an impact on a city like Ottawa. We’ll see what this recession looks like on the way out.”
