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The Progressive Economics Forum

Fair Wages and Public Sector Workers

Today’s Globe has a long article by Konrad Yakabuski on the potential for a Wisconsin style attack on Canadian public sector workers. It’s hard to challenge his argument that this is very much in prospect, and indeed we seem set for a debate – or a series of national, provincial and municipal debates – on the allegedly large superiority of pay and benefits in the public sector during troubled times for private sector workers and for cash-strapped governments.

 
What irks me about this piece is that it takes a few swipes at union inflexibility, and  makes no attempt to compare private and public sector pay and benefits beyond implicitly assuming that the latter are greatly superior.

This is a slightly tricky issue from a union perspective. How do you defend decent pay and pension and benefits coverage without re-inforcing  the image of a unionized public sector elite?

The answer lies in the research. While now somewhat dated, the best independent Canadian empirical studies show that a modest public sector pay advantage is mainly the product of higher pay for women in lower paid occupations, offset by lower pay for mainly male workers in managerial jobs.

The alleged ‘”public sector union elite” turns out not to be a bunch of overpaid archtypical bureaucrats, but to be modestly paid women such as caregivers who do much better than their private sector equivalents mainly because the latter struggle with low wages, are under-paid compared to equivalent male co workers, and rarely have access to pension and health benefits.

The best independent academic study is by leading economists Gunderson, Hyatt and Riddell and was published by the now defunct CPRN in 2000. (Searching for it on the CPRN archive was a reminder of the excellent work they did on labour market issues.) 

Their findings are summarized by Judith Maxwell as follows:

” Gunderson, Hyatt and Riddell disentangle the effects of various factors that influence overall pay levels and present detailed results for the major occupational groups represented in government workforces, such as managers, professional/technical workers, clerical workers, and service workers. Findings are also reported separately for men and women. The results show that the answer to the question of whether there is a ‘pay premium’ associated with employment in government is far from a simple one. On the one hand, some groups, such as senior managers and specialized occupational groups, such as information technology workers, are paid less than their private sector counterparts On the other hand, women in government, especially those employed in service jobs, such as food services, tend to be more highly paid than women in the private sector. It is clear that employment and pay equity policies, coupled with decades of collective bargaining, have narrowed the pay differentials between men and women and between the highest and lowest paid workers.”

And this is from the authors’ summary of their findings:
 “A combination of factors explains government-private sector pay differences. Notable in this regard are pay equity policies, which narrow the male-female pay differentials in government, and the tendency for governments to pay more than the private sector does for service jobs and less than the private sector wage rates for managers. In other words, the spread between the top and the bottom of the pay scale is less in government than in the private sector, likely a result of political, public and collective bargaining pressures.”

 

These findings in turn help explain why the CFIB attacks public sector wages so fervently – they put upward pressure on them to pay more to under-paid women service workers.

 

For those who need more, NUPGE have published an excellent technical study by David Macdonald which takes a comprehensive look at Canadian studies of public and private sector pay.

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Comments

Comment from Paul Tulloch
Time: March 12, 2011, 11:32 am

I hope that the numbers and research you mention can penetrate and influence the popular space that has opened up around this space.

David did some great work in that paper.

Comment from Larry Mutter
Time: March 12, 2011, 12:15 pm

Be sure the Canadian Right is watching the attack on the US public sector Unions with great interest.Its now a question of tactics.

Comment from Purple Library Guy
Time: March 12, 2011, 7:17 pm

Why should we allow a negative frame to be put on the idea that unions’ bargaining power allows unionized workers to gain better wages? That’s what should happen. Wages are lousy. Workers should have better wages, and unions should be allowing them to gain better wages.

Let’s imagine for a moment that public sector compensation was higher. It seems clear the conclusion to draw would be that the private sector needs higher compensation, which could be accomplished through greater unionization in the private sector.

