Top 10 Pieces of Misinformation Being Used to Justify Cuts

The current provincial government is expected to make devastating cuts to education, health care and other vital public services that Albertans rely upon based on misinformation about things like public-sector spending and public-sector wages. 

 

1. FALSE: The Alberta economy is hurting badly, so we can no longer afford overly-generous public services.

TRUE: Stories of Alberta’s economic collapse have been greatly exaggerated. It’s not that we can’t afford quality public services and infrastructure; it’s that the government is making a choice not to.

1 GDP per Capita

1 Capital InvestmentAlberta was hit hard by the collapse of global oil prices in 2014-15, but we still have the strongest economy in the country (as measured by GDP per capita) and we still attract more business investment per capita than any other province. Both of these things were true under the previous government, and they continue to be true today under the current government. The boom is over, but the sky is not falling.

 


 

2. FALSE: We are spending beyond our means.

TRUE: Alberta public-sector spending is the lowest in the country as a proportion of our economy and we have fewer people working in the public sector, as a proportion of our labour force than any other province.

No other provinces spend less than Alberta on public services, as a proportion of provincial income (GDP). If the concern is “spending beyond our means,” we here in Alberta are notable for spending far below our means.

2 Trevor Tombe

No other province has a fewer public-sector workers, as a share of the total workforce, than Alberta. If mass lay-offs are imposed, or if public-sector employment doesn’t keep up with population growth, we will fall further behind the Canadian mainstream and it will become even more difficult for the remaining workers to provide the services Albertans need and expect.
 


 

3. FALSE: Spending was “sky-rocketing” upwards under the previous government.

TRUE: When you adjust for inflation and population growth, Alberta public-sector spending has been pretty stable over the past decade, both before and during the previous government's term.

Far from “spiraling out of control,” public sector spending in Alberta has been pretty flat, barely keeping up with inflation and population growth.

 


 

4. FALSE: Alberta is about to “hit the debt wall.”

TRUE: Alberta has, by far, the lowest levels of debt in the country.

4 Debt to GDP Ratios

Even with the collapse in oil prices and the resultant collapse in natural resource revenue, Alberta continues to have the best balance sheet in the country. There is no province further from “hitting the debt wall” than Alberta. Obviously, deficits should always be taken seriously; but there is no immediate reason for panic, and certainly no justification for deep and economically debilitating cuts.

 


 

5. FALSE:  Alberta’s public servants are “over-paid.”

TRUE: When it comes to pay, the Alberta government’s direct employees, the people who work in the provincial bureaucracy, are NOT out of line with their counterparts in other provinces.

5 Public Administration Wages

 


 

6. FALSE: Alberta public-sector wages should be cut because they are higher than the Canadian average.

TRUE: Yes, public sector wages in Alberta are higher than the Canadian average. But that’s because ALL wages in Alberta are higher than the Canadian average.

6 NAIS

Context matters. All successful employers understand that they have to match or exceed the wages and benefits offered within the labour market in which they operate in order to attract and retain the staff they need. If the labour market in which you operate has higher wages, you have to offer higher wages; if it has lower wages, you can get away with paying less. It’s as simple as that. As a result of our oil and gas endowments, Alberta has a high-wage labour market. That’s the reality; and it’s something to celebrate, not denigrate. It is simply not reasonable or responsible for Alberta employers, in either the public or private sector, to say “I’m going to start paying my employees as if they live in New Brunswick.” It doesn’t work that way. Pretending that it does is foolish and misleading.

 


 

7. FALSE: Public-sector wages are higher than private sector wages in Alberta. 

TRUE: On average, public-sector wages are actually lower than private sector wages in Alberta.

This may come as a big shock to those who rail about “over-paid” public sector workers, but the truth is that, on average, public sector workers in Alberta earn slightly less than their private sector counterparts. Why? Because Alberta public sector workers did NOT see their wages rise at the same rate during the boom as workers in the private sector. So, when people say public sector workers should “share the pain,” they’re ignoring the fact that they didn’t fully “share the gain.”

 


 

8. FALSE: The current deficit was caused by overspending

TRUE: Alberta’s current deficit was caused by a structural over-reliance on natural resource revenue, which has dried up as oil and gas prices have fallen.

8 Revenue problem

It’s a common misconception that Alberta’s current deficit was caused by overspending. The truth is that per capita spending on public services remained relatively stable under the previous government. The thing that changed was revenue; especially revenue from natural resource royalties. As the chart prepared by University of Alberta economist Mel McMillan (above) shows, when the global price of oil collapsed in 2014 (largely as a result of the US fracking boom) per capita revenue for the Alberta government went into free fall. Almost all of Alberta’s current deficits can be attributed to this single factor.

 


 

9. FALSE: Lower corporate tax rates will spur investment.

TRUE: They never do.

9 Lower corporate tax

One of the Premier's most important core convictions is that lower taxes on corporate profits will spur investment. However, there’s very little evidence that it’s true. In fact, there’s a growing mountain of evidence from around the world that it’s not. Here in Canada, for example, lower corporate taxes have corresponded with falling, not increasing, rates of business investment. Instead of investing the proceeds of tax cuts, corporations have decided to “take the money and run.” So, here in Alberta, we will be cutting vital services and infrastructure in order to pay for corporate giveaways that won’t spur investment or jobs. In other words, we’ll be giving away something valuable (revenue that supports public sector services and infrastructure) and getting nothing in return.

 


 

10. FALSE: There’s no point in looking at the revenue side of the Alberta budget.

TRUE: Alberta is currently the lowest-tax province in Canada. If we taxed at the rate of the next lowest-tax province (B.C.) we’d raise an additional $11 billion per year and our deficit would disappear.

10 Alberta's tax advantage

For decades, Albertans have been able to enjoy Canadian-standard services without paying Canadian-standard taxes. Former Premier Ralph Klein called this the “Alberta Advantage.” But the “Alberta Advantage” was a sham. It basically involved using one-time, windfall resource revenue to cover an average of 20 percent of our operating budgets, year in and year out, for decades. If you want to know why we didn’t save any money during decades of oil and gas booms, it’s because we used the money to subsidize artificially low taxes. Now that oil prices and resources revenues have collapsed (and are unlikely to ever return) Albertans have a choice to make. Either we can start paying something closer to mainstream Canadian taxes to pay for mainstream Canadian services, or we can cling to the myth of the “Alberta Advantage” and accept levels of service and infrastructure that fall far behind the Canadian mainstream. 

 

This an edited repost of Top 10 lies and distortions the UCP is using to justify cuts, originally published by the Alberta Federation of Labour.