With governments collectively racking up almost $46 billion in deficits last year and continuing to struggle with health care costs as the population ages, both governments and citizens are concerned that tax dollars are spent wisely.
One of the major costs for governments is the compensation of public sector workers. That's why we recently released a series of papers comparing wages and benefits in the public sector with the private sector. Unfortunately, the issue of compensation differences often gets lost in name-calling and ad hominen attacks. Canada needs a real debate on government spending and how to solve our deficits and debt rather than a contest of who can scream the loudest.
Our study, which relies on previously-published academic papers and widely accepted approaches to measuring differences in wages, calculated that on average, public sectors workers in Canada receive a 12 per cent wage premium compared to similar positions in the private sector. The analysis relied on Statistics Canada data from the monthly Labour Force Survey (LFS) and controlled for a host of factors such as gender, age, work experience, tenure in position, occupation, industry, and union status.
In addition, our work also examined differences in non-wage benefits like pensions. In 2011, 88.2 per cent of the public sector was covered by a registered pension compared to 24.0 per cent of the private sector. Of those public sector workers covered by a pension, 94.0 per cent were covered by a defined benefit pension, which means they were guaranteed a benefit (i.e. income) in retirement. Just 52.3 per cent of private sector workers who were covered by a pension enjoyed such a benefit. Not surprisingly given the difference in pensions, public sector workers retired earlier than workers in the private sector.
There are 3.6-million public sector workers in Canada and 74.5 per cent of those are unionized. One of the most powerful and vocal unions in the country is the Canadian Union of Public Employees (CUPE). Paul Moist, CUPE president, has been one of the harshest critics of our work. Unfortunately, his opposition to the study is both misinformed and worse, based largely on fiery rhetoric and name-calling.
Of all the criticisms raised by Moist, only one is legitimate. It is the question of using the LFS versus the Census, which is what CUPE relied on in a recent study. (It also found a wage premium in the public sector but a smaller one than we calculated).
The sample in the LFS is smaller than the Census but still contains nearly 53,000 Canadians. Additionally, the LFS is the main source for a wide array of labour statistics regularly used by government bureaucrats and economists. If there is a sampling problem with the LFS, it affects more than just our study.
At the same time Moist ignores or is unaware of a major deficiency in the Census when trying to compare public and private sector compensation: it doesn't ask respondents whether they work in the public or private sector. Without such information, researchers must make an educated guess about who are public and private sector workers based on the industry they work in and their occupation. For example, under the CUPE approach, somebody who works at BC Hydro could incorrectly be considered in the private sector.
Additionally, the CUPE study excludes large job classes like teachers. The rationale is that such occupations reside almost exclusively in the public sector. The data tells a different story. More than 11 per cent of students in British Columbia, for example, attend independent schools and are taught by teachers outside of the public sector. Coincidentally, this is a job in which public sector workers enjoy a wage premium.
Moist has also repeatedly stated that our work ignores occupations. Had Moist actually reviewed our response or examined the LFS survey, he would find it includes 25 occupational classes (based on the 2006 National Occupational Classification).
It's also interesting to note that a 2000 study by the University of Toronto's Morley Gunderson, a leading researcher in this field, along with his colleagues, used both the LFS and Census data to compare wages in the private and public sector. They calculated an average public sector wage premium of roughly nine per cent using both data sources.
There is no doubt that governments across the country are struggling with deficits and increasingly need to examine current spending to ensure value-for-money. Persistent wage and benefit premiums in the public sector is something governments will have to tackle eventually. Having an informed, mature debate about the subject is a starting point. We welcome such debate but unfortunately, Mr. Moist's approach is none-of-the-above.
This column was written with assistance from Milagros Palacios, Fraser Institute senior research economist.
Few Canadians realize it, but Labour Day is as Canadian as maple bacon. It all began in 1872, when the Toronto Typographical Union went on strike to demand a nine-hour workday. When Globe and Mail chief George Brown had the protest organizers arrested, Prime Minister John A. Macdonald passed a law legalizing labour unions. Thus, a Conservative prime minister became a hero to the working class, and Canada became among the first countries to limit the workday, doing so decades before the U.S. The typographers' marches became an annual event, eventually being adopted by the U.S., becoming the modern day Labour Day.
The end of World War I brought social instability and economic volatility to Canada. On May 15, 1919, numerous umbrella union groups went out on strike in Winnipeg, grinding the city to a halt. Protesters were attacked in the media with epithets such as "Bolshevik" and "Bohunk," but resistance from the media and government only strengthened the movement. In June, the mayor ordered the Mounties to ride into the protest, prompting violent clashes and the death of two protesters. After protest leaders were arrested, organizers called off the strike. But the federal mediator ended up ruling in favour of the protesters, establishing the Winnipeg General Strike as the most important strike in Canadian history, and a precursor to the country's modern labour movement.
During the Great Depression, the only way for a single male Canadian to get government assistance was to join "relief camps" -- make-work projects set up by the federal government out of concern idle young men were a threat to the nation. The relief camps, with their poor work conditions, became breeding grounds for communists and other radicals. The "On-To-Ottawa Trek" was organized as a protest that would move from Vancouver across the country to Ottawa, to bring workers' grievances to the prime minister. The trek halted in Regina when Prime Minister R.B. Bennett promised to talk to protest organizers. When talks broke down, the RCMP refused to allow the protesters to leave Regina and head for Ottawa, and on June 26, 1935, RCMP riot officers attacked a crowd of protesters. More than 100 people were arrested and two killed -- one protester and one officer.
In May, 1938, unemployed men led by communist organizers occupied a post office and art gallery in downtown Vancouver, protesting over poor work conditions at government-run Depression-era "relief camps." In June, the RCMP moved in to clear out the occupiers, using tear gas inside the post office. The protesters inside smashed windows for air and armed themselves with whatever was available. Forty-two people, including five officers, were injured. When word spread of the evacuation, sympathizers marched through the city's East End, smashing store windows. Further protests against "police terror" would be held in the weeks to come.
In 1992, workers at Royal Oak Mines' Giant Mine in the Northwest Territories went on strike. On September 18, a bomb exploded in a mineshaft deep underground, killing nine replacement workers. Mine worker Roger Warren was convicted of nine counts of second-degree murder. The Giant Mine closed in 2004.
The Canadian Labour Congress, representing numerous labour groups, participated in protests in Toronto during the G20 summit in June, 2010. When a handful of "Black Block" anarchists rioted through the city core, it brought an overwhelming police response that resulted in the largest mass arrests in Canadian history. More than 1,000 people were arrested, with most never charged with any crime. Numerous allegations of police brutality have been made, and the Toronto police are now the target of several multi-million dollar lawsuits. So far, two police officers have been charged with crimes relating to G20 policing, and charges against other police officers are also possible.
When Vancouver-based magazine Adbusters suggested the public "occupy Wall Street" to protest corporate malfeasance, New Yorkers took the suggestion seriously, and occupied Zuccotti Park in Manhattan. Canadians followed suit, sparking copycat occupations in all major Canadian cities in September, 2011. By December, most of the occupations had been cleared, all of them non-violently. Though the protests achieved no specific goals, they did change the political conversation in North America. What their long-term legacy will be remains to be seen.