Ergo, the policy implication is that what is required is pro-unionization laws, making it easier to organize and harder for employers to block union organization, liberal strike laws and hard anti-scab laws, as well as higher minimum wages, government action on job creation, strong social safety net to reduce the bargaining power of employers and so on. After all, the current time is characterized by erosion of middle class purchasing power and rapidly increasing share of wealth going to the very rich, leading in turn to decreased demand and a weak, unstable economy. This trend has been caused by class war by the rich against the rest of the population, and by their successful creation and use of various tools to increase their bargaining power in the workplace and reduce the bargaining power of workers.

If we want a healthy economy, we need to increase demand, and to increase demand we have to increase the bargaining power of workers. Thus, what would be needed if the finding were that the public sector, rich in unions, get better compensation would be to get the private sector to look more like the public sector, not the other way around.

Comment from Purple Library Guy
Time: March 12, 2011, 7:30 pm

I’m just saying, when you focus your energies on trying to prove that no, mercy no, unions in the public sector don’t actually get anyone decent wages, so it’s all right and please don’t hurt the unions–when you do that, you implicitly admit that it would be a bad thing if unions resulted in better wages. This concedes the right wing frame and puts you on the defensive. You can do wonderful research on the topic, but it’s almost worse than a waste of time.

The thing to do is say “Yeah, banksters are taking home gajillions per year, CEOs hand so much to Tiger Woods to advertise their products that he makes more than the whole sweatshop workforce that actually makes the products, and we’re supposed to be apologizing for fighting for a living wage for our members? Go howl! There’s plenty of money all over, ordinary people can’t make ends meet because it’s all being used for parasitic derivatives trading by people who couldn’t spend all the cash they already have in a million years and who get massive tax breaks for it, and we’re supposed to buy the idea that ‘efficiency’ is all about taking even more away from the people who do the real work? Clowns with yachts hundreds of feet long are calling union members ‘elite’ because they haven’t been foreclosed on yet? What a pile. If unions got real people some actual cash and reduced the amount the rich crooks get to skim, GREAT!”

We’ve backpedalled about enough, and now the people who wrecked the economy want us to cringe and take the blame. To hell with that.

Comment from Larry Mutter
Time: March 13, 2011, 12:39 pm

Wisconsin,among many others is a dramatic example of the fact that we are at a historical point.We are in a battle for control of our Democratic systems against unfettered capitalism and economic corporate rule.The class war is full on without the knowledge of the majority of the working class. I use the term working class because thats what most of us really are.

Comment from Travis Fast
Time: March 13, 2011, 3:44 pm

Larry there is nothing historic or dramatic going on here. Unions were born of the necessity to fight against the tendency to drive wages to reproduction costs and then some. The 30 years after the II world war was an aberration that convinced social democrats you can indeed have your cake and eat it too.

The problem is as then as now capitalism. Your comment seems to want it both ways. Good luck with that.

Comment from The Analyst
Time: March 13, 2011, 4:30 pm

There’s a lot of danger in transfering Walker’s policies to Canada. The Fraser Institute has been floating around the idea.

Comment from Travis Fast
Time: March 13, 2011, 4:46 pm

Really? What exactly is the danger?

Comment from Brandon L
Time: March 13, 2011, 7:16 pm

Private sector unions are great. Public unions are not.

If we had higher rates of interest say a Vockler Push would crush speculators. People that deny this logic I do not agree with. Speculators are driving the prices solely like housing prices through the use of credit from low borrowing costs, unlike the housing booms this is being fueld on a global basis. If we had higher rates of interest, or higher borrowing cost speculators would be crushed. Commodities would be crushed. Stocks would be crushed. Gold would collase. All positives….

Yet everyone is so afraid of allowing prices to fall; the rich get richer. What we have now falling wages, & incomes, with price increases.

This has made it so the ordinary working class can not afford basic nessities in food, education and clothing. We have to make do with products that are shrinking in size and quality to keep prices flat.

Comment from travis fast
Time: March 14, 2011, 3:47 am

@ Brandon

What does this:

“This has made it so the ordinary working class can not afford basic nessities in food, education and clothing. We have to make do with products that are shrinking in size and quality to keep prices flat.”

have to do with:

“Private sector unions are great. Public unions are not.”

?????

