« What does the federal budget mean for the post-secondary sector? | Main | Exchange controls, barter, and Cunning Plans »


Feed You can follow this conversation by subscribing to the comment feed for this post.

"Since 1990/91, there has only been one period where federal revenue grew at least double the rate of expenditures for three or more years – the prolonged period from 1995/96 to 1999/00 – a period coinciding with rapid economy recovery, expenditure restraint and an export boom. Is such a boom anticipated over the next three years? "

So the minister is betting on a better than expected US expansion. The period that you've noted coincides with Greenspan's willingness to test the consensus on the NAIRU , correctly as it turned out. Perhaps the belief now is that the Fed will take its dual mandate seriously --to Canada's benefit.

This is not the time to try to balance the federal budget anyway. We still have the interest rate practically at the lower bound. Employment taken out of the economy by reducing the deficit cannot be made up by reducing interest rates, as happened when the budget was balanced in the mid 90's. We should be providing more stimulus until we get signs of overheating. Then would be the time to cool the economy by balancing the budget. This goes for the federal government, which can essentially just borrow from its own central bank.

I am not arguing that provincial governments should continue building debt. They do not have their own central banks and we need to worry about their solvency. One or more really could wind up like Greece. But a national government which has debts denominated in its own currency, and a good chunk of which is just owed to its own central bank, really does not need to worry about that. Its job should be to maintain full employment without worrying about its deficit.

It looks like the one thing the Tories fear is going into 2015 with a deficit. It alienates their Chamber of Commerce base.

2015 will be an unusual election. 2011 produced a double-winners: the Tories got their majority and the NDP broke through in Quebec and became the Official Opposition, relegating the Liberals. 2015 is going to be Part II of that upset.

People thought the NDP and the Quebec Rookies would be a hack-a-thon, a leak a minute and complete amateur hour. It turns out the Quebec MP's have been pretty good, kept their cool during the student protests and have been great in parliament.

So if you think the NDP has what it takes (and I do) then the Tories really have to get in touch with their base to be competitive.

Budget is currently a fight between on one side Flaherty, actually not a hack, and Finance dept. staff who know you can't Austerianize yourself into prosperity, and on the other side the Chamberof Commerce and their still-notunderstanding-were-not-in the middle-ages-gold-coin-using anymore.

actually not a hack

I remember his tenure as Minister of Finance in Ontario and his participation in the Harris Government. I do not share your opinion, Jacques.

Tony Clement is another ex-Harris minister and is definitely a hack.

The Harris Government is what happens when you let the Chamber of Commerce run the government.

By not a hack, I mean that he seems to have enough brain stem to obey his deputy minister.

OK, I'm setting the bar.
As the old Jewish saying goes, "life can be either horrible or miserable. Thank G_D you're miserable"

He could have been George Osborne.

Determinant - "So if you think the NDP has what it takes (and I do) then the Tories really have to get in touch with their base to be competitive".
Oh my! If ever the wish displaced the analysis.
The NDP are dropping like a stone in much of western Canada since Mulcair told the west they had some horrible disease while he has managed to alienate much of the rest of English Canada with his dalliances with his Quebec mistress (sovereigntists) over his proposal to water down the Clarity Act - opposed by 75% of English Canada in latest poll.
And he is not breaking through in Ontario nor is he connecting with voters like Layton did.
And then there was the Mulcair Washington trip that generated so much raw material for negative adds in 2015, it will be unfair to pay campaign managers a salary in 2015.
No - the existential threat to Harper - and Mulcair - is the man with the flowing mane and no apparent ideas.
Even though Justin has been vacuous thus far, having met him several times in media green rooms, there can be no absolutely doubt concerning his electricity and magnetism. He connects like no other politician today. I hear this from my students and even my own daughter (sigh).
Election 2015 will see the NDP returned to their traditional and important role as the conscience of Parliament and Canada as the 3rd party. The much more interesting question is whether Justin can take them into power or "merely" return them to official opposition. The NDP are dead man walking because you can not write off half the country and major parts of the largest province Ontario.
Livio - while I agree with your empirical analysis, I disagree with your conclusion. I am with Andrew Coyne that this govt will likely surprise us with more cuts revealed in the Budget Implementation Bill.
Moreover, the US is - finally - turning the corner on housing and autos which are two major sectors. In turn, this will boost growth in 2014-15 which will drive tax revenues
Finally, it is my judgment that Paul Martin taught Flaherty well with reserves and cookie jars tucked away in corners of the Finance Ministry that can be called upon to coin a phrase:), "manage earnings".

Hello Ian:
You may be right about further cuts but I think they will only use them if revenues start to falter. They are in the two year period leading up to another election and I suspect surprise cuts will not go over as well and will certainly be used more effectively by the opposition. The US is turning the corner but I think that there has been quite a structural change in southern Ontario manufacturing (a lot has disappeared) such that there is not going to be as automatic a spillover onto the Canadian economy as there has been in the past. The US share of our exports was already declining prior to the 2009 recession. Still, it should be interesting to watch events unfold.


This is a typical post from you: little fact, much preaching and overall very right wing. With a large condescending tone.

Even though Justin has been vacuous thus far, having met him several times in media green rooms, there can be no absolutely doubt concerning his electricity and magnetism.

