The Silver Lining Of Public Pay Voyeurism

Commentary, Peter Holle, Public Sector, Uncategorized

Talk show hosts grouse about it. Newspapers give it prominent copy. Are government employees overpaid?

Despite popular perceptions, evidence suggests that top-level individuals in government service are drastically underpaid compared to their private sector counterparts.

Media reports in Manitoba recently profiled the low pay levels of senior provincial government managers. A survey of senior level pay in other public sector organizations, the federal civil service and the City of Winnipeg, would also show dramatic pay gaps with comparable private sector management jobs.

Some applaud low public sector pay, but this position is penny wise and pound foolish. Low pay for managers means that the public service loses its best and brightest employees. Many of those remaining just hang on and plug away, becoming demoralized in the process. Public service, once a calling which garnered respect, turns into a frustrating time-serving exercise. They play the system and hope for early retirement, slowly losing their edge.

Other countries have liberated their managers from this outmoded model. They have curtailed the traditionally excessive control of the most mundane activities in government by central agencies like the Treasury Board and the Civil Service Commission. Not here. More band-aids are applied to the old monolith, as gimmicky substitutes for needed structural reforms. In a political culture where some actually view days off without pay (service cuts) as efficient public policy, the creative impulse flickers dimly indeed.

The latest patch stuck onto the low-performance paradigm involves publicizing public sector pay rates. A new Manitoba law, The Public Sector Compensation Disclosure Act, requires the province to publicize salaries above $50,000. Thus, we recently learned how a relative handful of managers in the crown corporation and hospital sector were making salaries, gosh, over a hundred thousand dollars a year.

But these salaries confirm that top managers in the public sector get paid peanuts, relative to their private sector peers. For example, the president of Manitoba Hydro, one of the largest government organizations in the province, earns just a smidge over $160,000 a year. This is chicken feed, by industry standards. For that, he oversees 3,900 employees, revenues close to a billion dollars and assets of $5.7 billion that generated about $56 million in income.

Compare that with pay packet of the president of Transalta, a much more dynamic share-traded power utility based in Alberta. It performed much better than Manitoba Hydro. It has fewer assets ($4.5 billion) but much higher revenues ($1.4 billion). With fewer assets it made over 3 times the income ($182 million). Its boss made about ten times as much as his counterpart in Manitoba last year.

Why the big difference?

Transalta’s CEO got paid for superior results. Most of his bonus came from increases in the company’s share price. Freed from the limitations of government ownership, it has expanded aggressively around the world while making its operation a benchmark for efficiency and innovation. Its comparatively strong performance is related, with little question, to an incentive system that ties rewards to the organization’s overall performance. Strong management tied to results was rewarded accordingly in the stock market.

Consider the public sector in Manitoba. A top level deputy minister gets paid $112,000 a year, plain embarrassing by private sector standards. For this, some run organizations with budgets in excess of a billion dollars a year and staff levels in the hundreds and thousands.

There is a silver lining in all this. Public pay voyeurism demonstrates how divorced our public sector structures have become from a world which rewards performance and good management with appropriate compensation.

Perhaps the new voyeurism will lead us into a much needed debate. It may nudge Manitoba’s political leadership into replacing the present low-performance model of government – notorious for its high costs, inertia and mediocrity – with a more modern one that embraces the simple but workable concept of pay for performance.

Pay them a million dollars a year. If they can deliver results.