High public-sector wages make it tough for smaller private-sector firms to attract and retain staff
Canadian governments are overpaying their workers, making it tough for small- and medium-size private-sector employers to attract and retain people, according to the Canadian Federation of Independent Business.
“Disparities in wages and non-wage benefits favouring the public sector distort the labour market by enticing workers to exit private-sector employment,” states the report Wage Watch, released last month by the association dedicated to promoting and supporting small- and medium-sized employers.
Study author Derek Picard said that because public-sector employers aren’t subject to market forces, there isn’t the same pressure to control wages that is felt in private firms.
He concluded federal workers are paid, on average, 15.1 per cent more than people doing the same job in the private sector. Provincial workers enjoy a 9.1-per-cent premium, while municipal government workers make 11.4 per cent more than their colleagues in the private sector.
Census data from 2001 was used to compare compensation levels for 174,360 public-sector workers to 4.4 million private-sector employees from 257 occupational groups found in both sectors.
Wage premiums were found to be highest among occupations with mid-range salaries, while senior level public-sector wages continue to lag behind those paid for comparable work in the private sector. The gap at the federal level has grown which makes it difficult for small and medium-size employers to compete for some workers, said André Piché, director of national affairs for the CFIB.
The problem is worse at the middle level and below, he said. A secretary is unlikely to take a job with a small private-sector employer when she can make so much more money working for the government. Once benefits are taken into account, federal workers enjoy a total compensation premium of more than 23.3 per cent (see chart).
Mario Baril, a spokesperson for the Treasury Board Secretariat, the agency responsible for staffing the federal civil service, said the CFIB’s claim that workers in the federal government enjoy a 23 per-cent wage premium is inaccurate.
It is hard to make comparisons between government and private-sector jobs for a number of reasons, he said.
“There is no single source of data that takes into consideration all of the factors required to provide accurate and reliable measures of comparative wages for all groups represented in the public service,” he said. For example the CFIB did not take into account union rates, education, age, experience and skill levels.
“In addition it has been suggested that because public-sector employers have a greater commitment to pay equity, there is a smaller difference in wages between the genders in the public sector than in the private sector,” he said, adding that payment of a $2.2 billion pay equity settlement in 2000 would further skew the numbers.
The Treasury Board regularly conducts market assessments to compare wages and the data indicates salaries are higher in some cases, while in others they are lower, he said.
“It is certainly an important public policy question,” said Craig Riddell, a professor of economics at the University of British Columbia, referring to government compensation levels.
There has been a public-sector pay premium for the last 20 years though it is hard to say why it exists, he said.
Premiums are sometimes necessary if work in a given sector is considered less desirable. But a lot of people would find work in the public sector actually more desirable. “There is no real good justification for (the wage difference),” he said.
“I think it is a serious public policy issue, but it is tricky to assess it for two reasons,” he said. “One is that the public sector is much more heavily unionized than the private sector. Some of what we are seeing here is a union premium,” he said.
The other issue is organization size. For a number of reasons, large organizations pay more than small organizations, making it difficult to say the government is paying too much when compared to small employers. “There is a legitimate question about what is the relevant comparison group,” he said.
The wage disparity was not uniform across all occupations. For example, federal clerical staff earn 27 per cent more than their private-sector counterparts. However, workers in electrical trades or telecommunications only make about 85 per cent of the salaries paid in the private sector.
The CFIB made a number of recommendations for changes that would close the gap.
“First and foremost we need more transparency,” said Piché. CFIB is calling for the creation of database of public and private wage and non-wage benefits that would enable quick and easy compensation comparisons.
“We need more information about what the situation is,” he said. “A comprehensive database would give us a better sense of whether (compensation) is right or not.”
The public should also be made more aware of the compensation levels.
“It should be a subject of a public debate,” said Piché. “How much of a gap should we have?”
Disclosure of compensation disparities “creates accountability of government employers and bargaining units to taxpayers who are, ultimately, the shareholders and customers of the public service,” states the report.
Public-sector workers also get much better benefits than employees working for private firms. For example, 82 per cent of public-sector workers receive retirement benefits, compared to 38 per cent of private-sector employees.
Federal workers receive benefits valued at 19.1 per cent of their total wages, compared to just 11.5 per cent in the private sector. Provincial workers get benefits valued at 18.9 per cent of their wages and local public administration workers get 17 per cent. All of these non-wage benefits translate into an 8.2 per cent premium for the federal public service, 5.7 for the provinces and 2.8 at the local level.
As for unpaid benefits, public servants take more time off for illness or personal days (11.7) compared to the private sector (8.2). Federally, employees missed about 12.5 days. Compared to the private sector, this translates into $792 million of additional benefits.
Time at work is another indirect measure of unpaid non-wage benefits and civil servants spent comparatively less time at work in 2000.
While the private sector worked an average of 42.2 hours a week, federal civil servants worked an average of 38.4 hours, in the provinces it was 37.4 and at the local level it was 39.1 hours. The shorter week at the provincial level, represents a $649 million benefit premium, according to the study.