How does crushing public unions (either overtly as in Wisconsin or by stealth as in Canada) help increase wages? Are you really trying to argue that public sector wage growth is driving up prices, i.e., the cause of inflation in food and energy?

Please do explain!

Comment from Richard
Time: March 15, 2011, 5:57 am

When one looks at the cost of the unlimted liabilities of the governments commitments of taxpayers money to fund their benifits and pensions it becomes a discussion of who is going to pay for it.FOR EXAMPLE the board of education in my county published the fact that 83 PERCENT of budget funds went to salaries benifits and pensions. ENOUGH SAID. THIS CANNOT CONTINUE.The taxpayer is broke.

Comment from Darwin O’Connor
Time: March 15, 2011, 8:14 am

“FOR EXAMPLE the board of education in my county published the fact that 83 PERCENT of budget funds went to salaries benifits and pensions.”

The majority of organizations, public or private, spend most of their money on salaries.

Comment from Purple Library Guy
Time: March 15, 2011, 12:11 pm

“FOR EXAMPLE the board of education in my county published the fact that 83 PERCENT of budget funds went to salaries benifits and pensions.”
A noted right-wing author (Heinlein) once pontificated that a school is a log with a pupil on one end and a teacher at the other. What would you expect education spending to be on? Would you be happier if the school buildings were more expensive? This reminds me of Dilbert’s boss once complaining it was unacceptable that 40% of sick days were being taken on Mondays and Fridays . . .

Comment from Travis Fast
Time: March 15, 2011, 12:42 pm

@Richard

“When one looks at the cost of the unlimted liabilities of the governments commitments of taxpayers money to fund their benifits and pensions it becomes a discussion of who is going to pay for it.”

A contract is a contract. Labour agreements are negotiated and pensions are differed wages. It is no more appropriate to demand from the person you bought your house from 20 years ago give you a 30% refund because you now think you paid too much than it is to reneg on pension obligations.

Why is it every time right wing populists get out of beg the only solution they can think of is savaging someone else’s labour contract?

Sad that you all have more respect for property than people.

Comment from Richard
Time: March 15, 2011, 1:13 pm

Darwin old boy .When I was working in a manufacturing business; if labor cost rose above 18 percent red lights went off.Here we are in education where 83 percent goes to labor costs.That does not LEAVE much for new equipment or innovation .Does it.It appears to me that we must adjust the percentage we spend on labor to that of technology.

Comment from Purple Library Guy
Time: March 15, 2011, 2:35 pm

Manufacturing business? Sure, whatever. And when I bought a DS for my daughter I didn’t pay to have a tutor teach her to use it, making the entire expenditure (directly) for the equipment involved. Clearly therefore spending any money whatsoever on actual teachers in the education system is out of line. Now, if you’re done comparing apples with Zoroastrianism . . .
Hint: The manufacturing business is notoriously capital-intensive, which is good for manufacturing. Try those ratios in education and you will end up with class sizes of two hundred in your elementary school. But the kids will all have very snazzy computers until they’re finished vandalizing them.

There’s a grain of something there, though. Cuts to education spending often start by reducing budgets for things less essential to education than having someone actually teach the kids, so it would not surprise me if stupid right-wing governments that starve their education systems of cash end up with very low budgets for everything but absolute necessities such as the teachers themselves, and thus do end up with lousy equipment, ancient textbooks et cetera.

Comment from Travis Fast
Time: March 15, 2011, 4:30 pm

I am trying to imagine lecturing in a hall made for 10,000 with 300 students and a concert hall sound system. I imagine the students would expect a fairly good show each week. Over in physics they could have a supercollider.

So I am with Richard lets get professor and administrative compensation down to 18% of university costs. Party on.

Comment from Richard
Time: March 16, 2011, 6:52 am

HERE is a number to digest.The Canadian taxpayer contributes around 24 billion dollars yearly to top up goverment employees pension funds.This number is out of control .When these goverment contracts were negotiated who would of thought that these numbers would get so large.As was said a contract is a contract like a marriage is marriage It does not always have a happy ending.There is a bill before US congress to allow US states to declare bankrupcy to renege on their financial commitments and labor contracts.Is this what has to happen to control these public union contracts.?

