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Comparing Public and Private Sector Compensation in Ontario by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative

Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

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Page 1: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

Comparing Public and Private Sector Compensation in Ontario

by Amela Karabegović, Milagros Palacios, and Jason Clemens

Ontario Prosperity Initiative

Page 2: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

Ontario Prosperity Initiative

February 2013

Comparing Public and PrivateSector Compensation

in Ontario

by Amela Karabegovi�, Milagros Palaciosand Jason Clemens

Page 3: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

Contents

Executive summary 4 5

Intro duc tion 4 7

I A Review of Past Research 4 8

II Comparing Wages in Ontario’s Public and Private Sectors 4 14

III Comparing Non-Wage Benefits in Ontario’s Public and Private Sectors 4 17

Overall Conclusion 4 22

Ref er ences 4 23

About the authors 4 26

Acknowledgments 4 27

Pub lish ing infor ma tion 4 28

About the Fraser Institute 4 31

Edi to rial Advi sory Board 4 32

Fra ser Insti tute 4 www.fraserinstitute.org

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Page 4: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

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4 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Page 5: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

Executive Summary

As Ontario’s pro vin cial gov ern ment con tin ues to strug gle with both def i cits and find -ing ways to con strain spending, there is height ened in ter est in how wages andnon-wage ben e fits (i.e., to tal com pen sa tion) in the pub lic sec tor com pare with those in the pri vate sec tor.

While a lack of non-wage ben e fits data mean that there is insuf fi cient infor ma -tion to make a defin i tive state ment about total com pen sa tion between the pri vate and

pub lic sec tors, the data that are avail ableindicate that the pub lic sec tor enjoys aclear wage pre mium. There are also strongindi ca tions that the pub lic sec tor hasmore gen er ous non-wage ben e fits thanthe pri vate sec tor.

Wage com par i son

Af ter con trol ling for such fac tors as gen -der, age, mar i tal sta tus, ed u ca tion, ten -ure, size of firm, type of job, and in dus try,pub lic sec tor work ers (in clud ing fed eral,pro vin cial, and lo cal) lo cated in On tarioin April 2011 en joyed, on av er age, a 13.9per cent wage pre mium over their pri vatesec tor coun ter parts. When union iza tionis fac tored in, the pre mium is re duced to12.4 per cent.

Non-wage com par i son

As of 2011, 76.5 per cent of pub lic sec torwork ers in On tario were cov ered by areg is tered pen sion com pared to 26.0 per -cent of pri vate sec tor work ers (fig ure 1).In ad di tion, 97.3 per cent of On tario’spub lic sec tor work ers who were cov ered

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 5

Fig ure 1: Per cent age of employ eescov ered by a reg is tered pen sionplan in 2011

The data that are avail ableindi cate that the pub lic sec tor enjoys

a clear wage pre mium.

76.5%

26.0%

0%

30%

60%

90%

Public Private

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by a pen sion plan en joyed a de fined ben e fit pen sion plan (i.e., a plan guar an tee ing acer tain level of ben e fits) com pared to 53.5 per cent of pri vate sec tor work ers.

On aver age, between 2007 and 2011, pub lic sec tor work ers in Ontario retiremore than a year ear lier (1.3 years ear lier) than pri vate sec tor work ers (fig ure 2).

Finally, in 2011, job losses were greater in Ontario’s pri vate sec tor than in thepub lic sec tor: 3.9 per cent of pri vate sec tor work ers lost their jobs com pared to 0.7 per -cent of pub lic sec tor work ers (fig ure 3).

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6 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Fig ure 2: Average retirement age,2007–2011

Fig ure 3: Job loss as a per cent ageof employ ment in 2011

0.7%

3.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Public Private

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Intro duc tion

As Ontario’s pro vin cial gov ern ment con tin ues to strug gle with def i cits and as it triesto con strain spend ing, there is height ened in ter est in how wages and non-wage ben e -fits (i.e., to tal com pen sa tion) in the pub lic sec tor com pare with those in the pri vatesec tor. This study rep li cates a pre vi ously used meth od ol ogy by which to com parewages in the two sec tors. It then com pares some avail able non-wage ben e fits moregen er ally in an at tempt to quan tify com pen sa tion dif fer ences be tween the prov ince’spub lic and pri vate sec tors.

This paper is divided into three dis tinct sec tions. The first reviews past researchcom par ing the com pen sa tion of the pub lic and pri vate sec tor work ers. The sec ondsec tion pres ents and explains the wage com par i sons between the pri vate and pub licsec tors (broadly defined) in Ontario. It also pres ents a sum mary of the meth od ol ogyemployed to com pare and cal cu late dif fer ences in wages between the two sec tors.Finally, the third sec tion com pares three avail able non-wage ben e fits, namely, pen sion cov er age, the age of retire ment, and lay offs, in order to gauge the gen er os ity ofnon-wage ben e fits in the pri vate and pub lic sec tors.

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Page 8: Comparing Public and Private Sector Compensation in Ontario · by Amela Karabegović, Milagros Palacios, and Jason Clemens Ontario Prosperity Initiative. Ontario Prosperity Initiative

I A Review of Past Research

Under stand ing com pen sa tion

Be fore re view ing the ex ist ing re search com par ing pub lic and pri vate sec tor com pen sa -tion, it is nec es sary to high light the dif fer ent com pen sa tion com po nents. The first andmost readily un der stood of these is the wages peo ple earn from their em ploy ment.

A sec ond com po nent of com pen sa tion is non-wage ben e fits. This cat e goryincludes such ben e fits as retire ment pro grams (includ ing pen sions and RRSPs), den talcov er age, sup ple men tal health ben e fits, fit ness and related mem ber ships, and thenum ber of weeks of vaca tion an employee has. These ben e fits can rep re sent a sig nif i -cant and mean ing ful por tion of an employee’s over all com pen sa tion.

A par tic u larly impor tant but fre quently ignored third aspect of com pen sa tion isjob secu rity, and the poten tial dif fer ence in job secu rity between the two sec tors. Thedif fer ence could arise from the fact that there is lit tle to no risk of bank ruptcy or insol -vency in the pub lic sec tor, at least in most indus tri al ized coun tries. Pub lic sec tor enti -ties that encoun ter finan cial prob lems are gen er ally bailed out in one way or another(i.e., they have “soft” bud gets), which allows them to con tinue oper at ing, in con trast tothe pri vate sec tor.1

In com par ing com pen sa tion between the pub lic and pri vate sec tors, it is impor -tant to include as broad a mea sure of wages and non-wage ben e fits as pos si ble. Unfor -tu nately, there are sig nif i cant data bar ri ers in Can ada to mea sur ing both non-wageben e fits and job secu rity. Despite that, the goal should be for pub lic sec tor com pen sa -tion to broadly reflect pri vate sec tor com pen sa tion for sim i lar and com pa ra ble posi -tions. The key is that the over all com pen sa tion lev els should be com pa ra ble betweenthe pub lic and pri vate sec tor work ers rather than the indi vid ual com pen sa tion com po -nents.

