What Travis Toews got wrong while criticizing AUPE

Last week, Travis Toews, Alberta’s finance minister released a statement regarding negotiations between the Alberta Union of Provincial Employees and the Alberta government.

AUPE had filed a complaint with the Alberta Labour Relations Board, arguing that the provincial government has not been bargaining in good faith regarding new collective agreements.

In particular, AUPE claimed the bad faith bargaining is evidenced by the provincial government changing their initial offer of 1% wage reductions to 4% wage reductions.

Toews’ statement was in response to that complaint. He justified the proposal change by blaming the pandemic:

In these tough economic times, Albertans expect that the government will be responsible stewards of the public purse. Due to the ongoing COVID-19 pandemic and the worldwide economic recession, there is an added urgency to get the province’s spending under control.

While the pandemic is certainly something that the provincial government couldn’t control or predict, the province’s current economic and fiscal reality can be only partially blamed on the pandemic.

In a time when the UCP government is facing pressure on revenue sources, it chose to purposefully reduce one of those sources: the corporate income tax. In just 1 year, the UCP cut the corporate tax rate from 12% to 8%.

In the UCP’s first budget year, corporate income tax revenue was $4.107 billion, compared to the previous year, when it was $4.871 billion, a loss of $764 million. This current budget year-which ends today-they forecasted only $2.146 billion in corporate tax revenue, a further drop of $1.961 billion (p. 7). If that holds true, Alberta will have lost $2.725 billion in corporate tax revenue since the NDP’s last budget.

Keeping corporate income tax at the 12% rate it had been at for 4 years could’ve mitigated some of that loss. Plus, Alberta still has no provincial sales tax, which also could be a sustainable source of revenue for the government, allowing it to better address some of the financial pressure it’s under. Same with higher taxes on the rich (billionaires pay a 15% personal income tax on anything above $315,000, meanwhile minimum wage earners pay 10%).

More than half of the province’s funds go to paying public sector compensation — which includes nurses, healthcare professionals, teachers and those who work for government.

Of course a large portion of government funds go to wages. We don’t have robot nurses and doctors. We don’t use algorithms to teach our students. Government services are provided by workers, so the cost of delivering those services will include wages.

The government needs to ensure this cost is fair, and results in the highest level of services for Albertans.

By what measure is a 4% wage decrease fairer than a 1% wage decrease? Fair compared to what?

Finding compensation efficiencies will allow more funds to go toward the programs and services that Albertans rely on as we focus on economic recovery and a return to prosperity.

This statement is an oxymoron. If services are provided by workers, how does reducing how much you spend on salaries increase the amount in funds that will be spent on programmes and services?

The only way to spend more on programmes and services is to pay the current staff more or hire more staff. And “finding compensation efficiencies” will not be paying more to current staff, as evidenced by the government’s proposal for 4% wage reductions.

To be clear, these cuts aren’t about asking for money to spend on services, it’s about justifying cuts to services.

In 2018–2019, the NDP spent $48.4 billion on operating expenses. In their first budget, the UCP reduced that by $200 million to $48.2 billion. In their second budget, they reduced it further to $47.8 billion, with plans to reduce it to $47.5 in 2021–2022 and $47.4 billion in 2022–2023.

That’s a full $1 billion in cuts to what Toews called “programmes and services”, compared to what the NDP spent in their final budget. If you add up the cuts from each year, it comes to about $2.7 billion in total that UCP have cut or plan to cut from programme spending since 2018–2019.

The UCP aren’t interested in “allowing more funds to go toward the programmes and services”. They’re trying to reduce how much funds go toward these services.

Arguing that your request for larger cuts is to spend more on programmes and services when you plan to spend nearly $3 billion less in programmes and services is the epitome of arguing in bad faith.

The proposal that the government of Alberta has set is reasonable. In contrast, AUPE wants to add $200M to public sector wages.

That seems like a lot, right? $200 million?

Remember, however, that the UCP are cutting by more than 10 times that much. It’s not like increasing spending by $200 million will set the UCP into overspending. That’s how much the cut spending in their first year alone.

We will make every reasonable effort to negotiate and work through next steps in the process to reach an agreement that reflects the province’s current economic and fiscal reality.

Here’s the province’s current economic and fiscal reality: they should be spending more.

A robust economy relies on consumers spending money. If unemployment is in the double digits, the key to fixing that isn’t to lay more people off. That’ll just end up with even higher unemployment.

If GDP is down, the key to fixing that isn’t to reduce salaries, thereby reducing how much money is being spent in the economy.

The government has a responsibility to keep spending. When a government spends, it injects money into the economy.

For example, if it builds schools or roads, it pays the company who they contract to build those projects, who, in turn, uses that money to buy supplies from suppliers, who then use that money to buy raw materials. And so on.

Likewise, every time it pays a public sector worker (whether a nurse, teacher, or civil servant), that worker then uses it to pay for their needs: housing, food, clothes, fuel, vacations, hockey games, whatever. Same goes for the workers hired by the contracted infrastructure builders. And the companies where these workers spend that money, in turn, use it to buy stuff from their suppliers and pay their own workers. And-well-you get the idea.

The government can’t do much about dropping GDP because of a recession, but it can mitigate the effects of it on the economy by making sure companies still have some customers.

Cutting salaries and cutting positions makes a bad economy worse, not better.

Originally published at kimsiever.ca on 24 February 2021.