The Canadian Taxpayers Federation (CTF) is right: the growing gap between compensation for public sector jobs and equivalent private sector jobs has to be brought under control.
The best way, of course, would be for private sector employers to be able to raise their pay and benefits so all liquor store clerks aren’t making $10.25 an hour. But in the unprotected marketplace, that’s not always possible.
It’s also not possible to expect struggling taxpayers to keep supporting gold-plated public sector compensation packages in tough economic times. Look what’s happening south of the border, where the city of Los Angeles is heading for bankruptcy as it faces a $943 million increase in pension and health benefit costs in the next five years – without adding a single new employee.
A CTF poll found three out of four British Columbians don’t think it’s fair that government workers get pay and benefits packages 30% higher than people doing the same jobs in the private sector.
But do taxpayers really want everyone on the public payroll to get what their private counterparts receive? That’s the intent of a proposed Compensation Equity Act promoted by the CTF and the Independent Contractors and Businesses Association of B.C.
Maybe not. At a recent breakfast meeting, MLA Colin Hansen introduced Premier Christy Clark’s economic adviser Jim Shepard (former CEO of Finning International and Canfor) with the quip that he just got a 100% pay raise – from $1 a year to $2.
That’s an extreme example of public sector compensation lagging the private sector, but there are others. When TransLink had a board made up of lawyers, developers and business people who happened to be elected officials, they were paid a few hundred dollars per meeting.
Today the chair of the current “professional board” makes $100,000 a year, more than the entire cost of running the previous board of elected officials five years ago. What if the former board had to be paid the equivalent of the current board? They did the same work and put in the same hours.
Judy Rogers was recently appointed chairwoman of BC Housing for $15,000 a year. Bob Rennie was appointed to the board for $7,500 a year. What if they had to be paid what they could get for equivalent work in the private sector?
Take the matter of bonuses for senior executives at BC Hydro, TransLink, ICBC and BC Ferries. Pay based on performance is commonplace in the private sector. Part of a person’s compensation is based on achieving measurable targets. Call it a bonus or look at it as a portion of someone’s salary that won’t be paid if targets aren’t met.
For some reason, radio talk-show callers go apoplectic about this, and finger-in-the-wind politicians quickly give in, even though it’s true to the principle of matching public-sector and private-sector compensation.
Underlying these misunderstandings is the growing gap between average private-sector workers and people at the top end.
To cite another extreme example, Jim Shaw retired from Shaw Cable with a $6-million-a-year pension. In 17 hours he will collect the maximum yearly retirement benefit paid out by the Canada Pension Plan ($11,520). Thanks to Canadian tax rules that subsidize professional sports, a third-line forward for the Vancouver Canucks can make $4 million a year. Are those models of pay that the public sector should match for its senior managers? Ah, no.
So let’s be careful about jumping to pay equity solutions locked in by legislation. Legislating equity between compensation in the public and private sectors is a clumsy instrument. Negotiation is a better route, with public-sector paymasters given the flexibility to limit pay to what they can afford – and to be able to compete with the private sector for the best people.•