Comment from Purple Library Guy
Time: March 16, 2011, 4:18 pm

Dude, if you’re not paid enough and have no pension, get a union. Don’t try to break people who have fought hard to be able to get by.
You’ve got a disconnect, man. 24 billion is a number. “too much” is a value judgment. You aren’t giving us any actual reason why it’s too much–it just looks big, but so what? A big percentage of the economy is public sector. Millions of workers work, and worked, for the public sector. Livable pensions for all of them is going to cost. *Not* having livable pensions for them is going to mean misery and poverty for huge chunks of the population. For what? So gajillionaires can each have one more gajillion? Is that what the economy should be for?

Comment from Travis Fast
Time: March 16, 2011, 5:09 pm

Meanwhile if you are a US banker you can have 3 trillion in taxpayers money cause you know like the sky is falling dude.

I say lets scrap the public health system for all those 65 and over. Do you know how much health care costs for the boomers???????????????????????????? WTF were policy makers thinking???????????????????????? OMG The Sky is Falling!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I am going to go re-read a Modest Proposal by Swift so I can sooth myself by reminding myself that such instincts are a permanent human condition.

Maybe just maybe Richard will have a Roquentin moment.

Comment from Travis Fast
Time: March 16, 2011, 6:58 pm

@ PLG

What is a gajillion? Is that a scientific term:)’

Comment from Purple Library Guy
Time: March 16, 2011, 10:51 pm

Absolutely. It’s a measure greater than a skillion, but smaller than a superdupermegabazillion.
Anyway, it’s easier to use an indefinitely large number for the really rich people nowadays, because every time you turn around they add another zero and what you said yesterday is out of date. Used to be if you talked about millionaires it sounded rich; at the rate things are going pretty soon we’ll have to be talking about trillionaires.

Comment from Richard
Time: March 18, 2011, 5:33 am

Sorry men I AM not out of touch .This is not a value judgement.The unfunded liability is huge and compounding as we speak.That 24 billion a year could be put into health care for the sake of all.LIABRARY man you hit the nail on the head .there are to many goverment employees across this nation .ALMOST 30 PERCENT .THE TAIL IS WAGGING THE DOG.

Comment from Purple Library Guy
Time: March 18, 2011, 10:44 am

You say “This is not a value judgement” and then you offer another unsupported judgment. What makes too many government employees? Is there some arbitrary cutoff? Does it matter whether they’re doing useful work?

I’d rather have more government employees than more derivatives traders or advertisers. There’s big chunks of the private sector that does nothing useful, but to the contrary is effectively parasitic.
Government employment is a case by case issue. Some areas there are not enough–there’s work that direly needs doing and not enough people to get it done properly. Other areas, maybe not so much–I have my doubts about the Department of Indian Affairs. But a sweeping “This percentage is too high because it’s a number I don’t like” is worthless.

Comment from Richard
Time: March 18, 2011, 5:00 pm

Liabrary GUY.This is not about derivative traders or bankers or the control of wealth by the top 5% .I agree that these compensations are obscene. HOWEVER MY TAXES do not support these thieves.However their greed and abuse effect our lives.Who in your opinion in the private sector is parasitic? The auto industry comes to mind ,a unionized industry that became uncompetitive due to bad managment and organized labor and their demands .Yes my tax dollars did bail them out and that makes me mad.

Comment from Darwin O’Connor
Time: March 19, 2011, 1:48 pm

“HOWEVER MY TAXES do not support these thieves.”

Maybe not, but unless you live like a Hippie, a portion of everything else you buy does.

The auto industry needed help because of derivative traders. If it wasn’t for them the auto industry probably could have restructured themselves because they wouldn’t have been hit by such a bad rescission and they could have refinanced through the banking system.

