Jacob Gamache never thought he’d end up in the public sector. “There is a stereotype that the government of Canada is very slow,” he says. Seeking a faster-paced, more competitive environment, Gamache used his master’s degree in sports administration to land a job in 2005 with a private, non-profit organization in Ottawa. Though officially the manager of communications and events, Gamache, now 28, says he was somewhat of a “jack of all trades,” creating pamphlets, updating the website, and offering tech support to his co-workers. “I got an opportunity to learn a lot,” he says of the job, which required plenty of overtime. “You come in in the morning at 7:30 or eight, and you’re not too sure when you’ll go home at night. When you do, the laptop comes with you. And the cellphone.”
By the fall of 2007, Gamache was ready for “something a bit more stable.” On a friend’s suggestion, he applied to the Canadian Institutes of Health Research (CIHR), a federal funding agency—and one of Canada’s Top 100 Employers this year. He took a job with the agency in May 2008 and hasn’t looked back. On top of solid benefits, an enviable pension and a higher salary, he says there’s plenty of opportunity to advance. (Despite his misgivings about the limits of bureaucracy, he’s already been promoted to project officer in a little more than a year.) What’s more: while the recent economic downturn has seen hundreds of thousands of Canadians lose their jobs, he’s had “no worries” about holding on to his. When asked whether he would consider returning to the private sector, Gamache says, “It would be a very tough sell.”
Gamache is not the only one discovering that a career in the civil service isn’t so bad after all. In 2000, when Richard Yerema, managing editor of Mediacorp, first compiled Canada’s Top 100 Employers, “the focus was still on big-bonus share options,” he says. “The private sector had the flashy and splashy stuff that caught everybody’s attention.” Today, following what could be the worst economic crisis since the Great Depression, “the shine is off,” he says. The hallmarks of public-sector employment—job security, benefits and a pension safe from the market fluctuations that decimated nest eggs the world over—are all the rage. Add in wage premiums, which many public sector workers are now said to enjoy over their private sector counterparts, and it looks like government has become a formidable competitor in the war for talent. Could Gamache’s conversion from company man to civil servant be a harbinger of things to come? Many private-sector companies aren’t waiting to find out. Instead, they’re trying to capitalize on their unique strengths to ensure that their best and brightest have every incentive to stay put.
That better benefits are generally found in the public sector is nothing new. Compared to private-sector offerings, says Doug Hyatt, a labour economist at the University of Toronto’s Rotman School of Management, “the gap has always been there and it’s always been substantial.” Thanks to hard-fought collective bargaining agreements, most government workers enjoy a package that looks something like what’s in place at CIHR: maternity top-up benefits equivalent to 93 per cent of salary for 52 weeks (35 weeks for new dads), a flexible health plan that includes paid coverage for retired employees, and a defined benefit pension plan, which often pays out to the tune of 60 or 70 per cent of final salary. By contrast, private companies have historically offered less when it comes to health benefits, often skipping or skimping on dental and extended coverage, and are slower to adopt maternity (and paternity) top-ups. When businesses provide pensions, they are commonly of the defined contribution variety, where payouts depend on how much is invested and how well those investments perform. When private companies do offer defined benefit plans, says Toronto-based pension lawyer James Pierlot, they “rarely pay out benefits [as] generous” as those offered by government.
Don Drummond, senior vice-president and chief economist at TD Bank Financial Group, says that between 1995 and 2005, jobs without benefits grew five times as fast as those with benefits. Nowhere is the divide more obvious, he says, than when it comes to pensions. Many companies have grown reluctant to assume the risk of traditional pensions, which they are required to back even if markets fluctuate or interest rates drop. (These plans have wreaked havoc on the finances of the Big Three automakers, which have had to beg for government bailouts in order to fulfill their obligations to employees.) While 80 per cent of public sector employees enjoy the traditional defined benefit plan, the proportion of workers in the private sector with any employee-sponsored plan has sunk to 23 per cent. “We’re almost moving to a point,” says Drummond, “where civil servants and politicians will be the only people with defined benefit plans.”
That might not be as big of a deal if private-sector workers were allowed to sock more away. But as Pierlot detailed in a report for the C.D. Howe Institute last year, under the current tax laws workers with defined contribution plans and RSPs can set aside a maximum of 18 per cent of their annual income. Meanwhile, what government workers and their employers put aside can potentially add up to 30 per cent of yearly pay. “You’re ending up with two classes of workers,” says Drummond, “public sector and private sector.”
Though top CEOs still bring home the richest paycheques, for everyone else, say some experts, government may be where it’s at. After Drummond left the Department of Finance in 2000 to join TD, he says he “got calls from so many former colleagues asking me to help them get a big, fat job in Toronto.” But even back then, he says, “there were very few jobs that actually paid what they were making in Ottawa, never mind getting them a big, fat one.”
According to the Canadian Federation of Independent Business, the salary divide has since expanded. In a report published last year, CFIB found that in 2006, federal government employees earned an average of 17.3 per cent more than their private sector counterparts, up from 15.1 per cent in 2000. Those numbers, however, have been hotly contested—unions point to CFIB’s vested interest and methodology (primarily low- to mid-range workers are included) as evidence of a skew. Ottawa has yet to weigh in. The spokesman for the Treasury Board of Canada Secretariat told Maclean’s that the department did not have enough time to comment on CFIB’s data prior to publication. But he cites as proof of fiscal responsibility recent legislation limiting annual wage increases for federal government employees to 1.5 per cent until 2011-2012. When determining salaries, he says, “policy is for compensation to be competitive with, but not lead, that provided for similar work in relevant labour markets.”
Of course, part of the reason the public sector has been looking especially sweet these days is that, unlike the private sector, government finances are not as directly linked to the economy. The most significant constraint on the public sector, says Hyatt, is political. While the effect of public anger over an unbalanced budget can also “be very strong,” he says, “it may come with a bit of a lag.” And during the recent economic meltdown, civil servants have fared pretty well—thanks, at least in part, to the strength of their collective bargaining power. In the wake of the crash, says Benjamin Tal, senior economist at CIBC World Markets, “we’re seeing the diminishing power of private sector unions, and we haven’t seen any of this diminishing power in the public sector.” Whereas auto workers were forced to endure layoffs and make significant pension concessions so their companies could stay in business, Toronto city workers walked the picket line for more than a month, demanding a 12 per cent raise over three years and a continuation of a controversial sick-day bank that allowed some members to cash in for up to six months pay upon retirement. They returned with their heads held high: members won a 5.6 per cent raise and the ability to cash in unused sick days or save them for later—despite the $450-million price tag.
