Private sector pay increases significantly higher than in the public sector

February 29 2024

A new report from the Canadian Centre for Policy Alternatives, How the public sector is fighting income inequality, (And why it’s still not enough), shows that, since 2021, pay increases in the private sector have been significantly higher than pay increases in the public sector.

Once inflation is factored in, pay in the private sector has increased by 1.0%. As the report points out, while it isn’t great, it’s a lot better than what workers in the public sector got. Since 2021, public sector wages have dropped by 4.0% in real terms (with inflation factored in).

In the public sector, senior executives get less while front-line workers get more

The report found that once wages were adjusted to ensure the public-to-private comparison involved like-to-like workers, the average wages in the private and public sectors are relatively similar. However, at the occupation level there are some significant differences.

Senior managers are paid 29.0% less in the public sector than in the private sector. But in sectors like social and community services and education that include many front-line workers, earnings are higher in the public sector.

The narrower gap between senior executives and front-line workers in the public sector is a good thing. The income and wealth equality that is fueled by obscenely high salaries for a few people and low pay for everyone else is bad for the economy and society.

Pay practices fairer in public sector but still need work

This narrower gap between higher-paid and lower-paid occupations isn’t the only way that pay practices in the public sector are fairer than in the private sector. While there is still discrimination based on gender and immigration status, the gap is lower than in the private sector.

When comparing what people doing similar work are paid, the report found that in Canada women were paid 8.5% less than men and workers who immigrated to Canada are paid 8.0% less than workers born in Canada. However, the report found that the wage gaps are lower in the public sector than the private sector.

In the private sector the gender pay gap is 10.0%, compared to 5.0% in the public sector. Similarly, the pay gap for people who immigrated to Canada is 8.0% in the private sector, compared to 3.0% in the public sector.

This doesn’t mean the public sector is perfect. There are still disturbing reports of discrimination that need to be addressed. But it does mean that if we’re trying to make our country fairer, we should be looking at what the public sector gets right.