Winnipeg Free Press - PRINT EDITION

Labour peace too expensive

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The NDP's 13 years of government have been very good for Manitoba's publicly paid workers, and a cosy relationship with unions has, in turn, been pivotal to keeping the party in power since 1999. The result, though, has been expensive for taxpayers who bear the cost of peace on the labour front, something brought into clear relief when the province made sweetheart deals to secure agreement on a two-year wage freeze in 2010 to help contain deficits.

Civil servants, nurses and doctors agreed to the "pause" in wage increases for 2011 and 2012, but their four-year deals mean they are seeing envious hikes now. Some received lump-sum payments, and long-term employees were recognized with additional pay increases. Health-care workers won cost-of-living raises to pension benefits. Doctors, further, received a promise their compensation would be tied to fees earned by counterparts in richer provinces, mimicking a deal with nurses a few years earlier.

For a long time, the richer benefits civil servants enjoyed was in exchange for what had been lower salaries, but that is no longer true as publicly paid wages generally exceed counterparts' wages in the private sector.

Other jurisdictions are starting to recognize a need to bring better balance to the imparity. The Selinger government, to date, has not. The wage pause saved the province money in salary costs for the two years straddling the last election, but it also agreed to dramatically hike its costs for enriched benefits. This was effectively done with borrowed money, as the deficits rolled in and piled onto provincial debt.

A good illustration of this can be seen in the cost of public-sector pensions. Public pensions are richer to start: They allow workers to retire at 55 years old without penalty, paying out a greater percentage of annual salary. Few private-sector pensions buffer retirees against inflation, but public-sector pensions do and, in 2010, the NDP granted the protection -- known as COLA -- to tens of thousands health-care workers.

Providing inflation protection to the Health Care Employees Pension Plan, with more than 67,000 members, means the government will directly inject $18 million into the COLA fund in 2015 alone.

But government's cost, generally, of public pension funding is ramping up steeply. Baby boomers are moving into retirement in greater numbers and retirees are living longer. The money now going into the pension funds can't keep up with benefits they are paying out -- the ratio of workers paying in, compared to the number of retirees drawing benefit, is falling. There are 1.9 civil servants paying into the Civil Service Superannuation Fund for every retiree drawing pension. The ratio is even starker for teachers, at 1.2 teachers working for each retiree.

The funds needed a heavy injection of cash, and the NDP delivered, agreeing to match increased contributions to both the civil-servant and teacher-pension funds. The hikes will cost taxpayers $85 million, in total, by 2015.

This year, the Ontario government, looking at the same demographic trends, negotiated with its teachers to dump the COLA. Last year it froze its contributions to other public-sector pensions for five years.

In contrast, the NDP lards up the debt, which also sucks money out of the treasury each year in debt-financing costs.

The NDP settled a four-year contract earlier this year with MPI workers that again included a two-year wage "pause," with numerous enticements. Experience shows, though, this is no real savings, but more a charade, because this government's conflicted loyalty sacrifices the taxpayers' longer-term interest.

It is time the NDP government is held to good account for its pacts with unions. Tory Leader Brian Pallister can do that by contrasting the projected expense of public-sector benefits with typical private-sector wages and benefits and remind Manitobans they are financing a growing gap between them.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition April 15, 2013 A8

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