WRT wages, the private sector bids for workers determined on how much the company can afford, and how much the worker is willing to accept. If there is a labour shortage, then wages can be bid up to unreasonable levels (such as in Alberta during boom periods; Tim Horton's workers were making wages many of us would envy), while if there is a labour surplus, wages get depressed as part of a natural cycle. Workers should be free to move from depressed markets to overheated ones, and the problem then corrects itself.
Paying the going market rate for government employees doing the same jobs as private sector employees is hardly a "race to the bottom" (unless all private sector workers are somehow currently living in poverty), and having $19 billion available in the economy would fund a tremendous amount of savings and investment across the entire breadth of the economy as @ 20 million people chose what to spend their share of the wealth on (rather than a handful of bureaucrats or a limited segment of the population). The $19 billion represents the resources to potentially create 380,000 full time private sector jobs as well.
This is the part of the argument which is willfully ignored. By removing large sums of money from the hands of the State, funds cannot be funneled into parts of the economy for whatever political purposes are deemed important by the political class (overpaying government workers to help ensure reelection is one classic distortion, as political ads paid for by Ontario's public sector unions are demonstrating in the runup to October's elections). This mitigates the appearance of bubbles, and moderates investment risk overall as money is not chasing perverse incentives created by politically motivated spending. Individual investors may choose unwisely, but this an individual issue, not a domino effect which can take out entire sectors of the economy.
