Have federal public sector workers really not seen any real wage growth?

The trend in the wage data doesn’t fit the PBO’s narrative, says Stephen Gordon


Blair Gable for Macleans Magazine

That’s the conclusion of a report released yesterday by the Parliamentary Budget Officer. I’m not convinced.

Some context first. As described here, the federal government’s path to a balanced budget, as charted by every Conservative budget since 2010, requires holding nominal expenditures on program spending constant — there’s no provision for increased spending to compensate for inflation. This means cuts. Instead of large, targeted reductions in one sector, the government is applying pressure across the board. The PBO report was prepared at the request of Paul Dewar, who is the MP for Ottawa Centre and whose constituents are more likely than most to be directly affected by these cost-cutting campaigns.

This is the key table from the PBO report:

The table decomposes increased federal spending on employment across different factors, and the two most important are simply the increase in number of employees and inflation. Real wage growth is tiny.

This seems implausible: Were federal public employees the only group that missed out on the wage gains in the last decade?

Here’s what the general trend in real wages looks like over the past 10 years according to Statistics Canada:

The average real wage increase is about 1.75 per cent a year – much more significant than what the PBO analysis suggests. The PBO’s analysis is based on a disaggregated database, but then again, so are StatsCan’s aggregate Survey of Employment, Payrolls and Hours series. There’s probably a perfectly good reason why the two sets of numbers differ so dramatically. Off-hand, though, I can’t imagine what that explanation could be.


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Have federal public sector workers really not seen any real wage growth?

  1. The other problem with the study is that it focuses only on wages without looking at total compensation (given the current interest rate environment, what’s a defined benefit pension plan worth?). Who cares what civil services wages are, it’s total compensation that matters (and from the government’s perspective, total compensation costs).
    In some sense, it’s unfortunate that the PBO agreed to perform this study for Paul Dewar, because its the sort of study that is useless for any purpose except as a talking point for an opposition MP, which undermines both the PBO’s credibility and its appearance of impartiality. It is, of course, entirely reasonable for Dewar to ask them to commission a study on public sector compensation, but they should have told him that they would do the study he asked for, but only in the context of a broader study of federal civil servant compensation (which study would be at least potentially useful for the purposes of getting to the bottom of the debate that Dewar and the government are having). Maybe the PBO doesn’t have the discretion to make that kind of decision, but if not, it’s liable to be used as a tool to light partisan fires under, rather than provide illumination on, policy disputes.

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