Yes there is. He isn't his father. He ran afoul of the politician's nightmare: saying something contradictory in English and French. I found a wonderful quote of his from 2010 where he said on Quebec TV (Francs-Tireurs) that "Our economic and socio-democratic agenda has been taken over by Albertans." question: "Is it better for Canada to have more Quebeckers than Albertans in power [in Ottawa]?" Justin's response: "Yes."

I will destroy him just with that in this Central-Ontario riding.

Election 2015 will see the NDP returned to their traditional and important role as the conscience of Parliament and Canada as the 3rd party.

And you suggest I am wishing? The change is simply that Ontario is turning into BC: the Liberals are dying in half of Toronto and most of Ontario outside of it. Those races are turning into Tory/NDP races which are typical of the West. That's just poll results.

You think Quebec is going to go back to the Liberal Party? The Bloc has had it and has turned into a joke. The NDP's numbers have been phenomenally steady in Quebec.

The NDP has taken a honest opposition stance on pipelines. That's what traditional left-right politics looks like. And you confused "Alberta" with the West. BC is quite against pipelines, Northern Gateway especially.

The Federal NDP is turning into something that it already is in BC, Saskatchewan, Manitoba and Nova Scotia: the alternative government.

And he is not breaking through in Ontario nor is he connecting with voters like Layton did.

Mulcair wasn't elected for his ability to break through, he was elected to give the Federal NDP the discipline of power and to consolidate our gains.

No - the existential threat to Harper - and Mulcair - is the man with the flowing mane and no apparent ideas.

See, this is where the NDP has depth. I'll see Trudeau's mane and raise you Ruth-Ellen "Vegas" Brosseau, who is very attractive, very popular and has a story ten times better than Justin's.

Attempting to balance the budget is a barmy objective. As Paul Friesen above put it, the job the government which issues its own currency is to “maintain full employment without worrying about its deficit.” Or as Keynes put it: “Look after unemployment and the budget will look after itself”.

Paul,Ralph: it,s obvious if you know economics. (I mean that Austerians don't know) But why would we expect the masses to know and understand given that we don't expect them to understand quantum physics?

"For the more prosperous fiscal years ranging from 1995/96 to 2008/09, revenues grew at an average annual rate of 4.3 percent"

While economic growth was supportive of strong revenues, growth was muted in a lot of these years due to tax cuts/expenditures.

From corp income tax to EI premiums to GST to income taxes. Heck now even my transit pass pays me a hundred bones every April.

Determinant - you are unconciously drole. Is it "very right wing" to state that Trudeau poses an existential threat to both Harper & Mulcair?

I think that the libs have a very good chance at regaining power in 2015 - by doing what the Lib Party did for 100 years in the words of Mackenzie King: "lean to the left, lean to the right and straddle the centre" (more "right wing analysis:)"

Did you watch the CBC budget coverage with the media scrum around Trudeau only 10 feet from Mulcair? CBC did notice and did comment.

Have you read any of the polls for the last year including Nick Nanos analyses in the Globe?

Have you spoken to any young people about Justin Trudeau.

If I was an NDP or Conservative Party strategist, I would be extremely nervous about Justin. And please note, I NEVER said he was not intelligent. He is bright and quick and disciplined. And he might be the next PM of Canada.

And one more thing. Trudeau is not Harper for those that detest Harper and he is not Mulcair for the 65% to 70% that do not support the NDP.

In short, he is a perfectly bilingual, younger Canadian - who poses an existential threat to those two leaders.

Have you read any of the polls for the last year including Nick Nanos analyses in the Globe?

Yes. The NDP is consistently ahead actually. The famous "Trudeau would get us a majority" poll said nothing of the kind. That poll did not compare the Liberals to the NDP, just the various liberal candidates.

Have you spoken to any young people about Justin Trudeau.

As I am 30, and a good part of the NDP Caucus is younger than Justin, him campaigning on youth is laughable.

Justin has zip to say about economics in which he leans seriously to the right. For a generation facing serious economic challenges, he has nothing productive to say to us.

Not to mention the Liberals' chronic fundraising troubles.

$20 says Justin and the Liberals get 3rd in the next election.

Jacques René Giguère,

You make a reasonable point about quantum physics, etc. On the other hand there are still plenty of so called professional economists who don’t understand the above Keynes quote. So I think I’ll continue to make that point even on blogs read mainly by people with a good grasp of economics. The objective being that when the 95% of the economics profession sing from the same hymn sheet, politicians and the masses won’t have much option but to agree.

In short, he is a perfectly bilingual, younger Canadian - who poses an existential threat to those two leaders.

Bilingual is par for the course for any Canadian leader. This isn't the 1960's anymore.

Actually that's the critique about Justin: It's not the 1970's anymore.


The Austerians are also inflationphobes. What is your strategy to deal with inflation?

@Ian/Determinant. Gentlemen, please.

What will win an election, policy or a personality cult? Consider (1) all the people who detest Harper without being able to coherently describe a single policy he has endorsed, (2) the grotesque DPRK-style spectacle of mass pseudo-emotion following Layton's death, (3) events to the south (DC, not Venezuela). I say Trudeau in 2015! Let's just hope--in vain--that his puppet masters know good policy when it bites them in the rearguard.

If the Bank of Canada is targeting 2% inflation, that determines a finite stream of seigniorage revenue, which creates the Bank of Canada's profits, which it gives to the government. That's a couple of billion per year. That will grow over time if the economy grows, but will fall over time if the use of 0% interest currency falls over time. That seigniorage revenue needs to be included in the government budget constraint. It does not mean the government has no budget constraint.

