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Taxpayers can’t fix the deficit alone

May 24, 2017
Taxpayers can’t fix the deficit alone

Taxpayers should be worried about what’s being left out of the debate about new labour legislation. Unions and government disagree on policy — that’s utterly unsurprising. But the point labour leaders are leaving unsaid is unsettling.

The Manitoba government recently introduced legislation to freeze government employee wages for two years and then limit raises to 0.75 per cent and one per cent in subsequent years. The reason is simple: the province’s finances are in trouble. The operational deficit is $840 million and spending is going up by $520 million. The province clearly hopes the legislation will control spending.

Labour leaders have responded unfavourably.

"It’s neanderthal," said Paul Moist, who worked for the Canadian Union of Public Employees.

Moist certainly wasn’t alone in his opposition to the legislation, but it’s important to recognize that not all unions are the same or react the same way in every situation.

Unifor, the union representing Winnipeg Free Press employees, provides a timely example. Unifor has agreed to eight per cent wage rollbacks if the paper runs into financial trouble and management has agreed not to lay anyone off. Obviously, wage reductions are an unpleasant possibility, but both sides recognize that shared challenges require shared struggle.

Michelle Gawronsky of the Manitoba Government and General Employees’ Union has rightly pointed out government workers shouldered burdens in the past.

"Following the global fiscal crisis of 2008 and the persistent flooding experienced in 2009 and 2011, the government and many people in Manitoba face difficult financial challenges," said Gawronsky in recent testimony to a legislative committee. "Our members chose to do their part in easing the financial strain following the economic downturn by agreeing to a two-year wage freeze."

Unfortunately, government union leaders are offering few solutions for the government’s current struggles. Government unions show no interest in controlling compensation costs even though provincial employees are paid nearly 20 per cent more than their counterparts in local businesses, according to research produced by the Canadian Federation of Independent Business.

It’s important to recognize the urgency of the situation. For years, the provincial government said it would balance the budget, and for years it failed. Credit rating agencies downgraded the province’s credit rating, which has a similar impact to lowering credit scores for individuals: the cost of borrowing money goes up.

Manitoba is already paying $911 million to cover interest payments on its existing debt. Finance Minister Cameron Friesen points out that a one per cent interest rate increase would cost the province $100 million a year. Passing legislation to prove it’s serious about financial responsibility may be the only way the province can avoid another credit rating downgrade.

In reality, the province has only three options: 1) keep borrowing; 2) trim spending; or, 3) raise taxes. What option would labour leaders choose?

Continued borrowing will become increasingly expensive and ultimately unsustainable with interest payments soon rising above a billion dollars annually.

It seems obvious labour leaders oppose spending restraint as they seem to consider the province’s financial problems to be somebody else’s problem.

"It is not a public-sector deficit, so to put it only on the shoulders of the public sector is improper and inappropriate," said Norm Gould, president of the Manitoba Teachers’ Society.

That leaves tax increases.

But taxpayers have been left to shoulder the deficit for years. The PST hike costs taxpayers about $300 million per year. A Winnipeg family with an annual household income of $75,000 pays $2,964 more in provincial taxes than its counterparts in Regina. Even though taxpayers bear an increasingly heavy burden, the province’s deficit problem remains unsolved.

Government unions aren’t overtly advocating for higher taxes, but that’s the only conclusion of their arguments.

Perhaps labour leaders have better solutions than the government’s wage-freeze legislation. If so, they should share them. But in the absence of innovative ideas, taxpayers should welcome the government’s move to control labour costs.


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