Comparing Public and Private Sector Compensation in Ontario

Abstract

As Ontario’s provincial government continues to struggle with both deficits and finding ways to constrain spending, there is heightened interest in how wages and non-wage benefits (compensation) in the public sector compare with those in the private sector. While a lack of non-wage benefits data mean that there is insufficient information to make a definitive statement about total compensation between the private and public sectors, the data that are available indicate that the public sector enjoys a clear wage premium. There are also strong indications that the public sector has more generous non-wage benefits than the private sector. After controlling for such factors as gender, age, marital status, education, tenure, size of firm, type of job, and industry, public sector workers (including federal, provincial, and local) located in Ontario in April 2011 enjoyed, on average, a 13.9 percent wage premium over their private sector counterparts. When unionization is factored in, the premium is reduced to 12.4 percent. As of 2011, 76.5 percent of public sector workers in Ontario were covered by a registered pension compared to 26.0 percent of private sector workers. In addition, 97.3 percent of Ontario’s public sector workers who were covered by a pension enjoyed a defined benefit pension plan compared to 53.5 percent of private sector workers. In 2011, job losses were greater in Ontario’s private sector than in the public sector: 3.9 percent of private sector workers lost their jobs compared to 0.7 percent of public sector workers.

Keywords: government spending, labour market