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1 For a gen eral dis cus sion of this phe nom e non, see Janos Kornai’s 1986 work on what is referred to as “thesoft bud get con straint” (Kornai, 1986).

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Past research com par ing wages in the pub lic and pri vate sec tors

A num ber of stud ies have em pir i cally quan ti fied wage dif fer ences be tween sim i lar oc -cu pa tions in the pri vate and pub lic sec tors.2 All of the stud ies sum ma rized in this sec -tion, ex cept for one, mea sure just the wage dif fer ences be tween the pub lic and pri vatesec tors due to a lack of suf fi cient data on non-wage ben e fits.

In a sem i nal study, Uni ver sity of Toronto Pro fes sor Morley Gunderson (1979)exam ined wage dif fer ences between the pub lic and pri vate sec tors using the 1971Cana dian Cen sus data. He found that after con trol ling for the effect of other deter mi -nants of pay, the pure wage pre mium in Can ada’s pub lic sec tor was 6.2 per cent formales and 8.6 per cent for females when com pared to the pri vate sec tor. Lower wagework ers received the larg est pre mium.

Shapiro and Stelcner (1989) extended Gunderson’s anal y sis using the 1981Cana dian Cen sus data. They found that after account ing for fac tors such as edu ca tion,train ing, and work expe ri ence, the pub lic sec tor wage pre mium was 4.2 per cent formales and 12.2 per cent for females in 1980.

In a com pre hen sive fol low-up study, Gunderson and two of his col leaguesexpanded his orig i nal anal y sis by using Cen sus data from 1971, 1981, 1991, and 1996,as well as data from the 1997 Labour Force Sur vey (Gunderson et al., 2000).3 Theyfound a pub lic sec tor wage pre mium of 7.6 per cent using the sur vey data and about 9.0 per cent using the 1996 Cen sus data. Over all, Gunderson et al. (2000) found that thefind ings from the two data sources were quite con sis tent, sug gest ing that, on aver age,those in the pub lic sec tor received a wage pre mium of roughly 9 per cent com pared tosim i lar work ers in the pri vate sec tor.4,5

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2 Note that male-female wage and union/non-union wage dif fer en tials are out side of the scope of this study. For a sur vey of this lit er a ture, see Ehrenberg and Schwarz (1986) and Bender (1998).

3 The major advan tage of the Labour Force Sur vey data is that pub lic sec tor work ers are explic itly iden ti -fied, whereas they are not in the Cen sus data.

4 While the 1996 Cen sus data are not strictly com pa ra ble to those from ear lier Cen suses due to dif fer entindus try clas si fi ca tions, the wage pre mium based on the 1996 data is higher than the wage pre mium fromear lier Cen suses (4.6 per cent in 1971, 5.5 per cent in 1981, and 8.5 per cent in 1991) sug gest ing that the pre -mium has poten tially increased over the past few decades.

5 The Gunderson et al. (2000) esti mate of the pub lic sec tor wage pre mium in 1971 is dif fer ent from thatfound in Gunderson (1979). This is likely due to slightly dif fer ent spec i fi ca tions used in the 2000 study tomake the wage pre mium esti mates com pa ra ble across the three Cen sus years (1971, 1981, and 1991). Forexam ple, Gunderson et al. (2000) includes those in the mil i tary, since those peo ple could not be excludedfrom the 1991 Cen sus, whereas peo ple in the mil i tary are excluded in Gunderson (1979).

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Prescott and Wandschneider (1999) exam ined 1981 and 1990 sur vey data fromCan ada’s Sur vey of Con sumer Finances and found a higher pub lic sec tor wage pre -mium: 14.3 per cent for males and 25.0 per cent for females for 1990.6

Mueller (2000) exam ined dif fer ences in pub lic sec tor wage pre mi ums by thelevel of gov ern ment (fed eral, pro vin cial, and local) using Cana dian data from 1988 to1990 from the Labour Mar ket Activ ity Sur vey (LMAS) and found that the pre mi umswere the high est for fed eral gov ern ment employ ees fol lowed by those in local and pro -vin cial gov ern ments.7 Over all, the pub lic sec tor wage pre mium was 3.3 per cent formales and 11.3 per cent for females. At the fed eral level, the wage pre mium for pub licsec tor work ers was 7.8 per cent for males and 16.0 per cent for females com pared to thepri vate sec tor. At the pro vin cial level, the pub lic sec tor wage pre mium was neg a tive 3.5 per cent for males and pos i tive 10.9 per cent for females. Finally, at the local or munic i -pal level, the pub lic sec tor wage pre mium was 5.0 per cent for males and 6.6 per cent for females over the pri vate sec tor.

The Cana dian Fed er a tion of Inde pend ent Busi nesses (CFIB) used 2006 Cen susdata and found that it was not only wages that were higher in the pub lic sec tor, butnon-wage ben e fits, too. The CFIB found “that gov ern ment and pub lic sec tor employ -ees are paid roughly 8 to 17 per cent more than sim i larly employed indi vid u als in thepri vate sec tor” (Mallett and Wong, 2008:1). How ever, after “tak ing into account sig -nif i cantly higher paid [non-wage] ben e fits and shorter work weeks, the pub lic sec tortotal com pen sa tion advan tage bal loons past 30 per cent” (Mallett and Wong, 2008: 1).8

More recently, Tiagi (2010) exam ined the pub lic sec tor wage pre mium for maleand female work ers in Can ada using data from Sta tis tics Can ada’s Sep tem ber 2008Labour Force Sur vey. After con trol ling for indi vid ual dif fer ences among work ers in the two sec tors such as edu ca tion, mar i tal sta tus, occu pa tion, job ten ure, and union iza -tion, the author found that both male and female pub lic sec tor work ers receive a wagepre mium: 5.4 per cent for men and 19.8 per cent for women.

There are a few stud ies that have sur veyed the research on pub lic sec tor wagepre mi ums in Can ada. For instance, Bender (1998) com pleted a com pre hen sive reviewof past research on pub lic sec tor wage pre mi ums for this coun try and a select group of

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10 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

6 The authors found that from 1981 to 1990, the pub lic sec tor wage pre mium for males slightly declinedwhile it increased for females.

