As the Conservative government lops thousands of jobs off the payroll, the cost of the average federal employee will continue to climb and could hit nearly $130,000 by 2015, says a report by Canada’s budget watchdog.
On Tuesday, Parliamentary Budget Officer Kevin Page released a major report into how the government spends $43 billion on pay, pension and benefits to federal employees. The report estimates the average public servant is costing $114,000 with pensions and benefits rolled in. The public service now employs about 375,500 people.
The average Canadian is paying $1,267 a year for the public service that delivers federal programs and services.
But the PBO estimates that per employee cost could reach between $121,000 and $129,800 by 2015 as the government continues to cut the size of the public service. The report noted that if historical growth rate levels in compensation continue unabated, the cost of an employee could hit $132,400.
Personnel costs are the government’s single biggest operating cost. It represents 18 per cent of all program expenses and 38 per cent of direct program spending that the Conservatives have been trying to reduce to rein in costs.
The total was about $23 billion a decade ago, before the public service went on an unprecedented growth spurt.
The cost and trends driving the various pieces of the total compensation bill in the public service is a black hole that mystifies most bureaucrats and Parliament doesn’t have a handle on. Page argues compensation spending needs more “transparency” and the government should be providing reports to Parliament on the costs and trends.
The size of the public service has see-sawed over the past 22 years, reaching a low of 288,500 employees after the Liberals’ massive downsizing in the mid-1990s. Then, the bureaucracy rebounded and grew even larger throughout the 2000s. That’s when personnel costs started to rise and grew steadily between 1999 and 2012, reversing the impact of a decade of restraint between 1990 and 1999.
For years, public service compensation lagged the private sector, particularly between 1990 and 2004, but it has picked up speed and outpaced the business sector, the consumer price index and the growth in all other levels of government. The turning point was in 2002-03 when the total cost of employees in the federal government outstripped the private sector.
The Conservatives have taken aim at mounting compensation in their spending cuts. The government is wiping 19,200 jobs off the payroll; reformed pensions so employees shoulder more of the costs; capped wage increases; frozen operating budgets to rein in salaries; and eliminated severance payments for public servants who voluntarily leave or retire.
The report says the job cuts will slow down the increase in overall compensation, but without more details on the nature of the reductions it is difficult to determine the impact of jobs cuts. Page has turned to the courts to help get the information on the $5.2 billion in spending cuts he asked departments for shortly after the 2012 budget in March.
The last major compensation study was ordered as part of the Martin government’s drive to clean up public management and improve transparency and accountability a decade ago.
The massive study was led by James Lahey who recommended a major overhaul to improve the management of compensation, including regular reports to Parliament. The report was kept secret as a cabinet confidence and wasn’t released until the Conservatives came to power. None of the major recommendations was implemented.
Lahey’s 2003 study found the average public servant in the core public service and separate agencies, such as the Canada Revenue Agency, earned about $53,300 in salary and closer to $73,400 when all benefits were rolled in.