Alberta desperately needs to reduce its labour costs

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Franco TerrazzanoAt the end of August Finance Minister Travis Toews released his budget update, which was 20 pages doused from top to bottom in red ink. Albertans couldn’t afford our high-cost provincial government before the pandemic. And Toews’ budget update shows we definitely can’t afford our high-cost provincial government now.

At $24 billion, this year’s deficit is expected to be the largest in the province’s history. The provincial government’s debt will also reach $100 billion by the end of the year, according to the budget update.

With Alberta families and businesses struggling to stay above water, Toews only has one option to fix the budget: cut spending. Toews can’t keep nibbling around the edges anymore. He must do what Alberta politicians haven’t been willing to do for two and a half decades: tackle government labour costs.

The Alberta government’s labour costs make up more than half of its operating budget. That means Toews doesn’t have a hope in hell of balancing the budget and repaying the debt unless he’s able to take some air out of the government’s ballooning labour costs.

Not only does Toews need to reduce government labour costs, he should be reducing these costs.

For five years now, workers outside of government have been feeling the pain of Alberta’s economic downturn. Countless private-sector workers lost their job or took pay cuts to continue putting food on the table.

In 2015, Christina Coffey was laid off from her oil and gas job. Since then, she’s been looking for work that’s been all too hard to come by. Only a few months ago she told Global News that she’s still “up half the night” worried about losing her home. How many other Albertans could share a similar horror story?

But instead of government employees sharing in the burden of the downturn, government labour costs continued their upward climb. Since the end of 2014, more than 10,000 government employees were added, and total costs increased by about $3.5 billion.

This might be the most staggering figure of all: while government compensation costs increased by nearly 15 per cent between 2014 and 2019, total compensation paid to all Alberta employees fell by five per cent.

The COVID-19 economic shutdown exacerbated the divide between Alberta’s government employees and everyone else. Alberta’s private sector was hit hard with many job losses and pay cuts. But as the Fraser Institute explains, “government employees have gotten through the economic shutdown largely unscathed.”

The Alberta government’s own finance bureaucrats admit massive savings could be found by simply bringing labour costs in line with costs in other provinces.

“Excluding payments to physicians, Alberta’s total spending on public sector compensation would be approximately $3 billion less every year if it matched the average spending of these provinces,” reads the province’s 2020 budget.

Taxpayers would save an extra $900 million if doctors’ costs were also brought in line with costs in Canada’s other large provinces.

So, what does the government need to do?

The Canadian Taxpayers Federation is calling on Toews to reduce government labour costs to 2014-15 levels, which is when the economic downturn began in Alberta and predates the big labour costs increases that occurred under Rachel Notley’s New Democrats. Private sector compensation still remains lower today than it was five years ago. So yes, it is time for government employees to go back to the austere days of Allison Redford.

As SecondStreet.Org reported, the vast majority of Alberta’s government employees haven’t seen a pay cut since 1994. That’s when a young Jason Kenney was leading the CTF and breathing down Ralph Klein’s neck pushing for necessary cuts.

Now Kenney is standing over Toews’ shoulder. And just like in 1994, it’s now necessary for government employees to take a cut.

Franco Terrazzano is the Alberta Director of the Canadian Taxpayers Federation.

Franco is a Troy Media Thought Leader. Why aren’t you?

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By Franco Terrazzano

Franco Terrazzano is Federal Director of the Canadian Taxpayers Federation. He joined the CTF after working as an economic policy analyst with the Calgary Chamber of Commerce and as a fellow with the Canadian Constitution Foundation. Franco has produced multiple reports and op-eds on the costs associated with tax increases, inefficient government and the unintended consequences of public policies. Franco completed his Master of Public Policy and Bachelor of Arts (Economics) degrees at the University of Calgary.

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