7 Mueller (1998) obtained sim i lar results. The author found that pub lic sec tor wage pre mi ums tend to behigher for fed eral gov ern ment employ ees, females, and low-wage indi vid u als.

8 Mallett and Wong (2008) found that the pub lic sec tor wage pre mium was the high est at the fed eral level(17.3 per cent) fol lowed by the munic i pal level (11.2 per cent) and pro vin cial level (7.9 per cent). Once thenon-wage ben e fits are included, the pub lic sec tor com pen sa tion pre mium increases to 41.7 per cent forfed eral work ers, 35.9 per cent for munic i pal work ers, and 24.9 per cent for pro vin cial work ers.

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devel oped and devel op ing nations. He found that the pub lic sec tor wage pre mium inCan ada was between 5 and 15 per cent.

In 2006, James Lahey, an asso ci ate sec re tary at the Trea sury Board Sec re tar iat,reviewed the lit er a ture on the pub lic sec tor wage pre mium in Can ada and con cludedthat the “fed eral pub lic ser vice wage pre mium was likely well under 10 per cent” (Trea -sure Board of Can ada Sec re tar iat, 2006: 73).

In an update of his study, in 2011 Lahey con cluded that the pub lic sec tor wagepre mium at the fed eral level was likely between 8 and 9 per cent (Lahey, 2011). Heargued that the total com pen sa tion pre mium for fed eral employ ees is roughly 15 to 20per cent once the non-wage ben e fits such as pen sions are added.

Sim i lar stud ies as those com pleted for Can ada have been under taken in othercoun tries with sim i lar results: the pub lic sec tor is con sis tently observed to main tainhigher wages and com pen sa tion than the pri vate sec tor.9 For exam ple, Biggs andRichwine (2011) found that fed eral work ers in the US enjoyed a wage pre mium of 14per cent. Crit i cally, how ever, the authors spent con sid er able time devel op ing esti mates for both non-wage ben e fits and job secu rity. They cal cu lated that the pre miumenjoyed by the pub lic sec tor increased to over 60 per cent after non-wage ben e fits andjob secu rity were included.

Explain ing the pub lic sec tor pre mium

There are a num ber of po ten tial causes for the com pen sa tion pre mium ob served in the pub lic sec tor. Im por tantly, two of them yield an un der stand ing of how such a pre -mium might be man aged and elim i nated over time.

The first con sid er ation is the type of con straint fac ing pri vate sec tor wages. Uni -ver sity of Toronto Pro fes sor Morley Gunderson noted in his sem i nal study, Earn ingsDif fer en tials between the Pub lic and Pri vate Sec tors (1979), that the main dif fer ence inthe pro cess of deter min ing wages between the pub lic and pri vate sec tors was the typeof con straint imposed on wages. In the pri vate sec tor, prof its are the main con strainton wages. That is, to max i mize prof its, busi nesses set wages in line with work ers’ pro -duc tiv ity so they can attract and retain the work ers they require to com pete.

In the pub lic sec tor, on the other hand, Gunderson observed that the “profit con -straint [on wages] is replaced by an ulti mate polit i cal con straint” (1979: 230). That is,wages are deter mined through polit i cal bar gain ing between gov ern ments and

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 11

9 See, for exam ple, Smith (1976 and 1977), Venti (1985), Moore and Raisian (1991), Choudhury (1994), andRamoni-Perazzi and Bellante (2007). Greg ory and Borland (1999) and Ehrenberg and Schwarz (1986) pro -vide prom i nent reviews of this lit er a ture for the US and/or other coun tries.

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employee groups (largely unions). Ulti mately, pub lic sec tor wages “depend on their[i.e., employee groups’] abil ity to com pete with other inter est groups over the allo ca -tion of the pub lic bud get” (1979: 230). In addi tion, Gunderson explained that the gov -ern ment’s abil ity to tax and bor row enables it to increase wages with out hav ing toreduce pub lic ser vices or sub sti tute labour for other inputs such as cap i tal. For theserea sons, Gunderson con cluded that the polit i cal con straint in the pub lic sec tor onwages may be less bind ing (effec tive) than the profit con straint in the pri vate sec tor.

The sec ond con sid er ation is the envi ron ment within which the pri vate and pub -lic sec tors exist. Most of the pub lic sec tor oper ates as a monop oly, which means thereis no threat from com pe ti tion. In other words, indi vid u als can not choose an alter na -tive pro vider for gov ern ment ser vices. This monop oly on ser vice pro vi sion means thatthe unions rep re sent ing pub lic sec tor work ers can demand a wage pre mium with outfear of com pet i tive pres sure or responses from other firms.

In con trast, the pri vate sec tor is rarely in a monop oly sit u a tion; when one doesexist, it is nor mally imposed by the state. Com pe ti tion and the threat of com pe ti tionchar ac ter ize non-monop oly mar kets. Firms, there fore, have to better bal ance the need to retain and attract work ers with their abil ity to com pete against other firms on price,qual ity, and cost.

These two envi ron ments have dis tinct effects on unions and the threat of strikes.Since the pub lic sector oper ates in a monop oly with no com pet i tors, work ers canthreaten and under take strikes that dis rupt ser vice in the pub lic sec tor with almost nofear of los ing cus tom ers or a con tract.

In stark con trast, in the pri vate sector, both employ ers and unions have anincen tive to set tle their dif fer ences quickly, espe cially under the increased com pet i -tive pres sures from glob al iza tion. Unions know that exces sive wage demands willmake the firm uncom pet i tive, which will likely result in reduced future employ ment. Employ ers, on the other hand, face trade-offs between wage demands and a loss ofmar ket share, prof it abil ity, etc., that result from a pro longed dis pute. Ulti mately, thepar ties usu ally come up with a com pro mise accept able to both.10

Con clu sion

The pro cess of de ter min ing wages in the pub lic sec tor is mark edly dif fer ent from thatin the pri vate sec tor. The pub lic sec tor wage pro cess is largely de ter mined by po lit i calfac tors, while the pro cess in the pri vate sec tor is largely guided by mar ket forces and

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12 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

10 For an addi tional dis cus sion about the dif fer ences between the pub lic and pri vate sec tor, see Christensen(1980), Kornai (1992), and Kornai et al. (2003).

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profit con straints. These dif fer ences are am pli fied by the mo nop oly en vi ron ment inwhich the pub lic sec tor op er ates ver sus the com pet i tive en vi ron ment of the pri vatesec tor.

