B.C. can afford to up public sector wages by five per cent: CCPA

By Shannon Waters June 28, 2022

The BC General Employees Union (BCGEU) and the Public Service Agency (PSA) returned to the bargaining table yesterday after contract negotiations reached an impasse in April.

The PSA is offering a three-year contract with a 1.75 per cent wage increase plus 25 cents per hour in the first year and two per cent increases in each of the next two years — less than half what the union is asking for.

The BCGEU’s recent vote saw nearly 95 per cent of voters support strike action in an effort to secure “a fair collective agreement.” That means a two-year contract with a cost of living adjustment (COLA) or five per cent wage increase in each year — whichever is greater — per the union, plus a flat rate increase in the second year.

“The bottom line is any wage offer that doesn’t include COLA is a wage cut and no worker should be expected to take a wage cut — especially not the public service workers who kept our families safe and our province operating throughout all the uncertainty of the last few years,” said union president Stephanie Smith following the release of the strike vote results.

The province should cough up the cash to give public sector workers “a fair deal,” according to Alex Hemingway, senior economist with the Canadian Centre for Policy Alternatives.

“If you look at what’s driving the inflation right now, wages are not it,” Alex Hemingway, senior economist with the Canadian Centre for Policy Alternatives, told BC Today.

“I think everyone can see around us right now that various public services are overstretched. And we really need to invest in those services and invest in those workers to create better working conditions,” said Hemingway in an interview with BC Today. “It could be really, really damaging to the province if we go down the road of shortchanging those workers in the name of misplaced budgetary constraints.”

Providing a five per cent wage increase to the entire public service over the next three years is well within the province’s means, Hemingway argues, even with the hefty price tag. The Ministry of Finance estimates raising public sector wages by one per cent would cost $310 million per year — a ballpark that is likely on the high side, Hemingway notes.

That would put the total cost of a five per cent increase at $9.6 billion for all three years — considerably lower than the $16.2 billion in contingency funding and forecast allowances built into B.C.’s books over the next three fiscal years.

The province is prone to “fiscal padding,” as Hemingway calls it — allocating large sums into what are essentially rainy day funds while underestimating revenues and keeping growth projections conservative. It’s a practice Hemingway says contributes to “a systematic bias against public spending.”

“As a share of GDP, public spending has declined substantially over the past two decades,” he said. “It’s actually projected in Budget 2022 to keep declining over the next couple of years — and that’s assuming that all of those contingency funds are spent in full.”

There’s also room for the province to raise more revenue in the form of taxes with a focus “on the rich, on wealthy landowners and on corporations,” Hemingway argues.

That’s a point on which at least one credit rating agency agrees. “British Columbia’s level of taxation is at the lower end of the Canadian provinces, providing flexibility to raise taxes… while still remaining competitive with other jurisdictions,” Moody’s noted in its most recent assessment of B.C.’s finances.

Public investment to combat inflation

That characterization is not likely to play well with many of B.C.’s business interests. The Surrey and Greater Vancouver boards of trade recently told the budget committee many businesses are “buried in provincial debt, rising inflation and an even higher cost of living” in the wake of the pandemic and called for a “comprehensive tax review.”

But the idea “that it would be unduly harmful to businesses to raise additional revenues” through increased taxes doesn’t hold water, according to Hemingway, who contends anemic public investments are a bigger problem for the province.

“Some of the biggest drags on our economy today stem from a lack of public investment in crucial areas over the past number of decades,” he said, citing housing, universal child care and public transit as examples of policies where governments are now playing catch up to address demand and economic realities. “[Those] make our economy function, make our cities more affordable and address the climate crisis — the longer we delay action, the higher the costs are going to be.”

Raising public sector wages is not an inflation issue either, per Hemingway.

“If you look at what’s driving the inflation right now, wages are not it,” he told BC Today. “The whole problem with inflation is that it is eroding the standard of living of workers, and suppressing wages is just another way of doing the same thing.”

Targeted tax hikes “could be one way to contribute to pulling demand out of the economy in a way that’s actually constructive instead of destructive, from the worker point of view.”

Another avenue for the province to “strike at the heart” of the cost of living would be “much more aggressively addressing the cost of housing [and] following through on the promises that have been made in relation to child care affordability,” Hemingway said.

While those investment strategies “may not bring down inflation tomorrow or next month,” they “are the primary areas where the province can make a difference.”

B.C. has yet to announce any efforts to directly combat inflation — although Premier John Horgan has promised action on that front soon.

Horgan’s government has room to improve when it comes to backing workers, Hemingway argues, pointing to the NDP’s decision to go with five days of paid sick leave — rather than the upper limit of 10 days, which most workers indicated aligned with their needs — and pegging the minimum wage increase to average inflation in 2021 rather than updating it to reflect the dramatic increase seen this year.

“Parties of whatever stripe in B.C., when push comes to shove, seem to defer to the business lobby when it’s on an issue that that lobby sees as important to its core interests,” he said. “That reflects the balance of power in our society, the balance of lobbying forces from business and the relative need for more working class organizing from below to shift that balance of power.”