Improved skills factor in Canadian government wage bill growth

10 Oct 13
A boost in the number of skilled professionals working for Canada’s federal government helped to fuel an increase in the public sector wage bill over the past decade, according to an analysis by the Parliamentary Budget Officer.

By Vivienne Russell | 10 October 2013

A boost in the number of skilled professionals working for Canada’s federal government helped to fuel an increase in the public sector wage bill over the past decade, according to an analysis by the Parliamentary Budget Officer.

The report, published yesterday, found this shift in employment classification was one of four factors that contributed to labour cost growth between 2001/02 and 2011/12. Between these dates, C$7.8bn was added to the wage bill.

However, changes in skill mix were not a major driver of the hike, explaining only 4.3% of the change.

The two main drivers were inflation and an increase in the number of people working for the federal government. The third factor was wage settlements negotiated between the government and trade unions.

Inflation-busting pay deals were agreed at the beginning of the period examined, but the gains these brought have since been exhausted due to real-terms pay cuts imposed in more recent years, the report said.

The decline in real wage growth in the federal government can be partly attributed to the effect of the 2009 Expenditure Restraint Act, which capped pay rises for federal public servants between 2006/07 and 2010/11. In three of those five years, Consumer Prices Index inflation increased at a rate higher than the wage increases permitted under the ERA, the PBO said.

It concluded: ‘Recent reductions in the level of employment and the Expenditure Restraint Act of 2009 have been successful in limiting the growth in labour costs.

‘However, to maintain a constant standard of living in the public sector, some cost growth is inevitable.’

The report was prepared at the request of Paul Dewar, member of parliament for Ottawa Centre representing the opposition New Democratic Party. It builds on a 2012 PBO report, which analysed the fiscal impact of federal personnel expenses.

The PBO’s legislative mandate is to ‘provide independent analysis to the Senate and the House of Commons on the state of the nation’s finances, the government’s estimates and trends in the national economy’.

Responding to the report, the NDP said that claims by the Conservative government that agreements with trade unions had led to large pay increases had been revealed to be false.

NDP Treasury spokesman Mathieu Ravignat said that the report showed the culprit for an increasing wage bill was ‘Conservative mismanagement and large-scale hiring’.

He added: ‘The Conservatives like to point the finger at workers, unions, and everyone but themselves for increasing costs – but this report shows the real story.

‘The reality is employees took a pay cut while the Conservatives went on a hiring binge.’

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