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Slash public sector salaries to balance the books

Author: Renaud Brossard 2021/01/31

While New Brunswick’s relative restraint with regards to COVID-19 spending must be lauded, the province is still paying the price for the decades it spent living above and beyond its means.

This has left New Brunswickers with $18,000 per person in provincial government debt. That drastically reduces the government’s ability to help the recovery by supporting New Brunswickers and their economy.

One such consequence of the years the provincial government spent living beyond its means is the existing salary gap between government employees and their private sector counterparts.

Even before the pandemic, government employees had salaries that were on average 11.9 per cent higher than their private sector counterparts, when adjusting for education.

On top of that 11.9 per cent wage premium, you need to add employer’s pension contributions, benefits such as health or dental insurance, as well as other non-monetary premiums such as increased job security.

These all bear important costs to the taxpayer and are much more generous than what the private sector offers. Take pensions for instance. Close to 92 per cent of all government employees working in New Brunswick are covered by some from of employer provided pension plan. In the private sector, this drops to about 23 per cent.

As for non-monetary benefits, we saw all too well that legendary job security in action at the height of the pandemic. While nearly 50,000 New Brunswickers lost their jobs and countless others had to take pay cuts, no provincial government employees lost a single penny despite the province’s worsening budget situation.

In short, if you work for the provincial government, you get a much better deal than the private sector taxpayers you serve.

This is the elephant in the room that needs to be addressed. It is not just because of the size of the premium provincial government employees enjoy over their private sector counterparts, but also because of how much money it costs them.

Out of the $9.8 billion the government of New Brunswick expects to spend this year, $4.2 billion will go towards paying its staff. That’s 43 cents out of every dollar the government spends. It is, by far, the biggest source of expenditure every year.

As the government heads deeper and deeper into debt, and as it looks for ways to finance its many initiatives to support the local economy, it is clear that to keep paying such a large premium is simply untenable.

Reducing the province’s annual spend in employee compensation by 15 per cent would not only help bring bureaucrats’ reality closer to that of their private sector counterparts; it would free up over $600 million in taxpayers’ funds.

The government could reinvest that money in the local economy through tax cuts. It could use it to help balance the budget and stop pilling on more debt. It could even use it to provide better services to New Brunswickers.

It’s clear is that this sort of premium is unaffordable. At a time where government finances are not just tight, but rather $183 million in the red, it absolutely has to go.

 

Renaud Brossard is the Interim Atlantic Director for the Canadian Taxpayers Federation


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