Public servants' costly pay-packet hat trick

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The average government employee makes more money, has better pension benefits and takes more sick time than the average person working outside of government.

Talk about a hat trick.

But before you read any of the following numbers about how the average taxpayer is getting a raw deal, know that it won't do you any good to get fed up with your neighbour the nurse or your uncle the paper pusher with the federal government.

It's not their fault.

The people ultimately responsible for the huge pay and benefit gap are our politicians. After all, they are the ones who continually approve the overly generous labour agreements with public-sector unions.

Today in Canada, the average government employee earns $1,040 per week, while the average person working outside government earns just $807. Should the two amounts be the same? Perhaps not.

But there are many well-documented cases where people doing work for government earn significantly more per hour than people doing similar work for local businesses.

It can be a Vancouver clerk working in a government liquor store making $28 per hour while a clerk in the grocery store next door makes just $11 per hour or a City of Winnipeg lifeguard making double what a YMCA lifeguard makes down the street.

However, a bigger story exists on the pension side of the equation.

Consider that Statistics Canada data show 87.1 per cent of government employees have workplace pensions, up from 75.5 per cent in 1977. Outside of government, the numbers have dropped to 24.4 per cent from 35.2 per cent over the same period.

Further, 81.9 per cent of government employees have the richest kind of pension -- a defined-benefit plan. That is up from 74.8 per cent in 1977.

At the same time, the private sector reduced the number of people in defined-benefit plans over the same period -- down to just 12.7 per cent from 31.4 per cent.

Why the reduction? Probably because defined-benefit plans are often very unsustainable and have proven to be extremely risky as they guarantee employees a defined annual payout for life, no matter how much money is in the fund or how long they live.

A 2010 study by the Certified General Accountants of Canada (CGA-Canada) showed that in 2007 -- prior to the financial meltdown -- 71 per cent of all private-sector defined-benefit pension plans were in a "solvency deficit." That number spiked to 92 per cent by the end of 2008.

As you can see, not only do such funds require guessing as to how long employees will live, they are also left vulnerable to dips in the economy. For instance, when the markets tanked like they did in 2008, many of those defined-benefit pension plans lost large sums of money. That means employers will have to contribute more money; on top of all the funds they have already put in.

In the case of shortfalls in government employee plans, taxpayers, most of whom have no pension plan, are now being asked to make even more contributions to the plans. In the case of the federal government's employee plan, the shortfall between what the fund has and what it has to pay out is estimated to be a staggering $227 billion.

Looking at the big picture, the average government worker saw $8,734 on average go into their pension funds in 2011 while everyone else saw just $4,091 deposited in their workplace pension plan or RRSPs.

Union bosses for government workers inevitably defend the status quo and suggest that instead of bringing their pension benefits down to Earth, everyone else needs an increase.

Yet if governments were to somehow provide private-sector workers with the same golden benefits that government employees enjoy, they would need an extra $64 billion. That's equivalent to a 51 per cent increase to federal personal income taxes or a 196 per cent hike to federal corporate income taxes. It's just not realistic.

Finally, there is the little matter of sick leave.

A recent federal government report noted the average federal government worker took 12 sick days last year; 18 if you include long-term illness. Yet Statistics Canada figures show the average employee in Canada took just 7.7 days.

It's time for taxpayers to demand politicians do something about these three issues. First, politicians need to stop adding new employees to defined-benefit pension plans and choose less risky alternatives -- such as defined-contribution plans. Second, they need to bring wages down to levels that people outside of government receive for doing similar work. And, finally, sick leave benefits should be scaled back to the average provided in the private sector.

The savings from all these measures should be used to get the nation's debt under control, put aside a bit of savings for a rainy day and reduce taxes for all.

Now there's a hat trick worth cheering for.

Colin Craig is the Prairie director of the Canadian Taxpayers Federation.

Republished from the Winnipeg Free Press print edition August 31, 2012 A12