Ontario government workers get better pensions, earn 8 percent more, and retire earlier than private sector employees, report finds

Government workers in Ontario earned nearly eight percent more than private-sector employees in 2024, and enjoyed significantly better benefits including superior pensions and earlier retirement, according to a new report. The Fraser Institute study, released Tuesday, found that government workers in Ontario, spanning federal, provincial and local levels, received a 7.9 percent wage premium over their private-sector counterparts in 2024. Beyond wages, the gap in non-salary compensation between the two sectors proved even more substantial. More than four out of five government workers in Ontario, 82.7 percent, were covered by a registered pension plan, compared to less than one in four private-sector workers at 23.6 percent. Among those with pension coverage, the disparity grew sharper. Nearly 95 percent of government workers enjoyed defined benefit pensions, which guarantee predetermined retirement payments (based on salary and years of service), compared to just 37.8 percent of private-sector workers. These pensions are rare in the private sector, where defined contribution plans (where retirement income depends on investment returns) are more common. The report also documented significant differences in job security and work patterns between the two sectors. Government employees retired an average of 2.2 years earlier than their private-sector counterparts. They also faced substantially lower risk of job loss, with an annual job loss rate of 0.6 percent compared to 3.5 percent in the private sector- a difference of six times. Full-time government workers lost more work time for personal reasons in 2024, an average of 14.4 days, compared to 8.2 days for private-sector employees. However, the report does not specify whether this reflects differences in sick leave policies, personal days, or other factors. Jake Fuss, Fraser Institute director of fiscal studies and one of the paper’s authors, told The Hub there could be justification for public sector workers to get more personal days if they were making less on average, but that the current situation is untenable. “There would perhaps be a trade-off for government workers if they were receiving lower wages than private sector workers but modestly better benefits,” said Fuss. “But that’s not the case. Government sector workers are receiving higher wages and much better benefits, which is not financially sustainable.” The study arrives as provincial and municipal governments across Ontario navigate budget pressures, including the Ontario government running significant deficits, while negotiating collective agreements with public-sector unions. The Financial Accountability Office (FAO) of Ontario determined there were 1.6 million public sector employees in Ontario at the end of 2022 (the last time they released estimates), which made up 25 percent of Ontario’s overall workforce. The office found the public sector was comprised of 654,641 provincial public sector workers, 520,989 workers in provincially supported organizations (such as long-term care homes, universities and child care centres), 225,597 municipal government workers, and 160,073 federal government workers in Ontario. Critics of public-sector compensation have long argued that government workers receive outsized benefits compared to private-sector employees performing similar work. Public-sector unions counter that government jobs require specialized skills and education, and that pension benefits compensate for wages that may lag behind private-sector counterparts. The Fraser Institute analysis controlled for education levels, job tenure and other factors that could justify wage differences, suggesting the public sector perks persists, even when comparing workers with similar qualifications and experience. “Bringing government sector compensation in line with the private sector in Ontario and tackling the bloat in the government sector is critical to improving fiscal responsibility with taxpayer money,” said Fuss. The analysis examined data on individual workers from January to December 2024, adjusting for variables including gender, age, marital status, education, tenure, firm size, job permanence, immigrant status, industry, occupation, and full- or part-time employment status. This article was prepared using NewsBox AI.