Last Friday, Travis Toews, Alberta’s finance minister released a statement regarding negotiations between the Alberta Union of Provincial Employees and the Alberta public service.
There are a few things he said in his statement that I wanted to provide context for.
The mandate presented to the union reflects the province’s current economic and fiscal reality. The government is asking unionized public service employees to be part of the solution, as we face the worst economic crisis in nearly a century.
While the pandemic is certainly something that the provincial government was unable to control or predict, the province’s current economic and fiscal reality can be only partially blamed on the pandemic.
In a time when the UCP government is facing pressure on revenue sources, it chose to purposefully reduce one of those sources: the corporate income tax. Since July 2019, the UCP have cut the corporate tax rate from 12% to 8%.
Last budget year, Alberta’s corporate income tax revenue was $4.107 billion, compared to the previous year, when it was $4.871 billion, a loss of $764 million. This year, they’re forecasting only $2.146 billion in corporate tax revenue, a further drop of $1.961 billion (p. 7). If that holds true, Alberta will have lost $2.725 billion in corporate tax revenue since the NDP’s last budget.
Keeping corporate income tax at the 12% rate it had been at for 4 years could’ve mitigated some of that loss. Plus, Alberta still has no provincial sales tax, which also could be a sustainable source of revenue for the government, allowing it to better address some of the financial pressure it’s under. Same with higher taxes on the rich (billionaires pay a 15% personal income tax on anything above $315,000, meanwhile minimum wage earners pay 10%).
Alberta’s government has led the way with pay cuts for the Premier, MLAs and most recently for political staff.
These sorts of cuts were simple posturing. They’re not large cuts for these individuals and are nothing more than justifications for cuts to public sector workers.
For example, the 5% cut to MLA indemnity introduced last year brought the base pay from $127,296 to $120,936.
When the UCP introduced a 7% wage cut for their staffers last month, the average UCP staffer on the sunshine list had been making $119,359.05 a year, which means that they’d still be making $111,003.92.
These are positions that can afford wage cuts.
The province has revised its bargaining position, asking the public service to take an additional three per cent reduction in the first year and zeros for the next three years.
This is cleverly worded.
The previous proposal was 1% cut in the first year and wage freezes for the next 3 years. The way this reads, it seems like a 3% cut instead, but notice the “additional”. So the 3% cut is on top of the originally proposed 1% cut. They’re really asking for a 4% wage cut.
Keep in mind that the last time AUPE received a wage increase was in 2016, when wages were increased by 2.5%. Not only have these AUPE workers already had no increase over the last 3 years, the government employer is trying to erase the previous increase.
As well, this 4% wage cut is just a base proposal. Some AUPE workers face even more significant cuts, such as another 2.79% for “Program Services 3” workers and 3.03% for “Program Services 4 classifications” in Local 002, which is the local for union members who work in administrative and program services. That’s a total of 6.79% and 7.03% in cuts for those two groups, respectively.
The union’s ingoing proposal is asking for a five per cent raise
To be clear, that’s 5% over 2 years. Technically, based on the original proposal from February, AUPE is requesting a 2-year term with 2.5% per year. That’d work out to 5.06% over the 2 years (2020 and 2021). Remember, however, that there were no increases in 2017, 2018, or 2019, so if we average out the 5.06% increase over the 5 years, that’s only 1.012% increases per year.
As well, an arbitrator awarded government workers a 1% wage increase earlier this year, indicating that AUPE members deserve at least that, which is 5 percentage points higher than what the UCP are proposing.
while thousands of Albertans working in the private sector have already taken pay cuts.
Here’s the thing though.
Cutting wages for public sector workers means public sector workers will have less money to spend. If they spend less money, then businesses in the private sector either end up with fewer customers or the customers they do have will buy less. And if businesses have fewer customers, they’ll have less revenue, leading to additional pressure to implement more wage cuts.
If you’re concerned about wage cuts in the private sector, cutting wages in the public sector isn’t going to fix that. It may even make it worse.
Public spending is one thing governments can do to improve the provincial economy. Just like spending more on capital projects ends up with a more robust private sector, ensuring that public employees have more money strengthens your private sector. I mean, if the private sector is that important to you.
Alberta now faces a debt burden of almost $100 billion and fiscal responsibility and accountability to taxpayers is more important than ever.
Then increase revenue.
Why must the responsibility to balance the budget always end up on the shoulders of the worker?