Canada's union leaders are turning their attention to the public sector this Labour Day as deficit-obsessed governments put the squeeze on their workers.

Striking Manitoba Hydro workers walk a picket line outside corporate offices in Winnipeg last fall. Unions with a traditional base in manufacturing are adding members from the public sector. (Bert Savard/CBC)

"I think there is the potential for quite a bit of confrontation in the public sector," said Erin Weir, an economist for the United Steelworkers union, which counts approximately 11,000 public-sector employees among its Canadian ranks.

Governments at all levels have warned that public-sector workers won't be immune as they shift their focus from stimulus spending to deficit cutting.

In Ontario, Premier Dalton McGuinty has asked everyone in the public sector — including nurses, teachers and university staff — to accept a two-year wage freeze as part of a battle to slay a massive deficit that has been projected at more than $100 billion over eight years.

In March, the province announced an immediate freeze on non-unionized workers and managers in the public sector. It will also cap compensation packages for unionized public sector workers for two years after their current contracts expire.

Although other provinces haven't been as direct as Ontario, there's no question belt-tightening is becoming a normal part of public-sector life across the country.

"Most governments at almost every level are facing deficits, and there's a public out there that sees that as something that they didn't create and yet they're being asked to pay for it," said Maurice Mazerolle, director of the new Centre for Labour Management Relations at Ryerson University in Toronto.

However, Mazerolle cautioned it's not going to be easy for any government — even one with a deficit as big as Ontario's — to freeze its employees' wages.

"To ask the union side to voluntarily agree to a wage freeze is at best optimistic. I really don't think that's going to happen," he said.

Paul Moist, president of the Canadian Union of Public Employees, said he expects a "challenging bargaining environment" as governments move to cut their deficits. But he warned that freezing wages or laying off workers in the public sector could push the economy backwards, eliminating any gains from stimulus spending.

'We risk the gradual unravelling of previous gains,' CAW president Ken Lewenza says of decreasing union membership. (CBC)

"If government takes on debt to stabilize the economy, it's like pouring gas on a smoldering fire that you've just put out to excessively cut back and retire that deficit," Moist said.

Ken Georgetti, president of the Canadian Labour Congress, agrees with Moist that cost-cutting at the expense of public sector workers is counterproductive.

"Freezing people's wages in any big employee group — and the public sector's big — is probably a short-sighted, ill-advised strategy," Georgetti said.

Along with Canadian Auto Workers president Ken Lewenza and Toronto mayoral candidate Joe Pantalone, Georgetti took part in a Labour Day parade Monday in Toronto to highlight these concerns.

Unions' new face

The fate of the public sector is an issue of growing importance to many of Canada's biggest unions. Even those organizations that traditionally focused on the manufacturing and resource industries, such as the Steelworkers and the Canadian Auto Workers, are recruiting more and more public-sector workers into their ranks.

White-collar workers have come to dominate the CAW, which split from the United Auto Workers 25 years ago this weekend, including health-care workers, university and college staff and other public-sector employees. In fact, only 45 per cent of the union's current membership comes from the manufacturing sector, half the level of a quarter-century ago.

Today, about 30 per cent of Canadian workers are unionized compared to a peak of nearly 40 per cent in the mid-1980s.

"If this decline in union density continues, we risk the gradual unravelling of previous gains as governments and employers grow confident that the check-and-balance system enforced by high unionization is starting to show signs of fraying," Lewenza said in a Labour Day message.

To combat this, labour groups are employing a variety of strategies. The Canadian Labour Congress is working with unions in the developing world to help increase their members' standard of living, while other unions like the Steelworkers and the CAW are trying to expand their ranks by diversifying into new segments of the economy.