MONTREAL, March 12, 2015 /CNW Telbec/ - While the government and the public sector unions are negotiating the renewal of collective agreements, the figures discussed in the public debate fail to include an important part of the picture: the annual pay grade progression of employees. "When you take these pay grades into account, the government's offer no longer represents the 'wage freeze' so decried by union groups, but rather an increase for a good portion of public sector employees," explains Youri Chassin, author of a Viewpoint published today by the MEI.
Pay grades are the different salary levels associated with an employee's seniority. With each move from one pay grade to the next, which can happen every year, wages go up by a certain percentage. Therefore, even in the case of a "wage freeze," an employee can see his remuneration increase year after year by progressing up the pay scale.
In order to illustrate the effect of this progression on wages, the author uses the hypothetical example of Mark, a teacher in his thirties with six years of experience. Taking into account his advancement up the pay scale, his salary of $58,991 would climb by $16,598 over the next five years. This is with the government offering a pay scale "freeze" for the next two years followed by an indexation of 1% for the three subsequent years.
If instead the unions' counter-offer were accepted as is (increases of 3% per year, combined with a 5.5% adjustment for the year 2015), Mark's salary would then grow by $29,715 after five years.
Whatever the outcome of the negotiations, this salary increase will be, for a good number of public sector employees like Mark, much higher than the average raises received by employees in the private sector. By applying this much more modest increase to Mark's salary, we would obtain an increase of approximately $8,406 for the five years of the collective agreement. In other words, the increase proposed by the government—considered a "wage freeze"—is for a worker like Mark nearly twice as high as the anticipated scenario for the average private sector worker.
"It is misleading to talk about a wage freeze without mentioning that a good portion of employees will climb up the pay scale, and will receive sizable wage increases over the next five years," maintains Youri Chassin. "Many private sector workers would be thrilled to have this kind of freeze imposed on them!"
The Viewpoint entitled "Public Sector Pay Grades" was prepared by Youri Chassin, Economist and Research Director at the MEI, in collaboration with Alexandre Moreau, Public Policy Analyst. This publication is available on our website.
The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
SOURCE Montreal Economic Institute
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