The Cana dian research exam in ing wage dif fer ences between the two sec torsover the past three decades con sis tently indi cates a pre mium for pub lic sec tor work -ers. The spe cific wage pre mi ums vary depend ing on the data source and tim ing. Whatis clear, how ever, is that a premium exists.

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II Comparing Wages in Ontario’s Public and Private Sectors

Meth od ol ogy and data sources

This study uses data from the La bour Force Sur vey for April 2011 (Sta tis tics Can ada,2011). The sam ple for On tario con sists of 15,257 in di vid u als for whom hourly wagerate, age, gen der, ed u ca tion, prov ince, mar i tal sta tus, type of work, and other char ac -ter is tics were avail able. The anal y sis cov ers paid gov ern ment and pri vate sec tor em -ploy ees only (per sons 15 years of age and over with em ploy ment in come); it ex cludesself-em ploy ment, un em ployed per sons, and per sons not in the la bour force. The La -bour Force Sur vey data breaks down the data by sec tor (pub lic and pri vate) but un for -tu nately does not pro vide data for dif fer ent lev els of gov ern ment. There fore, thepub lic sec tor wage pre mium in this sec tion per tains to lo cal, pro vin cial, and fed eralwork ers lo cated in On tario.11 In On tario, fed eral gov ern ment em ploy ees rep re sent14.8 per cent of the to tal pub lic sec tor. Pro vin cial pub lic sec tor work ers rep re sent 39.3per cent of the to tal pub lic sec tor in the prov ince, and lo cal gov ern ment em ploy eesrep re sent the re main ing 46.0 per cent (Sta tis tics Can ada, 2012e and 2012f).12

The model used for esti mat ing a pub lic sec tor wage pre mium in Ontario is sim i -lar to meth od ol ogy used in Gunderson et al. (2000):

w P xi i i i= + +b a h

In the equa tion, wi denotes the (log) hourly wage of indi vid ual i, P is the dummyvari able denot ing sec toral sta tus (P = 1 for the pub lic sec tor sta tus), x is a vec tor of con -trol vari ables such as gen der, age, mar i tal sta tus, edu ca tion, ten ure, type of work (per -ma nent or sea sonal), size of firm, indus try, and h is an error term which includesfac tors such as unob served skill or ability. The a and b are coef fi cient esti mates. In

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14 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

11 Spe cif i cally, the Labour Force Sur vey con sid ers the pub lic sec tor as those work ing for fed eral gen eral gov -ern ment (i.e., fed eral pub lic admin is tra tion), fed eral gov ern ment busi ness enter prises, pro vin cial gen eralgov ern ment, pro vin cial health and social ser vice insti tu tions, uni ver si ties, col leges, voca tional andtrade insti tu tions, pro vin cial gov ern ment busi ness enter prises, local gen eral gov ern ment, local schoolboards, and local gov ern ment busi ness enter prises. Those in the mil i tary armed forces are excludedfrom the sur vey.

12 Some pub lic sec tor employ ees do not reside or work in Ontario. These work ers account for a very smallper cent age (sta tis ti cally insig nif i cant) of pub lic sec tor work ers in the prov ince.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 15

Model 1Coefficient

(%)

Model 2Coefficient

(%)

(Private)

Public 41.0*** 13.9***

(Female)

Male 13.3***

(Age 15-19)

Age 20-24 -1.9*

Age 25-29 11.3***

Age 30-34 18.8***

Age 35-39 20.3***

Age 40-44 19.5***

Age 45-49 21.5***

Age 50-54 21.7***

Age 55-59 16.7***

Age 60-64 14.5***

Age 65-69 -1.1

Age 70+ 4.5

(Married)

Living in common-law -0.3

Widowed -0.2

Separated -5.0***

Divorced -0.7

Single, never married -6.1***

(Grade 0-8)

Some secondary 8.3***

11 to 13 years of schooling 11.4***

Some post secondary 17.9***

Post secondary certificate 24.7***

Bachelors degree 40.7***

Masters degree 47.8***

(Tenure 1-5 months)

Tenure 6-11 months -0.8

Tenure 1-5 years 4.8***

Tenure 6-10 years 13.2***

Tenure 11-20 years 22.3***

(Permanent Work)

Seasonal Work -10.4***

Contract Work -8.4***

Casual Work -8.5***

Model 1Coefficient

(%)

Model 2Coefficient

(%)

(Full Time)

Part Time -11.5***

(Establishment, fewer than 20 employees)

Establishment, 20-99employees

7.6***

Establishment, 100-500employees

11.2***

Establishment, more than 500 20.0***

(Agriculture)

Forestry, Fishing, Mining, Oiland Gas

35.4***

Utilities 35.8***

Construction 27.1***

Manufacturing—durables 14.5***

Manufacturing non-durables 9.4***

Wholesale Trade 14.3***

Retail Trade -7.7***

Transportation andWarehousing

6.3**

Finance, Insurance, Real Estate,and Leasing

19.2***

Professional, Scientific, andTechnical Services

27.0***

Management, Administrative,and Other Support

-4.9*

Educational Services 17.2***

Health Care and SocialAssistance

17.8***

Information, Culture andRecreation

11.4***

Accommodation and FoodServices

-8.7***

Other Services 8.2***

Public Administration 22.2***

Constant 2.9*** 2.3***

N 15,257 15,257

Adjusted R Square 0.12 0.51

Note: Self-employment is not included.* = Significant at a 90% level; ** = Significant at a 95%level; *** = Significant at a 99% level. All are based onrobust standard errors.Sources: Statistics Canada, 2011; calculations by the authors.

Table 1: Pub lic sec tor wage pre mium in Ontario, based on Labour Force Sur vey, April 2011 (Depend ent vari able: log of hourly wage)

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other words, the model con trols for age, gen der, mar i tal sta tus, edu ca tion, ten ure, type of work, size of estab lish ment, and indus try. Some may argue that age and ten ure mea -sure the same thing, i.e., expe ri ence. How ever, ten ure in the Labour Force Sur vey onlymea sures the length of time in the per son’s cur rent job and thus ignores over all expe ri -ence. The age indi ca tor is needed to cap ture the indi vid ual’s cumu la tive expe ri encefrom dif fer ent jobs over time.

Ordi nary least squares (OLS) were used to esti mate the wage pre mium in thepub lic sec tor. Results are shown in table 1 using dif fer ent con trol vari ables.

