The Sixth Estate

Recently I took a Globe & Mail columnist to task for arguing that Ontario’s public school teachers are overpaid. As a humble blogger I hardly expect a response from such a great luminary as Margaret Wente, but I do want to return to the topic anyways, because a couple of people raised some important points. In particular, one of my correspondents suggested that if a public-sector employee earns more than an equivalent worker in the private sector, then the public-sector is overpaid. Seems straightforward. Right?

Well, maybe. One of the most disturbing developments in recent Canadian history is how mean we’ve become — let’s make this point #1. Cheerfully guided by right-wing politicians, including the current Prime Minister, we’ve become an unhappy, resentful mob, easily whipped into a foaming rage because we feel that no one deserves to get more government largesse than we do. I want to emphasize that point. As much as people groan about civil servants being overpaid, I doubt many have ever or would ever tell their employer, when offered a raise, “I think you’re paying me too much for my job. I think it would be better for all concerned if you docked my pay by 15%.” It’s a lot easier to make these judgements when someone else’s paycheque is on the line, isn’t it?

Now, then. Here are some widely held proposals on how to ensure that public-sector employees are earning a fair wage. But I think very few people are actually firmly committed to any of them. I believe that many people just want public-sector employees to be paid as little as possible, certainly no more than they get paid themselves, and people are willing to grab at whatever intellectual argument seems to support that position in any given case, no matter how inconsistent with their other beliefs it might be. Quite frankly, I have no idea whether a public-sector wage is fair, just as I have no idea whether a private-sector one is fair. But people who do have such ideas ought to make sure they’re at least being consistent and ethical.

2. Public employees should earn roughly what they would earn in the private sector — It sounds like a nice principle, right? I’m tempted to argue that there are very few equivalents between the public and private sectors, but there’s a bigger problem here. Quite frankly, I am skeptical how many people honestly believe this point, no matter how often they repeat it. I’m skeptical because I only ever hear it brought forward in discussing how some bureaucrats are allegedly overpaid.

But consider. If you really believe this principle, it follows that politicians deserve a massive raise. As the chairman and (arguably) CEO of an organization with hundreds of billions of dollars in revenue, Stephen Harper should be earning at least an 8-figure salary, not his measly $300,000 a year or so. Compared with similarly sized corporations, Canada (GDP: $1.6 trillion a year) should be paying its Prime Minister and Cabinet ministers at least $10-$20 million a year, plus giving them large tax refunds in place of the stock options he’d be earning in the private sector. Right? And yet Bev Oda’s $16 orange juice somehow incensed these very same taxpayers.

3. Public employees should earn less than they would in the private sector — This is the argument people retreat to when they decide that parallel wage rates aren’t desirable, after all. The argument usually is that people performing a public service should at some level be doing it for altruistic reasons (“doing good/doing the right thing”), not just because of the paycheque they’ll get at the end of it. Therefore they should actually be paid less than what they get in the private sector.

I think a lot of people in public service already agree with that. Most people who get a degree in education or social work, for instance, are probably intelligent enough to realize that they could have earned more income by getting a science or commerce degree and going into business. They just didn’t want to, for whatever reason. More to the point, though, if you want to treat the public sector as a place where people take on a low-paying job as a feel-good hobby, then that’s the sort of person you’ll end up hiring. Which won’t matter for some positions, certainly. But I’m not sure if you want, say, your neurosurgeon to be a career accountant who thought it might be a fun change of pace to spend a few years poking sharp tools into people’s brains.

4. The government should legislate a reasonable pay rate to prevent strikes — Again, that sounds reasonable. People get very upset when transit, garbage collection, or other “essential” services grind to a halt. But on the other hand, consider what’s actually being proposed here, usually by people who identify themselves as “conservatives” in favour of “small government”: what you’re saying is that the government should have the power to dictate wages and working conditions through the law, backed by the power of the police and the courts.

Legislating workers back to work is not equivalent to anything in the private sector. Private corporations do not have the power to pass laws which will result in their employees being put in prison if they decline to accept a wage offer. What these people are seriously suggesting is that their “small” government should have the power to dictate a wage and benefits package. I can’t imagine that many of these people would be very pleased if the government decided to legislate their wage and benefits package. Unless, of course, it was a very beneficial one, in which case see my point #1 above.

