The Business Ethics Blog

Ontario’s public-sector unions are up in arms, over a secret deal granted by the government to one particular union. All of the province’s public-sector unions were to receive just a 2 per cent raise for 2012, part of an austerity plan aimed at taming the province’s multibillion-dollar deficit. But one union, the Ontario Public Service Employees Union, was secretly given a 3 per cent raise, “in exchange for non-wage concessions.”

See the details here: Employers up in arms over Ontario’s ‘secret’ wage deal, by Karen Howlett for the Globe and Mail.

The generosity of the deal is in sharp contrast to the McGuinty government’s pronouncements on the need to rein in spending in the public sector as it grapples with a multibillion-dollar deficit. Its flagship restraint measure consists of a voluntary two-year wage freeze for public sector workers who bargain collectively.

Against this backdrop, revelations that a sweetened deal was reached in December, 2008, for a union that often sets the benchmark has upset many employers in the sector….

For my purposes, the fact that the employer in question here happens to be a government is entirely beside the point. An employer is an employer, and this story could in principle have happened in the private sector.

Now, there’s an interesting side-issue here about whether limits expressed in terms of percentage points ultimately make much sense: we don’t know what “non-wage concessions” the government got from OPSE in return for the extra 1%, but it is entirely possible that it is something better for provincial coffers, in the long run. The non-wage benefits that unionized workers enjoy often amount to a large portion of their total compensation. But as I say, that’s a side issue. Wages per se have a special salience in labour negotiations, both because of their immediate impact on workers’ pocketbooks, and because of their symbolic significance.

The key ethical issues here have to do with transparency, and whether other unions have a right to know the details of one particular kindred union’s negotiations with the employer they share in common. There are reasons for and against transparency. On one hand, a reasonable level of transparency is essential for benchmarking, and knowing how much other groups are earning is a precondition for seeking wage parity. In that sense, transparency serves justice. On the other hand, wanting to know how much someone else makes is not the same as having a right to that information. An argument needs to be made that having such information serves an essential purpose. Also, more generally, such benchmarking can have a tendency to ratchet salaries upwards, sometimes pushing compensation higher than is warranted either by performance or by the law of supply and demand.

Equally interesting is the government’s (i.e., the employer’s) rationale for the secrecy:

“By bargaining hard, the government protected taxpayers,” said Geetika Bhardwaj, a spokeswoman for Government Services Minister Harinder Takhar. “That has one union upset because they wanted more from taxpayers and didn’t get it. We make no apologies for that.”

Two things are worth noting about this rationale:

The first is that, taken seriously, it justifies entirely too much. No behaviour is beyond the pale, so long as it saves taxpayers a few bucks.

The second thing worth noting about this rationale is that it makes plain an important truth: spending a budget is a zero-sum game. Many people treat “a good deal for the working man” as an unqualified good. But in government, as in business, every dollar in an employee’s pocket is a dollar taken out of someone else’s pocket. That’s as true for Walmart or GM as it is for the Government of Ontario.