Wage com par i son results

Ta ble 1 pres ents the tech ni cal re sults of the wage com par i son anal y sis in On tario. Thesec ond col umn of the ta ble (Model 1) pro vides the pub lic sec tor wage pre mium cal cu -la tion with out con trol ling for any fac tors. In other words, Model 1 rep re sents a cal cu -la tion that ig nores vari ables like age, ex pe ri ence, ed u ca tion, etc., which we knowin flu ence wages. The Model 1 es ti mate in di cates that wages in the pub lic sec tor, in -clud ing fed eral, pro vin cial and lo cal pub lic sec tor work ers lo cated in On tario are 41.0per cent higher, on av er age, than in the pri vate sec tor.

Table 1’s third col umn (Model 2) con trols for per sonal char ac ter is tics such asgen der, age, mar i tal sta tus, edu ca tion, ten ure, size of estab lish ment, type of job, andindus try. Con trol ling for these fac tors reduces the pub lic sec tor wage pre mium inOntario to 13.9 per cent, on aver age.13 It should be noted that Gunderson et al. (2000)also con trolled for union iza tion, and when this vari able is included in our model, thepre mium is fur ther reduced to 12.4 per cent.

There are some addi tional details pro vided in Table 1. For exam ple, the char ac -ter is tics shown in bold face in the table are called ref er ence groups, where other indi ca -tors in the same cat e gory are com pared to them. For exam ple, “female” is the ref er ence cat e gory for gen der. This means that the esti mate for the male indi ca tor shows thatmen, on aver age, earn 13.3 per cent more than women.

“Pub lic sec tor” in the Labour Force Sur vey cov ers all lev els of gov ern ment: fed -eral, pro vin cial, and local.

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16 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

13 The Labour Force Sur vey pro vides data by occu pa tion and indus try. How ever, pub lic sec tor wage pre -mium by indus try and occu pa tion is not pre sented in the paper due to small sam ple sizes.

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III Comparing Non-Wage Benefits inOntario’s Public and Private Sectors

It is im por tant to em pha size that wages are only a part of to tal em ployee com pen sa -tion, as dis cussed in the first sec tion. Even though pub lic sec tor work ers in Ontario en -joy a wage pre mium, this does not tell us whether or not their over all com pen sa tion ishigher, com pa ra ble, or lower to work ers in the pri vate sec tor.

Unfor tu nately, indi vid ual data on non-wage ben e fits such as pen sions, vaca tiontime, health ben e fits, etc., is not readily avail able in Can ada, which explains the lack ofresearch on this aspect of employee com pen sa tion.14

How ever, some aggre gated non-wage ben e fit data can be exam ined to roughlysur mise whether non-wage ben e fits are lower, com pa ra ble, or higher in Ontario’s pub -lic sec tor than in its pri vate sec tor. Three spe cific com po nents of non-wage ben e fitsare exam ined: reg is tered pen sions, aver age age of retire ment, and job loss. To somedegree, the lat ter is meant to mea sure job secu rity.

Reg is tered pen sions

The pen sion ben e fit is the first of the non-wage ben e fits to con sider. It has two im por -tant di men sions. The first is the per cent age of work ers in both sec tors cov ered by areg is tered pen sion plan. Ta ble 2 sum ma rizes the pen sions data for Can ada, and morespe cif i cally, Ontario. There is a dra matic dif fer ence in pen sion cov er age be tween thepub lic and pri vate sec tors. In 2011, the lat est data avail able at the time of writ ing, 26.0per cent of pri vate sec tor work ers in Ontario were cov ered by a reg is tered pen sion plancom pared to 76.5 per cent of pub lic sec tor work ers.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 17

14 It is crit i cal that Can ada’s sta tis ti cal agency, Sta tis tics Can ada, aug ment its cur rent sur vey in order to begin col lect ing and ana lyz ing data on non-wage ben e fits. In the United States, for exam ple, data on non-wageben e fits paid by pri vate sec tor employ ers and state and local gov ern ments are col lected by the Bureau ofLabor Sta tis tics (Biggs and Richwine, 2011). Non-wage data includes vaca tion time, hol i days, sick leave,life and health insur ance, short- and long-term dis abil ity insur ance, defined ben e fits, and defined con tri -bu tion pen sion plans (Biggs and Richwine, 2011). For fed eral employ ees, the Office of Man age ment andBud get (OMB) and Office of Per son nel Man age ment (OPM) pro vides a sim i lar level of detail on non-wage ben e fits.

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Sec ond, for those who have pen sions, what type of plan do they have? A definedben e fit plan pro vides work ers with a guar an teed ben e fit in retire ment. A defined con -tri bu tion plan, on the other hand, pro vides employ ees with a ben e fit that is based ontheir con tri bu tions, their employ ers’ con tri bu tions, and earn ings on the pen sion sav -ings over time. A defined ben e fit plan is increas ingly scarce in the pri vate sec torbecause of its high costs and risks for the employer. Spe cif i cally, in a defined ben e fitpen sion plan, the employer bears the finan cial risk since the employee is guar an teedthe ben e fit. If returns on the pen sion’s invest ment fund do not match expec ta tions, the employer must increase the con tri bu tions to the plan to fully fund the guar an teed ben -e fit. The com par a tive data pre sented in table 2 illus trate the increas ing scar city ofdefined ben e fit pen sions. In 2011, of the work ers in Ontario who were cov ered by a

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18 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Table 2: Registered pension plan (RPP) members, by type of plan and sector, as of January 1, 2011

Canada Ontario

Total(public

and private)

Privatesector

Publicsector

Total(public

and private)

Privatesector

Publicsector

Total number of memberswho have:

6,065,751 2,924,786 3,140,965 2,263,744 1,235,453 1,028,291

– Defined benefit plans 4,484,011 1,530,035 2,953,976 1,661,243 660,517 1,000,726

– Defined contribution plans 969,207 817,645 151,562 352,363 338,659 13,704

– Other pension plans 612,533 577,106 35,427 250,138 236,277 13,861

Total employment, 2011 15,746,600 12,183,600 3,563,000 6,087,500 4,743,800 1,343,700

% of employees covered bypension plans

38.5 24.0 88.2 37.2 26.0 76.5

As a % of total number of members As a % of total number of members

Defined benefit plans 73.9 52.3 94.0 73.4 53.5 97.3

Defined contribution plans 16.0 28.0 4.8 15.6 27.4 1.3

Other pension plans 10.1 19.7 1.1 11.0 19.1 1.3

Notes:(a) Total includes workers in the public and private sector as well as self-employed workers in incorporated business (withand without paid help). Self-employed incorporated businesses are included in the private sector because, like their publicand private sector counterparts, they are able to have a registered pension plan (RPP).(b) Numbers may not add up to the total due to rounding.Sources: Statistics Canada, 2012a, 2012b, 2012c; and calculations by the authors.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 19