(1) The NDP is the Official Opposition. Plus Vegas Brosseau is hot (in appearance and in politics).

(2) What was so bad about that? Jack Layton's funeral shows the NDP is the party that throws the better party!

(3) ??? Budget Gridlock is constitutionally impossible here due to the Confidence Convention.

Shangwen - I think you merely paraphrased me - albeit more elegantly

Determinant - Justin just raised an extra $1 million - for a ""rainy day"" - to donate to the Lib campaign.

Point well taken that the NDP caucus is mostly under 30 - and on a leave of absence from 2nd year university - no? Imagine their potential contributions if they graduated or even made it to 4th?

You should read my 2012 How Ottawa Spends (McGill Queens Press) article on the Corp Income Tax cuts and the 2011 election. Using Nick Nanos polling data from the final 72 hours (published in June 2011 IRPP) and Martha Hall Findlay's conversation with me concerning the repudiation she received on the phones and at the door in the final 72 hours - I argued the blue Liberals in the GTA pushed Harper to a majority (from 37% to almost 40% nationally) in the final 72 hours of the campaign in the GTA, as they were terrified of a minority govt that they knew would lead to an Ignatieff-Layton coalition.

Thus, I concluded that Stephane Dion and Michael Ignatieff should receive co-equal credit for electing Harper.

The secondary conclusion is that we all think highly of the NDP until we enter the polling station and at that very instant - a singularity - we have an "oh my gawd" moment and large numbers of woulda-coulda NDP switch to the Libs or even in the 2011 election to Harper.

Determinant - you are young so allow me to share a secret - Canadians are NOT hard right conservatives or hard left socialists. Canadians want "peace, order and good government" (POGG)- not "life, liberty and the pursuit of happiness".

And POGG means being able to drive short distances to Tim Hortons and the hockey arena in the winter and slightly longer distances in the summer to the lake.

And English Canada has absolutely no idea who Brosseau is (she worked at Olivers Pub at Carleton) and furthermore, they do not care.

And besides, what is so wrong with being the conscience of parliament in the far right corner of the House of Commons. We will know it is the NDP whenever we hear them swearing.


Do not patronize me. The NDP is a mile ahead of the Liberals in retail politics, always has been.

Let me share another secret, the modern Liberal Party HATES to talk about economics. Particularly social programs. It scares the Blue Liberals. That's why the Liberals haven't had a decent pro-active economic measure since the Canada Health Act in 1984. Pocketbook issues like CPP expansion are a Liberal third-rail. But economic issues are going to dominate 2015. Unless you want to legalize polygamy, there aren't really any more social issues to deal with.

"Determinant - Justin just raised an extra $1 million - for a ""rainy day"" - to donate to the Lib campaign."

That's nice. The Liberals need it, they are in third in fundraising. The NDP has enough money to spend the limit next election and will. I do hope he has at least 834 people on that donation list, any less and they exceeded the Elections Canada personal donation limit. Oopsie.

And English Canada has absolutely no idea who Brosseau is (she worked at Olivers Pub at Carleton) and furthermore, they do not care.

Advertising, my dear Ian. Makes for great copy. Plus it really helps in Quebec, the Liberals just can't manage to find a pulse there.

The secondary conclusion is that we all think highly of the NDP until we enter the polling station and at that very instant - a singularity - we have an "oh my gawd" moment and large numbers of woulda-coulda NDP switch to the Libs or even in the 2011 election to Harper.

Were that it were true. It isn't. Most of the Ridings in central-eastern Ontario, which tend to sway with the winds, turned into Tory/NDP races with the Liberals third. Ditto Western Ontario. Toronto may as well be on a separate planet in Ontario, along with Ottawa. But you knew that. The action in Ontario next election will be outside Toronto.

I commend you on your fallacy of composition though, trying to extend Toronto onto the Rest of Ontario. How long have you lived in this province?

And you do know where POGG came from, right? It's Colonial Office boilerplate, it appears in every Commonwealth Constitution, from Australia to the new Falkland Islands one, written three years ago.

Somehow BC, Saskatchewan, Manitoba and Nova Scotia have all managed to elect NDP governments now or repeatedly, in the past (or so high in the polls be a surefire thing in six months, in the case of BC). All that has happened is that the federal level is starting to resemble these provinces.

Which really helps the NDP because there is only one membership list, not two. Every member is simultaneously a federal and provincial member, each level has a section, not an independent party. Which really helps with finding good people and moving them from the provincial to the federal level.

You should read my 2012 How Ottawa Spends (McGill Queens Press) article on the Corp Income Tax cuts and the 2011 election. Using Nick Nanos polling data from the final 72 hours (published in June 2011 IRPP) and Martha Hall Findlay's conversation with me concerning the repudiation she received on the phones and at the door in the final 72 hours - I argued the blue Liberals in the GTA pushed Harper to a majority (from 37% to almost 40% nationally) in the final 72 hours of the campaign in the GTA, as they were terrified of a minority govt that they knew would lead to an Ignatieff-Layton coalition.

If it's on a par with the John Ibbotson's recent dreck (which contained racist comments) and equal to the repeated fallacies and wishful predictions (you seem to forget the future is uncertain) you have posted here, then I'll give it a pass.

