Earlier this week Teacherman wrote about whether or not public service compensation is the next “bubble” to burst. In the article, which I thought was excellent, TM, a civil servant himself, argues that public service compensation is “racing ahead” and the great gains public servant in Canada are achieving need to be curbed now, not later. TM makes some valid points, however, there are a few points where we do not see eye to eye.
Full disclosure: Mrs. SPF and I are public servants in the province of Ontario. Our livelihood, like TM, is intrinsically dependent on the public service compensation our employer provides. Additionally, elements of our compensation, like health benefits and a defined benefits pension plan are key parts of our future personal financial plan. Like TM, I will endeavour to not impart personal bias when discussing the subject of public service compensation.
Teacherman sites two studies in his article (CUPE and Treasury Board). These (typical) studies on this topic leverage statistics which can be selectively adopted based on the driving interests of the organization that produced the analysis while ignoring extremely important comparison considerations. This goes for both sides of the argument. When it comes to statistics I agree with Mark Twain (who attributed 19th century British Prime Minister Benjamin Disraeli): “There are three kinds of lies: lies, damned lies and statistics.”.
Treasury Board compares the public service compensation of federal employees to those of the public sector. CUPE is a union that represents workers in health care, education, municipalities, libraries, universities, social services, public utilities, transportation, emergency services and airlines (really?).
CUPE’s take on public service compensation
First, women in the public sector earn 4.5% more than women do in the private sector while men in the public sector earn 5.3% less than private sector counterparts. In August of 2011 the Federal Office of the Chief Human Resources Officer reported that:
The overall “wage gap” between men and women in the public service, calculated as the difference between the average salary of all men and the average salary of all women regardless of the group or level they belong to, has decreased from 17.7% in 1999-2000 to 10.9% in 2009-2010.
For public servants under the age of 35, where women and men with higher education levels are recruited into higher paying jobs, the gender wage gap is lower at 3.5%.
In the private sector, this report tells us the gap is over 18%. Equal pay for equal work amongst the sexes is important and the private sector has not kept pace with this basic tenet of equality in Canada. The public service also allows for women to be better compensated for the skills they provide to their employer.
Second, lower paid occupations (cleaning, food preparation, clerks) are paid more than their private sector counterparts while high paid occupations (managers, lawyers, accountants) are paid considerably less than their private sector counterparts. Which brings me to …
Interestingly enough, even the CUPE study revealed that the public sector was better paying (although only by .5% overall). When taking into account all forms of compensation, the gap widens to 4.6%.
A consultant that shares my profession that is brought in (private sector) on contract to work for government receives double my public service compensation.
When I look at other analysis tools, such as the IT Canada 2012 salary report (this is data collected by voluntary user submission) and enter in my profession and location I am quickly shown that the 2012 average compensation was up 6% last year while the average additional cash compensation to those in my profession saw and additional 6.7% (bonus!). This bonus is telling as it appears my profession gets a hefty cash bonus each year – but not where I work – so that the average salary with included cash compensation is likely higher in private sector as public service compensation does not allow for cash bonuses as far as I know.
Regardless, the bonus is 11.5% of the average salary. Most public servants I know who do the work I do will not see such a large cash compensation this year or any time soon. And 11.5% does dwarf 4.6% as reported by CUPE.
The reality is that people in the private sector should make considerable more money on average because their jobs are usually much less secure, and because they operate in a competitive environment.
The clumping of the public service or private sector into one aggregate is problematic. As CUPE noted, various professions are going to earn differing pay scales. Some jobs take more education, experience or knowledge than do others. This is reality. Where I work food service and cleaning tasks are outsourced privately (via a competitive process). Other positions that traditionally kept the average public service compensation at a lower number, such as traditional clerk work, are being phased out via service location consolidation, automation and transformed process efficiencies.
The jobs simply are not the same so I feel there is a comparison of wages from professions across sectors that do not match up. Our economy has also been reducing the “good” jobs in the private sector at an alarming rate. The local hardware store is gone (along with the decently paid jobs they provided) and we are served by Canadian Tire or Walmart employees who don’t see similar compensation. The North American economy has a widening gap between “good” and “not-so-good” jobs and the pay gap widens.