Table 3a: Average retirement age, from 2007 to 2011 (in years)

Totala Public sectoremployees

Private sectoremployees

Differencec

(in years)

Canada 61.9 60.0 62.4 2.5

Newfoundland & Labrador 60.0 58.2 62.3 4.1

Prince Edward Island 61.8 60.8 62.4b 1.6

Nova Scotia 61.5 60.0 62.0 2.1

New Brunswick 61.3 59.1 63.1 4.0

Quebec 60.4 58.5 61.7 3.2

Ontario 62.1 60.7 62.0 1.3

Manitoba 62.4 60.6 62.6 2.0

Saskatchewan 62.7 60.3 62.7 2.4

Alberta 63.5 61.7 63.8 2.0

British Columbia 63.0 60.7 63.5 2.8

Notes:(a) Total includes workers in the public and private sector, and self-employed individuals (including unpaid family workers).(b) The retirement age of private sector workers in Prince Edward Island was not provided by Statistics Canada for the year2011 since the sample was too small to be reliable. For Prince Edward Island, estimates based on a sample of less than 200are not reported. Therefore, the retirement age for Prince Edward Island is based on four years of data, 2007 to 2010.(c) Numbers may not add up to the total due to rounding.Sources: Statistics Canada, 2012d; and calculations by the authors.

Table 3b: Median retirement age, from 2007 to 2011 (in years)

Totala Public sectoremployees

Private sectoremployees

Differencec

(in years)

Canada 61.5 59.7 62.6 2.9

Newfoundland & Labrador 59.7 58.2 62.9 4.7

Prince Edward Island 61.3 60.1 63.0b 2.8

Nova Scotia 60.3 59.8 61.5 1.7

New Brunswick 60.8 59.1 64.0 4.9

Quebec 59.9 58.3 61.6 3.3

Ontario 62.1 60.6 62.4 1.8

Manitoba 62.3 60.6 62.9 2.4

Saskatchewan 62.0 60.2 62.3 2.1

Alberta 64.3 63.2 64.3 1.1

British Columbia 62.8 60.0 64.2 4.2

Notes and sources: Same as for Table 3a.

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pen sion plan, 97.3 per cent of those in the pub lic sec tor enjoyed a defined ben e fit pen -sion com pared to 53.5 per cent of those in the pri vate sec tor.

Clearly, pub lic sec tor work ers in Ontario are much more likely to be in a pen sionplan, and are much more likely to receive a defined ben e fit pen sion, than their pri vatesec tor coun ter parts.

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20 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Table 4: Job loss, by class of workers for Canada and the provinces, 2011

Number of those who lost a job(in thousands)

Number of those who lost a jobas a % of employment

Total Publicsector

Privatesector

Total Publicsector

Privatesector

Difference(percent-

age points)

Canada 445.4 22.1 423.4 3.0 0.6 3.8 3.2

Newfoundland &Labrador

10.4 0.5 10.0 5.1 0.7 7.4 6.6

Prince Edward Island 2.5 0.2 2.3 4.1 0.9 5.8 4.8

Nova Scotia 14.2 0.8 13.3 3.6 0.7 4.8 4.1

New Brunswick 13.4 0.8 12.6 4.3 0.9 5.7 4.7

Quebec 106.8 4.3 102.5 3.1 0.5 4.0 3.5

Ontario 178.2 8.8 169.4 3.1 0.7 3.9 3.2

Manitoba 10.4 1.0 9.5 1.9 0.6 2.5 1.9

Saskatchewan 8.0 0.7 7.3 1.9 0.5 2.5 2.0

Alberta 37.4 2.5 34.9 2.1 0.7 2.5 1.8

British Columbia 64.1 2.5 61.6 3.5 0.6 4.3 3.7

Notes:(a) Total job losses cover public and private sector workers only. Self-employed are excluded.(b) Reasons for losing a job include: company moved, company went out of business, business conditions, and dismissalby employer. Job losses due to an end of temporary, casual, and seasonal work are not included.(c) Numbers may not add up to the total due to rounding.Sources: Statistics Canada, 2012a and 2012d; and calculations by the authors.

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Aver age and median age of retire ment

Ta bles 3a and 3b pres ent in for ma tion on the av er age and me dian age of re tire ment forall work ers—pub lic and pri vate sec tor—be tween 2007 and 2011 both for Can ada as awhole and for in di vid ual prov inces.15

Regard less of whether the aver age or median age of retire ment is used, pub licsec tor work ers in Ontario retire at an ear lier age than their pri vate sec tor coun ter parts(as in fact is the case across the coun try). Spe cif i cally, on aver age, Ontario’s pub lic sec -tor work ers retire over a year (1.3 years) ear lier than do the prov ince’s pri vate sec torwork ers. The gap increases to 1.8 years if the median rather than the aver age is used.

Job loss as a proxy for job secu rity

Ta ble 4 pres ents data on job losses (ex clud ing those from tem po rary em ploy ment) for2011 for Can ada as a whole and the prov inces. Ta ble 4 in cludes job losses from firmsmov ing lo ca tion, firms that went out of busi ness, chang ing busi ness con di tions, anddis missal. In 2011, 3.9 per cent of those em ployed in the pri vate sec tor ex pe ri enced jobloss in On tario. This rate was much higher than that for the pub lic sec tor of 0.7 per -cent.

Con clu sion

While there is in suf fi cient data to cal cu late or make a de fin i tive state ment aboutnon-wage ben e fits dif fer ences be tween the pub lic and pri vate sec tors in On tario, avail -able data sug gest that the pub lic sec tor en joys more gen er ous non-wage ben e fits thanthe pri vate sec tor. More spe cif i cally, pub lic sec tor work ers in Ontario have higherrates of pen sion cov er age, higher rates of de fined ben e fit pen sions, lower ages of re -tire ment, and lower rates of job loss than pri vate sec tor work ers in the prov ince.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 21

15 Sta tis tics Can ada, which pro vided the data, noted that pro vin cial data should be used with cau tion due tosmall sam ple sizes. Five-year aver ages were used (2007 to 2011) to try to mit i gate the sam ple size prob lem.