5. Public-sector employees should be paid at rates similar to what they get in other jurisdictions — This argument is often made by unions in provinces where their pay rates are below average (teachers in B.C., for instance), or in cases where salaries are higher in Canada than in the U.S. (pretty much all teachers, social workers, etc.). Well, for starters, this is just the labour union equivalent of point #2: the people who raise this argument in favour of getting higher salaries never use it in favour of getting lower salaries, and vice versa.

6. Pay should be based on incentives and performance evaluations, not a set salary grid for everyone — Well, yes, maybe. Part of teacher union resistance to this idea is the knowledge that students from poorer families tend not to do as well in school, and consequently that teachers at schools in poor neighbourhoods will get substandard salaries, and therefore that only new or poor-quality teachers will hold down jobs in those schools, leading to even poorer outcomes, all of it even in the absence of any particular competence or incompetence on the part of the teachers in question.

More to the point, people suggesting this usually have in mind the idea that the “bad” teachers will get their pay cut, not that the “good” ones, however defined, will have their pay increased. So be honest here. An incentive-based system based on improving the quality of a service should be basically cost-neutral: some get pay increases, others get pay cuts. If the goal of the incentive-based system is to cut wages overall, then it’s just a fancy cover for the real goal of cutting wages. Which brings us back to the first question, which is what a “fair” wage is to begin with.

There’s a second problem here, which is that the salary grid is cheap to administer. That’s why most employers with very large workforces doing essentially the same task with a minimum of administrative overhead tend to have at least some sort of relatively fixed wage schedule. The more you want to play with adjusting salaries, the more bureaucrats you’ll have to hire to monitor the teachers, establish performance standards, and so on ad infinitum. Government’s very good at finding new ways to employ bureaucrats. Don’t encourage them by giving them another excuse.

7. Pay should be based on the interaction between employer and worker in the labour market — Here at last we arrive at the crux of the matter. There is a labour market, even in the public sector, in which employers demand labour at certain wages, and employees supply their labour in exchange for those wages. This market functions the same way any other one does: someone demanding labour at a very low rate won’t find many sellers, and someone supplying labour at an unreasonably high rate won’t find many purchasers. When an employer demands labour at a rate which labourers find acceptable, people get hired and the job gets done.

This is a popular argument and in some forms, unlike the above, it is actually fairly consistent. In most cases it isn’t, though. Because if you hold to point #6, then on the one hand, you have to acknowledge that unions are basically engaged in collusion to rig labour market prices, but on the other hand, you also have to oppose, on principle, any attempt by government to legislate workers back to work, because that, too, is a distortion of the market. I’ve met very, very few people who oppose both collective bargaining on the one hand and back-to-work legislation on the other. But that, at least, would be a fully consistent and logical position to hold. I wouldn’t agree with someone who held that position, but I would at least respect them.

8. Governments should pay their workers as little as they can get away with, even if that means breaking laws, so that they can save money for taxpayers . This seems to be the perspective held by a great many Canadians, especially right-wing columnists. You’ll note that it’s an explicitly self-serving position. Which kind of undercuts their ethical standing when it comes to criticizing its polar opposite:

9. Unions should force governments to pay workers as much as they can get away with, even if it means long strikes and high deficits. This is the perspective that is attributed to most union members and executives. You’ll note, however, that on any given day virtually no public-sector employees in this country are on strike. So they’ve obviously accepted that there’s a limit to what they can reasonably demand from other taxpayers.

There’s no easy way out on this question. If you’re going to decide that public sector salaries are either “too high” or “too low,” you’re going to have to explain why, and then you’re going to have to explain what level they should be at. And if all you’re really interested in seeing is the cutting of those salaries as low as you think we can feasibly get away with, then be honest and don’t say that you’re really interested in improving performance through incentive pay, or adjusting rates so that they parallel wages in the private sector, or other jurisdictions, or whatever else strikes your fancy.

I’m not saying you can’t do the above. I’m just saying that so far, most of the people complaining about overpaid teachers, etc., haven’t bothered to make their case.