Canadian government workers retire two years earlier, make more, and get better pensions than public sector workers on average: Study

Canadian government workers earned an average of 4.8 percent more in wages over their private-sector counterparts in 2024. However, the advantage extends beyond wages, including retiring more than two years earlier on average, and substantially more generous non-wage benefits. The numbers come from The Fraser Institute’s “Comparing Government and Private Sector Compensation in Canada” 2025 edition study, released last Friday. As Canada’s growth remains sluggish during a recent economic downturn, governments face tough choices ahead in managing public employee pay. “As deficits are rising, spending is going up, and it’s ultimately going to put even more pressure on [governments]  when they’re compensating government workers significantly more than…private sector wages and benefits,” Jake Fuss, Fraser Institute director of fiscal studies and one of the paper’s authors, told The Hub. On non-wage benefits, the report highlights an even greater disparity between workers in the public and private sectors: 86.7 percent of government workers have a registered pension versus 21.8 percent in the private sector. For those with pensions, 91.5 percent of public-sector plans are defined-benefit compared to only 40.7 percent in the private sector. Public-sector workers also retire earlier (approximately 2.2 years on average), experience lower job-loss rates (0.6 percent compared to 3.2 percent), and record 6.4 more work days lost for personal reasons (15.7 versus 9.3). Poring over Labour Force Survey data of 683,613 workers, the Fraser Institute controlled for factors including gender, age, education, tenure, job type, firm size, immigration status, industry, occupation, and location. Without these controls, the raw wage gap stood at a starker 26.1 percent. The public sector comprises 21.5 percent of Canada’s total employment (4.5 million workers), with the private sector representing 65.6 percent (13.6 million). Meanwhile,  self-employment accounts for 12.9 (2.7 million) percent of jobs in Canada. The wage premium varied considerably by industry and occupation. Health-care workers in the public sector enjoyed 14.5 percent higher pay than the average private sector worker, while educational professionals and public administration received 16.4 percent and 16.3 percent higher. Gap could be widening between public and private workers’ pay  Since the 2024 data analyzed by the Fraser Institute, it appears the gap is continuing to widen into 2025. Statistics Canada’s income data for the second quarter of 2025 showed the federal government’s public administration enjoyed an annualized salary increase of 2.5 percent. Meanwhile, the average private sector employee’s wage or salary only increased by 0.2 percent during the same time period, the lowest increase since 2016 (excluding the pandemic). “You have kind of what has been often called the golden handcuffs of the public sector, where it’s very hard for them to move and it’s very hard for anyone outside to [get high-paying positions in the public sector],” Charles St-Arnaud, chief economist at Alberta Central, told The Hub recently. The Fraser Institute study included aggregate compensation data, so a breakdown of the three tiers of government wasn’t available, but other reports and data show federal employees certainly fare better in overall average compensation. A late August Parliamentary Budget Officer report projected the average full-time federal employee will receive more than $172,000 in annual compensation by 2030. Implications  The Fraser Institute paper argues these disparities stem from fundamental differences in wage-setting mechanisms, stressing that while political factors largely determine public sector compensation, market forces and profit constraints guide private sector wages. The report suggests governments should improve transparency around total compensation packages and consider mechanisms like wage boards to address these gaps. As Canadian governments face fiscal pressures from demographic shifts and economic uncertainty, understanding the full scope of public-sector compensation advantages becomes increasingly important for policy decisions. The combination of wage premiums, superior pension coverage, earlier retirement ages, enhanced job security, and greater personal leave represents a significant total compensation package that exceeds private-sector norms across virtually all dimensions. “[Increased private-public compensation disparity] could ultimately mean that governments are raising taxes in the future, borrowing more money, and that that has an effect on the economy too,” Fuss explained.