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Ford government right to tackle bureaucratic bloat

April 10, 2019
Ford government right to tackle bureaucratic bloat

There’s an elephant in the room whenever politicians talk about the Ontario’s finances and it’s the cost of province’s enormous bureaucracy. It’s a relief to see the provincial government is finally starting to talk about it.

In remarks to the Canadian Club on Apr. 4, Treasury Board Peter Bethlenfalvy announced new public consultations on government employee compensation, on how to manage salary growth in a way that he described as “modest, reasonable, and sustainable.”

Addressing bureaucratic bloat is imperative for the government to achieve a balanced budget. While most politicians acknowledge that balancing Ontario’s budget is important, it’s a goal that cannot be achieved without addressing the largest cost driver in the province. It’s good to finally see a politician who is admitting it.

Wages, salaries and benefits for government workers are the most significant single expense in the provincial budget. Paying for bureaucrat salaries costs taxpayers about $72 billion annually, and represents about half of program spending.

The issue of bureaucratic bloat has to do with two things: the compensation for public sector workers, and the size of the bureaucracy itself. To solve the province’s financial problems, both need to be addressed.

In terms of cost, the government estimates the average government worker earns $16,049 more than the average private sector worker. The Fraser Institute estimates that government workers earn a wage premium over their private sector counterparts in Ontario of about 10.5 per cent. In terms of averages, rather than counterparts, the government estimates that the difference is even greater. The average private sector worker earns 33.6 per cent less than a government employee. Given that private sector workers pay the salaries of government employees, this disparity needs to change.

Government workers also receive other non-salary benefits, such as earlier retirement, higher job security, and pensions. In Ontario, 94.7 per cent of government employees have a defined benefit pension compared to just 41.5 per cent of private sector workers. Bureaucrats don’t need to earn higher salaries on top of these other non-wage benefits.

While the cost of the bureaucracy is high, it’s actually getting higher. Between 2003 and 2018, average salaries of all Ontario government employees increased by 48.1 per cent. This year, the Sunshine List, which discloses government workers earning over $100,000 per year, grew by 19,131 people, or 14.5 per cent. This is more than twice as fast as the list grew last year.

The provincial bureaucracy is bloated with over 1.3 million people earning a living on taxpayer dollars. Between 1997 and 2017, the number of government jobs has increased by over 43 per cent, about 10 per cent faster than the private sector grew over that period.

Both the Wynne and Ford governments have made some efforts to tackle both the size and cost of the bureaucracy, but until now, these have been drops in the bucket.

One of the first acts of the Ford government was to implement a hiring freeze and this was quickly followed by a salary freeze for executives. It also announced buy-out packages for non-unionized government bureaucrats who quit voluntarily.

But these moves are frankly less aggressive than similar policies by the previous Wynne government. While the Ford government has repeatedly said it will not “fire” anyone, the previous government’s 2009 and 2011 budgets proposed reductions of 3,400 and 1,500 bureaucrats over three and two years. The 2010 budget froze all salaries, not just executive salaries, and the 2014 and 2015 budgets adopted “net zero” bargaining that required all wage increases to be offset by other spending reductions. These moves by the previous government were not enough to stop bureaucratic bloat, so the new government must take stronger action.

It’s good news to see that appears to be what they are doing. Some of the suggestions of new measures Minister Bethlenfalvy announced include voluntary agreement to wage outcomes lower than the current trend, trade-offs that will lead to reductions in compensation costs, and even legislated measures.

Regular Ontario workers are already paying the salaries of bureaucrats who, on average, earn more than they do. With a massive deficit, the government will soon come knocking on their doors with tax hikes. But taxpayers can’t afford to pay more so the government needs to tackle that elephant in the room and reduce the size and cost of their own bureaucracy.

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