Alberta MLAs vote to cut their salaries by five per cent this week – a move pushed by the Progressive Conservatives – is pure politics that will result in no tangible savings. We can only surmise the decision, which will result in a mere $600,000 in annual savings, is designed to give the provincial government a symbolic moral high ground that will allow it to bring in sweeping cuts to public sector wages.
The NDP opposition has said as much, criticizing the government for trying to insulate itself from public backlash with a token gesture which creates the illusion of the government leading by example. Had Premier Jim Prentice truly wanted to make a statement, he might have sided with Wildrose MLA Rick Strankman who made a motion to cut MLAs salaries by 30 per cent, erasing an increase the government voted itself in 2008.
Politicking aside, the NDP’s warning that cuts to public sector wages are imminent will definitely rankle the unions, but we might have to consider the province has become a victim of its own success. In that vein, savings must be found and the province has a responsibility to balance the books while making an effort not to seriously erode services that are already under pressure.
Between 2000 and 2010, while Alberta was soaked in oil revenues, public sector wages skyrocketed, jumping by 119 per cent – to $14.9 billion from $6.8 billion – according to a 2012 report issued by the University of Calgary’s School of Public Policy. The national average increase for the same wages was only 63 per cent.
The report argues the substantial jump in wages cannot be justified as a correction following deep cuts made in the 1990s when Ralph Klein made sweeping slashes in spending in the wake of ballooning provincial debt. Between 1990 and 2000, public wages increased by 22.8 per cent, slightly lower than the national average of 26.4 per cent.
While Statistics Canada reports Alberta has shown dramatically more growth in population between 2006 and 2011 compared to the rest of the country – 10.8 per cent compared to a national average of 5.9 per cent – Alberta’s spending per employee has also outpaced the rest of the nation. In 2000, Alberta spent slightly less than the national average per employee in nearly every category. However, by 2011, Alberta’s per employee spending was higher than the national average in all categories and in most cases considerably so. In fact, general government employees salaries more than doubled in that time period to an average $83,000 per annum. The average increase in Canada was a little more than $22,000 to nearly $62,000.
In fairness, the provincial government has had to compete with extremely high private sector wages resulting from the success of Alberta’s oil and gas industry. Ironically, those increases in public sector salaries – according to the University of Calgary’s School of Public Policy – have consumed 95 per cent of the increase in provincial revenues, which are largely attributed to our volatile oil revenues.
Now that those revenues have plummeted to nearly half of what they were even a year ago, the province faces a deficit of $7 billion. Cutting public sector wages might not be the answer, however. Part of the so-called Alberta Advantage and what draws people to our province is the higher standard of living many people enjoy here. Cutting wages might only serve to drive people away and may deter people from moving here, both resulting in fewer tax dollars. That being said, the province might have to consider a wage freeze. While that decision will not be a popular one as we all expect a little more on our cheque each year to make up for inflation, the evidence points strongly that provincial employees have more than outpaced inflation over the past decade.
Unfortunately, the province has failed to properly manage its enormous gain in oil wealth over the years. Now that our sheikdom has stalled, we will all pay the consequences until oil prices rebound or the province finds a way to diversify its economy – as many have been suggesting for years.