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Overall Conclusion

The em pir i cal anal y sis of wage data and a sur vey of avail able non-wage ben e fit data forOn tario in di cate that pub lic sec tor work ers in the prov ince en joy both higher wagesand likely higher non-wage ben e fits than their pri vate sec tor coun ter parts. Spe cif i -cally, On tario’s pub lic sec tor work ers (i.e., fed eral, pro vin cial, and lo cal pub lic sec torwork ers) en joy a 13.9 per cent wage pre mium, on av er age, com pared to pri vate sec torwork ers af ter ad just ing for per sonal char ac ter is tics such as gen der, age, mar i tal sta tus,ed u ca tion, ten ure, size of es tab lish ment, type of job, and in dus try. When union iza tionis in cluded in the anal y sis, the wage pre mium for the pub lic sec tor in On tario de clinesto 12.4 per cent.

Avail able data for non-wage ben e fits in Ontario sim i larly indi cates that pub licsec tor work ers likely enjoy a pre mium over pri vate sec tor work ers. For exam ple, 76.5per cent of pub lic sec tor work ers in Ontario were cov ered by a pen sion com pared to26.0 per cent of pri vate sec tor work ers. Of those work ers who have a reg is tered pen sion plan, 97.3 per cent of pub lic sec tor work ers were cov ered by a defined ben e fit pen sioncom pared to 53.5 per cent of pri vate sec tor work ers. In addi tion, on aver age, pub licsec tor work ers in Ontario retire over a year ear lier (1.3 years) than pri vate sec tor work -ers. Finally, pub lic sec tor work ers face lower rates of job loss than pri vate sec tor work -ers. In 2011, 3.9 per cent of pri vate sec tor work ers lost their jobs in Ontario com paredto 0.7 per cent of pub lic sec tor work ers.

It is clear that pub lic sec tor work ers in Ontario enjoy higher wages—and likelyhigher non-wage ben e fits—than com pa ra ble work ers in the pri vate sec tor.

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22 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

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About the Authors

Amela Karabegovi� is a Se nior Econ o mist in the Fis cal Stud ies De part ment at theFra ser In sti tute. Since join ing the In sti tute, she has writ ten about 40 com pre hen sivestud ies on wide range of pol icy is sues in clud ing la bour mar kets, gov ern ment spend ing, nat u ral re sources, eco nomic in sti tu tions, in ter na tional trade, for eign aid, stock mar -ket per for mance, and so cial pol icy. She has pub lished in ac a demic jour nals such as theEu ro pean Jour nal of Po lit i cal Econ omy and Emerg ing Mar kets Re view and writes com -men tar ies that have ap peared in ma jor Ca na dian news pa pers such as the Na tionalPost, To ronto Star, Cal gary Her ald, and Van cou ver Sun. She holds a BM (Great Dis -tinc tion) in Gen eral Man age ment from the Uni ver sity of Lethbridge in Al berta and aMA in Eco nom ics from Si mon Fra ser Uni ver sity in Brit ish Co lum bia.

Milagros Palacios is a Se nior Re search Econ o mist in the Fis cal Stud ies De part ment at the Fra ser In sti tute. Since join ing the In sti tute, Ms. Palacios has authored or co-authored over 40 re search stud ies on a wide range of pub lic pol icy is sues in clud ing tax -a tion, gov ern ment fi nances, in vest ment, pro duc tiv ity, la bour mar kets, and char i ta blegiv ing, among oth ers. She has co-writ ten three books and is a reg u lar con trib u tor toFra ser Fo rum, the Fra ser In sti tute’s pol icy mag a zine. Her re cent com men tar ies haveap peared in ma jor Ca na dian news pa pers such as the Na tional Post, To ronto Sun,Wind sor Star, and Van cou ver Sun. Ms. Palacios holds a BA in In dus trial En gi neer ingfrom the Pon tif i cal Cath o lic Uni ver sity of Peru and an MSc in Eco nom ics from theUni ver sity of Concepcion, Chile.

Ja son Clem ens is the Fra ser In sti tute’s Ex ec u tive Vice-Pres i dent. Mr. Clem ens held anum ber of po si tions with the Fra ser In sti tute be tween 1996 and 2008, in clud ing Di rec -tor of Re search Qual ity, Di rec tor of Bud get ing and Stra te gic Plan ning, and Di rec tor ofFis cal Stud ies. He most re cently worked with the Ot tawa-based Mac don ald-LaurierIn sti tute (MLI) as Di rec tor of Re search and held a sim i lar po si tion with the San Fran cisco-based Pa cific Re search In sti tute for over three years. Mr. Clem ens has an Hon oursBach e lors De gree of Com merce and a Mas ters’ De gree in Busi ness Ad min is tra tionfrom the Uni ver sity of Wind sor as well as a Post Bac ca lau re ate De gree in Eco nom icsfrom Si mon Fra ser Uni ver sity. He has pub lished over 70 ma jor stud ies on a wide rangeof top ics, in clud ing tax a tion, gov ern ment spend ing, la bor mar ket reg u la tion, bank ing,wel fare re form, health care, pro duc tiv ity, and en tre pre neur ship. He has pub lishednearly 300 shorter ar ti cles, which have ap peared in such news pa pers as the Wall StreetJour nal, In ves tors’ Busi ness Daily, the Wash ing ton Post, the Globe and Mail, the Na -tional Post, and a host of US, Ca na dian, and in ter na tional news pa pers.

Fra ser Insti tute 4 www.fraserinstitute.org

26 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

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Acknowl edg ments

The au thors would like to thank a num ber of in di vid u als for their con tri bu tion and as -sis tance in com plet ing this study. They first thank the Uni ver sity of To ronto Pro fes sorMorley Gunderson and an anon y mous re viewer for for mally peer-re view ing the studyand pro vid ing help ful com ments and sug ges tions. The au thors also thank NachumGabler for his as sis tance on this study.

The authors are also grate ful for the assis tance and dil i gence of the Fra ser Insti -tute’s pub li ca tions and com mu ni ca tions depart ments whose work improved the qual -ity of the study.

Any remain ing errors or omis sions are the sole respon si bil ity of the authors. Wewould also like to express our grat i tude to those who donated to sup port this pro ject.With out their dona tions, this pro ject would not have been pos si ble.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 27

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Pub lish ing Infor ma tion

DistributionThese pub li ca tions are avail able from <http://www.fraserinstitute.org> in Por ta ble Doc u mentFor mat (PDF) and can be read with Adobe Ac ro bat® 7 or later, or with Adobe Reader® 7 or later.Adobe Reader® X, the most re cent ver sion, is avail able free of charge from Adobe Sys tems Inc.and may be down loaded from: <http://get.adobe. com/reader/>. We en cour age you to in -stall the most re cent ver sion.

