Our two-tier society

A National Post editorial highlights the new “two nations“:

Canada’s new haves and have-nots
Envy flourishes in hard times, and there is already considerable evidence that a healthy crop of the green stuff is developing as world economies plumb ever-lower depths. U. S. Senator John Kerry this week vowed to introduce legislation to punish bankers who entertain clients in a manner he considers too lavish, even if the bank is healthy and profitable. Vandals in Germany have taken to torching luxury vehicles, just because they represent wealth.
In Canada, there is every prospect for similar resentment to arise, as it becomes evident that the recession is dividing the country into a new class of haves and have-nots. But this isn’t traditional class warfare: The have-nots are workers in the private sector who have no protection against pay cuts, lost jobs and disappearing pensions. The haves are those who work in the public sector, and are insulated by government from any danger.
The startling results revealed by Quebec’s Caisse de depot et Public-placement du Quebec this week — a $40-billion loss for 2008, the worst-ever performance for any public-sector pension plan in Canada — illustrates the situation nicely. Since public sector pensions typically are guaranteed by the government, taxpayers are likely to be on the hook for much of the cost of fixing the damage.
Canadians in the private sector, on the other hand, have seen their pensions erode steadily, often to the point of disappearing. Many are underfunded. Most have lost heavily in the market downturn. Few companies any longer guarantee a fixed benefit, having pushed employees off on to “fixed contribution” schemes that depend on the success of investments.
Public employees need not worry about any of this. Their jobs are safe, their salaries are protected, their pensions are guaranteed.
There was a time when public employment came with a trade-off: In return for security, salaries were lower than in the private sector. That’s no longer the case. A report by the Canadian Federation of Independent Business, released in December, found that public-sector workers make from 8% to 17% more than workers in similar jobs in the private sector. With benefits and shorter work weeks, the gap grows to 30%.
There have been few signs that governments at any level intend to expose their employees to the same uncertainties confronting the rest of the country. While there has been talk of hiring freezes, reduced pay increases and the re-examination of bonus programs, the worst that most public employees face is the continuation of the status quo. An expected salary hike may be reduced somewhat, or put off for a year or two. Empty positions may not be filled immediately. Travel and other perks may be few and far between. Other than that, life goes on, cushy as it ever was.
Public servants aren’t to be criticized for having taken advantage of the protection offered by government, or for successfully negotiating such excellent terms. All Canadians had the same opportunity.
But Canadians can be expected to ask whether, in the current environment, employment by the government should continue to carry protections so much greater than those available to other workers.
Is it really the responsibility of those Canadian taxpayers who face the risks of the private sector to ensure the ironclad safety of those who don’t? A family scraping to cover the mortgage can be forgiven for wondering why it should be responsible for making up the pension losses of government-protected employees.
The challenges facing the country have already forced broad changes in the hopes and expectations of millions of Canadians. Life will not go on as most of us had planned. As accommodations are made, it’s a good time to question whether public employment should continue to guarantee the sort of perks that most of us won’t see for the rest of our working lives.

Mark C.

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17 thoughts on “Our two-tier society

  1. “In Canada, there is every prospect for similar resentment to arise, as it becomes evident that the…”
    National Post is willing to just make shit up to appease the sensibilities of its anti-union readership.
    Teachers get 4 months off in the summer! The bastards!

  2. Sometimes I wonder if the National Post really isn’t just kind of like the Onion, only way too subtle.
    I mean, what is the point of this article? The financial system collapses due to the entire economy being based on investing in overpriced housing, so public sector people have to lose their jobs? And they say public sector people don’t need unions…
    I mean, it really sounds like satire.

  3. What the Post is saying is why should the taxpayer bail out the overpaid public sector, as simple as that ,

  4. Perhaps we should be glad that there are still some “good jobs” out there. Public sector workers are just like everyone else. They were looking for a job one day and found one. Now they’re to be resented? They’re us too.

  5. The point that seems to be lost on posters here is that private sector workers are exposed to market forces, in that they benefit if their services are needed and they suffer if they are not.
    But in the public sector hiring, bonuses, raises and pensions accumulate whether they are needed or not, and eventually this becomes a burden on society in the form of higher taxes and wasted spending.
    Of course it’s much more than a fairness issue as well. Government workers belong to the unproductive economy in that they are largely a cost, whereas private sector workers are productive in that they create wealth. It doesn’t take a genius to recognize that the former must be restrained, particularly in times of scarcity.

  6. My wife is a teacher, and both of us believe public sector union employees are overpaid.
    Not only are they over paid for the work they do, they have overly generous pensions.
    There is a pension bomb ready to detonate across North America. In the coming decade, there will be enormous pressure on public sector plans like Teacher’s, OMERS etc when Boomers start to retire and draw down their DEFINED benefit pensions.
    THIS is the issue Canadians will be grappling with: Teachers have been promised, through collective bargaining, that they will receive a pension equal to 80% of their best 2 years (average) salary. However, because of the market carnage there is now a shortfall in the pension plan, who will pay to make up the shortfall?
    In the private world, if your RRSP or defined CONTRIBUTION plan is short, guess what, you take less, or you work longer, or get a PT job to top up your income.
    But in the public employee world, taxpayers will make up the shortfall.
    Why is it that public sector employees get rich salaries and pensions that are far richer than what is available in the private sector?
    Because the unions, and the government that negotiates with them, are using Other People’s Money. They don’t care for it the way we would if it was coming out of our pocket voluntarily.
    A revolution is coming, and it will be built on the legacy of profligate and irresponsible spending at all levels of government, by all political parties.

