Outcome depends on whether public service accepts budget deficit burden
Ontario Premier Dalton McGuinty’s latest budget emphasizes jobs, growth and a plan for better fiscal management in the face of a $19.7-billion deficit. There is a sense “we are all in this together” because the recent economic downturn has touched each of us.
Ontarians look to their government to see how it will steward this province’s resources towards the common good. We ask: What do we think of this government’s plan to return the province to prosperity? Where are the laurels and the losers in this budget? How are workers and their families made better or worse?
Workers should be encouraged by the increase in the minimum wage to $10.25 per hour on March 31 (now the highest rate in Canada) and the one-percentage-point decrease in the lowest tax bracket to 5.05 per cent on the first $37,106 of income. As part of a poverty reduction strategy, these are considerable measures.
But encouraging job growth is equally important. To that end, the government is committing investments in water and wastewater treatment plants and green energy initiatives, which are expected to result in 50,000 jobs. Commitments to hire more employment standards officers and continued investments in workplace literacy programs will help make workplaces safer, smarter and more accountable.
A bittersweet component of this budget is the new harmonized sales tax (HST), which takes effect July 1. In an effort to alleviate the transition to the new tax, the McGuinty government has set aside $4.2 billion to give back to taxpayers. Beginning in June, families with annual incomes less than $160,000 will receive three payments equaling a total of $1,000. Individuals with annual incomes of less than $80,000 will receive a total of $300. This “shush money” is being offered to ameliorate the collection of about $1.2 billion more in tax revenue from the HST in 2010-11 alone.
More concerns arise when wading through the government’s plan for revenue and expenses in 2010 and beyond. For example, the $19.7-billion deficit will not be off the books for eight years. In the meantime, the third largest item on the budget is interest paid on the debt, which is $9.9 billion this year and growing.
Fuelling the debt problem is the interest sensitivity on this large sum of money. The Ministry of Finance estimates a one-percentage-point increase in interest rates, a very real possibility over the next year, will increase debt servicing by close to $500 million.
The biggest buzz of the 2010 budget was the announcement all broader public service compensation would be frozen for a period of two years starting on March 25. MPPs and non-unionized employees of employers that receive more than $1 million from the Ontario government would see no increases to their compensation.
Although the government intends to honour all collective agreements, it is unclear how McGuinty and his colleagues will convince unions to “do their share” and agree to two years of “net zero” compensation agreements. The only stick that has been proposed is “no funding for incremental compensation increases for any future collective agreements,” according to Ontario budget documents.
Labour in Ontario is obviously concerned about the compensation spigot being turned off. This could set the stage for a showdown between government transfer partners and their unions. How will unions respond when universities, colleges, school boards, hospitals and social service agencies say “no” to wage increases during contract talks? These transfer partners will cite the austerity measures being placed upon them by the provincial government and labour unions will be forced to choose their response.
The issue is being forced right now in unionized workplaces throughout the province. For example, representatives with the Christian Labour Association of Canada report widespread refusal by employers to provide compensation increases because of the budget announcement.
How the labour movement in Ontario responds may be found in the answer to this question: Should the public service be required to carry the budget deficit burden on behalf of all Ontarians? If the answer is yes, we will have labour peace. If the answer is no, we may witness a revolt not seen since the Rae Days of 1993.
Chris Bosch is the director of research and education at the Christian Labour Association of Canada. He can be reached at [email protected].