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Dis claimerThe au thors of this pub li ca tion have worked in de pend ently and opin ions ex pressed by themare, there fore, their own, and do not nec es sar ily re flect the opin ions of the sup port ers, trust ees,or other staff of the Fra ser In sti tute. This pub li ca tion in no way im plies that the Fra ser In sti tute, its trust ees, or staff are in fa vor of, or op pose the pas sage of, any bill; or that they sup port or op -pose any par tic u lar po lit i cal party or can di date.

Date of issueFebru ary 2013

Cita tionKarabegovi�, Amela, Milagros Palacios, and Ja son Clem ens (2013). Com par ing Pub lic and Pri -vate Sec tor Com pen sa tion in On tario. On tario Pros per ity Ini tia tive. Fra ser In sti tute.

Editing and pro duc tionKristin McCahon

DesignLindsey Thomas Mar tin

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28 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

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Cover designBill Ray

Cover imagesBigstock, Pan orama of To ronto © Rob ertSOf fice work ers in cu bi cles © Paul Carvill

Sup port ing the Fra ser In sti tuteTo learn how to sup port the Fra ser In sti tute, please con tact

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For their long-stand ing and valu able sup port con trib ut ing to the suc cess of the Fra serIn sti tute, the fol low ing peo ple have been rec og nized and in ducted as Life time Pa tronsof the Fra ser In sti tute.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 29

Sonja BataCharles BarlowEv BergArt GrunderJim Chap linSerge DarkazanliJohn Dobson

Ray mond HeungBill KorolBill MacknessFred MannixJack PirieCon RileyCatherine Windels

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Fra ser Insti tute 4 www.fraserinstitute.org

30 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Pur pose, Fund ing, and Inde pend ence

The Fra ser In sti tute pro vides a use ful pub lic ser vice. We re port ob jec tive in for ma tionabout the eco nomic and so cial ef fects of cur rent pub lic pol i cies, and we of fer ev i -dence-based re search and ed u ca tion about pol icy op tions that can im prove the qual ity of life.

The Insti tute is a non-profit orga ni za tion. Our activ i ties are funded by char i ta bledona tions, unre stricted grants, ticket sales and spon sor ships from events, the licens -ing of prod ucts for pub lic dis tri bu tion, and the sale of pub li ca tions.

All research is sub ject to rig or ous review by exter nal experts, and is con ductedand pub lished sep a rately from the Insti tute’s Board of Trust ees and its donors.

The opin ions expressed by staff or author(s) are those of the indi vid u als them -selves, and should not be inter preted to reflect those of the Insti tute, its Board ofTrust ees, or its donors and sup port ers.

As a healthy part of pub lic dis cus sion among fel low cit i zens who desire toimprove the lives of peo ple through better pub lic pol icy, the Insti tute wel comes evi -dence-focused scru tiny of the research we pub lish, includ ing ver i fi ca tion of datasources, rep li ca tion of ana lyt i cal meth ods, and intel li gent debate about the prac ti caleffects of pol icy rec om men da tions.

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About the Fraser Institute

Our vi sion is a free and pros per ous world where in di vid u als ben e fit from greaterchoice, com pet i tive mar kets, and per sonal re spon si bil ity. Our mis sion is to mea sure,study, and com mu ni cate the im pact of com pet i tive mar kets and gov ern ment in ter -ven tions on the wel fare of in di vid u als. Founded in 1974, we are an in de pend ent Ca na -dian re search and ed u ca tional or ga ni za tion with lo ca tions through out North Amer icaand in ter na tional part ners in over 85 coun tries. Our work is fi nanced by tax-de duct iblecon tri bu tions from thou sands of in di vid u als, or ga ni za tions, and foun da tions. In or der to pro tect its in de pend ence, the In sti tute does not ac cept grants from gov ern ment or con -tracts for re search.

Nous envisageons un monde li bre et prospère, où chaque personne bénéficie d’un plusgrand choix, de marchés concurrentiels et de responsabilités individuelles. No tre mis -sion consiste à mesurer, à étudier et à communiquer l’effet des marchés concurrentielset des in ter ven tions gouvernementales sur le bien-être des individus.

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Val i dat ing the accu racy of our research

The Fra ser In sti tute main tains a rig or ous peer re view pro cess for its re search. Newre search, ma jor re search pro jects, and sub stan tively mod i fied re search con ducted by the Fra ser In sti tute are re viewed by ex perts with a rec og nized ex per tise in the topicarea be ing ad dressed. When ever pos si ble, ex ter nal re view is a blind pro cess. Up dates to pre vi ously re viewed re search or new edi tions of pre vi ously re viewed re search arenot re viewed un less the up date in cludes sub stan tive or ma te rial changes in themeth od ol ogy.

The review pro cess is over seen by the direc tors of the Insti tute’s research depart -ments who are respon si ble for ensur ing all research pub lished by the Insti tute passesthrough the appro pri ate peer review. If a dis pute about the rec om men da tions of thereview ers should arise dur ing the Insti tute’s peer review pro cess, the Insti tute has anEdi to rial Advi sory Board, a panel of schol ars from Can ada, the United States, andEurope to whom it can turn for help in resolving the dispute.

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Comparing Public and Private Sector Compensation in Ontario 4 February 2013 4 31

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Edi to rial Advi sory Board

Fra ser Insti tute 4 www.fraserinstitute.org

32 4 Comparing Public and Private Sector Compensation in Ontario 4 February 2013

Pro fes sor Terry L. Ander sonPro fes sor Rob ert BarroPro fes sor Michael BlissPro fes sor Jean-Pierre CentiPro fes sor John ChantPro fes sor Bev DahlbyPro fes sor Erwin DiewertPro fes sor Ste phen EastonPro fes sor J.C. Her bert EmeryPro fes sor Jack L. GranatsteinPro fes sor Her bert G. GrubelPro fes sor James GwartneyPro fes sor Ron ald W. JonesDr. Jerry Jor danPro fes sor Ross McKitrick

Pro fes sor Michael ParkinPro fes sor Friedrich Schnei derPro fes sor Law rence B. SmithDr. Vito Tanzi

Past mem bersPro fes sor Armen Alchian*Pro fes sor James M. Buchanan*† Pro fes sor Friedrich A. Hayek*† Pro fes sor H.G. John son*Pro fes sor F.G. Pennance*Pro fes sor George Stigler*† Pro fes sor Edwin G. West*Sir Alan Walters*

* De ceased

† No bel Lau re ate