Tuesday, January 06, 2015

Arbitration Awards or the Dilemmas of Public Financing

We don't have enough money ... it is a common enough refrain. When I was a kid, I heard it all the time with regard to wage settlements and workers' raises. Today, it is particularly common in the public and semi-public sector. There is a logic to, at least intuitively because it seems to make sense. Imagine, for instance, that I work in the semi-public sector, like my current job. The money for any raise I get has to come from somewhere and it is easy enough to say "well, that money has to come from somewhere and so students will have to pay a higher level of tuition." The same thing happens with workers -- say, as we recently have seen in Saint John -- with regard to police officers and firefighters. In Mirimachi, I believe, the municipality simply refused to pay its inside workers what they were looking for and there was a strike or a lock out or something. For workers employed in the public sector, you can substitute the word taxpayers for students. The result is that these workplaces can become very divisive.  While the vast majority of students, just as an example, during the faculty at Mount A were nice, encouraging, polite, a few weren't. A very small group started to speak about what I "owed" them.

Division is only one of the problems created by what we might think of a dilemma of public financing. "We don't have enough money" seems logical, but, I want to show, that it is not. In fact, it is tied up in a fairly disturbing contradiction. I recognize, though, that I am challenging some commonly held beliefs. Like most people, I'd like to believe that I would have a whole bunch more money if not for some greedy so and so who works at the DMV or in the university or whathaveyou. What I'll suggest, however, is that holding down public sector wages will not put more money in your pocket. It requires an open mind to rethink this problem. That is what I ask from you as you begin reading this blog.

What is wrong with the "we don't have any more money" argument. The first thing is that it is not accurate. There is more money. The truth is that politicians -- particularly local politicians -- don't want to access that money because it means (in their view) raises taxes. Canadian taxes are not, of course, "too high" but most people don't know this. Most people have been told so long and so often that "Canadian taxes are too high" that they simply assume this is true. But (and, look this up if you doubt me), Canadian taxes are about average with the OECD countries to which Canada compares itself. In other words, if we look at the other relatively wealthy, developed countries, what we would see  is that Canadian taxes are not at all out of whack. Hence, there is some room for an increase in tax, particularly if we are looking at maintaining vital services.

The problem is that politicians often run for office on precisely the opposite platform. At election time politicians can fall all over each other to offer "tax breaks" to Canadians. Local politicians are no different from federal or provincial politicians. Hence, their ability to bring in a very small tax increase to pay, say, firefighters a bit of a raise, is limited because their opponents in the next election will accuse them of broken promises and lying and they, in turn, will promise tax cuts.

But, perhaps even more to the point, there is money in the system but politicians don't want to spend it on things that don't inherently improve their public image. Municipal politicians have road repairs, playgrounds, parks and rec programmes, water and sewer and a range of other things to think about. Increasing someone's pay means taking money away from something else. At this point, in a budget debate, someone will (usually rhetorically) say "what do you want me to cut?" But, rhetoric aside, we know that it is more difficult to allocate money for things that people don't use (and hopefully won't have to use, like fire and police protection) than for things that people do use (roads, water, parks). It does not mean that fire protection is less valuable than parks and rec, but it is more difficult for public figures to shift money from a visible aspect of their job to an invisible one, regardless of value. Why? Because they need to get re-elected. Saying "OK, this is the road paving we did" or "this is the new park equipment" might win votes. Saying "we kept fire protection at the same level," likely will not. The first significant problem with this statement is that it is not accurate. It is just against the perceived self interest of politicians to address and so they claim that the cupboard is bare.

The second important problem with stating that "we don't have any money" is, as I intimated above, divisions that it creates. These divisions are, by and large, needless. But, even more important than that, they are often hypocritical. We have been through a period in NB history where we have become more aware of how dangerous some forms of public service -- police work, in particular -- actually can be. And New Brunswickers have, rightly, taken to reflecting on the importance of police officers and periodically giving them a thanks for the work they do. I hope this continues. But, then ... a police union asks for a raise and all the good comments, all the acknowledgement of the dangers of these jobs, disappear and the police are portrayed as a bunch of greedy so-and-sos looking to milk the public trough. This is hypocrisy. Either these people do a job that is dangerous and we should thank them, or they don't. At the very least, I am less than certain politicians should try to mobilize public opinion against their workers in order to pressure them to lower wage requests. But, to say "you do a dangerous job and you work hard and we are so grateful. You are heroes and if you die, I"ll leave flowers in front of the police station but I won't give you a raise if it causes a small increase in my property taxes" is ... well ... to give a lie to what one is saying.