If you're trying to claim a credit for publishing in IRPP, then given the varying quality of articles I have read in there and the fact that the Canadian policy wonk circle isn't big, it's not really a plum.

But if IRPP interests you, then I highly recommend Brad Lavigne's inside profile of the Orange Crush: www.irpp.org/po/archive/jun12/lavigne.pdf

And besides, what is so wrong with being the conscience of parliament in the far right corner of the House of Commons. We will know it is the NDP whenever we hear them swearing.

The Liberals seem to loathe it. I don't know why, their British parents made that their niche for decades.

Ah, speaking of fallacies Ian, I read your article in the Ottawa Citizen on Public Service "Reform".

It had this gem:

However, this week many Canadians were shocked to discover that federal public servants pay only 15 per cent of the total annual premium cost for disability insurance awhile paying nothing for dental plan benefits and nothing for the Extended Health Care Benefit and Level I of Hospital Benefit. This is far below the standard 50-50 cost sharing in the private sector between employer and employee.

Read more: http://www.ottawacitizen.com/business/Public+service+benefits+longer+sustainable/8106474/story.html#ixzz2ObrhhiE4

I am a trained insurance agent and know precisely what I am talking about. You, sir, clearly did not do enough research, else you would not have made the egregious false claims you made in this article. Mostly because you failed to understand the tax code. I note you did not provide a reference for your claims; particularly as your private sector interpretation is actually quite at odds with commerical reality as I was trained to sell in, I would appreciate seeing such a study.

1) "Extended Health Care Benefit" and Level I Hospital benefits ( the levels just adjust the deductible on semi-private coverage, the benefit is small) is the Public Service's Drug and Extended Health Care (Optometrists, etc). plan. Nothing more. I had a plan just like it when I worked at a call centre. I too paid "nothing" for it. In Canada, the premiums for such plans are a tax deduction for the employer and the benefits are received tax free by the employees. Premiums receive a significantly smaller tax preference in the hands of an individual, they are only eligible for the Medical Expense Tax Credit, not a deduction.

I used to sell these plans as an insurance agent. The standard is for the employer to pay the premium for the base plan. That's just tax law and insurance company standard practice for all group medical plans. Upgrades may result in extra premiums. So this part of the PS plan is decidedly average.

2) You may arrive at the 50% mark by including disability premiums. And in including this you would also be very wrong. According to tax law, there are two kinds of employer disability plans:

(a) a Wage Loss Replacement Plan, where the premium is tax-deductible to the employer and the benefit is taxable income.
(b) a Grouped Accident & Sickness Plan, in which the employee pays the premiums out of after-tax dollars and the benefits are tax-free. For long-term claims this can seriously impair retirement savings room.

The PS plan is (a). As the government does not pay tax but gets tax from benefits, a WLRP is in practice cheaper, all other things being equal. A Type (b) plan is often seen in smaller employers and I used to have one, but the wage has to be higher to account for the after-tax deduction if comparing "take-home" pay. Perhaps you are implicitly assuming that an employer will use after-tax deductions from the nominal wage rate as a backdoor wage cut. In which case your analysis is being inconsistent.

For legal reasons WLRP's are better for larger employers than GA&S Plans.

Further, for tax reasons, my disability insurance textbook strongly recommends that WLRP premiums be paid entirely by the employer, else the benefit is only taxable after premiums are exceeded that that is an administration nightmare to determine. That and the tax deduction are why WLRP premiums are in practice customarily borne by the employer in Canada.

Your claims about DB plans are similarly ill-founded and at best arguable. I refer you to the numerous posts on pensions here on WCI and the extensive coverage in IRPP. The government does not face solvency funding so going concern-funding is appropriate. Further the Public Service Pension Plan is actuarially in fine shape and since the government can and does take (monthly) payment surpluses out, it guarantees payment deficits too.

You also forgot the swingeing fees charged by DC plans and RRSP providers (Frances had a great thread on that). The PSPP doesn't have those.

I also refer you to the recent comments of the CIBC President commenting favourable on CPP expansion. I strongly suspect they were motivated by his realization that a large number of retirees without adequate provision would materially impair his business.

As for sick days, the PS at present doesn't have an STD plan at all. You are expected by "cash-out" your sick days to reach the 90-day Elimination period (in practice 120 days until a cheque arrives) when the Disability plan starts to pay out. I would re-examine your numbers to subtract those sick day claimants who took 120-day blocks to go on LTD.

I must say Ian that given the quality of your submission to the Ottawa Citizen, I am not impressed with your work. It did nothing to enhance your reputation (maybe your political one).

I think it's much more interesting that, apparently, the liberals have decided to stop fighting each other and start taking on their political opponents.

There's a certain Machiavellian charm to the choice of JT. A young, handsome, fit, personable, card carrying member of the Canadian aristocracy vs. Mr. Roboto? As a receptacle into which to pour the fruits of their backroom deliberations it's an inspired choice, really.

And as much as I'd like to like Mulcair, I just can't warm to the incoherent policy peddled by a slightly frumpy fire breathing socialist (a term I don't use as a pejorative).

Anyway, JT doesn't need to be a policy wonk or senior statesman. He just needs to look the part. IF the liberal machine is firing on all cylinders, then he just might pull it off. And if he doesn't? Well, between 4ish years as the leader of the official opposition, and the salt n' pepper coiffure he seems destined to sport he might just acquire the requisite gravitas the electorate demands of its leaders.

