Alberta has a problem.
Over the past 18 months, the price of oil has plummeted from more than $100 per barrel to less than $30 per barrel.
This is a big problem for the Alberta government because when oil prices were high, nearly a third of its revenue came from energy royalties.
The Alberta government now faces the prospect of a $7 billion deficit this year and $6 billion deficits in each of the following two years.
How did we get into this mess?
When did Alberta’s financial woes start?
About 15 years ago, the provincial government started slashing taxes on profitable corporations and extremely wealthy individuals.
They were able to do so while balancing the budget because the price of oil was extraordinarily high. But the systemic problem had been established: Alberta doesn’t collect nearly enough in tax revenue to pay for public services.
The only way our current budget model works is when we have huge windfall revenues from oil and gas royalties.
Every Albertan knows that oil prices go up and down. So why don’t we have a revenue system that can withstand inevitable swings in the price of oil?
And where is all the money that should have been saved when oil prices were high?
Do we spend too much?
Alberta’s conservative parties often claim that the current budget crunch is the result of spending.
They try and spin a tale that Alberta is spending too much on public services like education and health care.
But the truth is that, as a proportion of our overall economy, no province spends less than we do.
It’s important to point out that right-wing groups like the Fraser Institute are peddling outright lies and distortions when they say that public spending in Alberta has been “spiraling out of control.”
The truth is that spending has been growing at just over three per cent a year – well below the combined rate of inflation and population growth.
Are public-sector wages out of line?
What about public–sector workers and their wages? Have they caused the problem?
It’s true that public sector wages in Alberta are higher than the national average – but so are wages in Alberta’s private sector and so is cost of living.
In fact, Albertans in the private sector earn 26 per cent more than their counterparts in other provinces, while Albertans in the public sector earn 12 per cent more than their counterparts in the rest of the country.
The fact that wages in both the Alberta public sector and the Alberta private sector are higher than the Canadian average should not come as a surprise to anyone.
Looking at all of these factors it’s clear that Alberta wages are in-line with the economic context of our province.
To put it another way, Alberta wages, in both the public and private sectors, are appropriate for the labour market we’re in. Comparing Alberta wages with wages in other provinces is like comparing apples to oranges.