Comment from Richard
Time: March 20, 2011, 11:18 am

” The auto indusrtry needed help because of derivative traders” That is wrong wrong wrong.The north american auto industry has been on slippery down ward slope for the last decade or more .They have been producing automobiles below t he cost of prduction for years .DUE to poor management and overpaid union demands they became uncompetitive .The system was broken.Today one sees similarity between Goverments in Canada and the auto industry .Poor management and unsustainable union demands .The so call worst recession since the great depression (HORSE S–T) HAS NOT AFFECTED GOVERNMENT INSTITUTES one bit.I SEE no cutbacks or restrants buy goverment unions what so ever. In fact a new contract was just sign buy our government of ontario which included wage increases .The great recession has only affected the lower class.Bankers or still getting (9 BILLION dollars) bonus in2010.Retired teachers are still double dipping preventing young graduates from entering the work force.G overments are still giving huge severences for incompetency.Like I said the system is broken and needs restructuring.By the way I am not a hippie.How ever I .do live off the land .I am a self employed organic farmer with a degree in economics and a deep concern for the future of my children and the huge goverment liabilities we are burdening them with.Goverment and their Union employees appear not to really care ” TO BAD’.

Comment from Richard
Time: March 22, 2011, 10:16 am

Purple liabrary guy.I agree maybe us farmers should join a goverment Union.Then we would have all the perks,large salaries ,lots of benifits ,defined pension plans for life, early retirement(58 for goverment and 55 for teachers police and firemen.However there would be a small problem.FOOD prices would probable increase 3 to 5 fold .I do not think Canadian Goverments or consumers would like that.I imagine there might be a few upset people .THE other problem since we are all now retiring in our mid 50,s AND THE AVERAGE age of farmers is 57 . Guess what ,NO FOOD.There seams to be a problem for those who consider food as a necessity. What should we do ? G raphs and charts won”t solve this.However I GUESS farmers could work until we are 75 or 80 for the common good.

Comment from Darwin O’Connor
Time: March 22, 2011, 12:42 pm

I would encourage farmers to unionize.

“FOOD prices would probable increase 3 to 5 fold”

I don’t think prices would increase that much, however since the farmer only get a fraction of what consumers pay for food and food makes up a small percentage of what people spend money on, the impact wouldn’t be all that great. It would be a fair price to pay to improve the lives of farmers.

Comment from Richard
Time: March 23, 2011, 8:45 am

Darwin .thanks for the encourangment to join.However we neglected to include the farmers labor force.I realized the some of farming is very capital intensive (COMBINES CAN COST UP TO 500,000 DOLLARS EACH AND TRACTERS 100,000 TO 200,000 DOLLARS ).This is indicative of the grains etc.However the fruit and veg part of farming are very labor intensive.Currently a majority of farm labor is off shore labor which is paid minimum wage (10 plus dollars an hour) SINCE WE NOW all belong to the union our wage package should reflect at least what garbage (sanatation engineers) and bus drivers recieve.Hence farm labor should be in the 30 dollars an hour range including benifits and pensions for life.This would increase the cost of food to the consumers beyond acceptance .WE would have food riots .Somehow through the food channels ( processer,truckers,brokers,foodstores etc and compounding OF these cost ) the consumer will pay a lot more.A perfect example is the apple industry in C anada .The farmer or grower recieves in a good year 25 cents per pound for apples.By the time it reaches the foodstore and consummer the price is around (currently) 1.49 to1.69 dollars per pound.Therefore if labor cost where to increased from 10.00 to 30.00 per hour OR 200 PERCENT for labor then passed on through the normal channels, the price of apples would be outrageous PS I am glad we all belong to the Union now(what is it called snowy or duey or cupe) life is grand.Also in yesterdays paper I might be able to sign up for CIVIL SERVENT BUDDEST -INSPIRED STESS COURSE.IT will only cost 11,000 dollars for two nine-week “mindfulness-based stress reduction” sessions designed to help up to 40 puplic servants “learn to relate more consciously and compassionately to challenges of work and personal life’.The maximum buget for each of the sessions is $11,000 plus GST with an option of adding four more sessions .YES spend those taxdollars .

Comment from Todd
Time: March 23, 2011, 4:45 pm

“However the fruit and veg part of farming are very labor intensive.”

