The same people who lament corporate monopolies see nothing wrong with government monopolies
By Sean Speer and Charles Lammam : Normally this is the time of year many B.C. families would be counting down the days until school resumed. But this year is different, with the ongoing B.C. teachers’ union labour dispute casting a pall of uncertainty over the start of the school year. It’s a classic example of the negative effects of a monopoly, and as is often the case with monopolies, ordinary families are the ones most affected.
A monopoly is when “a single company or group owns all or nearly all of the market for a given type of product or service.” In the private sector, monopolies (or near monopolies) tend to be driven by government policies that restrict competition. Canadians rightly complain about protected industries – whether it’s dairy products, telecoms, banking, or transport – and the consequences in the form of less choice, poorer service, and/or higher prices.
Surprisingly, though, the same people who lament about their banking fees seem to apply different logic to government monopolies. The truth is, government monopolies over a wide range of key services – including education – have far-reaching consequences that affect B.C. families, even if 11.5 per cent of B.C. students are enrolled in non-government schools (and this share is growing over time).
One important difference between the government and private sector is how market pressures affect employee-employer relations and the dynamic between service providers and their customers.
Competitive markets help to ensure that employee wages are neither too high nor too low (compared to their earning potential elsewhere) and that non-wage benefits (such as pensions and job security) are rooted in employee contributions to the firm’s output. Markets are generally effective at doing this in the private sector in part because of competitive pressures and “hard budget constraints” whereby a business can actually run out of cash and go bankrupt.
Governments operate in a much different environment often divorced from competitive market pressures or the risk of bankruptcy or dissolution. Amplifying these challenges is the fact that the government sector maintains a much higher unionization rate (74.6 per cent) than the private sector (17.5 per cent). Together, widespread unionization, collective bargaining, and the right to strike have created a power imbalance between taxpayers and government-employee unions.
The ongoing teachers strike in B.C. is evidence of these forces in practice. The labour dispute exemplifies the negative consequences of monopolized government services and the impact on families when it comes to such a critical service as education.
While B.C.’s education system is marked by a greater degree of non-government involvement than most Canadian provinces, an overwhelming proportion – almost 90 per cent – of students still attend government-run schools. This limited degree of competition places enormous power in the hands of teacher unions (and the government) to dictate outcomes at the expense of parents and students.
When government is the sole supplier of services, the options for consumers are extremely limited. Parents and students can’t easily switch to alternative education providers, especially when many independent schools have long wait lists (nearly 2,200 students were on wait lists in B.C. in 2011).
It wasn’t always this way. Until the mid-1960s, government-employee unions were restricted in their ability to strike and essentially hold the system hostage through collective bargaining. That changed and now Canada has some of the most lenient rules with respect to the scope of union activity in the government sector.
Adding to the problem is the fact that governments, unlike businesses, have essentially unlimited resources through their ability to tax and borrow so there’s less financial pressure to control compensation growth especially since higher costs in the government may not be immediately reflected in higher prices. Government unions also tend to have considerable political influence because they’re large and well-organized.
British Columbians have every reason to bemoan monopolies in the private sector that stem from government policy. But their indignation shouldn’t stop there.
The same principle applies to government monopolies where the consequences can be even more perverse. The BC teachers strike shows that government monopolies can shut down services completely, leaving consumers with limited or no options.
Like many protected industries in the private sector, education needs greater competition and more choice to place greater power in the hands of BC families and their children. Hopefully the latest strike opens the door for reform.
Sean Speer is associate director of fiscal studies and Charles Lammam is resident scholar in economic policy at the Fraser Institute.