Ontario Government Workers Enjoy Nearly 11 Percent Higher Wages Than Private Sector Counterparts: Study

Ontario's provincial flag flies in Ottawa on July 6, 2020. (Adrian Wyld/The Canadian Press)

Employees in the Ontario government are enjoying a wage premium and receiving more generous benefits over their private sector counterparts, a new study by think tank the Fraser Institute says.

Published on Jan. 24, the study finds that the wages of government workers in Ontario are 34.4 percent higher, on average, than wages in the private sector in 2021, based on aggregated data obtained from Statistics Canada’s monthly “Labour Force Survey” from January to December of 2021.

After adjusting for differences such as age, gender, education, type of work, industry, and occupation, workers in Ontario’s government sector are still paid 10.9 percent higher wages. When unionization is taken into account, the wage premium declines to 8.8 percent.

“At a time when governments are facing serious fiscal pressures, bringing government sector compensation in line with the private sector would help reduce costs without necessarily affecting services,” said study co-author Ben Eisen, a senior fellow at the Fraser Institute, in a news release the same day.

Non-Wage Benefits

Wage isn’t the only indicator that public sector staff in Ontario are earning more, the authors wrote, for non-wage benefits based on available data suggest that the government sector also enjoys an advantage over the private sector.

The study noted that 83.9 percent of government employees in Ontario are covered by a registered pension plan, compared to 25.1 percent of private sector workers in the province.

“This gap between the two sectors is also evident when we consider the second dimension, the type of pension plan in each sector,” the authors said.

“In 2021, of the workers in Ontario who were covered by a pension plan, 94.5 percent of those in the public sector enjoyed a defined benefit pension while this was the case for only 36.9 percent of those in the private sector.”

A defined pension plan is one that guarantees employees a set income when they retire—a contrast to a defined contribution plan, in which the benefits are based on contributions from the employee and employer.

Government workers in Ontario also tend to retire earlier, the study noted. Comparing the average retirement age from 2017 to 2021 using Statistics Canada’s data, the authors found that the province’s public-sector staff retire 2.5 years earlier than their private-sector peers.

Lost Work Time

Moreover, full-time employees in the Ontario government were absent from their jobs for personal reasons five days more per year—with the public sector averaging 14 days compared to the private sector at 8.8 days.

Job security shows a similar trend with workers in the province’s public sector experiencing four times less job loss (1.3 percent) than those in the private sector (5.5 percent) in 2021.

“It’s important that all levels of government in Canada—municipal, provincial and federal—continuously review expenditures with an eye to producing better value-for-money to taxpayers,” Eisen said.

“Closing the compensation gap in Ontario between the government and private sectors would reduce costs and can help ensure the long-term sustainability of government finances.”