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Government pay is unfair and unaffordable

March 28, 2019
Government pay is unfair and unaffordable

In a time where inequality has taken centre stage in many political debates, one part of the problem desperately needs attention: the gap between compensation for government employees and compensation for the rest of us.

Government pay in Alberta is unfair and unaffordable.

Not only do government employees (all levels) earn a 10 per cent wage premium compared to those working outside government, they also retire earlier, are less likely to be fired and lose more work hours for personal time.

It’s a particularly poignant problem in Alberta’s struggling economy.

Since reaching a high in 2014, total workers’ pay in the province has declined by 9 per cent, according to Statistics Canada. Despite this, government employee compensation increased by 12 per cent between 2014 and 2018, according to Alberta government budgets.

Since May 2015, 40,000 jobs have been lost in Alberta’s private sector. All while nearly 60,000 government employees have been added, paid for by taxpayers who have been hammered with higher taxes and a tough economy.

But this isn’t the full story.

Not only are we paying for inflated salaries and a growing number of jobs, taxpayers are also on the hook for another, hidden government perk — defined benefit pension plans.

Under defined benefit plans, the Alberta government guarantees pension payments decades later and taxpayers are forced to take on the risk of bailing out the funds when they bust.

For example, in 2002 taxpayers were required to make a “one-time” payment of $60 million towards the Teachers Pension plan shortfall. Another $1.2 billion taxpayer payment was required in 2009.

According to the Fraser Institute, additional taxpayer contributions have also been made to the Universities Academic Pension plan, the Special Forces plan, the Management Employees plan, the Public Services Pension Plan and the Local Authorities Pension Plan.

For the Local Authorities Pension Plan alone, taxpayer costs have skyrocketed from $545 million in 2008 to nearly $1.4 billion in 2017; a 150 per cent increase in just 10 years.

Not only are the plans costly, they are scarce outside of government.

About 70 per cent of government workers are covered by a registered pension plan, compared to 24 per cent of workers outside of government. While 95 per cent of government employees covered by a registered plan receive defined benefits, for Albertans outside government who happen to have a pension, only 30 per cent get defined benefit plans.

There is a clear model the Alberta government can adopt to make its pensions more fair to taxpayers.

“One notable Canadian-made option for reform comes from Saskatchewan,” explains a Fraser Institute report.

“In Saskatchewan’s case, the NDP government enacted legislation to move much of that province’s public sector from defined benefit plans to defined contribution plans for the general civil service . . . New civil servants were automatically enrolled.”

Under Saskatchewan’s system, contributions come from both employees and government and the money is there for employees to withdraw in retirement. But unlike Alberta’s defined benefits system, there is no new risk of surprise shortfalls needed to be covered by future Saskatchewan taxpayers.

The next Alberta government needs to immediately begin addressing inflated government compensation. One way to do this is by ensuring all new hires are moved into matching RRSP-style pension plans. The status quo has forced many Albertans to pay for benefits we don’t receive as workers and can’t afford as employers.

It’s time to fix this inequity.

This column was published in the Calgary Sun on March 28, 2019. 

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