Whatever pay raise federal public servants get, layoffs could be next

Whetherthe union representing more than 150,000 striking federal workers gets everythingit wants or has to make concessions, the cumulative wage increases will add billions to government spending at a time when public appetite for large deficits is waning.

Faced with diminishing political capital, the federal Liberal minority government will be under immense pressure to control spending,observers say including by cutting the public service.

And if layoff decisions are made based on seniority a topic that's come up duringcurrent negotiations those hired during the COVID-19 pandemic could be the first to go.

The Treasury Board's own initial costing of the union's previous demand of a yearly pay raise of 4.5 per cent cumulatively 13.5 per cent over three years, but actually higher when compounded for the bulk of striking workers peggedthe amount at more than $3 billion in extra spending per year.

This figure, however, neglects the fact thatCanada Revenue Agencyworkers are demanding significantly more.

It also doesn't take into account the knock-on effect those proposed pay bumps could have on other bargaining units negotiating new contracts.

A 'benchmark settlement'

The Public Service Alliance of Canada (PSAC) workers on strike represent a large percentage of the federal public service, so the deal they forge will be "a benchmark settlement," said Kevin Page.

He's a former parliamentary budget officer who now heads the Institute of Fiscal Studies and Democracy at the University of Ottawa.

"All other bargaining groups are going to look at this and it will effectively become a floor in their negotiations," he said.

There are already signs the various bargaining units, each representing a different pocket of workers engaged in their own negotiations, arein lockstep.

Earlier this week, one unit representing more than8,000 Canada Border Services Agency workers said it was slated to go back to the negotiating table on Tuesday.

It now says it won't as long as the current strike continues.

"It's clear the ongoing generational labour actions by PSAC members will lay the foundation for future gains for all Canadian workers," the group said.

Workforce balloonedduring pandemic

Across Canada, the federal public service has grown by some 30,000 jobs over the past two years, bringing the total cost of personnel spending to roughly $60.7 billion in the last fiscal year, according to a report released earlier this month by the Office of the Parliamentary Budget Officer (PBO).

That's $14.4 billion more than the pre-pandemic fiscal year of 2019-2020.

Should every one of those full-time employees get an annual raise of 4.5 per cent, the PBO estimates it would cost the government $19.7 billion over five years.

That's the most expensive case scenario, as it's predicated on every worker getting a raise (instead of just those on strike).

Page saidit's still a useful exercise in the midst of a heated, protracted labour negotiation.

"It puts pressure on both sides to actually find something that is fiscally responsible," he said.

PSACNational President Chris Aylwarddid tell CBC's Power & Politics Wednesday that theunion had already "moved twice" on its wage demandand that 13.5 per cent over three years was less than the rate of inflation.

However, Aylward did not elaborate as to how much the union had moved.

WATCH | Wednesday's Power & Politics interview:

PSAC president says feds haven't addressed 'priority issues' yet

1 year ago

Duration 10:18

Chris Aylward, president of the Public Service Alliance of Canada, says key issues still need to be addressed before a deal is reached with the federal government.

Pressure to downsize

The Trudeau government comes into this strike already facing pressure to curb spending.

In its 2023 budget, the federal government projected a deficit of $40.1 billion. That was up from an earlier forecast of $30.6 billion, and the government has pledged to keep deficits relatively flat in the ensuing years.

Signing a new deal with a large swath of workers that starts with a 4.5 per cent annual pay raise would cut right into that, Page said.

"We would know right away that the government is not serious in maintaining that declining deficit track," he said.

For that reason, it will be difficult for the governmentto settle for anything above a three per cent annual wage increase, Page added.

Federal spending went up during the pandemic due to the suffering economy.

Now that it's improved, there's pressure for the government to rein in spending so that it has political roomto kick in stimulus dollars should the Canadian economy take anothernosedive, said Parisa Mahboubi, a senior policy analyst at the C.D. Howe Institute.

"We might face another recession, and the government needs to be prepared for that," she said.

Unintended consequences

Treasury Board President Mona Fortier showed no sign Wednesday of budging from the board's offer to increase wages by nine per cent over three years an offer she said mirrors the endorsement of a third-party commission brought in earlier in the negotiations to get things back on track.

"We need PSAC to start bringing their demands in line with the Public Interest Commission recommendations," Fortier said in a news release.

"They're telling us that we have to move," Aylward countered during a rally Wednesday on Parliament Hill. "That's not how bargaining works, Madame Fortier."

The higher the wage increase, however, the more likely there will be consequences for the workforce, including layoffs, Page and Mahboubi said.

If the wage increases land on the higher end, either taxes will go upor there will "be some restraint in the growth of the government,"Page said.

"At a minimum, [there would have to be] a freeze on hiring at some point," he said.

Merit or seniority?

In the event of layoffs, PSAC has in the past asked that decisions about who goes be made based on workplace seniority.

"Seniority rights are based on the idea that an employee's time with an employer should count for something," a PSAC spokesperson said Wednesday. "It protects against favouritism and management discretion."

The Treasury Board said it's willing to consider seniority as a criterion, but not the only one.

"We have proposed the possibility of jointly asking the Public Service Commission to consider making seniority a factor to be taken into account, after merit," Fortier said in a recent open letter to striking workers.

• New ruling reveals only a third of 120,000 striking PSAC members cast vote on work stoppage

Federal workers who joined the public service when its size ballooned during the pandemic could be "at high risk" of being on the chopping block, Mahboubi said.

"There [are]always some losers and winners during these activities and negotiations,"she said.

Page agreedthe outlook could be bleak for pandemic hires.

"In a relatively tight labour market, I'd be kind of thinking about making a move," he said.