The Emperor's New Clothes - there is no public wage restraint in Ontario

Back in March 2010, the Government of Ontario solemnly announced a program of public sector wage restraint. What the Government did do was to legislate a freeze on non-collectively bargained wages for 2 years.

However, the Government then engaged in a process of "moral suasion" with public sector unions. In essence, the Government politely asked unions to take 2 years of zero increases and also instructed public sector employers that no additional resources would be coming to fund any increases above zero. The Government in addition asked arbitrators to adhere to these "guidelines." I have already blogged about some of the arbitration awards here and here.

Many public sector unions have also engaged in collective bargaining and achieved non-zero wage increases. Although these increases are lower than in previous years, they are nonetheless actual increases (although private sector increases are higher than public sector increases).

The Society of Hydro Professionals (engineers, scientists and professionals at Ontario Power Generation) has recently won an interest arbitration which is the latest nail in the Government's wage restraint coffin. The award by Kevin Burkett excoriates the Government's wage restraint policy in the body of the award.

Here is what he says about the effect of these non-statutory calls for wage restraint:

It should come as no surprise that the parties made very little progress in direct two-party negotiation. Once OPG made it known that it was seeking a zero net compensation agreement and that it would be maintaining that position throughout, there was no reason for the Society to moderate its position or to seriously consider the OPG demands designed to improve the efficiency of its operations. The effect of the Government pronouncement and its direction to OPG was to "freeze" the bargaining and thereby to prevent the parties from either moving to an agreement or at least prioritizing their respective bargaining positions. In the result, an inordinate number of issues have been put into dispute before me.

Of course this is the result. True negotiations cannot occur if the parties are not free to make appropriate decisions. In this case, the Government's unilateral decision that employees of this profitable Government-owned corporation were not entitled to any wage increases effectively derailed any meaningful negotiations.

In the end Arbitrator Burkett awarded the union 3% annual increases in a 2 year contract, granted a break-through benefit increase (for dental implants where the dentist recommends them), leave for Canadian Forces veterans or members on Remembrance Day, enshrined the right of employees to carry forward vacation days, allowed for averaging of overtime over a longer period among other provisions.

Clearly it is time to say that the Emperor has no clothes. There is no wage restraint. Collective bargaining is proceeding as normal and arbitrators are making awards as normal. The only effect of the Government's continued pretense at wage restraint is that it makes bargaining harder and may tend towards more impasses in negotiations. In fact, the result may be an increase in strikes. Surely, this was not the Government's intent.

Readers, what do you think?

Has there been effective wage restraint?

Was it clever for the Government to rely on "moral suasion"?

What should the Government do now?

I think that the best way forward is for the Government to make its decisions on transfer payments and formally abandon any attempt at wage restraint. Allow employers and their employees to freely bargain deals that work for them in the actual circumstances facing local employers and unions. But, that is just my opinion. Yours?