29 December 2011

The reality of her world #nlpoli

Some people are trying to make a controversy out of Premier Kathy Dunderdale’s recent comments that public sector unions should “expect a more modest increase” than the salary rises they’ve been used to from the Conservatives since 2003.

Look at “the reality of the world”, Dunderdale admonishes everyone.

Well, a look at the world she lives in  - as opposed to the one people imagine exists - reveals a great deal.

Revelation One:  As labradore has noted repeatedly, the provincial Conservatives are responsible for expanding the public service both in absolute numbers and as a share of the provincial labour force.

In his most recent version, labradore notes both the size of the public sector: 25% of the provincial labour force.  Then he adds Revelation 2: the growth in the total value of the pay packet.  Since 2006, the total public sector pay cost has gone from about $1.9 billion to about $2.65 billion by January 2011.

Revelation 3 really puts it in perspective. Scan down through David Campbell’s commentary in the Globe on December 28 and you’ll find plenty to knock your eyeballs out about the growth of the provincial economy. Take the bits rom labradore and put it together with this on the relative position od the public sector pay envelope compared to the national average:

In 1998, the average weekly wage in the public administration sector in Newfoundland and Labrador was more than 22 per cent below the national average. Now it is 3.3 per cent above. That is a monumental shift in wages over a short 11 year period. A similar, but less pronounced story is found in both the health care and education sectors.

Most of that increase came since 2006.

So for anyone who is still harbouring any misapprehensions, understand that the provincial public sector has been driving the provincial economy for the past decade.  Thousands of more employees making – collectively – hundreds of millions more year over year and you have the growth since 2006 focused on the northeast Avalon. 

Now add to that the sources of provincial government revenue, as laid out in the annual provincial budget Estimates. You start to see the role that taxes on individual incomes and consumption play in fuelling the explosion in government spending since 2006.

Mining taxes and royalties produced about $167.5 million in revenue in 2010.  Personal income taxes brought in $888 million and sales taxes brought in another $791 million. Even gasoline taxes brought in more than mining royalties ($168.45 million) in 2010.

The forecast for 2011 did include an increase in mining royalties and taxes to $343 million. But even with that, two of those three taxes will still produce well over double the amount for the treasury than will come from rent companies pay for the privilege of exploiting the province’s non-renewable mineral resources.

When you look at the reality of things, Kathy Dunderdale and the Conservatives can’t afford to chop into provincial spending without putting a gigantic chill in the local economy.  As much as Dunderdale likes to admit that she and her colleagues have been irresponsible in boosting public sector spending to unsustainable levels, they haven’t left themselves any real manoeuvring room politically.

Now this might seem a bit harsh to Kathy’s delicate sensibilities, but the reality is that Dunderdale can’t do anything but provide the public sector with some lovely increases in their coming contract negotiations. 

When Kathy Dunderdale says public sector unions should expect more modest increases, we should understand she is probably speaking relatively.  Compared to their last contract when they got an eight percent jump followed by three successive years of four percent, public sector employees should probably look for something like four years of four percent. or four percent followed by three over the subsequent years.

But any serious confrontation?

Don’t count on it.

The Tories don’t have the nuts for it, pea or otherwise.

- srbp -