There's an elephant in the room whenever politicians talk about Ontario's finances, and it's the cost of the province's enormous bureaucracy. There is no way to address the government's $13.5-billion deficit without addressing the size of government, and it's a relief to see the provincial government is finally starting to talk about it.
In remarks to the Canadian Club on Apr. 4, Treasury Board President Peter Bethlenfalvy announced new public consultations on government employee compensation, on how to manage salary growth in a way that he described as "modest, reasonable and sustainable."
Addressing bureaucratic bloat is imperative for the government to achieve a balanced budget. While most politicians acknowledge that balancing Ontario's budget is important, it's a goal that cannot be achieved without addressing the largest cost driver in the province. It's good to finally see a politician who is admitting it.
Wages, salaries and benefits for government workers are the most significant single expense in the provincial budget. Paying for the salaries of government workers costs taxpayers about $72 billion annually, said Bethlenfalvy, and represents about half of program spending.
The issue of government bloat has to do with two things: the compensation for public-sector workers, and the size of the bureaucracy itself. To solve the province's financial problems, both need to be addressed.
While the cost of the bureaucracy is high, it's actually getting higher.
The Fraser Institute estimates that Ontario government workers earn a wage premium of about 10.5 per cent more than private-sector counterparts doing similar work. In terms of averages, rather than counterparts, the government estimates the average government worker earns 33.6 per cent, or $16,049, more than the average private-sector worker. Given that private-sector workers pay the salaries of government employees, this disparity needs to change.
Government workers also receive other non-salary benefits, such as earlier retirement, higher job security and pensions. In Ontario, 94.7 per cent of government employees have a defined benefit pension compared to just 41.5 per cent of private-sector workers. Bureaucrats don't need to earn higher salaries on top of these other non-wage benefits.
While the cost of the bureaucracy is high, it's actually getting higher. Between 2003 and 2018, average salaries of all Ontario government employees increased by 48.1 per cent. This year, the Sunshine List, which discloses government workers earning over $100,000 per year, grew by 19,131 people, or 14.5 per cent. This is more than twice as fast as the list grew last year.
The provincial bureaucracy is bloated with over 1.3 million people earning a living on taxpayer dollars. Between 1997 and 2017, the number of government jobs has increased by over 43 per cent, about 10 per cent faster than the private sector grew over that period.
Both the Wynne and Ford governments have made some efforts to tackle both the size and cost of the bureaucracy, but until now, these have been drops in the bucket.
One of the first acts of the Ford government was to implement a hiring freeze, and this was quickly followed by a salary freeze for executives. It also announced buy-out packages for non-unionized government bureaucrats who quit voluntarily.
The new government must take stronger action.
But these moves are frankly less aggressive than similar policies by the previous Wynne government. The Ford government has repeatedly said it will not "fire" anyone, and that there will be fewer government workers as a result of attrition and voluntary retirement. The previous government's 2009 and 2011 budgets proposed reductions of 3,400 and 1,500 bureaucrats over three and two years. The 2010 budget froze all salaries, not just executive salaries, and the 2014 and 2015 budgets adopted "net zero" bargaining that required all wage increases to be offset by other spending reductions. These moves by the previous government were not enough to stop bureaucratic bloat, so the new government must take stronger action.
It's good news to see that appears to be what they are doing. Some of the suggestions of new measures Minister Bethlenfalvy announced include voluntary agreement to wage outcomes lower than the current trend, trade-offs that will lead to reductions in compensation costs, and even legislated measures.
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Regular Ontario workers are already paying the salaries of bureaucrats who, on average, earn more than they do. With a massive deficit, the government will soon come knocking on their doors with tax hikes. But taxpayers can't afford to pay more, so the government needs to tackle that elephant in the room and reduce the size and cost of their own bureaucracy.
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