Additionally, while Canada does sport numerous resource based jobs the economy is transitioning to service based. Perhaps this is part of the problem – the reduction of producing things to sell while increasing information and service businesses. Usually, those who receive public service compensation are not creating goods and the world economy has dictated that there has been a paradigm shift in the valuation of work. We are not going to see $30/hour private sector service positions and the days of lucrative manufacturing jobs are gone. Ian said it as well as I could in his comment in the original public service compensation article.
In the private sector the median wage is crashing compared to GDP as wealth is concentrated to a smaller number of people. I don’t think this trend will reverse itself anytime soon as long as we have free trade and our manufacturers are competing against countries with lower standards for human rights and the environment.
If we want to discuss job security one must take a look at the recent 2012 Canbadian Federal budget and ask the 19,000 or so public servants who were issued pink slips just last week, or will soon. Their union apparently can’t do anything about these job cuts, so where exactly is the job security?
The next statement I want to examine is the following:
“If public sector jobs continue to become more and more lucrative, it will take away more and more of the top talent that the private sector needs in order to flourish.“
This doesn’t appear to be the case! The folks who hold occupations like engineers, management, legal, IT and financial experts still flock to higher paying private sector opportunities for employment. Obviously government needs to streamline, improve, reduce redundancy and trim waste. Who do you prefer work on these objectives? Folks with solid skills, experience and talent, or, people with lesser skills, experience and talent? Should the people in the public service striving to improve flock to higher paying jobs? Should tax payers accept marginal talent running services and managing critical information?
How about those teaching our children? Enforcing the laws, criminal and otherwise? Prosecuting crime? Assisting Aboriginal communities? Regulating health care, heck, providing health care! Keeping an eye on industry to ensure compliance that adheres to the will of the public? Overseeing important infrastructure projects? Inspecting food? Monitoring water quality? I can go on and on and on … but I will ask again, do we really need to drive all of the talent solely to the private sector? At what detriment?
Where exactly should the transfer of talent occur?
“The main reason why this is worrisome is that the private sector feeds the public sector and not the other way around.”
“it’s a parasitic relationship, not really a symbiotic one.” (response to a comment)
Where do public sector employees ultimately spend their money? Two places I can think of: first and foremost, the private sector and second, taxes, which effectively contribute to their own salaries. The public sector not only supports the private sector financially with earned money it enables industry to operate within the confines of the laws of our provinces and nation.
Reduce the public sector and expect slower reactions to much needed economic prosperity. Reduce public service compensation and expect less money to pump into the economy. Offer less money and watch a skilled worker “brain drain” occur, once again, in medical and IT fields. And as mentioned, expect less improvement in government process and efficiency which ultimately cost the private sector and the public more money and taxes.
We can’t have our cake and eat it too.
To sum up (finally!) …
By simplifying aggregated salary numbers into an apples versus oranges discussion the true analysis of the wage “gap” between private and public sectors is diluted, and in my opinion, driven by media and some fear-mongering. To rile people up. A closer investigation will show that if you were to take only the professions available in the public sector, looking at the same number of jobs for each profession, I am certain the pendulum would swing back to the side of the private sector. The professions offered in each sector are not the same across the board to permit a true evaluation of this particular subject.
Sure, 1000 sanitation staff in public sector likely make more money than 1000 of their counterparts in the private sector. Equally as important, 1000 lawyers in the private sector likely make much more money than 1000 of their public sector brethren. Since the public sector does not have nearly the proportion of lower paying jobs as does the private sector it is evident that the salaries are now almost equal. The problem however is that there is no study I know of that neutrally looks at the question by analysing all the possible jobs (in equal total number of jobs) in the public sector and compares them to those in the private sector. This is the study I would like to see, not the partisan government or union reports.
Remember Disraeli … “There are three kinds of lies: lies, damned lies and statistics.”