Apples, Oranges, Public, Private 

January 1st, 2014 | R. Rados 

The public sector is not the private sector. The means in which both sectors acquire the revenue used to pay their employees are fundamentally different. One pays salaries from profit, while the other pays salaries from taxation. Taxes are acquired through law, while profits are acquired through mutual exchange. It's all quite simple. Customers and taxpayers are two fundamentally different sources of revenue. This fact should change the entire dynamic of what it means to be an employee. This key difference separating employees and public servants should be considered in all aspects of arbitration, legislation, and future governance. Current notions of equality between the public and private sectors are fallacious and need to be squelched.

The term “public servant” has become a spurious label. When it comes to truly serving anyone, only police officers, soldiers, and emergency workers fit the label. Few kinds of government employees are really serving the public any more or less than an employee of a private company. When the public sector's quality declines, salaries rarely decrease. In the private sector, profit depends largely on quality of service. When profits decline in the private sector, so do salaries and jobs. Private companies aren't afforded the privilege of automatically increasing their revenue when the going gets tough. Private companies only have two choices: improve their brand or make cutbacks.

When the public sector goes into debt, there are seldom cutbacks or layoffs. Necessary cutbacks and layoffs in the public sector largely depend on the type of government that is in power. The same can't be said for the private sector, minus the rare type of financial intervention following the 2008 meltdown. Even following the bailout, major banks and industries saw layoffs and cutbacks in salaries that were clearly reflected in 2009's spike in unemployment.

Theory dictates that in order to provide quality services to taxpayers, public sector salaries must compete with private sector salaries. If that is indeed the case, we should be asking why we bother to have public versions of services that private companies are capable of providing. Truly serving the public entails some sort of sacrifice, like when a soldier travels abroad to serve his country. “To serve and protect” is a popular motto among municipal police forces. Unfortunately, that motto is only in the job descriptions of 25% of public sector employees, as seen in the Public Accounts Of Canada report by the Receiver General. 

Public servants employed in public safety and defence make up less than one quarter of Canada's entire public sector. However, their importance is unquestionably greater than that of other public sector employees.

With that being said, it's important to acknowledge the shameful fact that soldiers, fire fighters, emergency workers and law enforcers have some of the lowest salaries within the entire public sector. The average wage for a Calgary police officer in 2011 was $34 per hour, adding up to $70,000 per year. Calgary city councilors make $108,000 per year, while the mayor makes over $200,000 per year. Calgary offers a good example of the disparaging differences between public servants who sacrifice their own safety and those who act as glorified pencil pushers. The situation is the same in all Canadian municipalities, including Toronto. These differences also exist in provincial governments and Canada's federal government.

We've concluded that true public servants – like police officers – have nothing to compare their salaries to. We've also concluded that they make far less than their other public sector counterparts. Whether those two conclusions are connected is up for debate, but what isn't up for debate is the lack of sacrifice involved in publicly funded office work.

The average starting salary for a RCMP officer is just over $50,000 a year, according to the RCMP's web page. The average salary for an office administrator employed by the federal government is between $40,000 and $50,000 per year. On the higher end, paralegals and administrators employed by the federal government can make upward of $65,000 per year. The average salary for an office administrator in the private sector begins at $28,000 on the low end and only $51,000 on the high end, according to Payscale. If you'd like your curiosity to take you further, the Vancouver Sun offers a free search for public sector salaries.

According to a report by the Fraser Institute, public sector employees make 12% more on average than private sector employees. Unfortunately, pensions and benefits offered in the public sector are also greater than what most private employers are able to offer.

Again, private employers don't have the privilege of increasing their profits on a whim. When the public sector and its various unions demand higher salaries and better benefits, the increases come at the expense of taxpayers and the private sector. The tax hikes required to increase public salaries can take the form of corporate taxes (which get passed to consumers through increased prices), sales taxes, income taxes, carbon taxes, tariffs and border taxes (which also get passed to consumers), and transport taxes. Sometimes governments will create entirely new taxes against the will of taxpayers. In severe situations, taxpayers may see cuts to services, which in turn makes them less beneficial when compared to their final costs.

The answer is simple. If public sector services are going to cost as much – or more – than services provided by private companies, they might as well be privatized. Privatization offers higher quality services via competition. When private service providers compete to win and keep public contracts, the benefit to taxpayers is always greater. On a municipal level, most forms of snow removal, road maintenance, and garbage disposal would be significantly improved by privatization. For an example of successfully privatized garbage disposal, we don't need to look any further than Toronto, where taxpayers have saved millions following partial privatization.

