Wage freeze has little impact on the deficit. But will McGuinty have to reassess the politics of attacking public sector workers?
Holding the line on those salaries .... is a linchpin of the government's plan to eliminate Ontario's $21.3-billion deficit. (Windsor Star -- See here. My emphasis. )
This seems to be the notion behind the government's compensation freeze proposal.
I use "notion" advisedly here: this doesn't really qualify as a full fledged 'idea'. Here's why.
Some have suggested the wage freeze might 'save' $750 million next year.
But that is a gross exaggeration. The government (and government backed employers) have already signed contracts with the major public sector bargaining groups for this year, next year, and, often, beyond that. So any savings aren't going to happen for these groups any time soon.
And, of course, decreasing the real wages of a large chunk of workers will have a negative impact on the economy and local jobs. The incomes of working people support local economies - more so than corporate profits (that are getting a major cash injection thanks to the McGuinty government's corporate tax cuts).
But even if there were $750 million in savings next year and the policy didn't harm Ontario's economy, would this policy make a real difference to the deficit? Well $750 million is 3.5% of the $21.3 billion deficit in the most recent fiscal year.
So 96.5% of the deficit is left.
As noted elsewhere, economic growth has had a much more significant impact reducing the deficit this year, and if we can believe, Finance Minister Dwight Duncan, it will have more of an impact in the near future.
But if the compensation freeze is not really about economics, what is it about?
For my money, it is politics and scapegoating. Someone has to take the blame -- and it doesn't matter if they had no hand in creating the problem if it helps the government get re-elected in the fall of 2011.
Well, the government may just have to re-assess that political calculation. On this, only time will tell.
But, in the interim, we have work to do.