Finding Balance in the Public Sector

With the declaration of a state of public emergency, the threat of a strike by Calgary’s EMS union has been put to rest by the provincial government. The larger question however of whether or not the province should declare EMS an “essential service” will be tackled this fall.

Such a declaration would remove the right to strike for ambulance workers and paramedics. And rightly so. A strike would significantly affect the lives of Calgarians who have no alternatives to the monopolized services provided by the EMS union. Herein lies the heart of the problem: it is inappropriate for governments to maintain monopoly provision of services and at the same time allow workers to strike.

There are real differences in labour negotiations between services provided by monopolies and services provided in the presence of competition. Suppose unionized workers at a grocery store decided to exercise their right to strike. Because of competitive alternatives (i.e. other grocery stores), the strike is little more than an inconvenience for consumers. Competitive forces also compel the union and the grocer to settle their differences quickly.

Unions in competitive markets understand that unreasonable wage increases and/or prolonged strikes will ultimately destabilize the company and could result in a loss of jobs. On the other side, the employer must balance the effects of losing market share from a prolonged dispute with demands for wage increases. Both the employer and the union face incentives to solve disputes quickly, on terms both can live with. Such incentives do not exist when the service is provided by a government monopoly.

It is critical to ensure that public sector unions are not able to hold the general public ransom. To that end, the government should either allow competition and the right to strike or continue to provide services in a monopolized manner and prevent strikes. In other words, you can have monopoly or the right to strike but not both.

While prohibiting the right to strike for public sector unions would clearly ensure access to service, it obviously leaves the problem of how wages in the public sector would be determined. If public sector workers are not permitted to strike how can they be assured that they will not be taken advantage of by their employer, the government? Indeed, both the current president of the CUPE local representing the paramedics and the provincial NDP leader have voiced concerns about the effect an essential service designation would have on the union’s ability to negotiate wages.

One solution to deal with the reduced power of the unions to negotiate wages is to link public sector wages to their private sector equivalents through wage boards. Wage boards are independent governmental bodies responsible for collecting, analyzing, and setting wages and benefits in the public sector on the basis of wages and benefits in the private sector.

One of the main benefits of this approach is that public sector wages based on those in the private sector would reflect the economic conditions of the times. Wage boards would also remove the political nature of wage negotiations, likely making public sector workers better off in the long run. Currently, wage bargaining in the public sector often ends up as a political confrontation.

The preferred and admittedly longer-term solution is to open up the health care system and indeed most public services to competition. A wide body of academic research has found that private competitive operations are more efficient and productive than their public sector counterparts. They provide citizens with the goods and services in a timely manner with superior customer service, higher quality and lower prices.

While the province should declare EMS an essential service this fall, the real solution to the current dispute involves making a clear choice between either allowing competition and the right to strike, or continuing to provide services in a monopolized manner and restricting the ability to strike.