In City Magazine, Steven Malanga looks at Canada’s civil service pension problems, which may not be quite as bad as some US state problems, but are still going to be a source of conflict going forward:
Governments throughout the country are grappling with as much as $300 billion in unfunded government-worker retirement debt. In a country of just 38.5 million people, that’s a pension problem roughly equivalent to the one that California faces. And it’s widely shared.
Municipalities throughout Quebec, for instance, owe some $4 billion in retirement promises that have yet to be funded, prompting the province’s new Liberal government to demand this summer that workers pay more to bolster the system. A new report on the finances of Ontario’s government-owned utilities revealed their pensions to be unsustainable without deep subsidies from Canadian electricity customers. For every dollar that workers contribute toward their retirement, government-owned utilities now spend on average about four dollars, raised through electric bills—though the cost is even higher at some operations. The news is even bleaker at the federal level, where Canada faces more than $200 billion in total retirement debt for public workers, when the cost of future health-care promises made to public-sector workers is combined with pension commitments. One big problem is pension debt at Canada Post, whose budget is so strained that the federal government gave the mail service a four-year reprieve on making payments into its pension system, even though it’s already severely underfunded.
At the heart of Canada’s pension woes are some of the same forces that have helped rack up several trillion dollars in state and local pension liabilities in the United States. For years, Canadian governments have provided generous pensions at low costs to employees. Workers could earn full benefits while retiring in their mid-fifties, even as they lived longer. Politicians relied on optimistic assumptions about stock-market returns to justify those benefits. Governments were quick to grant additional benefits to politically powerful employee groups, but they underfunded pensions when budgets got tight.
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Dmitri Melhorn says the union movement is missing an opportunity to be more relevant in the private sector, because public sector unions don’t help poorer workers (because public sector union members are middle class professionals, not working class):
Progressive hostility to [Harris v. Quinn], however, is shortsighted. Harris and decisions like it have the potential to revitalize progressive politics by restoring the relevance and political potency that labor held in the early-to-mid-20th century. The great labor leaders of that era — AFL-CIO President George Meany, President Franklin D. Roosevelt, and the like — agreed with the majority in Harris: it was both impractical and inadvisable to afford public employees compulsory collective bargaining rights.
Roosevelt said that collective bargaining and public workers’ right to strike would be “unthinkable and intolerable.” Meany said it would be “impossible.” In the view of these leaders, civil service laws from the Progressive Era of the 1890s to 1920s had made government jobs good and safe. Labor and progressives, therefore, needed to focus on blue-collar workers’ need to fight collectively for basic safety, dignity and living wages. Through this focus, the United States saw historic gains in the well-being of workers and the country’s middle class.
That labor heyday lasted through the 1950s, but starting in the late 1960s labor lost ground. Public-sector unions grew rapidly, but private-sector unions shrank. By 2012, public-sector workers had union membership rates more than five times higher than rates among private-sector workers.
Essentially, the public-sector unions sucked up all the oxygen. Talented labor organizers opted to work with government workers: their members were relatively prosperous and well connected, so they were easy and lucrative to organize. As explained in Jake Rosenfeld’s book What Unions No Longer Do from earlier this year, this shift to public-sector unions meant that unions no longer fought primarily for the working poor. Instead, much of their muscle was devoted to improving the status of middle-class professionals.
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Victor Davis Hanson explains why the drop in trust — specifically the peoples’ trust in government — is on a steep downward trajectory:
Transparency and truth are the fuels that run sophisticated civilizations. Without them, the state grinds to a halt. Lack of trust — not barbarians on the frontier, global warming or cooling, or even epidemics — doomed civilizations of the past, from imperial Rome to the former Soviet Union.
The United States can withstand the untruth of a particular presidential administration if the permanent government itself is honest. Dwight Eisenhower lied about the downed U-2 spy plane inside the Soviet Union. Almost nothing Richard Nixon said about Watergate was true. Intelligence reports of vast stockpiles of WMD in Iraq proved as accurate as Bill Clinton’s assertion that he never had sexual relations with Monica Lewinsky.
Presidents fib. The nation gets outraged. The independent media dig out the truth. And so the system of trust repairs itself.
