Comparing Public and Private Sector Compensation in Canada

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A lack of non-wage benefits data mean that there is insufficient information to make a definitive comparison of total compensation between the private and public sectors. But the data that are available indicate that the public sector enjoys a clear wage premium. After controlling for such factors as gender, age, marital status, education, tenure, size of firm, province, city, type of job, and industry, public sector workers (including federal, provincial, and local) enjoyed a 12.0 percent wage premium, on average, over their private sector counterparts in Canada. When unionization status is factored in, the wage premium for the public sector declines to 9.5 percent.

Public sector workers seem to enjoy better non-wage benefits than those in the private sector, too. For example, 88.2 percent of public sector workers were covered by a registered pension plan compared to 24.0 percent of private sector workers. Of those public sector workers covered by a registered pension plan, 94.0 percent were covered by a defined benefit pension compared to just over half of private sector workers. In addition, public sector workers retire earlier than their private sector counterparts?about 2.5 years, on average?and are less likely to lose their jobs (3.8 percent in the private sector versus 0.6 percent in the public sector).

To ensure that the overall public sector compensation is fair to both taxpayers and public sector workers, a new institutional frame work is needed.

First, Statistics Canada must collect data on wage and non-wage benefits for public and private sector workers more regularly and more systematically than it now does.

Second, the comparison must include total compensation, not just a narrower comparison of wages or specific benefits such as pensions.

In order for this new framework to function properly, information regarding public sector wages and benefits must be transparent, accessible, and disclosed regularly.

Finally, a number of mechanisms would better ensure that overall public sector compensation is comparable with the private sector. They include a specific, legislated mechanism within government that regularly calculates and sets the total compensation levels for public sector positions; an independent wage board; and empowering public sector unions to become more involved in the determination of the composition of compensation.

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