Ford government should consult the data amid calls for government pay increases

Public-sector wages and benefits continue to headlines across Canada. For example, unions in Ontario are railing against Bill 124, which has capped pay increases in recent years. If the Ford government, which will table its next budget later this month, wants to put Ontario’s finances on a sustainable fiscal footing, it must carefully manage the wages and salaries of government employees. This will be no easy task.

Given that government wages and salaries generally consume about half of all program spending for the provinces, the results of any labour dispute will likely play a big role in determining any province’s fiscal health.

So how should the Ford government approach public-sector wage negotiations? These debates are always fraught with emotion. After all, peoples’ wages are at stake. It’s important for the Ford government to step back and take a dispassionate look at the numbers to better understand how compensation levels in the government sector compare to private-sector workers.

For example, according to a recent analysis published by the Fraser Institute, government employees in Ontario (at the federal, provincial and local levels) enjoy advantages across several different dimensions of total compensation. The study controls for factors such as gender, age, education, tenure and industry to help generate an “apples to apples” comparison so government workers are compared to similar private-sector workers.

Let’s start by looking at the largest component of overall compensation—wages. The analysis finds that government workers across Ontario enjoyed a 10.9 per cent wage premium (on average) relative to comparable private-sector workers in 2021.

The available data on non-wage benefits is imperfect, but what we do have suggests the government sector enjoys several other advantages. For example, 83.9 per cent of government workers in Ontario are covered by registered pension plans compared to 25.1 per cent of private-sector workers.

Government workers also retire 2.5 years earlier (on average) than those in the private sector. In 2021, job security appears to have been better in the government sector—only 1.3 per cent of those employed in the government sector experienced job loss; far lower than the private-sector equivalent (5.5 per cent).

Finally, fulltime workers in the government sector took more time off in 2021 for personal reasons (14.0 days on average) than similar private-sector counterparts (8.8 days) in Ontario.

Of course, unions will point to high inflation since 2021 when the data we have analyzed was collected. However, inflation seems to be cooling at least from its peak, weakening the case for large increases in future years and strengthening the case for restraint from governments to help shrink the gap between government and private-sector compensation.

It’s vitally important for the government sector in Ontario to pay competitive wages for government workers to ensure we have people who can develop sound policy and deliver high-quality public services. It’s also important to protect taxpayers from rapid wage bill growth that must ultimately be paid for through taxes. The data show that in general government workers across Ontario earn more than their private-sector counterparts. The Ford government should view with skepticism any claims that large pay increases are needed to keep the government competitive as an employer with private-sector firms.