Determinant - the Nanos polling data for my article was sourced from IRPP. My article was published in the annual publication: How Ottawa Spends, published by McGill-Queens.

To answer your question concerning the source of the research for the Citizen Op-Ed on public sector benefits:

See the 250 page TBS (Treasury Board Secretariat which is the employer of the GoC public service) Lahey Report, Expenditure Review of Federal Public Sector Compensation Policy and Comparability http://www.tbs-sct.gc.ca/report/orp/2007/er-ed/vol1/vol1pr-eng.asp?format=print

Also see PBO The Fiscal Impact of Federal Personnel Expenses: Trends and Developments at http://publications.gc.ca/collections/collection_2012/dpb-pbo/YN5-42-2012-eng.pdf

In addition to the 250 page TBS Lahey Report and the recent PBO report, CBC journalist Greg Weston reported on an internal confidential TBS report on GoC absenteeism:

Public sector sick days cost $1B a year
By Greg Weston, National Affairs Specialist, CBC News
Posted: Jun 20, 2012 9:03 PM ET

From the CBC Report by Greg Weston:

A confidential government report obtained by CBC News reveals federal workers have been booking off sick in record numbers, costing Canadian taxpayers more than $1 billion a year in lost wages alone.

The internal Treasury Board report indicates federal public servants are staying home an average of 18 working days a year, or almost a full month off the job.

That is about 2½ times the average rate of absenteeism in Canadian private industry, and almost twice the level of sick leave and disability claims in the rest of the public sector.

This apparent epidemic of bureaucratic no-shows means that on an average weekday, more federal public servants are off sick than there are employees at Ford Canada and General Motors combined.

End of quote from CBC article

Determinant - "I am a trained insurance agent and know precisely what I am talking about. You, sir, clearly did not do enough research, else you would not have made the egregious false claims you made in this article. Mostly because you failed to understand the tax code. I note you did not provide a reference for your claims""

The answer to your very pointed question: The ""research" was actually copied from the Govt of Canada Treasury Board website as follows:

How much do I pay for disability benefits coverage?

Unless you are a member of the Executive Group, you pay a monthly premium for your disability benefits coverage. Your premium represents 15% of the cost of your coverage because the Employer pays the other 85%.
The current premium rate for DI is $1.93 for every $1000 of your insured salary. Employees pay 15% of this amount.
The current premium rate for LTD is $1.40 for every $1000 of your insured salary. Employees pay 15% of this amount.
The Employer pays 100% of the costs of coverage for members of the Executive Group

How much do I pay for my Dental Care Plan?
The Government as your employer pays the full cost of your Dental Care Plan. However, if you live in the Province of Quebec, the contribution made by the Employer in your behalf is a taxable benefit.
For some types of leave without pay, you may be required to pay the full cost of your coverage. Your compensation advisor will provide you with further information

How much do I pay for my Health Care Plan?
Once you have applied to be a Plan member, the Government as your employer pays the full cost of your Extended Health Care Benefit and Level I of your Hospital Benefit.
Employees who choose Level II Hospital Benefits will pay a premium of $1.10 per month for Single coverage or $3.53 per month for Family Coverage.
Employees choosing Level III Hospital Benefits will pay $5.31 per month for Single coverage or $10.34 for Family Coverage.
Contributions are deducted from employees’ paycheques.
Members of the Executive Category are provided with Family Coverage Level III Hospital Benefits and these are fully paid by the Employer.
Please also refer to the Question on Leave Without Pay.

Hope that clarifies.

Determinant -

In addition to the reports cited above, I should have disclosed that the following annual reports - while not invoked explicitly for my Op-Ed - forms part of the knowledge base (including mine) concerning the public service of Canada


Sixth Report of the Prime Minister's Advisory Committee on the Public Service

Nineteenth Annual Report [of the Clerk of the PCO] to the Prime Minister on the Public Service of Canada

Determinant - last post on this important subject of parity between private sector & public sector wages and benefits parity.

There is a belief by many including the CFIB and the CD Howe (see its excellent peer reviewed studies of PS pension plan http://www.cdhowe.org/ottawa-pension-abyss-the-rapid-hidden-growth-of-federal-employee-retirement-liabilities/19972), that there is an imbalance between benefits in public sector (more liberal) versus more frugal, prudential benefits in the private sector.

To be fair, this is a hypothesis, but it appears from the quote below from Budget 2013 that the GoC will be studying this further.

From Budget 2013 at page 277 in pdf version:

Going forward, the Government will continue to ensure that the public
service is affordable, modern and high-performing. To help do this, it will
examine overall employee compensation and pensioner benefits and will
propose changes to the labour relations regime. The Government will work
with its employees, bargaining agents and others to identify and implement
improved practices and approaches following the lead of other public and
private sector organizations. It will also explore other opportunities to
further transform and modernize the public service to address the demands
of the modern world and respond to the evolving needs of Canadians.
These improvements will benefit both public servants and all Canadians.
In addition, the Government will be examining its human resources
management practices and institutions in a number of areas, including
disability and sick leave management, with a view to ensuring that public
servants receive appropriate services that support a timely return to work.
The Government will be consulting with key stakeholders on these
objectives over the coming months.

