Tough times for public institutions: The public-private gap suggests labour trouble ahead

By Jeffrey Simpson

EXCERPT FROM: Globe and Mail Tuesday, Dec. 15, 2009


Suppose you run a business, or are organizing your household budget. You discover two disconcerting trends. First, 70 per cent to 80 per cent of your spending is locked in but still rises at, say, 3 per cent a year. Second, your income has gone in the tank. Next year, revenue might recover somewhat but certainly won’t increase by 3 per cent.What to do? Since you can’t touch the 70 per cent to 80 per cent, you could cut from the remaining 20 per cent to 30 per cent. You could stop doing things altogether. You could try to increase your revenue. Or you could go to your (un)friendly bank and borrow.

This crude depiction illustrates the dilemma facing hospitals, universities, schools, libraries and all other public institutions today and in the coming period of restraint. This dilemma is stark. Wages, salaries and benefits account for 70 per cent to 80 per cent of their budgets. Their employees are unionized. Unlike the private sector, where unionized employees have lost jobs or taken real income reductions, public-sector unions (nurses, teachers, municipal employees and transit workers, to name a few) have locked in long-term deals at 2 per cent, 3 per cent or 4 per cent. In the case of Ontario university faculty, adding in promotions means a wage bill increase of 5 per cent to 6 per cent. Teachers are getting 3 per cent a year for three years.

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