Mind the Gap

The Fraser Institute is at it again. In their mission to
measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals
they have released a study Comparing Government and Private Sector Compensation in British Columbia.

The introduction states:
While British Columbia’s government has returned to an operating surplus, the province still faces fiscal challenges as it continues to borrow to pay for capital expenditures, thus increasing government debt. In fact, a recent study warned that the province’s fiscal position could become unsustainable unless the government restrains spending in the future (Wen, 2014) [This is another Fraser Institute study called Capital Budgeting and Fiscal Sustainability in British Columbia.]

As the BC government struggles with growing debt and looks for ways to restrain spending, now is an opportune time to examine the compensation levels of government employees, particularly in light of ongoing collective bargaining negotiations between the government and its public sector unions.
The report concludes that
The empirical analysis of wage data and a survey of available non-wage benefit data [there is insufficient data to calculate or make a definitive statement about the differences in non-wage benefits between the public and private sectors in British Columbia, the available data suggest that the public sector enjoys more generous non-wage benefits than the private sector. (p. 28)] for British Columbia indicate that government workers in the province enjoy both higher wages and likely higher non-wage benefits than their private sector counterparts. Specifically, British Columbia’s public sector workers (including federal, provincial, and local government workers) enjoy a 6.7 percent wage premium, on average, compared to private sector workers, after adjusting for personal characteristics such as gender, age, marital status, education, tenure, size of establishment, type of job, industry, and occupation. When unionization is included in the analysis, the wage premium for the government sector in British Columbia declines to 3.6 percent.
Could this be an argument for more unionization of private sector workplaces? Considering the Fraser Institute's vision is
a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility.
probably not. It is more likely that they are recommending that the provincial debt can be retired by cutting the public sector 6.7% "wage premium."

But the Canadian Centre for Policy Alternatives portrays the situation differently.

Using data and analyses from the CCPA study Narrowing the Gap: The Difference That Public Sector Wages Make, one of the authors, Kate McInturff, in an article titled Who gets paid more? points out that
wages are higher in the public sector precisely for those groups of people who experience the greatest discrimination in the private sector—because the public sector goes further in correcting those discriminatory practices. Salaries are lower in the public sector for the groups least likely to experience discrimination on the basis of race and sex.
She proposes that in order to bring public sector compensation in line with the private sector, public sector employers would need to
  • lower the wages of women, Aboriginal workers, and visible minority workers
  • raise the wages of the highest paid employees
  • shrink or eliminate non-wage compensations for workers who have accepted a public sector wage penalty because the public sector offered benefits such as pensions
  • spend more money on compensation for the workers at the top end of the scale.
    (The highest paid public sector workers see their salaries top out at just under half a million dollars annually while the top private sector workers receive compensation packages worth twenty times that much. The CEO of Rogers Communications makes a base salary of $1.1 million, has a pension worth $1.9 million and receives additional benefits totalling $23.8 million)
  • react to market volatility and economic shocks by laying off workers (oil prices fall, nurses get laid off)
The picture that CCPA paints is one of a public sector that is making moves to increase pay equity and shrink the pay gap.

Most public sector jobs are unionized and wages and benefits are collectively bargained by elected representatives who are accountable to their membership and representatives of elected governments that are accountable to their constituencies. This accountability structure means that the people at the bargaining table must balance budget constraints, long term community and economic health, individual rights, and fair employment standards.

The accountability structure in the private sector is much different and these reports show us that the outcome for workers, especially in non-union workplaces, reflects that difference.


Maria said...

Hmmm... Check this out

Kate Nonesuch said...

Very useful information, especially the last graphic. Thanks.