Crown Corporations

Economic Action Plan 2013 takes steps to align employee compensation offered
by Crown corporations with what is available to federal employees.
In Economic Action Plan 2012, the Government indicated that it would
work with Crown corporations to ensure that their pension plans are broadly
aligned with those available to federal employees. The Government will
continue to work with Crown corporations with a view to moving to a 50:50
cost sharing between the employer and employees by 2017 and aligning the
age at which retirement benefits become available with those announced in
Economic Action Plan 2012 for post-2012 hires under the Public Service
Pension Plan. The Government will also look at options to improve the
financial viability of Crown corporations, including compensation levels.

Back on topic: Will they balance the budget? Who knows, and who cares? On top of the growth scenarios cited by Livio, the inflation rate in healthcare--running near 40% of most provincial budgets--is 5-8%. If growth is higher, healthcare inflation will be higher. If there is a recession, healthcare growth will still be positive. And healthcare productivity is still negative. I have a number of proposed solutions to that--cheap flights to India, a hotel in Chandigarh, and the colonization of Belize--and they seem more likely to me than a 90s-style slashback of spending.

Straddling both topics: I would welcome (gaaah!) a Liberal government if they could do the left-right shell-game of the Chretien years again, and make deep cuts in provincial transfers while getting the lefties to feel warm and fuzzy about their overlord being in office. Policy people seem to have forgotten the 90s. We made large cuts in health spending. The important point is that, for the health care system, it was a front-end collision, but for population health it was a bumper dent. See here for a great overview. I'm not excited at the thought of firing tons of people, but I would like my kids and their friends to have decent care in the future. If the wonks who prop up JT can make big cuts again while wheeling him out periodically to talk up the statist grandeur narrative, I'm all for it.

Re: the public service and its costs. Determinant: I know, and have worked in, plenty of private health care clinics (outpatient obviously). Do you know how they make all their money? Government workers. Bank workers can't afford 15 sessions of physio, and guys who sell alarm systems can't get time and coverage for 60 minutes of psychotherapy every Wednesday at 2:30. I don't demonize individuals--you can't blame anyone for taking a good deal, and that's the problem.


I was already very familiar with those programs. Thanks for confirming your error. Nothing in those programs is outrageous or unusual in the private sector. Private sector plans don't make workers pay premiums for basic coverage either, that is insurance company practice. In fact when I worked at a call centre I got a package very similar to that and I didn't pay any premiums for it (aside from the DI, which was an after-tax deduction shuffle, as I described). For WLRP, the preferred practice of insurers is for the company to pay the premium entirely.

In fact Ian, if you go and compare that package to what you get at Carleton or what a regular person gets at a call centre or at a bank, you won't find much difference.

As I said, I worked at a call centre and got a substantially similar package.

If you wish, you can double-check my conclusions with any group health insurance agent of your choice, there are lots in Ottawa.

The pension is a different story, but it has been determined that the contribution rate will increase. You may believe the pension is outrageous, but the basic formula hasn't changed in decades. The government formula also deducts CPP from the benefit, so a typical payout is more like 45% of salary instead of the apparent maximum of 70%.

I wouldn't call the private sector's plans "prudent" when the CIBC says they aren't enough.

Lastly, if you don't net out sick days claimed in lieu of disability benefits and compare apples to apples, then you have committed a category error.

It is apparent to me, Ian, as a trained practitioner that you plainly did not know what you were talking about when you wrote that article, as evidenced by the error-ridden analysis. Either you honestly didn't know or you didn't care when you wrote the article as a political opinion. It wasn't academic analysis, it was political opinion without facts.

Then you are effectively repudiating the TBS report on absenteeism as well as the TBS Lahey Report. These two foundational reports are the basis of the government's decision (and my arguments) to harmonize the benefits of the crown corporations with the core federal public service and the related decision to harmonize the federal public service with the private sector.

Re pensions, I am finishing an Op-Ed on pensions and the alleged inadequacy of pension savings by Cdns. Per Stats Can Household Balance Sheet report reveals personal aggregate assets owned of approx $8.5 Trillion less the $1.5 trillion owed by Cdns = $7 Trillion net worth or about $190K per capita. Per Stats Can, about 1/2 of the $7 trillion net is real estate - homes, seasonal and undeveloped land - while about $1.8 T are pension assets and the remainder are savings such as mutual funds, cash etc

Contrary to CLC, CCPA, CIBC et al Cdns in fact are saving a great deal - $7 trillion net - to be precise. Indeed some Cdns are downsizing at retirement to a smaller home in same city or to a smaller home in a less expensive town nearby e.g. Kingston or Perth for those selling in Ottawa. After all, principal residence is the only investment that is capital gains free.

Given that 69% of Cdns own their homes per Stats Can and given that older Cdns have avg net worth much higher than young Cdns, those retirees who are homeowners should downsize to contribute to their retirement rather than ask younger people with much lower net worth to contribute through higher lifetime premiums contributions.

And for the 5% of seniors below the poverty line per OECD Pensions at a Glance, we can provide a targeted rather than universal solution through OAS-GIS enhancements - as Layton argued in 2011 election.

So, while real estate is not liquid, it is ultimately fungible and tax free if principal residence therefore we should not enhance CPP - as I do not want to exploit Determinant or any of those 1st year university NDP MPs.

