New Brunswick’s Fiscal Challenges and the Argument for Public Sector Restraint

New Brunswick Premier Brian Gallant announced recently that he is voluntarily reducing his pay by 15 per cent and members of his cabinet will endure a 10 per cent reduction in their wages. He also officially opposed any recommendations to increase the pay of elected officials.

Gallant’s promise is a good sign for the province, which is in desperate need of leadership, particularly in light of the economic issues facing the region. Despite the provincial government’s willingness to examine the salaries of its highest ranking employees, Danny Legere, who is the President of the New Brunswick Canadian Union of Public Employees, says he and his members will not consider wage reductions. Furthermore, he warned that the provincial government “will get the strongest possible resistance if they try to roll back wages in the public sector.”

In New Brunswick, wherein economic and political problems have plagued the province for quite some time, average public sector compensation increased 20 per cent between 2009 and 2013 (as per Statistics Canada), while inflation averaged roughly 8 per cent during that same period. In comparison, average private sector compensation rose 9 per cent between 2009 and 2013. Yet, the labour movement refuses to accept its role in public finance issues in Canada. Data available in the CANSIM Table 383-0030 shows that public sector spending in New Brunswick averages roughly $4.5 to 4.7 billion annually. Additionally, sub-national government sector employees comprise nearly 19 per cent of New Brunswick’s labour market. One thing is clear, therefore, which is that the federal government and its provincial counterparts are not spending less on the public sector. In fact, public sector salaries constitute the largest expense for every government in Canada.

There must be some consensus among New Brunswick’s elected officials if the province is to emerge from its economic woes. Moreover, the provincial government and the province’s labour representatives must cooperate if both parties wish to stimulate the provincial economy. It might be true that some members of the Canadian Union of Public Employees cannot make ends meet, as Legere claims, and although that is unfortunate, they are ultimately beholden to the provincial government, and more importantly, the province’s taxpayers.

Rationalizing the public sector is another option available to governments in Canada that wish to reduce their expenditures and align them with current economic realities. Although this process may entail eliminating public sector positions that are redundant and unnecessary, reducing public sector employment rates through attrition is a more palatable alternative. Since 2010, attrition has resulted in 10,000 less public sector positions annually and, in a growing economy, prospective employees should be able to identify other opportunities in the private sector. (In economics, the “crowding out” effect explains how reducing the public sector, or government involvement in the market, can create new job opportunities in the private sector.) Importantly, however, as argued frequently by former Nova Scotia Finance Minister Graham Steele, attrition is an imperfect solution because some departments will have much larger outflows of retirees and simply eliminating those positions would be incongruous with departmental demands. In any case, although this solution is less than ideal, it is a step in the right direction.

Aligning benefits, wages, and pensions with the private sector is another positive step forward. In New Brunswick, on average, federal, provincial, and municipal employees earn 43, 25, and 34 per cent more than their private sector equivalents when calculating both wages and benefits. The Canadian Federation of Independent Businesses has also calculated that New Brunswick defined benefit plans have unfunded liabilities of roughly $500 million. Lastly, the average retirement age for public sector workers is 60, whereas in the private sector it is 63, and for the self-employed it is 66–and the government actually provides early-retirement incentives.

Recent developments in New Brunswick pertaining to public finances are positive. Premier Gallant is positioning himself to reduce government expenditures and place the province on a sturdy foundation from which to grow the economy. Although he will still receive nearly $152,000 annually, down 15 per cent from $164,000, his gesture demonstrates a serious willingness to consider deep reforms for the sake of New Brunswick’s future.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

An Economic Exploration of Bilingualism, Part Two

In contrast with Montreal’s unique bilingual nature is New Brunswick, which is the only officially bilingual province in the country. That province often sets the pace for bilingual policy and with a roughly 33/66 per cent split between Francophones and Anglophones, it is proving ground for Canada-wide application.

New Brunswick’s largest linguistic minority are the Acadians, which is a group that the English had marginalized by the mid-18th century onward. Taking inspiration from the Franco-Quebecois awakening in the 1960s, the Acadians demanded greater inclusion in the then-Anglo dominated New Brunswick. The relatively poor and more isolated Acadian regions were able to use their size to elect a Francophone premier in 1960 who implemented an equalization plan that improved infrastructure and government services in those regions. This transformation amounted to a greater centralization of power in Fredericton. Nine years later, the provincial government enacted the Official Languages Act, which gave the French population equal status in the province. Most of the premiers elected since the enactment of that bill have been bilingual and sensitive to Francophone demands.

Today, New Brunswick remains Canada’s second-most bilingual province, with roughly 30 per cent of the population identified as bilingual (second only to Quebec with around 42 per cent).

It is important to note the differences between New Brunswick’s “brand” of bilingualism and that of Montreal. As I write in Part One, there has been no conscious effort in Montreal to promote bilingualism: it has arisen spontaneously from various structural and socioeconomic forces. The Anglo-Montrealer minority has had to bend to the will of the much larger Francophone majority and, thus, has not been a significant political force in the city. On the contrary, New Brunswick has an Anglophone majority with a very large, nationalistic Francophone minority. Bilingualism has been chiefly a political concern for New Brunswickers and has been largely manufactured, rather than spontaneous. It arose out of mobilization and demands for parity by what was then a marginalized minority, rather than economic necessity (or efficiency). Moreover, the movement had manifested itself largely through government: legislation, the civil service, and various social programs are bilingual imperative. The province’s education system, although segregated by district and language, focuses primarily on producing future generations of bilingual New Brunswickers. (In New Brunswick, the proportion of students enrolled in French immersion schools is the highest in Canada.)