“Disparities in wages and non-wage benefits favouring the public sector distort the labour market by enticing workers to exit private-sector employment,” states the report Wage Watch, released last month by the association dedicated to promoting and supporting small- and medium-sized employers.
Study author Derek Picard said that because public-sector employers aren’t subject to market forces, there isn’t the same pressure to control wages that is felt in private firms.
He concluded federal workers are paid, on average, 15.1 per cent more than people doing the same job in the private sector. Provincial workers enjoy a 9.1-per-cent premium, while municipal government workers make 11.4 per cent more than their colleagues in the private sector.
Census data from 2001 was used to compare compensation levels for 174,360 public-sector workers to 4.4 million private-sector employees from 257 occupational groups found in both sectors.
Wage premiums were found to be highest among occupations with mid-range salaries, while senior level public-sector wages continue to lag behind those paid for comparable work in the private sector. The gap at the federal level has grown which makes it difficult for small and medium-size employers to compete for some workers, said André Piché, director of national affairs for the CFIB.
The problem is worse at the middle level and below, he said. A secretary is unlikely to take a job with a small private-sector employer when she can make so much more money working for the government. Once benefits are taken into account, federal workers enjoy a total compensation premium of more than 23.3 per cent (see chart).
Mario Baril, a spokesperson for the Treasury Board Secretariat, the agency responsible for staffing the federal civil service, said the CFIB’s claim that workers in the federal government enjoy a 23 per-cent wage premium is inaccurate.
It is hard to make comparisons between government and private-sector jobs for a number of reasons, he said.
“There is no single source of data that takes into consideration all of the factors required to provide accurate and reliable measures of comparative wages for all groups represented in the public service,” he said. For example the CFIB did not take into account union rates, education, age, experience and skill levels.
“In addition it has been suggested that because public-sector employers have a greater commitment to pay equity, there is a smaller difference in wages between the genders in the public sector than in the private sector,” he said, adding that payment of a $2.2 billion pay equity settlement in 2000 would further skew the numbers.
The Treasury Board regularly conducts market assessments to compare wages and the data indicates salaries are higher in some cases, while in others they are lower, he said.
“It is certainly an important public policy question,” said Craig Riddell, a professor of economics at the University of British Columbia, referring to government compensation levels.
There has been a public-sector pay premium for the last 20 years though it is hard to say why it exists, he said.
Premiums are sometimes necessary if work in a given sector is considered less desirable. But a lot of people would find work in the public sector actually more desirable. “There is no real good justification for (the wage difference),” he said.
“I think it is a serious public policy issue, but it is tricky to assess it for two reasons,” he said. “One is that the public sector is much more heavily unionized than the private sector. Some of what we are seeing here is a union premium,” he said.
The other issue is organization size. For a number of reasons, large organizations pay more than small organizations, making it difficult to say the government is paying too much when compared to small employers. “There is a legitimate question about what is the relevant comparison group,” he said.
The wage disparity was not uniform across all occupations. For example, federal clerical staff earn 27 per cent more than their private-sector counterparts. However, workers in electrical trades or telecommunications only make about 85 per cent of the salaries paid in the private sector.
The CFIB made a number of recommendations for changes that would close the gap.
“First and foremost we need more transparency,” said Piché. CFIB is calling for the creation of database of public and private wage and non-wage benefits that would enable quick and easy compensation comparisons.
“We need more information about what the situation is,” he said. “A comprehensive database would give us a better sense of whether (compensation) is right or not.”
The public should also be made more aware of the compensation levels.
“It should be a subject of a public debate,” said Piché. “How much of a gap should we have?”
Disclosure of compensation disparities “creates accountability of government employers and bargaining units to taxpayers who are, ultimately, the shareholders and customers of the public service,” states the report.
Public-sector workers also get much better benefits than employees working for private firms. For example, 82 per cent of public-sector workers receive retirement benefits, compared to 38 per cent of private-sector employees.
Federal workers receive benefits valued at 19.1 per cent of their total wages, compared to just 11.5 per cent in the private sector. Provincial workers get benefits valued at 18.9 per cent of their wages and local public administration workers get 17 per cent. All of these non-wage benefits translate into an 8.2 per cent premium for the federal public service, 5.7 for the provinces and 2.8 at the local level.
As for unpaid benefits, public servants take more time off for illness or personal days (11.7) compared to the private sector (8.2). Federally, employees missed about 12.5 days. Compared to the private sector, this translates into $792 million of additional benefits.
Time at work is another indirect measure of unpaid non-wage benefits and civil servants spent comparatively less time at work in 2000.
While the private sector worked an average of 42.2 hours a week, federal civil servants worked an average of 38.4 hours, in the provinces it was 37.4 and at the local level it was 39.1 hours. The shorter week at the provincial level, represents a $649 million benefit premium, according to the study.
