They make more, receive better pensions, and retire earlier than private sector workers in similar positions
With declining energy prices and a vulnerable economy, the provincial and various municipal governments in British Columbia are facing important fiscal challenges. This warrants a sober review of government spending and an important place to start is the compensation of government employees, a key spending item for all governments.
And in light of ongoing collective bargaining negotiations with public sector unions, now is an opportune time to ensure that the wages and benefits of government employees are in line with comparable private sector positions.
This is about more than just economics; it’s also about simple fairness. It seems entirely unfair to have government workers receive a premium that is paid for by private sector workers who receive less overall compensation for similar positions.
The traditional trade-off was that the government sector received lower wages than the private sector in exchange for more generous benefits. But as a recent Fraser Institute study reveals, that bargain has been undone. The government sector now enjoys a wage premium, and more than likely, more generous benefits as well.
Using Statistics Canada data from 2013 (the latest available), we found that the average wage in the government sector in B.C. (including federal, provincial, and local governments) is 34.2 per cent higher than the private sector. However, this doesn’t account for differences like education, the nature of the position, the experience of the workers, etc. Once we control for these factors, the average wage premium enjoyed by the government sector is 6.7 per cent compared to the private sector.
But total compensation includes much more than just wages; it also includes benefits such as health, dental, pensions, job security, etc. Unfortunately, Statistics Canada does not collect comprehensive data on non-wage benefits so it’s difficult to make a definitive statement about whether government workers enjoy more generous benefits than their private sector counterparts.
The best and most comparable available data nonetheless point to a rather generous benefits package for the government sector compared to the private sector.
For example, pensions are one of the costliest benefits provided to workers in both sectors. In 2013, 86.9 per cent of government sector workers in B.C. were covered by a registered pension compared to 19.2 per cent of private sector workers.
Also telling, among those covered by a registered pension, 95.7 per cent of government workers enjoyed the gold standard of pensions – a defined-benefit pension, which guarantees a certain level of benefits in retirement – compared to 46.9 per cent of private-sector workers.
More evidence from the available data: government sector workers in B.C. retire almost three years earlier, on average, than private sector workers.
When it comes to job loss, a proxy for job security and another way to measure non-wage benefits, government workers have a distinct advantage. In 2013, 3.3 per cent of private sector employment in B.C. experienced job loss – more than four times higher than the 0.8 per cent of government sector employment.
A final indicator of the dramatic difference in compensation between the government and private sectors: the rate of absenteeism, which is the number of days lost per worker due to personal reasons throughout the year. In 2013, full-time employees in B.C.’s private sector were absent for an average of 9.3 days while the average government worker was absent 12.7 days.
Of course, governments need to provide competitive compensation to attract qualified employees, but the fact is government sector workers in B.C. enjoy higher wages and, more than likely, more generous benefits than comparable workers in the private sector.
As governments in B.C. struggle in the face of fiscal and economic uncertainty, policy-makers can control spending by ensuring government sector compensation broadly reflects private sector compensation for similar positions.
By Charles Lammam and Jason Clemens
Charles Lammam and Jason Clemens are co-authors of the Fraser Institute study Comparing Government and Private Sector Compensation in British Columbia,available at http://www.fraserinstitute.org