Reality Check – Salary grids are budget neutral; freezing them is not

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An established salary grid that provides for an annual salary increase is budget neutral.
 
This may seem counter-intuitive to claim, but it is a fact. The reason for the difference between intuition and reality is because the amount of money tied up in an established salary grid is constant, and it is only individual positions relative to one another that change as they move through the grid.
 
The following table is a very simple version of a salary schedule. It provides for a salary uplift for each year of a person’s service until they reach the top of the ladder. In this model, there is a zero per cent increase to the salary schedule itself, but individuals move one step up the ladder. They also move off and on: if one person retires (or otherwise departs) and another is hired, total salary does not change.
 
 As every single employee does eventually leave (either through retirement or some time earlier), over time the number of entrants is matched by the number of exiting employees. Therefore the total salary remains constant over time with slight fluctuations from one year to the next. Note that the total amount of money expended in grid payments each year is a function of the average of the length of service of all individuals currently employed— i.e. those with little service as well as those with a number of years of seniority. This is clearly a more stable statistic than simply counting annual departures and hires, and therefore the fluctuations in total grid payments are much less marked than annual changes in employment flows, if there are such changes.

The salary schedule could have many more steps, but the result will still be the same. Other factors may change the total amount of salary paid – an improvement in the student-to-educator ratio, for example – but the change is a result of staffing policy, not the existence of a salary grid.
 
So, when politicians seek to freeze the grid, they do save money because they are paying less than they were previously paying to the same workforce. In other words, a freeze is actually a payroll cut. Grids are cost neutral, and freezes to the grid are a means to cut payroll.  This hurts the individuals – and their families – who have their salaries frozen. It’s bad policy, and it plays politics with the income of hard working Ontarians.

This article originally appeared in the OCUFA Report. To receive stories like this every week in your inbox, please subscribe.

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