Actually no Ian, I am just reiterating the Lahey Report. Nice attempt at spin though.

On the Disability Insurance Plans:

The life and disability insurance plans both lags and exceeds others

As was the case in the previous areas, the federal policies both lag and exceed what other employers offer. For the most part, other employers cover plan costs fully or to a greater extent than does the Treasury Board. On the other hand, indexation of long-term disability pensions, up to an annual limit of 3%, is better than for most employers.

Public Service Health Care Plan is competitive but lags in some areas

In general, Mercer Human Resources Consulting found the PSHCP to be competitive with the coverage provided by other large public and private employers in Canada. However, some features were relatively less generous in relation to active employees, including the levels of deductibles and reimbursement, hospital room coverage, the absence of a drug card, limits on many paramedical specialists, vision care, private duty nurses and out-of-country coverage.

Based on a small sample of other employers' actual per capita costs, the PSHCP fell in the middle range at $823 per member annually. The full range was from $495 per capita to $1,243.

Few employers provide the same level of coverage to retirees as to active employees. The PSHCP is very competitive with respect to coverage provided to retirees.

The last paragraph is understandable in that the PUblic Service tries to provide uniform compensation across provinces, whereas few private sector employers are that large that it is necessary. The United Church, for example, is another one of the few that try to provide interprovincial equity.

The Public Service Dental Care Plan is also competitive, but with lags in some areas

Again, the federal plan is broadly speaking competitive, but lags the most generous employers in some areas such as the maximum level of reimbursement in a year and the deductible levels. On the other hand, the PSDCP is more generous on lifetime orthodontics reimbursement levels and coverage for retirees.

Nothing here says rich or overgenerous.


Some reports in 2003[152] asserted that there is a substantial general premium whereby federal public sector salaries exceed on average those paid for similar work in the private sector. In our view, the case is unproven. The more we compare salaries for specific jobs, the smaller any such premium becomes. In fact, the 2003 report of the Quebec Institut de la statistique, which used a job matching methodology, found that federal public service salaries were generally in line with those in the Quebec private sector, which is itself similar within 5.5% to the Canadian private sector average.

Nevertheless, all the general studies examined in this review, as well as our own analysis of federal public service compensation, point to a rate of increase in salaries in the federal public service since 1998 that exceeds what was experienced in the private sector on average. If there was at most a small premium overall as of 2002–2003, a continuation of the relatively faster rate of growth in federal public service salaries will certainly create one of significant size.

With respect to Mr. Lahey, he isn't an insurance agent and it shows:

Probably the most important innovation would be to introduce real choices for employees in the benefits they receive. If this were successful, the need to rethink our programs would in effect be done by individual employees as they made their choices. Still, designing the choice options would require thoughtful policy analysis, informed by in-depth canvassing of employees and their union or professional representatives. Previous attempts to move in this direction have foundered on fear of administrative complexity, concerns about costs, employee and union resistance, and the inherent caution of government officials. Moving successfully to introduce meaningful flexibility would likely require two things: first, determination of an annual total amount to be paid by the employer for each employee for such benefits; and second, design of a set of manageable choices that could be offered at reasonable cost.

This thinking is anathema to the efficient and effective provision of insured benefits. The more choice, the less risk pooling there is, therefore the premium for benefits will will be correspondingly higher Insurance is not a pure micro exchange and never has been. This is the explicit trade-off of insurance, you cannot get around it, it is an iron economic law.

Plus every "Flex" plan I saw on offer in the private sector had less generous benefits in each individual package, due to this fact.

There is also the fact that Disability Insurance is a complicated product, period, and similar "integration" provisions (CPP, EI, pensions, etc) exist in the private sector.

Lastly, I note a dissonance between the final conclusions and the conclusions in the body of the report. The report body sees nothing wrong with the specific plans, yet the conclusions still call for substantive changes. Further, the author was not a compensation or insurance specialist, and it shows. Looks like a political report to me.

The only thing truly exceptional about the PS sick leave plan is that it is used in lieu of a short term disability plan. People who go on LTD will have booked 120 days of sick leave already, which in private employers is covered by an STD plan. Until the numbers are reanalyzed on this basis, they are useless as an indicator.

Much sound an fury, signifying nothing, and sloppy analysis to boot.

"Will closing tax loopholes really generate that much extra revenue?"

Some of them will generate significantly more revenue than finance is projecting. One of the "under-the-radar" announcements (at least in the broader public, is the crackdown on so-called "character conversion transactions" which, in simplified terms, are used to convert what would otherwise be fully taxable interest (or other) income into capital gains, only half of which are taxed. Given investor low interest rates and investor focus on yield over the last few years, these sorts of transactions were increasingly common in publicly (an privately)offered investment funds.

In the budget, Finance projects that this change will bring in $175 million over the next five years (roughly $20 million more than the elimitation of the deduction for safety deposit box fees). Maybe, but once you figure that the current size of the public market for these structures is somethink like $30 billion (who knows how big the private market is) and that these structures are particularly attractive to taxable Canadian investors (though, no doubt, people hold them in RRSPs as well, although they really shouldn't) the notion that this change will only bring in $35 million a year over 5 years sounds pretty fishy.

