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City Budget Bulletin #4: Labour Costs Part One

This is the fourth in a series of City Budget Bulletins through which we will be raising awareness and proposing solutions—please share them and let the Mayor and Council know how important it is to hold the line on property tax increases in the upcoming municipal budget.

The City of Edmonton cannot expect to constrain operational spending growth unless it addresses the largest expenditure category: employee wages and benefits.  With employee compensation making up 57% of the operating budget, it is critical that the City hold the line on labour costs.

Since the start of the recession, business owners have had to make difficult decisions to survive including reducing wages, cutting hours, freezing hiring, and even laying off staff.  Alberta-wide, wages today are roughly the same as they were three years ago. In Edmonton, overall municipal government staffing levels have increased, and the last collective agreements gave raises that amount to more than double the wage growth of the average Edmontonian.

In fairness, the City negotiated these most recent deals before we understood the full impacts and extent of the recession.  However, these contracts are expiring in December 2018 and the City, as part of upcoming negotiations, must take the position that its union wage increases have outpaced comparable wage trends in either the province or in the general economy, and the next round of agreements must not include further increases. 

These raises are not only out of line with private sector trends but also with provincial public sector agreements, where we have seen the Government of Alberta set a precedent of multi-year wage freezes with the unions representing teachers, health workers, and nurses.

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Despite three economic booms in the last two decades, which catapulted Alberta’s private sector wages far beyond the national average, City wage growth exceeded Edmonton’s as a whole.

The Canadian Federation of Independent Business (CFIB) did a wage comparison analysis in 2015 and found that, even at a time of record private sector wages, City of Edmonton workers enjoyed an overall wage premium of 2.1%.  Advantages in benefits were worth another 10.6% premium in compensation over the private sector.  Some of the benefits in different agreements include: a 33.75-hour work week; seniority-based (rather than merit-based) raises; 2x overtime rates (instead of 1.5x); and other elements not common in the private sector.

There is ample precedent and research to support holding the line on wages in this round of public sector negotiations. It is also the key to avoiding tax increases. Assuming the City is spending roughly $1.3 billion on salaries this year (excluding benefits), each 1% raise costs taxpayers about $13 million.

Put another way, since property tax revenue is nearly equal to personnel expenditures, every 1% increase in salaries means a roughly 1% increase in property taxes. Questions for the City:

  1. Will the City strive to hold the line on wage increases, just as industry has had to over the last three years?
  2. Is it fair that businesses have had to pay for City union raises during an economic downturn when they could not afford to give salary increases to their own employees?
  3. How can the City increase the productivity and efficiency of its workforce?

Let us know what you think of this Bulletin and, if you agree, contact the Mayor and Council. Tell us how property taxes have affected you and any savings or other ideas you have for making Edmonton more competitive for business.

Contact us at policy@edmontonchamber.com

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