Do not follow suit

Posted Wednesday, June 29th, 2011. Filed Under Corporate - Tips/Tools Blog

The government to me is like a parent holding a cigarette and telling his/her child not to smoke. There has been concerns by the finance minister that the average Canadian is spending more than he/she is earning and thus putting themselves in a precarious financial situation. So much so that if interest rates rise, and they may as inflation has gone up greater than our earnings have, then Canadians may be in trouble.

So, if the average Canadian it told to be financially prudent then why is our government (imagine like a parent) not doing the same? It really boggles my mind. Not only is the federal government not being financially prudent and looking to cut costs it has increased costs tremendously. The federal government won’t balance the books until mid-decade. Our country has been told by the International Monetary Fund (IMF), who recently reviewed our finances, that we must reduce the share of GDP devoted to government expenditures from 43% to 38% over the next decade. Failure to meet this target will mean either higher taxes or the expansion of a dangerous debt load. One thing against us is our aging population and the pressure it has on health expenditures.

So, if the government were private and you wanted to reduce expense what do you do? One place to look is within. In this case it is at the salaries and benefits of public employees. Let’s look at the unsustainable growth of the government wage bill in which the taxpayers pay for the salaries and benefits of public employees. While in the private sector some people have lost their jobs, others have had no raises or bonuses and still few have received the cost of living increase per year, our government employees, due to the government wage bill for federal civilian employment, has seen a growth of 7% between fiscal 1999/2000 and 2009/2010. In dollar terms, the wage bill increased by 90% from $12.8 billion to $24.4 billion, while the economy grew by only a little more than 55% during the same decade.

This trend has two causes. The first is the significant increase in the number of public servants. The federal government’s civilian workforce grew by 35% between 1999 and 2009, while the Canadian population increased by only 11%. Jobs in the for-profit sector of the economy increased by 14% during this time period.

The second major contributor was a steady increase in compensation costs per employee. In the CD Howe report it notes that total compensation per civilian employee in the federal government reached $94,000 in 2009/2010, nearly double the average $47,500 in the private sector.

So what are we going about this? The private sector must not use the government as an example to follow. In fact, it is one that must be addressed and challenged. As in the private sector, we must make sure our programs are sustainable and accountable, so must the government.

What boggles my mind is the size of our government. I want to share with you a comparative view of Canada’s federal government structure to that of our neighbours to the south. Canada has 308 MPs and 105 senators for a parliamentary total of 413 legislators representing 33 million Canadians, for a representation-to-population ratio of 80,000 people to one parliamentary legislator. Our neighbours to the south have 435 representatives and 100 senators for an overall congressional total of 535 legislators representing 305 million Americans with a representation-population ratio of 570,000 people to one (1) congressional legislator.

If we applied the U.S. representation-by-population formula to Canada’s two legislative bodies, we would have a mere 57 parliamentary legislators. Conversely, if our formula were to be applied in the United States, they would be “blessed” with a total of 3,800 congressional legislators.

So what to do with this information? My strong suggestion is to not follow suit and make sure that you make decisions that they are measurable, sustainable, accountable and responsible. We will force this change through our own actions and ultimately our youth.

** This information has been summarized from two articles found in the National Post paper (sorry I usually give credit to the authors but I was so tired I ripped up the two articles)

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