  7. I have been arguing for some time now that there will be a day of reckoning for the public sector on CDA much like the ATC firings in the reagan era and the breaking of the coal strike by Maggie thatcher.
    I think it will happen a couple of years after the CAW parasite kills its last major hosts – GM Ford and Chrysler. Once there is almost nil high-flying private sector union membership in CDA the public iron rice bowl will be attacked and removed by the politicians with little or no backlash from the voting public.

  8. Interesting, I work for the government and what we have to deal with is that our workforce will be reduced by 30%. It’s happening now and has nothing to do with economics, it’s all demographics. There really aren’t very many qualified persons for the jobs that are advertised. This was recognised and job advertisements went from internal to external to international in the hopes of reaching a larger market. No takers and the best we can come up with is a huge reduction in the workforce. That’s not necessarily a bad thing but the last hiring panel I was on, the only externals (ie non-governmental employees) who bid on a job turned it down because it didn’t pay enough. So my experience is that people who meet the qualifications for a government job don’t take them because they are qualified for a higher paying job elsewhere. Your mileage may vary.

  9. “Teachers get 4 months off in the summer!”
    It’s two months (unless you belong to a university or college faculty).
    JasperPants:
    My wife is a retired principal. It’s ironic that when she retired, Teachers was so flush with cash they were offering early retirement incentives.
    Gord:
    Unlike the two examples you provided, from what I see, non-union public servants are content to keep a low profile

  10. A point that might be missed here. The public sector is paid by the private sector. That’s what taxes do. A situation in which the public sector is paid more than the private sector can’t last long. It’s like a company that pays more in salaries than it makes in earnings.

  11. The math doesn’t really point to civil servants as the worst offender.
    Why not the failing car companies getting bailed out?
    Or maybe the “profitable” Canadian financial institutions who have found a new revenue stream by not passing on the interest rates reductions handed to them by the Bank of Canada?
    Any shortcomings in pension plans are surely supposed to come due after we’ve recovered from this recession (correct me if I’m wrong by all means) and their wages have yet to establish a noticeable gap.
    As far as pension plans in general, they are a benefit that companies offered on their own reputation to entice employees. Just look at the varying deals that are offered, some of them are so massively unsustainable that it’s obvious that part of the plan is not being called on it due to turnover.
    When an employee accepts that benefit, they’ve played their chips. Public servants played their chips on a winner, people who have lost their pensions played their chips on a loser.
    There are plenty of people out there who are still holding a privately issued winning ticket, should they be forced to kick back into the pot too? If not, what is different about their employment agreement other than the signature on the checks?
    So what it comes down to is that the “conservative” position on union employees is that their respective employers(e.g. GM or Canada), should be able to renege on legal agreements which are later considered to be “unfair”.
    It’s like a mobius strip built entirely out of stupid.
    If you switch the employee with the employer in that statement, it’s exactly what Mike Harris conservatives like myself were pissed off at the Ontario unions for. In it’s original form, it validates nearly everything that unions claim to have to protect their members against.

  12. Dara, I read your post twice and I can’t really understand your point.
    For what its worth, the auto companies should be allowed to go bankrupt and emerge from protection as leaner meaner auto companies. Or, if they cannot restructure into competitive entities, wound up and sold off.
    Paiunful, yes. Greater harm will be throw billions at them now, only to see the same thing happen a few years (months?) down the road.
    As for the pension question, I don’t get where you are coming from….

  13. Jasperr,
    My point is that the National Post is manufacturing this issue simply because they relish going after unions.
    There is no justification to go after public employees on this issue. Any potential “bail out” won’t happen until years down the road in a better economy and it’s not really a bail out as much as sticking to the agreed contract.

  14. The interesting thing about the above conversation is that it presumes there are choices here. Unless the public service pension funds were very clever indeed and shorted the market and are shorting US bonds, there is every chance that there will simply not be the money to pay the pensions.
    A government guarantee is lovely; but it depends on the government being able to back that guarantee. If the economy contracts significantly the dollars will not be there.
    So, does the government borrow – sure it does. For a year or two. But past that it negotiates a reduction. Because if it does not it will run out of borrowing room, it will have to cut other programs which the voters like.
    No government can afford to pay pensions negotiated in times of plenty when things go pear shaped. With luck Canada will weather the storm and have a fully functioning, prosperous – albeit car manufacturing free – economy on a one or two year scale; but if the rosy picture does not happen, public service workers and pensioners are going to have to take the hit along with the rest of us.

  15. “Government workers belong to the unproductive economy in that they are largely a cost, whereas private sector workers are productive in that they create wealth. It doesn’t take a genius to recognize that the former must be restrained, particularly in times of scarcity.”
    This was a joke, right?
    Okay superstar, the next time the police force asks for more money, you get to give them the bad news. In fact, go tell the soldiers in Afghanistan that they have to ration their bullets. After all, the army doesn’t create wealth for us. It’s an expense that needs to be reigned in during times of scarcity. Besides, if those guys were so smart, they’d be working on Wall St., not clearing IEDs in Central Asia.
    And as for the private sector creates wealth crap, here’s an amusing statistic for you: actual growth in the US economy during the Bush years was 1%, when you factor out all the asset backed paper crap. In other words, $65 trillion, or whatever, of the worlds economy that has shrunk were Credit Default Swaps whose existence was based on the assumption that housing prices would rise forever.
    But yeah, it’s all about those lazy unions.

  16. “What the Post is saying is why should the taxpayer bail out the overpaid public sector, as simple as that ”
    Well said! What we should be doing, is bailing out the overpaid private sector.

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