Third, is there ever enough money? Seriously. Imagine if a town had enough money to give a raise to its workers ... would they? Or, would the people who make up the town budget take that surplus and start applying it to all matter of other things. A few years ago the provincial government of NS briefly ran a surplus. The opposition immediately demanded a tax cut, but why? Because there is a surplus (there actually wasn't because that surplus was on the deficit; not the debt, but that is another story). You see my point. If there was money, political figures start spending it in ways that either (a) they like (which might be good or bad, let's be agnostic on this one) (b) look to reduce the amount of the surplus by cutting taxes (which might be good or bad ...). Political figures will not suffer a surplus for long. They will use and there is nothing wrong with that but the effect of using it is to create an artificially constricted budget that does not allow for wage increases. In other words, the "we have no money" argument is, in fact, a self-fulfilling prophecy. Most people who have worked in the public or semi-public sector for a long time know this because they have seen surpluses spent on things other than workers over and over again; they know labour is not a political priority and if they wait for it to become one ... well ... they will wait a very long time indeed.

Finally, the "we don't have enough money" argument is shaky because it does not take into account public safety. We've seen this before, unfortunately. We've seen what happened in Mike Harris' Ontario when beds in mental hospitals were closed, women's shelters lost their funding, and money for testing labs was contracted. It was not a pretty picture. The folks got their tax cut, but people actually died as a result. The question, then, that we should ask ourselves before we take one side of this debate or another is this: what consequences am I prepared to live with? If the price of my tax cut is that a battered woman has no place to go and so stays in her house ... am I good to live with that? If the price of my tax cut is that beds in mental hospitals are closed and now mentally disabled people live on the street .... am I good with that? If the price of my tax cuts is that services are contracted ... am I prepared to live with that?

Let me be clear. There are cheaper firefighters out there than the ones we currently pay. Heck, I'll do it for you (P/T of course as I have a regular job) for a fraction of the price firefighters are currently changing you. You won't like the results. In fact, its pretty doubtful I could even put out a kitchen grease fire, let alone carry someone from a burning building. I could be a cop, too, if you want but I doubt I'd ever catch a crook or stop a robbery. One of the big lies offered by the "we don't have enough money" argument is implicit: you can get the same level of service for less. You can't. Or, if you could, you should vote for someone else in the next election because the current crop of politics really is wasting your money. If the president of your University is wasting money ... he or she should be canned right now if not sooner. The problem is that they aren't wasting money, by and large. We might have disagreements about how money should be spent but local governments do due diligence (as required by law, btw). They track down the most efficient price for whatever it is they are buying, be it stationary or fire protection. They never intentionally pay more than they have to. You are, already, then, getting the best price you can get for these products or labour.

What does this mean? It means that if you cut  taxes or don't pay people what they want (and most people want a cost of living -- inflation rate -- increase in their pay) ... your quality of service will decrease. It really will. Why? Because you are paying less for it. If an apple costs $1.00 ... how much of an apple do you get for 50 cents? See what I am saying. Even if what you are interested in is speedy and efficient service at Service NB .... you get what you pay for. (Service not fast enough for you ... it could be faster if you hire more staff but that might take a tax increase!) If you lose experienced workers and hire inexperienced workers because they cost  less there will be a service hit.

Public figures particularly don't usually make these arguments. Instead, they talk vaguely about efficiencies and hard choices and privatization (which, btw, does not save money either and cannot, but -- again -- that is a story for another day). This is a problem because it obscures a debate that we really should be having about the proper level of public service, what those services cost, and the degree to which we seriously respect the people who provide us with potentially endangering public services (like police and firefighters). If we don't have this discussion, misconceptions multiple and, sooner or later, the "we don't have enough money" argument wins the day, services contract, and people are left wondering how bad thing X or Y "could have happened." There is, of course, much room to discuss the character and nature of a tax regime. I know a lot less about these things. But, that might be beside the point. The first thing we need to discuss is how misconceptions create bad policies, as the "we don't have enough money" argument is doomed to do.
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