Key Takeaways:
- Government sector workers in the Atlantic provinces earn 6.3% more on average than their private sector counterparts.
- Public sector workers in the region enjoy a range of non-wage benefits, including higher pension rates, earlier retirement ages, and greater job security.
- Bringing government-sector compensation in line with the private sector could help governments in Atlantic Canada control spending without reducing services.
- The Fraser Institute suggests that the current compensation gap is unfair to taxpayers and that governments should strive to provide competitive compensation that is in line with the private sector.
Introduction to the Compensation Gap
The Fraser Institute has released a new report highlighting the significant compensation gap between government sector workers and their private sector counterparts in the Atlantic provinces. According to the report, government sector workers in the region earn 6.3% more on average than private sector workers. This gap is based on an analysis of Labour Force Survey data from Statistics Canada, which provides a comprehensive picture of the employment landscape in the region. The report’s findings have significant implications for governments in Atlantic Canada, which must balance the need to attract and retain qualified employees with the need to control spending and maintain fairness for taxpayers.
The Prevalence of Public Sector Employment
The report notes that the Atlantic provinces have a high proportion of public sector employees, with 27.6% of total employees in the region working in the public sector. In Nova Scotia, this figure is even higher, with 26.6% of workers employed in the public sector. This high level of public sector employment is likely a contributing factor to the compensation gap, as governments in the region may feel pressure to offer competitive salaries and benefits to attract and retain employees. However, the report suggests that this pressure may have led to a situation in which public sector workers are enjoying a wage premium that is not justified by market conditions.
The Wage Premium
The report finds that public sector workers in the Atlantic provinces enjoy a significant wage premium compared to their private sector counterparts. On average, public sector workers earn 6.3% more than private sector workers, although this gap narrows to 3.9% when controlling for unionization. This wage premium is a key factor in the compensation gap, and the report suggests that it may be unfair to taxpayers who do not enjoy similar benefits. The Fraser Institute argues that bringing government-sector compensation in line with the private sector would help governments in Atlantic Canada control spending without reducing services, while also maintaining fairness for taxpayers.
Non-Wage Benefits
The report notes that wage is not the only factor contributing to total compensation, and that public sector workers in the Atlantic provinces enjoy a range of non-wage benefits that contribute to the compensation gap. These benefits include registered pensions, earlier retirement ages, greater job security, and more generous absence policies. In each of these categories, the public sector comes out on top, with public sector workers enjoying significantly better benefits than their private sector counterparts. For example, the report finds that 94% of public sector workers in Nova Scotia have a registered pension, compared to just 20.6% of private sector workers. Public sector employees are also more likely to have a defined benefit plan, which guarantees a benefit upon retirement regardless of contributions.
Pension Rates and Retirement Ages
The report highlights significant gaps in pension rates and retirement ages between public sector and private sector workers in the Atlantic provinces. In Nova Scotia, the gap in pension rates is particularly striking, with 94% of public sector workers enjoying a registered pension compared to just 20.6% of private sector workers. The report also finds that public sector employees in the region are able to retire earlier than their private sector counterparts, with an average gap of 2.5 years in Nova Scotia. This gap is greater than in any other non-Atlantic province except Quebec, and suggests that public sector workers in the region are enjoying significantly better retirement benefits than private sector workers.
Job Security and Absence Policies
The report also examines job security and absence policies in the Atlantic provinces, and finds that public sector workers enjoy significantly better benefits in these areas. On average, public sector employees in the region experience far fewer job losses than private sector workers, and are also more likely to take personal days. This suggests that public sector workers in the region enjoy a higher level of job security and work-life balance than their private sector counterparts, which may be a contributing factor to the compensation gap.
Conclusion and Recommendations
The Fraser Institute’s report highlights the significant compensation gap between government sector workers and their private sector counterparts in the Atlantic provinces. The report’s findings suggest that public sector workers in the region enjoy a range of benefits, including higher wages, better pensions, earlier retirement ages, and greater job security, that are not available to private sector workers. The Institute argues that bringing government-sector compensation in line with the private sector would help governments in Atlantic Canada control spending without reducing services, while also maintaining fairness for taxpayers. As Grady Munro, policy analyst at the Fraser Institute, notes, "Of course, governments in Atlantic Canada should provide competitive compensation to attract qualified employees, but clearly wages and benefits in the government sector are out of step with the private sector."
