Canada’s public sector sets a pay equality standard, but further progress needed

David Macdonald: Public sector cuts discriminatory pay gaps in halfThe gender and immigration pay gap is narrower in Canada’s public sector, which is good news if we want to reduce income inequality across the country.

However, the same is not true for the private sector, and that should change.

By public sector, we mean jobs in government public administration, protective services, crown corporations and publicly funded health and education: Think bureaucrats, first responders, teachers and health care professionals. And again, it turns out that public sector pay compensates women and new Canadians more fairly than the private sector, which pays men and top executives way more at the top of the income scale.

To be clear, despite this good news, wage discrimination is alive and well in Canada in 2023.

In 2023, women were paid 8.5 percent less than men, even after adjusting for variables including age, marital status, education, tenure, job permanence, full/part-time, workplace size, industry, occupation, immigration, and province.

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But the gender wage gap is even bigger in the private sector: Women’s hourly pay is 10 percent less than men’s in the private sector. The private sector also paid landed immigrants eight percent less than Canadian-born workers. This is even after making sure we’re comparing workers with similar educations, age, tenure, and so on.

The public sector cuts those discriminatory pay gaps in half—women get paid five percent less than comparable men, and new Canadians get paid five percent less than Canadian-born workers. This is clearly better, but plenty of work still needs to be done.

How does the public sector manage this more equal pay? It does so in two ways: by bringing up the bottom and constraining the top.

Women get paid a little over four percent more in the public sector, while men actually get paid less, adjusting for other factors. This is due to the public sector achieving pay equity for women in the lower middle class, making around $20 an hour, where women are paid the same as similarly qualified men – a rarity in Canada.

However, after other factors are adjusted for, a quarter of the highest-paid workers get more in the private sector, and this is true regardless of gender. This illustrates the public sector’s ability to constrain high-end wages for those making over $100,000 a year.

When it comes to professions, senior managers are paid 29 percent more in the private sector. The extreme pay packages of $15 million a year seen on Bay Street are entirely unheard of in the public sector. Medical professionals – think dentists, doctors, and pharmacists – are paid more in the private sector. Cost containment of public Medicare is likely constraining their pay in the public sector.

On the other hand, educators in primary and secondary schools, universities, and colleges are paid more in the public sector. The same goes for social workers and counsellorsoccupations often employing more women.

Capping the extreme pay for dentists, doctors, and execs – and using this to produce less wage discrimination for equally qualified women and new Canadians – reduces wage inequality in the public sector.

While there is still work to be done to eliminate the gender pay gap, the public sector is further along than the private sector, where the pay gap is twice as big.

The private sector should pay its workers comparable to the public sector. The key is paying people more fairly, as equal pay legislation applies to both public and private employers. It’s about lifting equally qualified women and new Canadians up while also constraining extreme pay for top executives to create a fairer, far less discriminatory pay grid.

David Macdonald is a senior economist at the Canadian Centre for Policy Alternatives.

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