That isn't to say that Finance is counting on that particular provision to help close their gap - I don't think they have any idea how big that industry is - but I do think they'll be pleasantly surprised by that change. Indeed, the Tories have been politically pretty clever, there are actually a lot of tax increases in the budget (another one increases the effective tax rate on dividends paid by small businesses - a key constituency for the Tories), but they're presented as closing loopholes so voters don't go berzerk. There is a lesson in that for their counterparts south of the border.

As an aside, Jeffrey Simpson had a piece on the weekend about how someone was going to have to fix all the inconsistencies introduced to the Tax Act by the Tories' predilection for using boutique tax credits, etc. to achieve their policy goals (i.e., get elected). Maybe, and people can certainly question the wisdom of using the tax system as a social policy tool (although there are arguments both ways). But in some sense, those are relatively unimportant inconsistencies in the tax system. When you step back and look at the bigger picture the Tories have actually done a fairly good job of trying to resolve far more important, and distorting, inconsistencies in the tax system.

So, for example, in 2006 they shut down income trust structures (which created a distortion in the taxation of different business vehicles). Over the past few years, they've been fairly diligent about ensuring the proper integration of the corporate and personal tax systems (including raising the effective tax rate on "ineligible" (i.e., small business) dividends in the last budget). The last budget shut down these character conversion transactions and extended Canada's thin-capitalization rules to non-residents carrying on business in Canada (which limits the ability of non-residents to strip income out of Canada). True, these are "technical" changes coming from Finance, rather than political initiatives coming from the politicians, but ultimately the buck stops with the politicians, so they get the credit for allowing Finance to pursue these technical changes.

oops, I think my comment got eaten

Yep. Bob Smith is stuck in spam, 2 hours ago.

Determinant - in response to your statement that it was a "sloppy" "political" report, I have copied 3 or 4 salient sections concerning the origins of TBS Lahey Rpt - as well as a brief bio of Lahey - who was a career PS and ADM at Dept of Labour & later TBS and later still at HRSDC.

1. Introduction [to the TBS Lahey Report]

This Report documents the first-ever comprehensive description and analysis of compensation in the Canadian federal public sector. It offers as well a full set of recommendations on how to strengthen management of federal public sector compensation in support of a first-class public service equal to Canadians' expectations.

Origins and nature of this Report

Relatively rapid increases in the size of the federal public service and in total personnel spending in the late 1990s and early 2000s raised questions about what factors were driving the changes. The Public Accounts of Canada provide information in total on the "personnel" expenditure object reported at the departmental level and on the expense recorded by the government, once adjusted for full accrual accounting. Comparability of expenditures from year to year is affected by the timing of large payments such as pay equity settlements and comparability of expenses may also be affected by changes in accounting policies. Nevertheless, the total expenditures in this area reported in the Public Accounts, on a comparable basis year-over-year, show significant growth beginning in 1999. Starting in 1995, the first year the figures are accessible electronically, the expenditures are reported as shown in the table below.

Recent external studies about the comparability of federal compensation to that paid for similar work in the Canadian private sector and at other levels of government suggested that there was a significant and growing premium in favour of the federal public sector. Several such studies are assessed in Section 3 of this Volume. We conclude that these studies likely overstate the size of any premium, but that it appears to be true that in recent years the rate of increase in federal public service average salaries was greater than in the broader Canadian labour market.

An independent point of view

Neither the Treasury Board President nor Treasury Board Secretariat leaders or other officials have sought to shape the findings or recommendations of the Review. As such, the Report is in no way a statement of Treasury Board or Treasury Board Secretariat views on federal public sector compensation. The analysis and recommendations laid out in this Report are the responsibility of its principal author, James Lahey, who held the position of Associate Secretary of the Treasury Board Secretariat until December 2004, and of Associate Deputy Minister, Indian and Northern Affairs Canada, thereafter.

Having completed the Review from a largely independent perspective, based on his experience in the former Human Resources Management Office at TBS and earlier as Assistant Deputy Minister of Labour and later of Strategic Policy at Human Resources Development Canada, Mr. Lahey has submitted his final Report to the Secretary of the Treasury Board.

So? Mr. Lahey's conclusions were loosely connected to his findings. It was a classic example of "notwithstanding the evidence, here is my finding"; the classic hallmark of a political report designed to advance an agenda.

No wonder the unions refused to participate.

Nowhere does it say that Mr. Lahey has any experience in insurance. In compensation certainly, but insurance is *not* merely compensation and goes a good deal beyond the simple transfer of dollars from employer to employee. The loss of mutual indemnification through a "Flex" plan *will* cost each individual employee more in premiums for a given product choice. There is a clear cost for the flex part or any sort of choice in insurance and the cost is a decrease in net insured benefits.

Simply papering over the increased costs by saying that that each employee has a set Flex Allowance may make sense to a person trained in compensation but it is erroneous insurance logic as it ignores the cost of losing mutual indemnification. These choices are not equal but that is not apparent until you look at the insurance side.

All I see in your quoted paragraphs, Ian, is an appeal to authority without addressing the underlying assumptions and the flaws they contain, which I have pointed out.

Further, a former ADM and Human Resources Officer (aka management) producing a report for their Employer, without employee participation and claiming to be "independent" is patently ridiculous. Bob Smith wouldn't let one pass, it doesn't even have the veneer of independence. It would never pass as truly independent in any formal Labour Relations setting.

We are interested and thinking about what you will be covering the following.

The comments to this entry are closed.

Search this site

  • Google

Blog powered by Typepad