Sunshine Superman

Last week the Province of Ontario published its annual "Sunshine List",  naming all the employees of the Provincial government, its agencies and municipalities who earned more than $100,000 last year.  The CBC's version of the story, with a link to the list itself in case you want to look up your pals and tap them for a loan, can be found here.

Remarkably, in a year with sluggish economic growth and very little inflation, the number of public servants making it onto the list rose by more than 11 percent.  Since 2009 the number has grown by a staggering 39 percent.  The publication of the list has prompted the Tory opposition in the Provincial legislature to decry the failure of the Liberal government to come to grips with public sector compensation.  The unions, in turn, are defending the swelling list, offering up the usual arguments that they have no interest in participating with the private sector in a "race to the bottom" in pay and benefits.

I have to say that this line of argument doesn't go very far with me.  There are no data available, but I would bet any amount you care to name that the number of people in the private sector pulling down more than a hundred large did not grow by anything like 11 percent in 2012 -- and those are the people paying the public sector's salaries.

By coincidence, today's Toronto Star carries a story that goes a long way towards explaining how public sector compensation continues to rise so sharply. Firefighters in bucolic Scugog, in the centre of the Province, now earn $80,000 per year, more than their (presumably more stressed out) colleagues in Toronto.  Don't worry, though -- the Toronto guys and gals will soon overtake their rural cousins.  How do we know this?  Because wages for essential employees like firefighters or the police (who are not allowed to go on strike) are set by compulsory arbitration, and one of the key factors that the arbitrators take into account is comparability with other recent contracts.

There's one thing they never take account of, however: the ability of the employer to afford the settlement.  The taxpayers of Scugog are paying 27% more for their firefighters now than they did last year, thanks to an arbitration settlement that the town is not allowed to dispute.  This is a recipe for continuous leapfrogging of wages and benefits, and it's no surprise to learn that the municipalities are up in arms about it.

This all ties in to another developing story in the Province.  The Toronto region has perhaps the worst public transit system of any large municipality in the developed world, thanks to decades of political neglect and incompetence. (Both of the two very short subway extensions approved in the last thirty years have been built in entirely the wrong places, as a result of political deal-making). Now there are plans to correct the problems, with a large-scale transit expansion known as the Big Move, but the cost is very high, at an estimated $50 billion in today's dollars.

Plans for a slate of taxes and fees to pay for all this are already running into heavy weather from predictable quarters, led by Toronto's neanderthal mayor, Rob Ford.  Hizzoner seems to think that a casino in Toronto would provide all the funding needed, but the hosting fee the city will receive is probably no more than $100 million a year.  Hey, Rob, can you divide $50 billion by $100 million?

People on Ford's side of the political spectrum like to argue that all the money that's needed to pay for all this transit spending can be found by eliminating wasteful spending elsewhere in the public sector.  But this is where the Sunshine List and the Scugog firefighters loom large. Wages and benefits over which the employers have diminishing amounts of control are eating up a larger and larger share of public sector spending, leaving little over for projects like transit expansion.  It is, sadly, very unlikely that any of the unions will give up their sweet deals just to make it easier for their fellow citizens to travel to work.