The federal public servants’ strike is backing Ottawa into a corner

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The strike by the Public Service Alliance of Canada – with more than 150,000 members, it accounts for nearly half of all federal government employees – is being described as the largest in Canada since … the 1991 PSAC strike.

Of course, a lot has changed since then. In 1991, the federal government employed roughly 218,000 people (that’s the core public service, not counting agencies such as the RCMP or Crown corporations such as the CBC and Canada Post) for a population of just over 28 million: roughly one federal public servant for every 129 citizens. As of 2022, it employed about 336,000 for a population of just under 39 million: a ratio of one to 116.

With rising productivity – computers, the internet, all that – you’d think your average government employee would be able to serve a good many more Canadians today than 30 years ago, rather than fewer. Or, even assuming no gain in productivity, you’d think an 11-per-cent reduction in the ratio of population to public employees would mean some improvement in service. Neither seems much in evidence.

Yet while productivity may have declined and service deteriorated, compensation for federal employees has marched steadily upward. A 2017 study by the C.D. Howe Institute found that average total compensation in the federal public service, including wages, pensions and other benefits, grew by nearly 5 per cent annually between 2005-06 and 2015-16 – that is, under the Harper Conservatives.

Over all, the study found average compensation in the federal public service, at $64 an hour, exceeded that of comparable private-sector service jobs by 40 per cent to 60 per cent. Again, that’s after 10 years of the Harper Conservatives.

Since then, needless to say, even the pretense of constraint has been relaxed. The number of employees on the federal payroll has grown by more than 30 per cent; total compensation has grown by more than 50 per cent.

But perhaps this is to compensate for the greater job instability that public employees suffer? No: Government employees are five times less likely to lose their jobs than private-sector employees, according to a new study by the Fraser Institute. They work shorter hours, take more days off, retire earlier.

What explains the gap? In part, it is because governments face softer budget constraints than private-sector employers: It is always possible to borrow to cover any shortfall between revenues and expenses, and always tempting to shift the costs of employment and other expenses onto future generations, rather than the generation that votes in the next election.

But part of that calculation is also likely to be the size and militancy of public-sector unions, compared to their private-sector counterparts. Just 14 per cent of private-sector workers in Canada belong to a union, versus 75 per cent in the public sector. Moreover, while private-sector unions are ultimately subject to the same market realities as their employers, no such discipline tempers the expectations of public-sector unions.

Put the two together – the increasing concentration of unions in the public sector, and the growing gap in compensation between public- and private-sector workers – and the picture that emerges is of a union movement that, far from the struggling industrial working class of old, has increasingly come to represent white-collar civil servants, who make considerably more, on average, than the people who pay their wages.

All of which is to provide some context to the current dispute. It is impossible to look at the union demands or management offers without taking into account where they are starting from.

On the one hand, federal public employees are already handsomely compensated relative to the general public, even without the increases the union is demanding: between 30 per cent and 47 per cent more over three years, according to Treasury Board figures, depending on the bargaining unit, when non-wage compensation is included. That would remain true if the union were forced to accept the latest federal wage offer – 1.5 per cent for 2021, 4.5 per cent for 2022, 3 per cent for 2023.

On the other hand, they face a Liberal government that, never much inclined to parsimony to begin with, has been eager to court the union vote, in pursuit of its all-consuming ambition to marginalize the NDP. Not only has it massively expanded the numbers of those employed in the public service and substantially raised their pay, but it has passed a series of overtly pro-union measures: among them, repealing the Harper government’s law requiring transparency in union accounts; reinstating the tax credit for labour-sponsored venture capital funds; and, as of last year’s supply-and-confidence agreement with the NDP, promising to ban replacement workers during strikes (a particularly egregious measure: the principle recognized in human-rights law is that you have the right to withdraw your own labour, not someone else’s).

So although the union is unlikely to be able to call upon much sympathy from the public – as one PSAC member candidly put it to the Ottawa Citizen, “people hate us” – neither does it have much reason to fear the government. The longer a strike wears on, the more it is likely that the public will turn its fury on the party in power. In theory, the government could pass legislation at some point ordering the whole thing into arbitration and forcing its employees to go back to work, as it did in 2021 to end a strike at the Port of Montreal.

But a number of factors suggest the Liberals would think twice before reaching for such a lever in the current dispute. For starters, it would undo all of their previous efforts to cozy up to the unions. Worse, it would provide an opportunity for the NDP to remind the unions who their real friends are, and to differentiate themselves from the Liberals in the minds of progressive voters. Indeed, NDP Leader Jagmeet Singh has already announced his party would vote against any back-to-work legislation.

Neither is it a cinch that they could find support for it from the Conservatives or the Bloc Québécois. The Bloc has historically depended for much of its support on its appeal to union voters, while the Conservatives have lately made inroads with the same demographic and will be leery of squandering it. This may be one of those issues, like supply management, where the interests of the broad majority take a back seat to those of the passionate minority.

If that were not enough, the constitutionality of such legislation, after the Supreme Court’s 2015 ruling in Saskatchewan Federation of Labour v. Saskatchewan, must be in some doubt. That was the issue, remember, that undid Ontario Premier Doug Ford’s attempt to bar the province’s education workers from striking (a plan to use the notwithstanding clause to spare its back-to-work bill from judicial scrutiny was withdrawn in the face of a massive show of force by organized labour).

It is one thing to prohibit strikes where essential services are concerned or public safety is in peril – exceptions for which the Court explicitly made room. But there’s already a carve-out for essential workers – they remain on the job – and the threat to public safety from closed passport offices or delays in processing tax returns seems remote.

You can see, then, why the union might have liked its chances – if not to get everything it is asking for, then at least some. Still, why now? Why hasn’t there been a PSAC strike before this – in fact, not since 2004? Why did PSAC decline to take up arms against the hated Harperites, but has now declared war on those adorable Trudeau Liberals?

One word: inflation. High inflation, such as we have recently experienced, also tends to be unstable – and unpredictable.

That leaves more room for discord between management and labour over how much employees should be compensated for the resulting loss of purchasing power, past and future. When inflation is locked in at 2 per cent, as it was from 1992 on, any increase beyond that clearly has to be justified, whether by higher productivity or some other factor. But when inflation is 6 per cent – or is it 4? – everything gets a little foggier. That’s when fights start.

It’s no coincidence, in other words, that the number of days lost to strikes and lockouts tends to rise when inflation is high, and fall when inflation is low. On average, Canada lost more than seven million person-days to strikes each year during the inflationary 1970s. Prior to the pandemic, it was more like 1.2 million.

Of course, inflation is as much a consequence of wage hikes as the cause (even if both are ultimately functions of monetary policy). Which is why the federal government will be under pressure not to cave to the union’s demands. Even the 4.5-per-cent annual wage increases contained in the main PSAC bargaining position, let alone the increases in non-wage benefits or the much larger demands by its Canada Revenue Agency unit (admittedly revenues are up: perhaps they are working on commission?) would act as a baseline for other labour negotiations, public and private.

It would also destroy what remains of the government’s fiscal credibility. As it is, the government’s uncertain commitment to an eventual reduction in the debt-to-GDP ratio depends on a five-year freeze in operating expenses, in absolute dollar terms.

Yet the number of employees on its payroll is forecast to expand to 409,000 over the next five years: a 22-per-cent increase. Layer 4.5-per-cent annual increases in wages on top of that, and there’s no possible way of hitting its fiscal targets.

A union that is feeling its oats, calculating that the feds will have no option, politically, but to give it much of what it wants. A government that is running out of fiscal room. This one could run and run.