What is the Solution to the Health Care Impasse?

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posted June 21, 2001
Twenty-one years ago the Fraser Institute published a marvellous monograph by Dr. Sandra Christensen entitled, “Unions and the Public Interest”. It did a great job puzzling through the issues associated with trade unionism and the public sector. Regrettably its conclusions are as timely as when they were written.

First, it is clear, as Christensen finds in her careful analysis, that there is no point in pretending that wages in the public sector are determined by collective bargaining and the economic contest which characterizes private sector bargaining. There, the employer suffers economic consequence as the union members withdraw their services and as their competitors take their customers. While there are complexities related to capital and fixed costs, if employers are free to replace striking workers, the basic determinant of the outcome is the fundamental economics of the industry and the particular firm.

In the public sector, the difference of opinion about wages is settled in a political contest between the workers and the government. Withdrawal of the service leads to some level of political pressure on the government and in the end, the confrontation between that political pressure and the pressure exerted by citizens as taxpayers determines the outcome. The economics of the situation have nothing, or very little, to do with it. The political stripe of the government and the general mood of the public of course will.

Christensen concludes that those services which are provided by governments on a monopoly basis cannot be the subject of collective bargaining. Rather, she suggested the creation of a wage comparability board that would set wages in the public sector in comparison to those in the private sector. A solution which has been adopted in the United States and in the U.K. In both those countries, strikes in the public sector are generally forbidden.

Which brings us to the current situation with regard to nurses. How much should a nurse be paid? What is a nurse worth? And what to do about the withdrawal of nursing services.

The only answer that will serve the interest of Canadians in the long term is that nurses must be paid – including working conditions - their opportunity cost, particularly if they are young and mobile. We do not need a strike by nurses to determine what this compensation is. It can be seen in the wage packages which are offered by our competitors in U.S. hospitals where the market for health care personnel has not been obscured by government action to the same degree. It is those competitors from whom we have most to fear. It is they to whom our nursing graduates have been fleeing.

Why don’t we just pay the market rate for nurses and get on with it? Well, we have been able to rely on nurses who are not mobile because of their age and their family attachments and effectively exploit their immobility. Also, hospitals have the same problem as hockey teams and basketball teams (sigh!) – the Canadian dollar’s reflection of our thirty year flirtation with anti-market policy. But most importantly, the budgets of our hospitals have been depleted by paying the hotel workers in hospitals – the cooks, the painters, the grounds keepers, the plumbers, the floor sweepers etc. some 30 per cent more than their unionised counterparts in the hotel industry for less work..

We can’t do anything about the loonie in the short term. We can continue to exploit the immobility of older nurses to some degree, just as we are doing with older Canadians in every profession – especially physicians and other health care personnel – whose attachments make them immobile. Lets call it the price of being Canadian. We can definitely do something about the organization of the hotel services and end the lunacy of paying hospital-hotel workers who are in no danger of leaving 30 per cent more than the market while paying less than market to nurses who are in short supply.

Of course, government can’t permit the strike or withdrawal of services. We effectively made that decision when we opted for socialized, government provided health care. Under this ethic, as the trade union leaders of the country told us during the debate about Bill 11 in Alberta, access to health care cannot be determined by economics. Presumably that includes the economics of wages.

If the right to strike is very important to union leaders, they must argue in favour of the sort of market competitive health care supply environment in which it would make sense. It is interesting to note, however, that in the U.S. where there is competition, nurses don’t seem to need to strike to get what they need.

The solution in the short term is to appoint a wage comparability board to set health care compensation on the basis of comparability with our competitors East and South. Longer term adjustments require the rationalization of non-medical hospital costs and the introduction of private sector competitors who will show public sector hospitals how to produce services more efficiently. Early entrants, like the Vancouver’s Cambie Surgery Centre, are already showing how to attract and keep highly skilled nurses and other medical personnel.

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