Public pay premium hurts the industry

JOC ARCHIVES

February 11, 2013

View from the Board | Philip Hochstein

The next time your company accountant is cutting a cheque to the taxman - municipal, provincial, or federal - remember that you're helping make sure government workers get paycheques bigger and better than those you can afford to give your own staff.

A recently released report from the Fraser Institute showed just how large the public pay premium is here in B.C.

Right now, getting a paycheque from any level of government in B.C. translates into a 14 per cent premium over someone doing the same job in the private sector.

And that’s just the problem with the regular pay packets.

The Fraser Institute’s report also highlights the other costly benefits subsidized by taxpayers – richer pensions, longer holidays, earlier retirement and rock-solid job security.

With staffing being one of the biggest costs for governments, it means the cheques you cut to the taxman are larger than they have to be.

Philip Hochstein

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View from the Board

Philip Hochstein

It goes further than that.

The pay and benefits premium from the public sector makes competition for key personnel even tougher.

The siren song of higher pay, earlier retirement and bigger benefits is hard to resist – and hard for private companies to match.

So construction companies – like all private employers across the province – are paying higher taxes to help subsidize competition from the public sector for employees.

The system for setting public pay is broken and it has a lack of fairness at its heart.

There is a way to bring back fairness – one that the Independent Contractors and Businesses Association has been promoting for more than a year.

A new law establishing public-private compensation equity would bring equality for government workers and for taxpayers by establishing a market-based model to guide future public sector wage rates and compensation packages. The aim would be bringing public sector wages and benefits in line over time.

Instead of having politicians in charge – and subject to all kinds of public and private pressure – decisions would be handled by an independent, five-member Compensation Equity Board made up of economists, actuaries and accountants. It’s been done before.

In the early 1980s, the Compensation Stabilization Board took the politics out of compensation to get a fair result. Any politician with courage could seize this idea and run. It looks like a political winner.

A survey done by Angus Reid last year showed that four out of five British Columbians thought government employees should be paid the same amount as people doing the same jobs in the private sector.

That seems one of the few things all British Columbians come close to an agreement on.

Construction companies – like all private sector employers – stand to benefit if this kind of fundamental change can be implemented.

It’s up to us to remind government that they need to have the same eye on costs that we do.

Philip Hochstein is the president of the Independent Contractors and Businesses Association of British Columbia. Phil is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to editor@journalofcommerce.com.

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