So’s organic farming, but I don’t see organic foods priced completely into the stratosphere. Pull the other one.

“SINCE WE NOW all belong to the union our wage package should reflect at least what garbage (sanatation engineers) and bus drivers recieve”

Why those particular jobs? Being a member of a union doesn’t mean that your pay will match that of any other unionized workforce.

“Hence farm labor should be in the 30 dollars an hour range”

Did you actually read the article above (can you even read to begin with?)? There are differences among wage rates for unionized workers; they don’t all make the same amount that the highest-paid unionized workers make.

“life is grand”

Not so long as some members are ready to stab other members in the back with the bosses because some members haven’t a clue about how capitalism works.

There _are_ unions for closet scabs like you, you know.

Comment from Purple Library Guy
Time: March 25, 2011, 3:22 pm

“The farmer or grower recieves in a good year 25 cents per pound for apples.By the time it reaches the foodstore and consummer the price is around (currently) 1.49 to1.69 dollars per pound.Therefore if labor cost where to increased from 10.00 to 30.00 per hour OR 200 PERCENT for labor then passed on through the normal channels, the price of apples would be outrageous”

Hmmm . . . 25 cents. But let’s say the farmer breaks even on that 25 cent price; not all the expenses of the operation come from labour. Let’s assume the labour component of the farmer’s costs accounts for 15 cents out of the 25. Now triple that; labour goes from 15 cents/pound to 45 cents/pound, an increase of 30 cents. That would put the price of apples from that 1.49-1.69/pound upt to 1.79-1.99 a pound. Not a huge price to pay for non-impoverished farm workers.
Heck, dump out a middle-man or two from the farmer to table process and you could do it while holding prices steady.

Comment from Travis Fast
Time: March 25, 2011, 9:01 pm

Nietzsche said somewhere to beware of the abyss. I fear this conversation has gone decidedly south.

Comment from Richard
Time: March 26, 2011, 3:19 pm

Travis I agree it is time to move .

Closing remarks and Facts regarding unsupported value judgement.

A)The growth of public service.”The federal bureaucracy swelled 35% during a10 year period ending in2009.” ( National post march 22 2011 C.D.Howe). PS out of control.
b)UNFUNDED Government liabilites such as public sector pension funds.Calculations puts Canada’s debt closer to 900 billion rather than 563 billion as stated.
( National POST march 22 2011 IMF).Great gift for the next generation.
c) ” Governments will continue to sweep under the rug issues pertaining to growing pensions and benifits liabilities.(National Post march 22 2011 CFIB).Let’ hope that this becomes an election issue.
e)’ SCAB’ Is an air born fungus. AS an apple farmer I DEAL WITH IT EVERY SEASON .Left uncontrolled it can destroy one’ crop.
f)’ Life is GRAND’.Yes ,it’s time to put away the skis and snow shoes get out side ,start prunning ,feel the sun on one’s back,listen to the bird and bees and look forward to swimming and sailing in the bay.I DON’T think I will have time to inroll in this year’s Civil SERVANTS BUDDHIST-INSPIRED STRESS COURSE.May be next year.
However,
you will hear from me in the future when I FIGURE out this voodoo math FORMULA (I don’t recall learning it at university)
FORMULA? service + age+ TAXPAYERS DOLLARS=PENSION JACKPOT FOR LIFE.

Comment from Todd
Time: March 26, 2011, 9:56 pm

“I agree it is time to move”

Then why are you still writing?

“SCAB’ Is an air born fungus”

‘Nuff said on that topic.

“I DON’T think”

Well, there’s truth (finally) . . . .

“Governments will continue to sweep under the rug issues pertaining to growing pensions and benifits liabilities”

“Calculations puts Canada’s debt closer to 900 billion rather than 563 billion as stated.”

The calculations talked about here?:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/01/the-value-of-unfunded-pension-liabilities-and-interest-rates.html

(Funny: every time I tried to Google CD Howe and this 900-billion figure, I got no result.)

Why is that, when the rich people you want to climb into bed with demand even more money in the form of tax-breaks, scabs like you will just howl all the louder for them?

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