Of all the fiscal challenges faced by the BC NDP government during this pandemic, the most daunting may lie just ahead.
Almost all of the collective agreements covering 393,000 unionized public sector employees are set to expire at the end of this month, and union expectations at the bargaining table have rarely been as high as they are now.
That is because an economic issue has suddenly appeared on the scene in a way not seen since the early 1990s. It is the rate of inflation, which has exploded in growth and now sits at more than 5%.
It is unclear whether that rate will hold, decrease or climb even higher, but for the moment we haven’t seen an annual rate that high in decades.
And so inflation is being included in union messaging for the first time in a long time.
In fact, a recent full-page newspaper advertisement jointly sponsored by five prominent public sector unions insists their members deserve a fair deal that specifically “protects their wages against inflation.”
The ad (I can’t remember the last time that many unions joined together in a common front tied to contract negotiations) was jointly sponsored by the B.C. Government Employees Union, the Canadian Union of Public Employees (BC), the B.C. Teachers’ Federation, the Hospital Employees Union and the Health Sciences Association.
If they are all taking the position that covering the current inflation rate is a minimum for a wage increase, it is going to be either an expensive round of negotiations or, perhaps more likely, a disruptive one.
Consider that public wages and compensation consume about $38.6 billion annually, or more than 50% of all government revenue.
A 1% wage increase across the board for all unionized employees costs about $310 million. Non-union managers tend to get a matching increase to union workers, and a similar 1% raise for them costs about $70 million.
Since any wage increase is built into the “base” - and therefore is part of every budget going forward - it is easy to see how the dollars associated with wage hikes pile up.
For example, an annual 1% increase costs about $2.5 billion over three years. This is the normal length of a contract, although there are signs some unions may be looking for a two-year deal.
A 3% annual increase costs about $5.6 billion, while a 5% annual hike would cost almost $9.5 billion.
The government has set aside more than $10 billion in contingencies over the next three years, in anticipation of an expensive bargaining round. But contingencies also cover emergencies such as a bad wildfire season, so it cannot all be earmarked for contract settlements.
In any event, there are already signs this is going to be a rocky ride at the table. The BCGEU has said its set of talks have “stalled” with the major outstanding issue being wages. It says a “gaping chasm” exists between it and the employer when it comes to wage proposals.
I wonder whether a way to bridge that chasm is by going the route of providing generous signing bonuses in the thousands of dollars in lieu of higher wage hikes.
Union negotiators don’t like that because they would rather build the compensation base with higher percentage wage hikes, but a more realistic and attainable goal may be getting nice, plump government cheques to their members at a time of financial hurting for many.
Keith Baldrey is chief political reporter for Global BC.