The realities of Ontario’s public sector compensation

Released February 2014

Ontario must re-evaluate its public sector compensation levels. 

In the era of sunshine lists and pension debates, there has been increasing public focus on compensation packages among public sector workers. In The realities of Ontario’s public sector compensation, the Institute examines the evolution of public sector compensation in Ontario and provides insights as to how the province’s public workers are paid relative to their counterparts in the private sector. The Institute finds that overall, Ontario’s public workers enjoy considerable benefits in the form of higher wages and more generous pensions, and that these benefits have increased over time.

The major concern is that the difference between public and private sector wages for equivalent jobs, after a decade of steady increase, currently costs the government over $1 billion per year.

The costly wage premium is an average and further research shows that, depending on the occupation, the public wage premium varies considerably. Managerial occupations earn low or negative premiums, or discounts, while clerical and administrative occupations currently earn a premium of 10 percent. This misalignment is problematic, as government may find it challenging to attract talented individuals for senior decision-making roles. The Institute calls for a realignment in public sector wages to reduce the possible negative effects of this rank-dependent premium.

The second component of compensation, pension benefits, is currently the subject of heated debate. Public sector employees are more likely than those in the private sector to be members of an employer-sponsored pension plan.

Finally, there are no easy solutions. The Institute urges the government to recognize the need for change and monitor the issue closely to ensure a fair and sustainable level of compensation for its employees.

Topics: Government investment and innovation