Download Rich get richer, poor get poorer

Understanding
the McGuinty
wage freeze
Profits and wages, corporations and workers,
politicians and voters
Randy Robinson, A/Political Economist
Ontario Public Service Employees Union
September 2010
Dwight Duncan’s story
 Under the Liberals (elected in October 2003),
wage increases in the public sector were
higher than in the private sector
 55 per cent of the budget – more than $50
billion – goes to pay public employees
 Ontario has a big budget deficit.
 Government must cut wages to save jobs and
public services.
 “Protecting jobs and services while eliminating
the deficit must remain our highest priority.”
 “Ontario families have done their part…. It’s
time for us to do our part.”
Dwight Duncan’s story
(simplified)
1. The money saved from the wage freeze will
allow Ontario to save jobs, protect public
services, and pay down the deficit; and
2. Public employees should be the ones who
pay because (the Liberals say) they get paid
too much anyway.
Chart from Ontario government presentation Aug. 9, 2010
Chart from Ontario government presentation Aug. 9, 2010
Another version

Public employees DO NOT get paid too
much.
These wage cuts are
permanent….
Income loss to inflation from a two-year wage freeze
51000
50000
49000
48000
47000
1
2
3
4
5
6
Income with wage increases equal to inflation
Income with two-year wage freeze followed by wage increases equal to inflation
These wage cuts are
permanent….
Income loss to inflation from a two-year wage freeze,
over five years
10000
8000
6000
4000
2000
0
1
2
3
Wage loss to inflation per year
4
5
Total wage loss to inflation
6
Wage loss calculation
Year Income
Income with
without freeze freeze
0
$50,000
$50,000
Income
loss
$0
1
$50,000
$49,020
$980
2
$50,000
$48,058
$1,942
3
$50,000
$48,058
$1,942
4
$50,000
$48,058
$1,942
5
$50,000
$48,058
$1,942
Another version (2)


Public employees DO NOT get paid too
much.
The money saved from the wage freeze
will NOT save jobs, protect public
services, OR pay down the deficit
Another version (3)



Public employees DO NOT get paid too
much.
The money saved from the wage freeze
will NOT save jobs, protect public
services, OR pay down the deficit
The wage freeze has NOTHING TO DO
with saving jobs, protecting services, or
paying off the deficit
Government
Voters
Corporations
What
corporations
have been up to
Trends in wages and profits since 1980
Rich get richer,
poor get poorer
 Between
1980 and 2005, the top 20 per
cent of full-time full-year earners in
Canada saw their incomes rise by 16.4%.
 The bottom 20 per cent saw their incomes
fall by 20.6%.
 Those in the middle saw their incomes rise
by $53, from $41,348 in 1980 to
$41,401 in 2005 (in 2005 dollars)
The real numbers
are even worse

The stats include only full-time, full-year jobs
 More and more jobs are part-time, temporary, or
temporary agency jobs
 Between 1980 and 2005, median earnings for
families went up by 9.3 per cent. This was
mostly caused by families working longer hours.
 Compared to 30 years ago, families are putting
in much longer hours just to stay in the same
place.
Why is income
distribution changing?
 It’s
not because Canadian workers are
less productive – they’re actually more
productive
How much money
is missing?
 If
real wages had risen in proportion to the
increase in productivity between 1991 and
2005, average workers’ incomes would
have been $200 higher each week in 2005
(in 2005 dollars)
 Canadians who work full-time for a full
year would have been receiving at least
$10,000 more in average real pay in 2005
Why is income
distribution changing?
 If
the economy is way bigger and
productivity has increased, why are wages
stagnating?
 Why are so many people falling behind?
 Why are so many people working so much
harder just to stay in the same place?
Why is income
distribution changing?