What distinguishes democracies from tinhorn dictatorships and totalitarian monstrosities are our permanent meritocratic government bureaus that remain nonpartisan and honestly report the truth.
The Benghazi, Associated Press, and National Security Agency scandals are scary, but not as disturbing as growing doubts about the honesty of permanent government itself.
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The problem of the Ministry of Defence is that in peace time the three armed forces have no one on whom to vent their warlike instincts except the cabinet or each other.
Jonathan Lynn, “Yes Minister Series: Quotes from the dialogue”, JonathanLynn.com
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Any unwelcome initiative from a minister can be delayed until after the next election by the Civil Service 12-stage delaying process:
1. Informal discussions
2. Draft proposal
3. Preliminary study
4. Discussion document
5. In-depth study
6. Revised proposal
7. Policy statement
8. Strategy proposal
9. Discussion of strategy
10. Implementation plan circulated
11. Revised implementation plans
12. Cabinet agreement
Jonathan Lynn, “Yes Minister Series: Quotes from the dialogue”, JonathanLynn.com
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It’s always headline-worthy to say that some absurdly high number of Americans are living in poverty — that the richest country in history still has desperately poor people in vast numbers. It’s shocking to see … and it’s mostly bogus:
We get told they do often enough I know, the latest example being this:
About 15% of Americans live in poverty, so why is no one talking about it?
It isn’t true.
In a nation where, according to the US Census Bureau’s poverty statistics released last month, 46.5 million people (roughly 15%) of the nation’s population lives in poverty,
Sorry, but their repeating it does not make it true.
The correct formulation is that 15% of Americans would be living in poverty if it were not for the things that are done to alleviate poverty.
There are two things that make this correction really rather important. The first being that everyone else measures poverty after all the things that are done to alleviate it. Thus any comparison across countries is going to leave the US looking very bad indeed: for others are talking about the residual poverty left after trying to do something about it and the US is talking about the poverty before alleviation. Very different things I hope you’ll agree.
There are reasons why this meme won’t go away (aside from it being a handy eye-catching headline to attract readers for newspapers and websites), including the fact that many civil servants are employed in federal, state, and local organizations to work on programs intended to alleviate poverty. If they are too successful, their caseload goes down and so will their budget and headcount. Any bureaucracy has a prime directive quite separate from their original reason for existing — organizations have primal motivations for surviving and growing. Their incentive is thus merely to ease the problem, not to solve it, or else they’re working to put themselves out of business.
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Those poor Greek civil servants … this is so hard on them:
In a sign of just how hard the austere financial climate is hitting, it has been reported that the Greek government has been forced to put an end to one of its civil servants’ most treasured privileges. We speak, of course, of the Hellenic Sir Humphreys’ entitlement to an extra six days a year paid holiday if they are compelled to work with that frightful engine of misery, the computer.
Reuters reports that the long-standing regulation, in which all Greek government workers compelled to use a computer for more than 5 hours a day get an extra day’s leave every two months, was axed in an official announcement on Friday.
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Steven M. Teles on the defining characteristic of modern American government:
The complexity and incoherence of our government often make it difficult for us to understand just what that government is doing, and among the practices it most frequently hides from view is the growing tendency of public policy to redistribute resources upward to the wealthy and the organized at the expense of the poorer and less organized. As we increasingly notice the consequences of that regressive redistribution, we will inevitably also come to pay greater attention to the daunting and self-defeating complexity of public policy across multiple, seemingly unrelated areas of American life, and so will need to start thinking differently about government.
Understanding, describing, and addressing this problem of complexity and incoherence is the next great American political challenge. But you cannot come to terms with such a problem until you can properly name it. While we can name the major questions that divide our politics — liberalism or conservatism, big government or small — we have no name for the dispute between complexity and simplicity in government, which cuts across those more familiar ideological divisions. For lack of a better alternative, the problem of complexity might best be termed the challenge of “kludgeocracy.”
