It’s not just lost jobs — there’s a lot to not like about Saskatchewan’s plan to privatize 40 liquor stores
Labour Day Report 2016 | by Gregory Beatty
SaskTel may be grabbing most of the headlines these days, but the Saskatchewan government is engaged in another privatization initiative that will have significant impact on the province.
Following its April re-election, the government’s first bill introduced the groundwork for the privatization of 40 of 75 existing public liquor stores, plus the opening of 12 new private stores in communities across the province.
A mere three sentences in length, Bill 1 repeals s. 2(b)(ii) of The Crown Corporations Public Ownership Act. Passed in 2004 by the Lorne Calvert-led NDP government with unanimous support from the then-Saskatchewan Party opposition, the act sets out a procedure that must be followed before a Crown corporation can be privatized to ensure the public interest is protected.
Crowns mentioned in the act include SaskTel, SaskEnergy, SaskPower, SGI, and (in s.2 (b)(ii)) the Saskatchewan Liquor and Gaming Authority.
Private liquor vendors aren’t new to Saskatchewan, of course. For decades now, the province has had a mixed public-private system. Before the Wall government’s election in 2007, though, private sector involvement was typically limited to off-sale outlets and small-scale vendors in rural communities.
Starting in 2009 with the granting of two speciality wine franchises in Regina and Saskatoon, followed by four full-line liquor vendors in 2013, and a further move to privatize four public stores in Ituna, Langenberg, Kerrobert and Ponteix in 2014, the government has steadily widened the opening for private liquor retailers.
Further private sector expansion was part of the Sask. Party’s campaign platform in the April election, and its victory could be interpreted as a mandate to charge ahead. Still, by issuing requests for proposals (RFPs) to establish private retail outlets to replace the 40 SLGA stores before Bill 1 has been passed, the government is arguably violating The Crown Corporations Public Ownership Act.
That’s not the only bit of trickery it’s engaged in, says Saskatchewan Government Employees Union (SGEU) spokesperson Tina Vuckovic.
“Back in November, when the government indicated it was going forward with privatization, it said only in communities smaller than 2,000 would it allow a franchise to open in an existing business such as a grocery or convenience store,” says Vuckovic. “Now that the RFPs have been released, it states that communities under 5,000 will be able to do that — so the potential exists for [many towns] to lose their free-standing store.”
What will happen to those stores is a major concern for many town councils, says Vuckovic. In the case of Ituna, Langenberg, Kerrobert and Ponteix, SLGA leased one property and owned the three others outright.
Two years after they closed, all three still sit empty.
“Almost every community that’s been targeted for privatization already has vacant buildings they can’t fill,” Vuckovic says. “So what’s going to happen when a liquor store, which is substantially bigger than most buildings, is empty too? Unless you get a large retailer of some sort taking that building it’s probably going to be pretty difficult to fill.”
That won’t be the only negative impact of privatization on rural communities, says Vuckovic.
“What we’ve heard from a lot of people is there won’t be job loss. If the public store employs six people and another store opens they’ll hire six new employees. That’s a myth. Because if a grocery store or gas station is already running, it has its employees. It doesn’t need to hire more just because it’s going to clear some space on the shelves and start offering alcohol.”
What the owner will do, though, is fire any employees who are under 19. And in the rare instance where a new outlet does open in a community, employees will be earning little more than minimum wage with no benefits or pension.
Critics might accuse SGEU of advancing that argument to protect its members’ cushy union jobs,* but when you factor in the multiplier effect, the hit for local businesses is likely to be substantial.
And it won’t be limited to the loss of SLGA employees, or the reduced purchasing power** of their private sector replacements, either.
Winners & Losers
The Wall government has an oft-stated policy of not picking winners and losers in the economy, but through the RFP process that’s precisely what it’s doing. Say you’ve got two grocery stores in a town. One gets the liquor license, the other doesn’t. Whose business do you think is likely to prosper, and whose is likely to decline?
It’s picking winners and losers, plain and simple.
Bars and licensed restaurants could face adversity too. As it stands right now, one Maple Creek bar owner notes in an online video (produced by SGEU), that the local SLGA outlet functions as a “neutral hub” that she and her competitors all patronize.
Once the franchise is privatized, though, she’ll be forced to purchase liquor from whichever competitor gets the license.
As if that wasn’t bad enough, the government is also committed to slashing the mark-up on the wholesale price of liquor by 25 per cent to create what it describes as a “level playing field” between existing SLGA outlets and new private vendors, which will inevitably face increased distribution costs in comparison to SLGA’s province-wide network.
In the case of the Maple Creek bar owner, that means her competitor will enjoy a sizable cost advantage, and she’ll be at their mercy trying to negotiate a comparable discount so she can stay in business.
So dim is that prospect, she says in the video, that she and her partner have already decided to sell their bar.
Saskatchewan taxpayers will also take a hit from liquor privatization, a recent Canadian Centre for Policy Alternatives report concluded. While there will be some cost savings for SLGA from the store closures, and a modest bump in corporate income tax, author David Campanella estimated that reducing the mark-up by 25 per cent for private retailers would cost the government between $20-$25 million annually in lost revenue.
With the government already cash-strapped, Vuckovic also questions its decision not to institute a competitive bidding process for the right to sell alcohol in the province.
“Normally when a government gives up an ‘entity’, they try to put a dollar figure on it,” says Vuckovic. “That’s not what’s being done here. The RFP pretty much says ‘Make your proposal to us. Not a monetary one, but give us information on where you would be located, how big your store would be, what your [retail] background is, what date you can be open, and so on.
“There’s no bid for the business, so we are giving away stores that earn hundreds of thousands, even millions of dollars, and we’re not asking for anything in exchange. To me, that doesn’t make good business sense,” she says.
No Bargain Booze
Allowing further private involvement in the provincial liquor market, boosters say, will increase competition and lead to lower prices for consumers. In larger centres with multiple outlets, that might possibly happen — at least in the short term.
But smaller centres, says Vuckovic, will almost certainly face higher prices.
Under current regulations, SLGA sells liquor for the same price at every outlet it owns, whether it’s in downtown Regina or a remote rural location. Once the latter communities lose their public stores, private operators will be free to charge whatever the market will bear, both to cover their increased distribution costs and earn a tidy profit.
Still not convinced? Consider Alberta’s experience. Alberta privatized its liquor system in 1994, and according to a January Calgary Sun report, it now boasts the highest liquor prices in Canada.
A 12-pack of Molson Canadian, the Sun found, cost $29.54 in Alberta compared to $26.75 in Saskatchewan and $24.95 in the Yukon.
Crown Royal, meanwhile, sold for $35.20 in Alberta, compared to $26.87 in B.C. and $25.60 in the Yukon.
Longer term, Saskatchewan could even see the emergence of a powerful private liquor lobby as happened in Alberta. Described by Calgary Herald columnist Don Martin as the “most successful government lobby group in Alberta today”, the Alberta Liquor Store Association has proven to be extremely effective at advocating for its members’ interests.
Were that to happen in Saskatchewan, Vuckovic has no doubt it would lead to further government concessions.
“This is just the beginning,” says Vuckovic. “They’re privatizing 40 of our 75 public stores, and I don’t believe the remaining 35 stores are safe under this government.
“I believe at some point they’ll hit the chopping block too.”
* Fair enough, and also, so what? Don’t we want well-paid jobs in Saskatchewan so people can spend their disposable incomes at local restaurants and shops?
** Like I said.