Quote:
Originally Posted by Dado
We're talking about several thousand employees at the most. That's fewer than the number who have been hired during the Conservatives' tenure...
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but we're also likely to see little-to-no new hiring for the next two or three years as well. Let me explain (this will get wonky and detailed, skip the rest of this post if you don't care!):
The government recently froze departmental operating budgets while at the same time transferring responsibility for covering negotiated wage increases to departments (departments' annual reference levels used to be topped up by the amount of collectively-bargained salary increases). At the same time, the government has continued to negotiate collective bargaining agreements with its unions that include year-over-year cost of living adjustments (or "COLAs") on the order of about 1.5%/yr. On top of this, many or most employees also get "statutory merit increases," which are annual raises on the order of 2.5-4% within the salary band of their classification level (these are not promotions, but just raises for gaining another year's experience at a given classification level, they vary by job classification type and level, but there are generally 3-6 years worth of merit increases at any given level before an employee "maxes out")
So what does this mean? Departments must now find away to manage within a fixed budget to fund payroll increases of between 1.5-5.5% (some employees have maxed out their salary within their classification level and receive only cost of living increases, while others will receive both COLAs and the "merit" increases). Effectively, if nothing changes, this will produce a hiring freeze and perhaps even ongoing contraction of the government workforce, since most of the savings a department will make from the government's average 4% attrition rate must go to pay the increased salaries of the department's remaining employees. (there is some allowance since many of the people leaving will be at the top of the payroll and new employees generally cost less, but senior positions need to be filled, so there will be promotions, and the effect is still little-to-no-growth overall, if not contraction)
If the region's largest employer (by far) stops hiring, that will greatly reduce demand for new people (and, therefore, for new first time homebuyers) to move to Ottawa, or to stay in Ottawa after finishing school/training -- especially when we consider that a good portion of non-government employment in this town involves providing goods and services to government and/or government employees.
As a result, I think we could see a fairly sharp drop in Ottawa's population growth rates. If the population growth drops, where does demand for new housing come from? If you don't have new home buyers, how do existing home buyers trade up the property ladder? If you don't have existing homeowners trading up to larger family homes, how do new empty nest boomers sell to downsize to a nice new condo? That's when you get a bubble bursting and a serious downturn in the housing market, not just a "correction" in prices. A correction that I agree with Dado is much needed given the
Quote:
Originally Posted by Dado
overvalued expectations of would-be sellers who seem to think they're entitled to the unrealized capital gains their houses would have had if they had sold at the top of the market. At a society-wide level, we could do with a good price cut on all housing.
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Those kinds of "soft landings" in housing markets are very very rare!
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