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Municipal government labour costs have lost touch with reality

Author: Franco Terrazzano 27/06/2020

Struggling families and businesses can’t afford to pay big property tax bills to fund bloated municipal governments. Alberta municipalities need to reduce that burden by addressing the cost elephant in the room: labour.

For many Albertans working outside of government, the last five years have been nothing short of a nightmare full of job losses, pay cuts and underemployment. But for government employees, it’s largely been business as usual.

The Canadian Taxpayers Federation released a report comparing Alberta’s municipal governments’ labour costs with the financial realities facing Albertans working outside of government between 2014 and 2018 and the contrast is staggering.

Alberta’s municipal government labour costs have increased by nearly $873 million, or 17 per cent, outpacing population growth (five per cent) and inflation (seven per cent). But more importantly, while municipal government labour costs increased by hundreds of millions of dollars, total compensation paid to all Alberta employees declined by six per cent.

Instead of relief, many struggling Albertans were forced to fork over more tax dollars to cover the growing government labour bill.

Alberta’s two largest cities both increased their labour costs by more than $200 million between 2014 and 2018. With labour costs making up more than half of Calgary and Edmonton’s budgets, the sheer amount of tax dollars going to pay for city salaries and benefits is significant. But what may be more concerning than the actual dollar figure is the type of perks our tax dollars are paying for.

Both cities have hundreds of employees who are eligible to receive not one, but two pensions when they retire. The vast majority of Alberta workers outside of government don’t receive any workplace pension, never mind two.

While Edmonton clearly has work to do to address its ballooning costs, the city of Calgary’s labour bill has become completely detached from reality.

Calgary spends more than every other major Canadian city combined on multiple pensions for its employees. Calgarians also have the dubious honour of living in the only major Canadian city that provides some of its city employees with three pensions and its mayor with two. Mayor Naheed Nenshi’s second and completely taxpayer-funded pension is in addition to the city’s standard gold-plated council pension plan, which costs Calgarians more than council pensions in Vancouver, Edmonton and Ottawa combined.

Alberta’s smaller cities also have a lot of work to do to rein in their labour costs. Leduc, Spruce Grove and Airdrie all saw their city labour costs increase by more than 30 per cent between 2014 and 2018.

Among Alberta’s mid-sized municipalities (population between 5,000 and 30,000 people), the Municipal District of Taber, Greenview and Blackfalds had the fastest growing labour costs. The small Alberta towns with the fastest growing labour costs were Gadsby, Edberg and Lougheed, which all saw their labour costs more than double between 2014 and 2018.

The recent triple-whammy of the COVID-19 health pandemic, economic shutdown and 2020 oil price collapse further exacerbated the difference between government employees in Alberta and everyone else. While the number of private sector jobs in Alberta dropped by 20 per cent between February and May, government employment declined by eight per cent.

“Government employees have gotten through the economic shutdown largely unscathed,” wrote the Fraser Institute’s Tegan Hill and Niels Veldhuis in May.

Property taxes are especially harmful for the cash-strapped families and business who still owe the large tax bill on their homes and offices. Albertans need meaningful tax relief and that will require municipal governments to cut spending and take some air out of their ballooning labour costs.

This column was originally published in the Calgary Sun on June 27, 2020.