Newfoundland’s Showdown with its Unions

By Peter Fenwick


In a battle reminiscent of the Winnipeg general strike, close to 20,000 public service workers in Newfoundland walked off the job April 1st in the largest job action in provincial history. Hospitals, highways workers, general government workers and many school board support staff have set up picket lines from Cape Spear to Nain Labrador.

Although the unions walked out over the monetary terms of a new collective agreement, the fight is more about what shape the new Newfoundland economy will take. The unions are reeling from the recently tabled budget that proposed laying off 4000 public employees over four years, an eighth of the provincial public service.

And while those cuts will hurt, it is difficult to see what else the government could do.

When the Williams government took over the most indebted province in Canada four months ago it found itself facing a billion dollar deficit, a deficit that exceeded 6% of provincial GDP and represented a full 25% of government spending for the year.

In a desperate effort to rein in spending, the premier announced a two year public service wage freeze, and finance Minister Loyola Sullivan brought in an austere budget that increased fees across the board while it cut the provincial payroll by close to 1000 in year one. To eliminate the cash deficit he then proposed cutting the civil service by another thousand each year until the cash accounts balanced in 2007-2008.

For the public sector unions it was too much. Despite last minute negotiations with the premier himself the two parties could not agree on a settlement. On a five year contract the parties were a full seven percentage points apart.

The fiscal mess has been almost eight years in the making. In the mid nineties despite the grim economic times, the Wells government had managed to wrestle the deficit to the ground. By laying off thousands of public employees, and by cutting wherever he could, the fiscal house he passed on to Brian Tobin in 1996 was in the best shape since Confederation.

But Tobin abandoned the financial restraint of Wells and ramped up spending, a practice that was continued by his successor Roger Grimes. Worse still, the profligate duo raided the cupboard for the small nest eggs that had accumulated over the years. Special one time funding for roads, constitutional subsidies, dividends from Newfoundland and Labrador Hydro, and special federal payments for abandoning the Newfoundland railway in 1989 were consumed as spending rose. Once these one-time payments were exhausted, program spending and debt charges exceeded revenues by hundreds of millions of dollars a year.

To make matters worse federal transfer payments continued to decline. That coupled with huge increases in the cost of the statist health care system made prospects for the future much, much worse. A December economic review by Price Waterhouse Coopers predicted gross deficits of a billion dollars a year for the next four years.?

Once the budget was tabled on March 30th the opposition Liberals attacked the government for reneging on their election promise of no mass layoffs. The government claimed that the 400 unionized employees to be let go this year were but one per cent of the public sector. (The rest of the layoffs were teachers and managers) The government then reminded the opposition that they had campaigned on a plan to cut back on the size of the public sector, but would do it by attrition as over 6000 public employees quit or retired over the next four years.

Missed in all the sound and fury is the impact on the political culture of cutting over 4000 employees from the public service. While there will be consolidation in the education, health care and social services sectors (20 welfare offices will be closed), the real impact will be on the balance of public versus private sector employees in the province. Newfoundland has always had a disproportionately large number of public employees. Over 50% of employees in the St. John’s area work for one level of government or another. The proportion in the rest of the province is lower, but is still in the 30 per cent range.

By cutting 4000 civil servants from the work force while the private sector workforce is growing, the balance of public versus public sector employees shifts significantly. In the last six years the total work force has increased by almost 30,000, mainly in the private sector.

Combine this shift in the work force with the impact of the loss of union dues when 4000 public employees are cut loose and the dominant position of the public sector unions will be lessened significantly.

Frankly it is long overdue. In a province that would not privatize Newfoundland and Labrador Hydro, and strongly supports public employment while it dismisses shareholder held organizations as greedy, businesses have traditionally kept a low profile. Yet if the economy is to grow, the massive reliance on government spending as the employer of last resort has to stop.

Which is why the confrontation between the government and the unions may be the sign of change in the province. Just as Margaret Thatcher’s breaking of the miners union and Ronald Regan’s elimination of the air traffic controllers union signaled a shift to a less government interventionist, more free enterprise friendly economy, the fight between the government and the unions may signal the same thing in Newfoundland.

It’s about time.

Peter Fenwick is AIMS Fellow on Newfoundland Issues. He lives in Cape St. George, Newfoundland