Compensation in Quebec’s public sector outpaces private sector

As Quebec struggles to balance its budget, better control of spending is needed

Download Compensation in Quebec’s public sector outpaces private sector
Montreal Out

By Charles Lammam
and Philip Cross
The Fraser Institute

VANCOUVER, BC, and OTTAWA, ON, Feb 27, 2015/ Troy Media/ – As the Quebec government struggles to eliminate its deficit and rein in the largest debt burden in Canada, it has identified government-sector compensation as a way to restrain spending and balance the budget in 2015/16.

With collective agreements set to expire at the end of March for 430,000 provincial government workers, now is an opportune time to scrutinize the compensation levels of government employees, which consumes around half of government program spending.

Benefits to public sector unfair

And it’s not just an issue for the provincial government. Municipalities also pay wages and benefits to government workers above those of comparable private sector positions.

This is about more than just economics. It seems unfair for government workers to receive a premium paid for by private sector workers who receive less overall compensation for similar work.

The traditional trade-off was that the government sector received lower wages than the private sector in exchange for more generous benefits including job security. But as a new Fraser Institute study reveals, that bargain has been undone. The government sector now enjoys a wage premium and likely more generous benefits.

public sector
Reining in public sector compensation will help Quebec balance its budget

Using Statistics Canada data from 2013 (the latest available), the study found that, on average, government workers in Quebec at the federal, provincial, and local government levels receive 10.8 per cent higher wages than comparable workers in the private sector.

This wage premium accounts for differences in the personal characteristics of workers such as differences in education, the nature of the position, and a worker’s experience.

But total compensation includes much more than just wages; it also includes benefits such as pensions, health, dental, and job security. Unfortunately, Statistics Canada does not publish comprehensive data on non-wage benefits for individual workers 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 rather generous benefits 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, 87.8 per cent of government sector workers in Canada were covered by a registered pension plan compared to 23.9 per cent of private sector workers.

Also telling, among those covered in Quebec, 96.9 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 just 58.5 per cent of private-sector workers.

More evidence from the available data: government sector workers in Quebec retire about three years earlier, on average, than private sector workers.

When it comes to job loss, a proxy for job security, government workers have a distinct advantage. In 2013, 4.2 per cent of private sector employment in Quebec experienced job loss – about eight times higher than the 0.5 per cent of government sector employment.

A final indicator of the dramatic difference between the government and private sectors: the rate of absenteeism. In 2013, full-time employees in Quebec’s private sector were absent due to personal reasons an average of 8.9 days throughout the year while the average government worker was absent 14.2 days.

Public sector negotiations looming

Of course, governments need to provide competitive compensation to attract qualified employees. But the fact is, government sector workers in Quebec enjoy higher wages than comparable workers in the private sector. They also, according to the available data, likely enjoy more generous benefits.

As governments at all levels in Quebec struggle to balance their budget, better control of spending is needed. And with collective bargaining negotiations looming, now is a good time to ensure government sector compensation broadly reflects private sector compensation for similar positions.

Charles Lammam is associate director of tax and fiscal policy at the Fraser Institute and Philip Cross is former chief economic analyst at Statistics Canada. Comparing Government and Private Sector Compensation in Quebec is available at www.fraserinstitute.org

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