Public sector wage gains cool off

Large number of contracts renewing in 2010 will affect coming years
By Danielle Harder
||Last Updated: 07/02/2010

2010 is a big year for collective bargaining in Canada, but there is little prospect for significant wage increases in the public sector, according to several economists.

In the first quarter of this year, wage gains in the unionized public sector averaged 2.2 per cent, which is lower than the past three years (2007, 3.4 per cent; 2008, 3.5 per cent; 2009, 2.5 per cent), according to Human Resources and Skills Development Canada (HRSDC). March saw the lowest dip at 0.2 per cent, which was influenced by two Health Employers Association of British Columbia agreements.

Overall, contracts covering some 750,000 workers expire this year, including 285,000 workers in the healthcare sector and 110,000 provincial government employees.

Karla Thorpe, associate director of compensation and industrial relations research programs at the Conference Board of Canada, says provincial and federal governments are still reeling from large deficits in the aftermath of the recession and are unlikely to offer major increases.

“Unions representing public-sector employees will largely be focused on holding their own during negotiations in 2010 rather than seeking to make widespread gains,” she says.

Adding to the fiscal realities is public and political pressure to freeze wages in the public sector, says Sylvain Schetagne, a senior economist with the Canadian Labour Congress.

“There’s a clear trend out there, a message, that says it’s not good for government to overspend and we should balance the books as quickly as possible,” he says. “The implication of this is that we don’t want our services cut, so where do we cut? The wages of those who work in the public sector.”

Thorpe says there may be two exceptions to the cooling trend: municipal workers and non-residential construction. Several cities, including Montreal, Hamilton, Winnipeg and Edmonton, are negotiating in 2010. Thorpe says unions representing those workers will likely be “more aggressive” at the bargaining table.

“Municipal revenues are only indirectly affected by the recession because of their reliance on property taxes rather than personal or corporate taxes,” she says. “(They) did not incur the same recession-related expenditures as higher-level governments.”

On the construction front, Thorpe says the influx of public-sector infrastructure spending is keeping the non-residential industry strong. However, she notes that most construction labour agreements run through 2011.

The HRSDC quarterly report also indicates contracts are getting shorter. Contract duration in March averaged 28.5 months, compared to 45.5 months in the previous round of settlements. Schetagne says collective agreements over the past 10 years have been longer than over the previous 15 years, when the average was typically about 30 months. He doesn’t anticipate lengthy contracts this time around.

“In an environment that is so volatile now, with the possibility of inflation and (the fact) we’re not sure where we’re going, you don’t make employees absorb wage cuts or freeze them for 10 years,” he says. “You try to sell it to them for a short period of time, with a potential recovery afterwards.”

Private-sector wage increases have cooled only slightly, down from 2.1 per cent in January to 1.9 per cent in March. Meanwhile, public-sector wages continue to outstrip those in the private sector as they have for the past five years, especially as the recession battered private firms. The gap has ranged from 0.3 per cent in 2006 to 0.7 per cent in 2009, but is expected to narrow to 0.3 per cent again in 2010, according to Thorpe.

Schetagne says the wage gap is not a function of private versus public; it’s explained by other factors such as education level, public policy and the age and experience level of people working in the public sector.

“Are they components related to public versus private sector — or more related to human capital and what kind of individuals you’ll find in the public sector?”

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