Fair Wages and Public Sector Workers

By Andrew Jackson 
The Progessive Economics Forum
March 12th, 2011

Today’s Globe has a long article by Konrad Yakabuski on the potential for a Wisconsin style attack on Canadian public sector workers. It’s hard to challenge his argument that this is very much in prospect, and indeed we seem set for a debate - or a series of national, provincial and municipal debates - on the allegedly large superiority of pay and benefits in the public sector during troubled times for private sector workers and for cash-strapped governments.

What irks me about this piece is that it takes a few swipes at union inflexibility, and makes no attempt to compare private and public sector pay and benefits beyond implicitly assuming that the latter are greatly superior.

This is a slightly tricky issue from a union perspective. How do you defend decent pay and pension and benefits coverage without re-inforcing the image of a unionized public sector elite?

The answer lies in the research. While now somewhat dated, the best independent Canadian empirical studies show that a modest public sector pay advantage is mainly the product of higher pay for women in lower paid occupations, offset by lower pay for mainly male workers in managerial jobs.

The alleged ‘”public sector union elite” turns out not to be a bunch of overpaid archtypical bureaucrats, but to be modestly paid women such as caregivers who do much better than their private sector equivalents mainly because the latter struggle with low wages, are under-paid compared to equivalent male co workers, and rarely have access to pension and health benefits.

The best independent academic study is by leading economists Gunderson, Hyatt and Riddell and was published by the now defunct CPRN in 2000. (Searching for it on the CPRN archive was a reminder of the excellent work they did on labour market issues.)

Their findings are summarized by Judith Maxwell as follows:

” Gunderson, Hyatt and Riddell disentangle the effects of various factors that influence overall pay levels and present detailed results for the major occupational groups represented in government workforces, such as managers, professional/technical workers, clerical workers, and service workers. Findings are also reported separately for men and women. The results show that the answer to the question of whether there is a ‘pay premium’ associated with employment in government is far from a simple one. On the one hand, some groups, such as senior managers and specialized occupational groups, such as information technology workers, are paid less than their private sector counterparts On the other hand, women in government, especially those employed in service jobs, such as food services, tend to be more highly paid than women in the private sector. It is clear that employment and pay equity policies, coupled with decades of collective bargaining, have narrowed the pay differentials between men and women and between the highest and lowest paid workers.”

And this is from the authors’ summary of their findings:

”A combination of factors explains government-private sector pay differences. Notable in this regard are pay equity policies, which narrow the male-female pay differentials in government, and the tendency for governments to pay more than the private sector does for service jobs and less than the private sector wage rates for managers. In other words, the spread between the top and the bottom of the pay scale is less in government than in the private sector, likely a result of political, public and collective bargaining pressures.”

These findings in turn help explain why the CFIB attacks public sector wages so fervently - they put upward pressure on them to pay more to under-paid women service workers.

For those who need more, NUPGE have published an excellent technical study by David Macdonald which takes a comprehensive look at Canadian studies of public and private sector pay.