The report shows that virtually all the growth in federal public service pay over the last 11 years has merely kept up with inflation and that about half of the $7.8 billion additional expense in paying for public servants between 2001-02 and 2011-12 was due to additional hiring.
Salaries accounted for about 47 per cent of the increase, the PBO says, but 96 per cent of that merely kept up with inflation — only four per cent could be counted as real income gains and that is over 11 years.
On average, public servants earned just under $70,000 last year, according to the data in the report.
That is in variance to the $114,000 estimate the budget office reported last December, but officials said a different methodology was used — the new calculation does not include benefits and does not include salaries for the RCMP and the military.
The report also shows that growth in Ottawa's labour costs has all but stalled in the last three years as the government brought in cost-cutting measures that restrained salary hikes and cut levels in the core public service.
NDP critics were quick to jump on the findings as evidence that the Harper government unfairly targeted public servants in their austerity measures.
"The Conservatives like to point the finger at workers, unions and everyone but themselves for increasing costs, but this report shows the real story," said NDP Treasury Board critic Mathieu Ravignat.
"The reality is employees took a pay cut while the Conservatives went on a hiring binge."
The report was compiled at the request of NDP MP Paul Dewar, who asked the budget office to determine the main forces driving increases in federal labour costs.
Dewar said the report shows that Treasury Board President Tony Clement did not have the facts before proceeding to attack the public service as bloated.
"They are using the public service as whipping boys and as a wedge between those who are having a hard time at the moment and public servants," he said.
The PBO also appeared to dismiss the myth that costs have been driven by reclassification, involving moving public servants to higher-paying categories even though their duties have remained largely the same. Costs due to classification added less than five per cent of the total increase, the PBO found.
"Cumulatively, changes in classification and real wage growth contributed little to overall labour cost growth," the report, one of the first by new watchdog Jean-Denis Frechette, concludes.
"Recent reductions in the level of employment and the Expenditure Restraint Act of 2009 have been successful in limiting the growth in labour costs," it adds.
However, it notes that some labour cost growth is inevitable if public servants are to maintain a constant standard of living.
Over the 11 years surveyed, the federal government spent $354 billion on compensation for its employees, exclusive of the RCMP and the military.