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Attacks on public sector and public employees inflict just as much damage on the private sector

April 3, 2017

7-minute read

The labourer is worthy of his hire.


In the early 1960s, while I was working for the Canadian Labour Congress in Corner Brook, the paper mill unions won a 5% pay raise for the mill’s workers – much to the dismay of the town’s business leaders. When I next shopped at our small neighbourhood grocery store, the manager complained to me about “overpaid” workers.

“Now I’m being pressured to raise the pay of my own staff,” he grumbled. “There should be some limit put on the pay increases the unions can negotiate.”

I looked around the store. There were a dozen other shoppers in the aisles, most of them members of mill workers’ families.

The Nonagenarian's Notebook

“Take a closer look at your customers,” I said. “The money they’re spending in your store comes from the wages they earn at the mill. This was the first raise they’ve had in three years. Did it never occur to you that, the lower their pay, the less they’d have to spend at your store?”

His eyes widened and his jaw dropped. Obviously he had never made the connection between the mill workers’ wage increases and the extent of his own profits from their purchases.

That was more than a half-century ago, but the same purblindness still afflicts business owners and managers across Canada. They are especially enraged that the wages and salaries of public employees are substantially higher than the pay of most private sector workers.

Organizations such as the Fraser Institute, the Canadian Taxpayers’ Association (CTA), the Canadian Federation of Independent Business (CFIB), and the National Citizens Coalition (NCC) incessantly rant against this disparity, charging that public employees don’t deserve higher compensation and should have it cut back to match the private sector’s lower rates.

A 2016 report by the Fraser Institute calculated that the millions of public employees in Canada, on average, were being paid 10.6% more than their private sector counterparts. Public sector employees also receive “more generous non-wage benefits than the private sector, including higher rates of pension coverage, higher rates of defined benefit pensions, earlier ages of retirement, lower rates of job loss, and more days lost.”

Of course the main reason for these pay and benefit differentials is because most public employees are unionized, while most private employees are not. The higher salaries (and benefits) in the public sector are negotiated by the public sector unions. Workers in private industrial and retail service jobs, lacking unions to represent them, have to take the lower wages their employers decide unilaterally (and reluctantly) to offer.

Public sector unions have also narrowed the pay gap for women, aboriginals, and visible minorities. A 2014 study by the CCPA found that women, aboriginal workers, and visible minority workers experience less wage discrimination in the public sector than in the private sector. The difference in public and private sector wages is due to higher levels of discrimination in the private sector and a more equitable system of pay in the public sector.

So the reality is not that public employees are overpaid, but that private sector employees are underpaid. A much better case can be made for raising inadequate private sector pay rates than for lowering them in the public sector.

Anti-government governments

It’s not just business organizations that are campaigning against what they misperceive to be “too large, too wasteful, and too tax-imposing” government. Governments run by neoliberal conservative parties — such as the previous Harper regime — have also been committed to smaller government, lower taxes, anti-unionism, fewer public employees, deregulation, privatization, and leaner public services.

A CCPA study released during the Harper reign, Scapegoating Canada’s Public Sector, found that “public services and the legislation that governs them have been seriously weakened by the Harper government, compromising our ability to help the unemployed, provide services to indigenous communities and veterans, curb climate change, and protect the environment. The ranks of the public service have been decimated, while revenue has been slashed by tax cuts that primarily benefit the wealthy.”

The study also pointed out that the public services for which Harper cut funding have been worth about $41,000 a year for the average Canadian household, or 63% of the median family income. As the study’s author, Howie West, noted, “Public services reduce inequality, provide stability, and promote social and environmental security. They are demonstrably more efficient, less expensive, of higher quality, and more accountable than privatized services. They constitute the best deal we’re ever going to get.”

If privatization and unregulated market forces were superior to public services, as neoliberals contend, says West, “Why was it the public sector that was called upon to deal with and manage every major crisis of the last 100 years, from the Great Depression to Second World War mobilization to post-war reconstruction to the ‘stimulus’ measures implemented to cushion the effects of the 2008 financial meltdown?”