To entirely eliminate the need for tax increases – or drastically reduce current tax rates – more extreme reforms would be required.

Most municipalities in Canada see property tax increases ranging from 3 to 7% annually. If some services were partitioned by wards and neighbourhoods, the costs of road maintenance and garbage disposal could be deferred and billed privately to each ward or constituency based on how much service is provided. Completely eliminating and privatizing publicly funded transit systems would defer costs to those who use buses, rails, and other services like those provided by Car2Go. If all of these costs were deferred to consumers, there would be fewer reasons for municipalities to increase property taxes at all. Lower taxes would increase every consumer's capacity to afford the private services that only they use.

For now, such extreme measures are unrealistic. They would require an astoundingly brave, democratically elected government – the kind of government Canada has yet to produce. However, reminding voters about the success and prevalence of private services could make such “extreme” reforms more realistic in time.

Private transportation and private services are all around us and the choices are becoming increasingly more diverse. As more affordable options are presented to the public by private innovators, the need for a public sector will diminish.

Car2Go is a successful German enterprise that has spread to several major municipalities in North America, including Seattle, Calgary, Vancouver, and Toronto. The company provides small, basic and environmentally friendly cars to paying customers. Carshare businesses like this have the potential to revolutionize modern transport and reduce the need for private automobile ownership and some forms of public transport. Older forms of private transportation include school buses. Companies like First Student Canada still transport students to both public and private schools across several municipalities. Taxicabs are some of the oldest forms of private municipal transportation. In Seattle, there are private taxicab companies that offer a flat rate based on destination.

In Regina, a recent referendum resulted in a new public-private sewage treatment plan which is estimated to save the city over $50,000,000. In Edmonton, there is a public-private LRT line in the works. Public-private partnerships are commonly referred to as P3s and, as cities like Edmonton and Regina experiment with them, we'll begin to see more of them. P3s are a first step toward having more efficient and affordable municipal services.

On a federal level, national courier services like UPS and FedEx offer a viable and affordable alternative to a failing public mail service. In the late 1800s, most nationalized mail services outsourced their delivery services to private couriers. As time went on, public mail services began spending taxpayer money to expand their delivery methods. Today, Canada Post has made significant cutbacks and announced that it will discontinue its inner city delivery services. As email, electronic exchange, and private courier services outpace the quality and affordability of Canada Post, the company is becoming less relevant. However, because of unions, Canada Post will likely remain in business until it becomes completely unsustainable and costly to taxpayers.

Fading even further into irrelevancy is Canada's publicly owned broadcaster. At over $1 Billion per year, the CBC is one of Canada's most costly and non-beneficial Crown corporations. With ratings that fail to compare to Canada's two major private broadcasters, the CBC continues to drain the country's treasury at an alarming rate. With fewer viewers than there are subscribers to other, privately operated subscription channels, the CBC could vanish overnight without most Canadians noticing. The recent deal between Rogers and the NHL has, essentially, sealed the CBC's fate. The national broadcaster's benefit to Canadians has dipped to the lowest point of its entire broadcasting history. There is little reason for Canadians to continue subsidizing a public broadcaster that's unable to keep up with the quality programming offered by private broadcasters.

It's easy to conclude that most public sector departments serve little purpose or benefit to taxpayers. Whether they employ thousands in the federal government, or any municipal and provincial government, most public sector jobs could be done better by the private sector. It may be time for Canadians to part ways with some of their Crown corporations and public sector services – particularly those that served their purpose a century ago, but have been rendered less useful by an innovative private sector. The 25% of the public sector that protects our nation's borders and our citizens from threats are more important than the 75% that push pencils and manage costly services. It's not illogical to believe that the 25% could benefit from higher salaries if the 75% saw drastic cuts.

Cutting irrelevant and costly public sector jobs shouldn't hinge on how it would affect the country's unemployment rate, but on how it would affect the sustainability of our government. A big, bloated government doesn't do any good for itself or the families and households that pay its bills. Nothing is free. In a world where costs and inflation are eating away at household budgets, it's time for the government to step back and quit deferring its unnecessary expenses to taxpayers. It's time for families and individuals to pay for the services they use and let those who don't off the hook. It's time for voters to stand up for themselves and expel the politicians and leaders that have decided to make their time in public service a permanent career with big benefits and adjustable salaries. The idea that this can't or shouldn't be done will begin to fade over time, as long as we remind voters about the many private innovations that they've been taking for granted.