Liberals to hike pay for 10,000 bureaucrats even as federal deficit continues to swell

OTTAWA — The Liberal government on Wednesday announced pay hikes for 10,000 civil servants, even as private-sector job losses across the country remain in the millions and the federal deficit continues to swell.

The Treasury Board has signed a tentative agreement with the Public Service Alliance of Canada (PSAC) to boost the wages of unionized workers by 6.64 per cent over the next three years, including new provisions for caregiver leave, parental leave, and a 10-day domestic violence leave. It follows an earlier agreement, announced July 10, that hiked wages for 84,000 “administrative services” bureaucrats, who also saw a 6.64 per cent increase over the next three years.

The announcements come as finance officials estimate the federal deficit will hit $343 billion in 2021, or roughly 16 per cent of GDP, prompting calls for aggressive fiscal belt-tightening.

Many observers, including the Parliamentary Budget Officer, have indicated that public service wages account for one of the single-largest expenses on government books, and would have to be targeted by Ottawa in order to rein in spending. Federal personnel costs are expected to increase from $47.3 billion in 2020 to $52.1 billion by 2025, according to the PBO.

Those costs would have to be cut in order to trim the Liberal government’s massively expanded budget, observers say. Other major budget expenses, like transfer payments to the provinces or elderly care and child care benefits, would be far more politically untenable to cut.

The agreement comes as Trudeau, for months, has reiterated that Canadian taxpayers are “in this together” in their battle against COVID-19. The department under Treasury Board Minister Jean-Yves Duclos did not immediately respond to a request for comment on the agreements with PSAC.

“The idea that government employees should be getting a pay raise right now is incredibly tone deaf,” said Aaron Wudrick, director of the Canadian Taxpayers Federation.

“There are millions of Canadians who have lost their business, lost their job, taken a pay cut, and now they see people in government not only making no sacrifice at all, but actually getting a pay raise, which ultimately is going to come out of the pockets of people working in the private sector,” he said.

The new agreements with public service workers come as private sector layoffs reach all-time highs. As of July 12, a more than eight million Canadians had applied for the Canada Emergency Response Benefit (CERB), a financial aid program for workers who have been laid off or had their hours dramatically reduced.

*Paid leave*

Meanwhile, the Treasury Board said Wednesday that it had extended paid leave to some 76,000 public employees in the first eleven weeks of the COVID-19 pandemic, costing taxpayers a total of $439 million.

The size of the federal public service has continued to swell under Prime Minister Justin Trudeau, increasing by roughly 10,000 bureaucrats per year.

It had previously reached a peak of 370,000 employees under former prime minister Stephen Harper in 2012, which the Conservatives gradually cut back to 340,000 by 2015. That number has since ballooned again under the Liberal government, and is expected to reach a new high of 380,000 by the end of 2020, according to estimates by the PBO.

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Experts say the cost of public service personnel will continue to expand in coming years as interest rates remain low. When interest rates decline, the amount owing on pensions and disability liabilities effectively rises, in turn increasing the amount of money Ottawa needs to set aside every year to cover personnel expenses.

In his last fiscal update before the pandemic, Finance Minister Bill Morneau posted a deficit that was nearly $7 billion higher than estimates (totalling $26.6 billion), largely due to higher pension costs that resulted from lower interest rates.

Wudrick said the decision by Ottawa to complete negotiations with PSAC is especially perplexing given that Ottawa has declined to table an annual budget during the pandemic, citing an unusually high level of economic uncertainty. Morneau has yet to table his annual budget, and only posted a brief fiscal “snapshot” earlier this month that showed the first glimpse into Ottawa’s fiscal situation since the beginning of the pandemic.

“By the government’s own admission, they can’t even produce a budget because they don’t know what the fiscal landscape is going to look like,” Wudrick said. “And yet they’re comfortable striking these agreements that give a unionized employees pay raises.”