Public sector keeps wage growth high in Canada: report

Government workers 'making outsized contribution to wage growth'

Public sector keeps wage growth high in Canada: report

Since May 2022, the average hourly wage in Canada has grown between 4 per cent and 6 per cent, according to a report from Desjardins.

Coming out of the COVID‑19 pandemic in early 2022, private sector wage growth led the advance in compensation by a wide margin, according to the report.

Since then, however, public sector wage gains have continued to increase while private sector wage growth has gradually stabilized.

“Public sector wage gains have been particularly concentrated in public administration and health and social services recently, the latter reflecting still-elevated job vacancies,” said Randall Bartlett, senior director of Canadian economics, in a Desjardins bulletin.

“The public sector is making an outsized contribution to wage growth. This reflects already high hourly wages in the industry, strong recent growth related to labour negotiations, and surging hiring.”

(Insert photo: Public sector compensation)

Another factor resulting in public sector wages leading the increase in wage growth is the growth in employment numbers, he says. Since December 2019, public sector employment has increased by nearly 657,000. That’s equivalent to 17 per cent. 

In April, Ontario released its annual “Sunshine List” of the top-paid employees in the public sector.

Meanwhile, private sector job creation was up by 662,000 over the same period. That, however, is equivalent to just a 4 per cent increase in net new jobs.

“At the end of 2019, there were over four private sector workers for every public sector worker in Canada. Today, that ratio is closer to 3.5:1,” says Bartlett.

(Insert photo: Public sector wages)

Another factor is that public sector workers are paid at a higher rate than private sector workers.

“Hourly pay for public administration is particularly high,” he says. “Notably, out of 16 industries in the [Labour Force Survey], the only ones to provide higher hourly remuneration than public servants so far in 2024 are utilities, mining and oil and gas extraction, and professional services. Even the average rate of hourly compensation in finance, insurance, real estate and leasing was lower.”

Business sector wage growth

Despite the increasing wage rate, Desjardins forecasts more weakness ahead for business sector wage growth. This is because “interest rates remain elevated and growth soft”.

“Still-elevated interest rates are working to cool private sector wage growth and inflation along with it, in spite of federal public service compensation pushing in the opposite direction.”

(Insert photo: Business sector hourly compensation)

The City of Winnipeg would have to spend more than $3 million more per year if it offered city workers a wage rate that some advocates consider a living wage, according to a report.

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