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Public vs. private

November 17, 2020 Cory Hare, ATA News Managing Editor


Applying an economic lens to UCP government’s actions


On Nov. 6 the government announced that it is seeking a four per cent wage rollback from public sector workers represented by the Alberta Union of Provincial Employees, which is in the midst of bargaining a new collective agreement.

The government had previously asked public sector unions to delay their contract negotiations until March 31, 2021, when it’s hoped that there will be more clarity on the impact of the global pandemic.

Also, in mid-October, news emerged that the government will lay off between 9,700 and 11,000 Alberta Health Services employees who work in laboratories, linen services, cleaning and in-patient food services. These jobs will be outsourced to private companies.

And in August, the government passed Bill 32, Restoring Balance in Alberta’s Workplaces Act, which requires that unionized employees opt in to having their fees used for political activities.

Turning to the private sector, this past summer the government fulfilled a campaign promise to lower Alberta’s corporate income tax rate from 10 per cent to eight per cent.

More recently, it created the Innovation Employment Grant to provide incentives to industry for research and development expenditures and also pledged $5 million for the Alberta Enterprise Corporation’s Accelerate Fund, which helps launch new technology start-ups. In October the government announced a three-year property tax exemption for companies drilling new oil and gas wells and building new pipelines.

Within this context, the ATA News spoke to economist Jim Stanford, director of the Centre for Future Work, for his thoughts on the Alberta government’s recent moves and fiscal approach.

What is your assessment of government’s recent decisions in terms of the private and public sectors?

It seems to me that the Kenney government doesn’t really know how to respond to this unprecedented economic crisis.

  Economist Jim Stanford says that the Kenney’s government’s approach to the public sector is based on flawed ideological principles.

They’re going back to tried and true ideological principles that have always guided them, which is a vision of the provincial economy that is dominated by private business, that assumes smaller government is always better, and that concludes anything that enhances the profit and freedom of private business will ultimately be good for the provincial economy.

It’s all wrapped up in the assumption that petroleum is the driving force of Alberta’s economic development. Now we’ve got a pandemic, we’ve got a recession, we’ve got the biggest deficit in Alberta’s history and all they can think of is the same recipe book.

All of these disparate and desperate actions have a common underlying theme: restrict government, downsize government, control the workers of government, cut taxes, subsidize and otherwise assist private business, and wait for the market to deliver the solutions.

What do you make of this approach?

There’s a couple of fundamental features of this pandemic and the pandemic recession that they haven’t acknowledged. The first one is that it has been a shock to the petroleum industry globally. The shock to demand globally and prices is an indication that petroleum will never be the engine of growth again.

Instead of studying this and trying to understand it and trying to develop solutions to it, the Kenney government is still pretending that it didn’t happen.

They are also not appreciating the role of the public sector in the response to the pandemic and the economy coming out of the pandemic. Public servants have played a vital role, obviously delivering essential services to Albertans, health care in particular, but other services too.

Can you elaborate on the merits of the public sector from an economic standpoint?

The public service is a vital anchor of stability for the economy. The public service and the public sector are not subject to the same roller coaster ups and downs as private sector activity. This is a good thing, not a bad thing.

Instead of seeing the public sector as a cost or a drain, we should see the public sector as an industry in its own right, and as a growth industry. Our demand as a society for education and health services is growing, and this is a good thing, not a bad thing.

The jobs that can be created in those sectors should be celebrated rather than trying to suppress that natural growth and suppress the income associated with it. Public services like education and health care are industries in their own right and they contribute directly to Alberta’s GDP and Alberta’s incomes and Alberta’s consumer demand.

How do you interpret Kenney’s actions?

By turning his guns on public sector workers like teachers and nurses and civil servants, Kenney is actually undermining one of the important sources of strength for the provincial economy at this time, and it’s very perverse.

We’re seeing wage freezes and even a desire on the part of government for rollbacks, public sector workers being laid off and unions feeling like they’re under attack. What do you make of this?

This whole nonsensical crusade against unions and their lobbying and political activities all stem from an assumption that anything that interferes with the power of private employers to hire and fire at will for the cheapest costs possible must be bad and we’ll try to get it out of the way.

Alberta’s economy has been the worst of any province in Canada during the pandemic and Kenney’s actions will undermine Alberta’s recovery even further.

What approach would you suggest?

We should be hiring more people, not laying off staff in our schools and our hospitals and our public health agencies. We should be providing regular wage increases and engaging in normal collective bargaining with those workers as a way of supporting average wage growth and consumer demand.

In terms of the rest of the economy, outside of the public sector, we should be moving forcefully to diversify Alberta’s economic structure, nurture and expand other industries, including value-added and innovation-intensive industries, embrace the energy revolution instead of trying to deny and delay it.

Sometimes [Kenney] does seem to recognize that the writing is on the wall in terms of the long-run future of the petroleum industry, so some of the proposals that are out there [to foster innovation and diversification] … some of those look very promising, but on the whole he has still doubled down on the centrality of the petroleum industry in Alberta’s future.

What can we learn from other countries?

Governments all over are running deficits and, for the most part, governments have not embraced austerity as a response to this pandemic. In some cases they have, but in most parts of the world — including in the industrial countries — governments have recognized “we’re going to have big deficits. This is going to be crucial as we try to respond to the pandemic and support jobs moving forward.”

This idea that the only choice is to cut spending and cut public services is nonsense. Most of the rest of the world has recognized that that’s not possible. The World Bank and the International Monetary Fund concluded their annual meetings in Washington [recently] and they both came out and urged governments to spend more, not less, as the economies recover from COVID.

The general view of economists around the world is, certainly, we need more government, not less. ❚



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