A “kludge” is defined by the Oxford English Dictionary as “an ill-assorted collection of parts assembled to fulfill a particular purpose…a clumsy but temporarily effective solution to a particular fault or problem.” The term comes out of the world of computer programming, where a kludge is an inelegant patch put in place to solve an unexpected problem and designed to be backward-compatible with the rest of an existing system. When you add up enough kludges, you get a very complicated program that has no clear organizing principle, is exceedingly difficult to understand, and is subject to crashes. Any user of Microsoft Windows will immediately grasp the concept.
“Clumsy but temporarily effective” also describes much of American public policy today. To see policy kludges in action, one need look no further than the mind-numbing complexity of the health-care system (which even Obamacare’s champions must admit has only grown more complicated under the new law, even if in their view the system is now also more just), or our byzantine system of funding higher education, or our bewildering federal-state system of governing everything from welfare to education to environmental regulation. America has chosen to govern itself through more indirect and incoherent policy mechanisms than can be found in any comparable country.
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The Instapundit (Glenn Reynolds) on the special privileges enjoyed by the people who are supposed to be “serving” the public:
All over America, government officials enjoy privileges that ordinary citizens don’t. Sometimes it involves bearing arms, with special rules favoring police, politicians and even retired government employees. Sometimes it involves freedom from traffic and parking tickets, like the special non-traceable license plates enjoyed by tens of thousands of California state employees or similar immunities for Colorado legislators. Often it involves immunity from legal challenges, like the “qualified” immunity to lawsuits enjoyed by most government officials, or the even-better “absolute immunity” enjoyed by judges and prosecutors. (Both immunities — including, suspiciously, the one for judges — are creations of judicial action, not legislation).
Lately it seems as if these kinds of special privileges are proliferating. And it also seems to me that special privileges for “public servants” that have the effect of making them look more like, well, “public masters,” are kind of un-American. Even more, I’m beginning to wonder if they might actually be unconstitutional. Surely the creation of two classes of citizens, one more equal than the others, isn’t the sort of thing the Framers intended. Why didn’t they put something in the Constitution to prevent it?
Well, actually, they did. Article I, Section 9 of the Constitution prohibits the federal government from granting “titles of nobility,” and Article I, Section 10 extends this prohibition to the states — one of the few provisions in the original Constitution to impose limits directly on states. Surely the Framers must have considered this prohibition pretty important.
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In the Globe and Mail, Barrie McKenna explains why there’s a widening fairness gap between public employees and everyone else:
The seven-month-long dispute [between the Ontario government and public school teachers] has exposed something much more disquieting: the widening fairness gap in the Canadian workplace. Thousands of public sector workers enjoy high salaries, guaranteed pensions and special perks that other Canadians will never get, regardless of how long or hard they work.
Public sector workers argue they’ve earned these gains through decades of tough negotiations with employers. And once promised, governments should not unilaterally revoke them. Fair enough. But it’s not an argument that’s likely to sway many Canadians, who exist in a parallel universe.
The ability to bank and monetize sick days is virtually unheard of in the private sector. Less than 3 per cent of the 1,336 private sector plans in Mercer Canada Ltd.’s client database allow employees to bank sick days, according to figures supplied to The Globe and Mail. That compares to 28 per cent of the 407 government plans tracked by the benefits consultant.
No wonder Ontario teachers chanted “respect teachers, respect collective bargaining,” while they suspended school sports, plays and other extracurricular activities for millions of students in recent months. “Cash for sick days” doesn’t have the same populist appeal.
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Once upon a time, back in the far-distant past, public sector workers got lower wages but better job security, benefits, and pensions than their private sector counterparts. Over the last few decades, the public sector wages caught up and surpassed the private sector, and if anything the benefits and pensions got better. The Fraser Institute calculates that currently there is between a 9% and a 12% premium paid to public sector workers for similar jobs (and that understates the overall differential):
Comparing Public and Private Sector Compensation in Canada examines wage and non-wage benefits for government employees (federal, provincial, and local) and private-sector workers nationwide. It calculates the wage premium for public-sector workers using Statistics Canada’s Labour Force Survey from April 2011, after adjusting for personal characteristics such as gender, age, marital status, education, tenure, size of establishment, type of job, and industry. When unionization is included in the analysis, the national public-sector “wage premium” (i.e., the degree to which public-sector wages exceed private-sector wages) declines to 9.0 per cent from 12.0 per cent.