The “small government” madness

It’s not just the public sector’s more generous pay and benefit packages that infuriate big business leaders, investors, and lobbyists. They are also determined to reduce the size and spending of the federal and provincial governments. “The smaller the government, the better,” they claim. And over the last few decades they have succeeded in slashing governments’ ability to improve or even maintain the levels of essential public services.

Privatization and deregulation have been rampant. Health care, education, the environment, public housing, gender equality, child care, tax fairness, trade, and even democracy have all been dealt punishing blows by the oligarchs of corporate and political neoliberalism. Their war on “big government” has been relentless. They seem oblivious to the fact that the more they shrink and cripple the public sector, the more they damage the private sector. Why? Because the two sectors are intertwined and interdependent.

The private sector, for example, would collapse if not for the billions of dollars it derives from the public sector. The federal government alone spends about $16 billion a year on the purchase of private goods and services — everything from paper clips to aircraft, from computers to scientific research. Add the amounts spent in the private sector by provincial and municipal governments, and such vast expenditures are probably more than doubled.

And then there are the purchases of private sector goods and services by the 3.6 million public employees in Canada. I haven’t been able to get an estimate of this huge sum, but it must run well into the billions annually. And for every public sector worker who is laid off because of anti-government business pressure, down incrementally goes private business patronage and profits. But the corporate moguls remain as unaware and unconcerned about this crucial correlation today as was the grocery store manager in Corner Brook 55 years ago.

The unbreakable public-private link

The public and private sectors have become so interdependent that one cannot be attacked or diminished without hurting the other. Public expenditures often stimulate private sector activities. Many industries could not get started or keep going without government services and infrastructure. And of course governments need a robust economy to boost employment and generate the revenue they need to provide social services.

Public funds spent on making workers healthier and better educated provide the private sector with a more efficient work force. Public funds spent on roads, airports, and other utilities are essential to the operation of private industry.

So intertwined are the functions of the two sectors that it is often impossible to differentiate clearly between them. Most production is the outcome of both public and private activities combined. Consider the following example.

A private company extracts public gas, sends it through a public pipeline to another private company with a public franchise, which sends it by a public railway to a private brickworks, where it is combined with public electricity and private clay to make bricks, which go by private trucks on public roads to a private contractor who is building public housing on public lands, to be sold to a private citizen with a first mortgage from a public housing agency and a second mortgage from a private bank.

I defy any neoliberal ideologue to sort out the public from the private sector in this not-so-farfetched example, and then explain how shrinking the public sector will enhance the private sector.

Would the result be less public gas going through a smaller public pipeline or a larger private one, to somehow make more private bricks which private contractors would put into less public housing to sell to more private citizens with fewer public mortgage loans?

That’s the absurdity of the neoliberal assault on the public sector. Somehow more private industrial development is supposed to flow from less public education and research. More private X-ray machines, MRIs, and other hardware is supposed to be made for fewer public hospitals. More private cars and trucks are supposed to be driven on fewer public highways. A smaller public police force is supposed to guard larger private fortunes.

What is more likely to happen — and what in fact has happened in recent years — is that restraints on growth in the public sector cause overall national production to be slowed down, rather than causing a shift in growth from the public to the private sector.

You would think that, by this time, our political leaders would realize just how illogical, inequitable, and impracticable this anti-government dogma really is. Instead, they submissively continue to aid and abet the corporate kingpins in their deranged attacks on the public sector and public employees.

And that’s the main reason why our economy still hasn’t recovered from the catastrophic neoliberal financial crisis of 2008.

Ed Finn was Senior Editor at the CCPA and editor of the CCPA Monitor from 1994-2014. Formerly, as a journalist, he worked at The Montreal Gazette and for 14 years wrote a column on labour relations for The Toronto Star. He also served for three decades as a communications officer for several labour organizations, including the Canadian Labour Congress and the Canadian Union of Public Employees. And yes, Ed is a true nonagenarian, having celebrated his 90th birthday last June. Stay tuned for more passages from The Nonagenarian’s Notebook.





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