Premier Wynne has removed the "net zero" requirement from government employee contract bargaining, effectively re-opening the floodgates of wage increases for bureaucrats and other unionized government employees.
"Net zero" bargaining was the government's attempt at fiscal responsibility. With over $300 billion in provincial debt and nine straight deficits, Premier Wynne has been under pressure to show a modicum of restraint. The net zero mandate required that any wage increases negotiated in government employee deals must be offset by savings elsewhere.
Of course, in many cases those wage increases did not end up being "net zero" in practice. For example, the Ontario government gave teachers a 2.5 per cent pay bump in the most recent round of negotiations, and then excluded millions from the "net zero" framework, including the secret payouts to teachers unions.
Treasury Board President Liz Sandals stated that she "didn't say we are going to make it rain" for government employees. But the truth is it could be more like a firehose than a rain shower.
Lately, the Ontario government had been less generous than usual during negotiations. Premier McGuinty used to boast of hiking teachers' salaries by 25 per cent between 2003 and 2012. In comparison, the teachers' most recent 2.5 per cent wage hike over two years pales in comparison. But when the rest of the province is facing wage growth below inflation, showing restraint in union negotiations makes sense.
To now officially abandon the net zero framework (despite the government's history of working around it) is a mistake.
The government is making possible the kind of largesse that got the province into this current economic mess. The Fraser Institute found that total compensation of government employees - which includes wages and benefits - has grown 47 per cent since 2005-06. The net-zero concept was a part of the 2012 Drummond Report, and is good for fiscal accountability even in times of growth.
But in that same report, Drummond warned of large "catch up" wage hikes that follow periods of restraint. The time for catching up could be timed conveniently by the governing party to coincide with an election.
Removing the net zero mandate before the government has even achieved their balanced budget target is reckless, and will guarantee the Financial Accountability Officer's prediction that the government will return to deficits immediately following the election.
While government employee wage growth may not have been sufficient to satisfy the unions, it is worth keeping in mind that government employees are already earning about 11.5 per cent more than their non-government counterparts. With inflation outpacing wage growth, many Ontarians are seeing wage loss in real terms.
For the government to re-open the trough when many in the province who pay for those salaries are still suffering is not only reckless, but insensitive. Ontarians are being forced to buy off the Premier's political allies while their hydro rates soar, wages slump, and we brace ourselves for new taxes like the cap and trade regime coming into effect January 1st.
While "net zero" may have been a thin and porous dam blocking that government employee wage firehose, it was the only thing we had.
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