Not all of New Brunswick’s linguistic history has been political, however, as much of the drive for bilingualism in the province was economically necessary. Statistically, bilingual members of the labour force end up with higher incomes, and boasting a bi- or multilingual workforce is an economic boon. In fact, it can measurably contribute to economic growth. Consequently, provincial governments in New Brunswick have focused on promoting bilingualism as a unique brand on the national and international scene to reap economic gains similar to those of multilingual European countries. At the same time, the province is quickly losing younger workers (especially bilingual Francophones), and the government is worried about upsetting the linguistic balance. In response, the provincial government has attempted to court Francophone and bilingual immigrants–a tough task with many competitors. Nonetheless, the province has experienced growth in service industries arguably attributable to this “bilingual branding.”

Once again, however, one must note that this “economic bilingualism” is the product of a planned effort by New Brunswick’s government and Francophone communities. In reality, the language of business and most government activities is English, which also tends to dominate public affairs. Very few Francophone New Brunswickers are unilingual, while many of their Anglophone counterparts speak only one language. Unlike in Montreal, there is much less pressure for Anglophones to learn French, and much more pressure for Francophones to learn English.

New Brunswick’s government is right to promote bilingualism as an economic asset. Evidence does show that multilingualism in places such as Switzerland can satisfy demands for internationally-accessible services.  Yet, New Brunswick is unlikely to become a world financial centre, which mutes the benefit.

However, the way government promotes bilingualism matters. Requiring all services to be in both languages is unnecessary, especially in areas skewed towards one linguistic group or another. The government justifies this structure by asserting that members of both groups live all around the province, but it is highly unlikely that individuals living in an area dominated by the opposite group will be unilingual. As the Fraser Institute study cited above shows, this kind of policy is quite costly. New Brunswick would be better off directing these resources into promoting bilingual education, which, in addition to its economic benefits, would probably do more to serve–and better integrate–both linguistic groups than blanket regulations mandating bilingual services.

In essence, the state should tailor its strategy toward providing tangible benefits all New Brunswickers, and take a step back to let New Brunswickers form their own unique socio-linguistic identity.

Leo Plumer is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics and political science at McGill University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Revitalizing Atlantic Canada

Writing for Free Exchange allowed me to examine a multiplicity of issues facing Atlantic Canada and the following are some that I have found to be of paramount importance.

The most prominent issue in Atlantic Canada is slow economic growth, which has resulted in an enormous outflow of skill labourers, young professionals, and families who have left for British Columbia, Alberta, and Saskatchewan to find work. Economic growth rates in New Brunswick, Nova Scotia, and Prince Edward Island, for instance, have fallen below the national average of 2 per cent in 2013. Newfoundland and Labrador, which is currently booming due to oil production, is somewhat of an exception, however, declining revenues threaten to derail the province’s path to prosperity. In addition, the three Maritime Provinces experienced declining populations in 2013.

NL’s growth is largely attributable to strong oil and gas production, which has been growing in the province since the mid-2000s. The rest of Atlantic Canada could benefit from NL’s model and the region may need to look toward the oil and gas sector. New Brunswick currently boasts an opportunity to host the Energy East Pipeline and has a prospective shale gas industry. Other opportunities include increased cooperation or shared services between the three Maritime Provinces and exploring trade prospects with emerging markets.

Another problem facing the region, and the entire country, is unfunded liabilities. In other words, public sector pensions are a significant issue that plagues both federal and provincial government. This is where Atlantic Canada can lead: New Brunswick and Nova Scotia both made changes to their pension programs and the rest of Canada could learn from their progress.

In addition, Canada’s healthcare system requires additional consideration and policymakers must look into issues plaguing it. Through the Canada Health Transfer, the federal government allocates funds to the provinces to assist them with growing wait lists, quality assurance, and a number of other issues. However, progress has been futile. The federal government has given $41 billion in additional healthcare funding since 2004, yet, in 2010, Canada ranked last out of 11 countries in terms of wait times. This is why policymakers should consider alternatives to the status quo.

There are also serious democratic issues facing the country. The Senate remains unelected and unaccountable, and the Supreme Court’s recent ruling inscribed the current structure in stone. Its ruling does not need necessarily indicate defeat, though, and the Prime Minister, in addition to supporting premiers, must take the lead and ensure reform to the Upper Chamber.

While many Canadians may agree that these issues are of great importance, there must be action. We often criticize the political sphere for not dealing with these issues adequately, however, the truth is that we, as electors, must show that they are a priority or politicians will not give them due consideration. It is our duty to ensure that ideas, such as natural resource development, prudent fiscal management, and adequate healthcare, receive fair scrutiny, rather than arbitrarily dismissing them from the outset; it is our duty as citizens to place them on the political agenda.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute