Smith government should be cautious in wage negotiations with provincial employees

With a temporary windfall in resource revenue and large collective agreements (including with the Alberta Union of Provincial Employees) due for negotiations next year, the new Smith government will feel pressure to increase government employee wages.

But if the government wants to put the province’s finances on a sustainable footing, it must carefully manage the wages and salaries of government employees. This will be no easy task. Given that government wages and salaries generally consume about half of all program spending for all provinces, the results of wage disputes can play a big role in determining provincial fiscal health.

So how should the government approach government-sector wage negotiations? These debates are always fraught with emotion. After all, peoples’ wages are at stake. But it’s important for the Alberta government to step back and take a dispassionate look at the numbers to better understand how compensation levels in the government sector compare to private-sector workers.

One point to consider in determining the appropriate levels for government compensation is to compare government-sector employees to similar workers in the private sector. According to a recent analysis published by the Fraser Institute, government employees (federal, provincial and local) in Alberta benefit from advantages across several different dimensions of total compensation. The study controls for factors such as gender, age, education, tenure and industry to help generate an “apples to apples” comparison so government workers are compared to similar private-sector workers.

Let’s first look at the largest component of overall compensation—wages. The analysis finds that government workers across Alberta enjoyed a 5.6 per cent wage premium, on average, relative to comparable private-sector workers in 2021 (the latest year of available comparable data).

While that may not seem like much, the government sector enjoys several other non-wage benefits. Indeed, the available data suggests 70.7 per cent of government workers in Alberta are covered by registered pension plans compared to 19.2 per cent of private-sector workers. In addition, government workers generally retire earlier than those in the private sector with the average gap at 1.5 years.

In 2021, job security also appears to have been better in the government sector in Alberta. In fact, only 1.8 per cent of those employed in the government sector experienced job loss, far lower than the private-sector equivalent (5.0 per cent). Finally, fulltime workers in the government sector took more time off in 2021 for personal reasons (14.4 days on average) than similar private-sector counterparts (8.9 days) in Alberta.

Of course, unions will point to the inflation since 2021 when the data we’ve analyzed was collected. However, inflation, which will impact both the government and private sector, is cooling from its peak, weakening the case for large increases in future years and strengthening the case for restraint from governments to help shrink the gap between government and private-sector compensation.

The Smith government must be careful to protect taxpayers from rapid growth in government employee wages. While paying competitive government employee wages is important to ensure efficient and high-quality public services, the data suggest that government workers across Alberta already enjoy significant non-wage benefits and a wage premium compared to their private-sector counterparts.