Aside from higher wages, the study also found strong indications that Canada’s government workers enjoy more generous non-wage benefits than those in the private sector, including:
- Pensions: 88.2 per cent of Canadian government workers were covered by a registered pension plan in 2011 compared to 26.4 per cent of private-sector employees.
- Early retirement: Government employees retired 2.5 years earlier, on average, than private-sector workers between 2007 and 2011.
- Job security: In 2011, 0.6 per cent of government employees lost their jobs — less than one sixth the job-loss rate in the private sector (3.8 per cent).
To ensure public-sector compensation is fair to both taxpayers and government workers, the report argues that better data collection is needed and suggests that Statistics Canada should gather data on wages and non-wage benefits more regularly and systemically than it does now. In addition, comparisons between the public and private sectors should focus on total compensation, not just wages or specific benefits such as pensions.
About one in five Canadian workers is in the federal, provincial, or local government civil service or related organizations, and only 15% of Canadians are self-employed. The vast majority of government workers are unionized, while the reverse is true in the private sector.
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There are some stories which are just too silly for words:
THREE county council workers have been suspended from duty for attempting to fill in a pothole outside Carrigaline.
There has been outrage at the suspensions, which were imposed by the local authority after a health and safety inspector came across the workers carrying out unscheduled repairs to a road.
The outdoor crew were suspended on full pay pending an inquiry, and are now fearing for their jobs.
Council workers must pre-plan road works, fill in reports detailing the repairs to be carried out, and use the appropriate signage to alert the public.
It’s understood workers were on their way back to a council depot in Carrigaline when they spotted a large pothole on the road surface.
They decided to stop their vehicle to repair the pothole, even though it was not on their official list of jobs. They had earlier been carrying out scheduled repairs on the Carrigaline to Crosshaven road.
A health and safety inspector came across the workers carrying out the unofficial repairs and reported them to the local authority for a breach of health and safety guidelines.
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Back in my teaching days, many years ago, one of the things I liked to ask the class to consider was this: Imagine a government agency with only two tasks: (1) building statues of Benedict Arnold and (2) providing life-saving medications to children. If this agency’s budget were cut, what would it do?
The answer, of course, is that it would cut back on the medications for children. Why? Because that would be what was most likely to get the budget cuts restored. If they cut back on building statues of Benedict Arnold, people might ask why they were building statues of Benedict Arnold in the first place.
The example was deliberately extreme as an illustration. But, in the real world, the same general pattern can be seen in local, state and national government responses to budget cuts.
At the local level, the first response to budget cuts is often to cut the police department and the fire department. There may be all sorts of wasteful boondoggles that could have been cut instead, but that would not produce the public alarm that reducing police protection and fire protection can produce. And public alarm is what can get budget cuts restored.
Thomas Sowell, “Will Obama turn the United States into the world’s largest banana republic?”, Washington Examiner, 2013-03-04
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Tad Dehaven thinks the upsurge in horror stories about what sequestration will do to the US economy means it’s more likely that those cuts will actually take place:
The odds that $85 billion in “unthinkable, draconian” sequestration spending cuts will go into effect in March as scheduled are looking better. The odds must be getting better because, as if on cue, the horror stories have commenced.
A perfect example is an article in the Washington Post that details the angst and suffering being experienced by federal bureaucrats and other taxpayer dependents over the mere possibility that the “drastic” cuts will occur. You see, the uncertainty surrounding the issue has forced government employees to draw up contingency plans. Contingency plans? Oh, the humanity!
[. . .]
I certainly believe that Washington’s bouncing from one manufactured fiscal crisis to the next is detrimental to the economy, but my sympathy lies with the private sector – not the federal bureaucracy. It’s the private sector that has been suffering under the constant uncertainty surrounding federal tax and regulatory policy. And let’s not forget that there is no public sector without the private sector – the former existing entirely at the latter’s expense.
Yet, what follows in the Post article is boo-hoo after boo-hoo without the slightest regard to those who are paying for it or whether the whiner’s agency could use some belt-tightening
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