Concerned about rising taxes at the local level? Employee compensation in your municipality is probably a factor.
A couple of years ago the Business Council published a report documenting steady and significant increases in local government operating costs in Metro Vancouver’s 20-odd municipalities. Although the picture varied across communities in the region, collectively municipal expenditures in Metro Vancouver soared by 80% over a ten year period. Ongoing inflation and population growth mean that municipalities must spend more to meet the service requirements of local residents and businesses. But we found that even after adjusting for population and inflation, municipal operating costs in the Metro Vancouver area jumped by 32% between 2000 and 2010. This is three times higher than the comparable rate of growth in provincial government operating expenditures over the same period -- despite the fact that the province pays the lion’s share of costs for health care and education.
Our report also showed that the number of employees working in the municipal sector in Metro Vancouver has risen sharply since 2000, far faster than in the provincial public service or in the health care sector. We speculated that a combination of prolific hiring and over-sized wage increases largely explained the pattern of escalating operating costs in Metro’s municipalities, but a detailed review of the drivers of municipal spending was beyond the scope of our analysis at the time.
Now a new report by EY fills this gap and confirms our earlier suspicions. Having worked hard to manage their own costs, provincial government officials have long been troubled by relentlessly rising compensation costs in other parts of the public sector. Based on this, the province commissioned EY to “conduct a review of recent trends in compensation across the BC Public Sector and to assess the current models for setting mandates and management and executive compensation.”
The final document is a comprehensive review of public sector compensation and anyone who is interested in the findings is encouraged to read it. In short, the report concludes that regional & local governments in BC are typically paying higher compensation for comparable jobs and that compensation has increased more quickly in local government. To quote:
There is clear variation in models used for setting compensation across the BC Public Sector. Compared to the Provincial level of Government, Local Government compensation is not coordinated (or regulated); there are no limits other than what Local Governments determine the sector can bear; and there are [fewer] transparency requirements. This has resulted in a lack of alignment in compensation between levels [of government] and also across the Sector.
Some of the findings for the three different employee groups reviewed in the EY report are as follows:
For employees covered by collective agreements, wage increases in the provincial public service have been generally in line with inflation. But collective agreement wage increases at the local government level have significantly outstripped inflation:
- Between 2001 and 2012, what the report refers to as core government employees [provincial public service] received a 19% cumulative wage increase.
- Those in the broader public sector [which covers K-12, healthcare, universities and Crown Corporations] received cumulative wage increases of 24%
- And those fortunate to work in regional & local government enjoyed a 38% pay boost. Inflation over this period was 23%.
For middle management and staff excluded from collective bargaining, pay is higher in local government:
- Compensation for provincial core government middle management employees has been essentially flat since 2009.
- A sample of salary bands indicates that managers in the broader public sector are typically paid more than their peers in the core government, but less than those working in regional & local government.
- Compensation levels in regional & local governments are higher than in core government and the broader public sector. There is no clear alignment between provincial and regional & local government in terms of pay levels for similar middle management and staff jobs.
With a couple of exceptions, compensation for Executive positions tends to be more comparable across the provincial public service, the broader public sector and local government:
- Average executive salaries within core government essentially remained flat from 2009 to 2014.
- Compensation across the most senior leadership roles (e.g., CEO compared to a Deputy Minister) was higher in the broader public sector than in core government. However, the majority of broader public sector organizations roughly “held the line” on executive pay from 2009 to 2011.
- Compensation in the most senior leadership roles (i.e. City Managers and Chief Administrative Officers of larger municipalities vs. Deputy Ministers) was generally on par with the core government, but the City of Vancouver and the Metro Vancouver regional government paid their most senior staff more than the top of the Deputy Minister salary range in the BC public service.
In a world of low inflation and muted wage increases, rapidly-rising compensation costs at the local level of government are a concern. Of course, managing costs must be balanced with the need to attract skilled and motivated individuals into public sector jobs. But given the documented pay discrepancies between local government and other parts of the BC public sector, we believe there is a compelling case for embracing one of the key recommendations in the EY report:
There is a need to drive greater alignment in compensation across the Core, Public Service, Broader Public Sector and Regional & Local Government in order to meet the expectations of the “single taxpayer” that tax dollars be spent consistently and effectively for comparable resources across all areas of Government.