Because productivity gains have not
gone to wages, they have gone to
PROFITS

For 30 years, government
and business have worked
together to shape public
policy so this keeps on
happening.
The transfer of wealth
 The
transfer of wealth from workers to
owners is the most significant trend
affecting the incomes of most Canadians –
and people all around the world
 So how does it work?
The transfer of wealth
 Business
promotes a set of policies aimed
at moving money from workers to owners,
but today in Ontario, two major policies are
1) wage freezes for public employees, and
2) tax cuts for corporations.
These wage cuts are
permanent….
Income lost to the wage freeze for an OPSEU member
earning $45,000 a year
50000
49000
48000
47000
46000
45000
1
2
3
4
5
Wage increases at rate of inflation
Two-year wage freeze followed by wage increases at the rate of inflation
What Dalton and Dwight
are up to…
Cost savings from non-union workers from a two-year
wage “freeze” that will save the government $750 million
over two years
Year
Total
1
2
3
$250 m
$250 m
$250 m
$250 m
$250 m
$500 m
$500 m
$250 m
What Dalton and Dwight
are up to…
Cost savings from OPSEU members from a two-year
wage “freeze” (with inflation at two per cent, phased in
over five years)
Year
1
2
3
Total
$32 m $96 m $160
m
4
5
$221
m
$250
m
What Dalton and Dwight
are up to…
Cost savings from all Ontario provincial employees from
a two-year wage “freeze” (phased in over five years)
Year
1
2
$285 m $770 m
3
4
5
$1.2 b
$1.6 b
$1.835 b
Left hand, meet
the right hand…
Corporate income tax giveaways, phased in over four years
Year 1
Year 2
Year 3
Year 4
$1.2 b
$1.2 b
$1.2 b
$1.2 b
$300 m
$300 m $300 m
$300 m $300 m
$600 m
Total
$1.2 b
$1.5 b
$1.8 b
$2.4 b
There’s a hole
in the bucket….
Wage “freeze”
Corporate
income tax cuts
Annual savings to government
when fully implemented
Annual cost to government
when fully implemented
+ $1.8 BILLION - $2.4 BILLION
How do corporations get
government to do this?
 Constant
lobbying
How do corporations get
government to do this?
 Constant
lobbying
 Campaign financing at $950-a-plate
How do corporations get
government to do this?
 Constant
lobbying
 Campaign financing at $950-a-plate
 The promise of future employment after
politics
How do corporations get
government to do this?

Constant lobbying
 Campaign financing
at $950-a-plate
 The promise of future
employment after
politics
 Constant
bombardment of the
public with procorporate messages
Corporate tax cuts
won’t create jobs
Corporate tax cuts
won’t create jobs
 In
terms of job creation, public spending
creates five times more jobs per dollar
than corporate income tax cuts
Bang for your buck
Table 1
Expenditure and Tax Multipliers
Infrastructure investment measures
Housing investment measures
Other spending measures
Measures for low-income households and the
unemployed
EI premiums
Personal income tax measures
Corporate income tax measures
1.6
1.5
1.4
1.7
0.6
1.0
0.3
Corporate tax cuts
won’t create jobs
 In
terms of job creation, public spending
creates five times more jobs per dollar
than corporate income tax cuts
 When fully implemented, the wage freeze
will reduce Ontario’s GDP by $3.4 billion,
wipe out 20,000 jobs per year, and lower
tax revenue by about $600 million
Corporate tax cuts
won’t create jobs

Canada
(and
Ontario)
already
have lower
taxes than
competing
jurisdictions
KPMG Total Tax Index for 2010
200
150
100
50
0
MEX CAN NED AUS UK
US GER ITA JPN FRA
Corporate tax cuts
won’t create jobs
 Tax
rates make up a very small part of
investment decisions
 KPMG says taxes only account for up to
14 per cent of location-sensitive
investment costs
 This means other factors (wages, public
health care, skilled work force) become
key to investment decisions
Where do
voters fit
in all this?
Spin and public opinion
What Liberals are
telling voters

Dwight Duncan says
the wage freeze is
necessary to preserve
public services in the
face of a $19.7 billion
deficit.
 He suggests strongly
that public employees
are overpaid
Assessing Liberal spin

The Liberals feel they have a good strategy
 While most members of the public don’t know
about the wage freeze, many think it is a
good idea
 There has been a strong media campaign to
portray public sector workers as overpaid
 The public is not interested in significant cuts
to public services – people want them – so if
people can’t get the same services at a lower
cost, they’re content.
Assessing Liberal spin
 Could
work on public opinion, but only if
public employees go along it
 Liberals will play on workers’ fear of a
Tim Hudak government
The political landscape
 Liberals
are in trouble
 Tories have overtaken Liberals in some
polls
 Between 68% and 73% per cent of
Ontarians say the province is on the
“wrong track”
 Liberals far behind in many ridings
 Hudak more popular than McGuinty
The political landscape (2)




Hudak is cut from the
same cloth as Mike
Harris – a Hudak
government would be a
disaster for public
services
Hudak is largely
unknown to voters
He has never fought an
election as leader
He will be subject to
attack
The political landscape (3)

The Liberals are most concerned about their
right flank
 Based on their track record, they will try to
show the public that they can be as right wing
as necessary while still trying to hold on to
their centre and centre-left supporters
Questions
for OPSEU
members

What are our options for campaigning
around the wage freeze?
1.
2.
What are our options for campaigning
against it?
What are the implications for the
provincial election?
Campaigning against
the wage freeze:
building our message
 What
arguments will persuade our
members and the public to support a
strategy (either centrally or locally) that
builds our ability to defeat the wage
freeze or mitigate the negative fallout?
 The following slides evaluate seven
possible union messages
Evaluating arguments against the freeze
1.
“The deficit is not our fault”
Evaluating arguments against the freeze
1.
2.
“The deficit is not our fault”
“We are not overpaid”
Evaluating arguments against the freeze
1.
2.
3.
“The deficit is not our fault”
“We are not overpaid”
“It’s not fair”
“It’s not fair”
A
four per cent wage cut is a big hit for
low-income workers
 The wage freeze will hit women more than
men; the public sector workforce is 60 per
cent female (67 per cent in education, 82
per cent in health and social services)
 Women already earn less than men; the
wage freeze just make this worse
Evaluating arguments against the freeze
1.
2.
3.
4.
“The deficit is not our fault”
“We are not overpaid”
“It’s not fair”
“It will hurt jobs and the economy”
Evaluating arguments against the freeze
1.
2.
3.
4.
5.
“The deficit is not our fault”
“We are not overpaid”
“It’s not fair”
“It will hurt jobs and the economy”
“It will not strengthen public
services”
Evaluating arguments against the freeze
1.
2.
3.
4.
5.
6.
“The deficit is not our fault”
“We are not overpaid”
“It’s not fair”
“It will hurt jobs and the economy”
“It will not strengthen public services”
“It will not help pay down the
deficit”
Evaluating arguments against the freeze
1.
2.
3.
4.
5.
6.
7.
“The deficit is not our fault”
“We are not overpaid”
“It’s not fair”
“It will hurt jobs and the economy”
“It will not strengthen public services”
“It will not help pay down the deficit”
The wage freeze will not protect public
services, save jobs, or pay down the deficit.
Every dollar saved through the wage freeze
will be a direct donation to corporate profits.
A “sea change”

76 per cent agree that existing corporate
income tax cuts should be postponed
 81 per cent of Ontarians support higher taxes
on corporations to pay down the deficit
 75 per cent say CEOs should make sacrifices
to pay down the deficit
 75 per cent support a 10 per cent surtax on
those earning $300,000 a year or more
The time is ripe…
 Canada’s
Big Six banks paid out $8 billion
in bonuses in 2009 and are on track for $9
billion this year
 Big Six profits were more than $14 billion
last year
The union message…

“We are always ready to talk about
ways to protect public services and
save jobs, but why should our
families make a donation to
corporate profits?”
The union message…







This approach goes after the Liberals where it hurts –
their relationship with corporations on the one hand and
their need for public employees’ votes on the other
It will resonate with the public
It is in line with what we have been saying all along
It challenges the long-term trend that is moving money
from wages to profits
It provides no comfort to Tim Hudak
It lays the groundwork for a public conversation about
the influence of corporations on our democracy
It lays the groundwork for an agenda in support of good
jobs, good services, and fair taxation
A union campaign



Even a campaign that only reached
public employees would be huge
The Liberals need our votes
A serious lobbying effort, combined
with other tactics, could create
significant leverage for OPSEU
members and other workers