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Nice Pay ... If You Can Get It

by Patrick Basham

A decade ago, 9 in 10 Canadians told a Gallup Poll they didn't know what "pay equity" meant. Today, most probably still don't. But they're about to find out what pay equity costs.

In a deeply misguided attempt to eliminate alleged wage disparities between traditionally female- and male-dominated occupations, the Canadian Human Rights Tribunal's July 29 ruling in favour of equal pay for work of equal value affects almost 200,000 current and former federal public servants. This decision will cost taxpayers in excess of $7 billion in compensatory back pay, for an average pay-out of $35,000 per clerical worker. Tribunal panel chair Donna Gillis calls the case "an issue of social justice" and it's being celebrated as such by victorious public service union members.

Overlooked, however, is the confused logic that forms the basis of such decision-making. The ruling ignores both the lack of an economic structure to determine public sector wages and the impossibility of fairly and efficiently performing any alternative kind of pay level calculation.

For there's a critical, though rarely articulated, distinction between equal pay for equal work and equal pay for work of equal value (so-called "pay equity"). From time to time the former, while a simple concept, may prove problematic; the latter is simply unattainable.

In most cases, determining equal pay for equal work is a relatively straightforward matter. On occasion, however, the specific dynamics of the labour market prove irresistible. It has proven, for example, far harder to recruit female guards in female penitentiaries than it has to recruit male guards in male penitentiaries. Therefore, respective prison authorities may pay female guards more than male guards to perform the same tasks simply because the supply of willing female gatekeepers is smaller.

The true value of a job is determined by whatever an employer is willing to pay and an employee is willing to accept. By contrast, the concept of the relative value of a job vis-à-vis another job is far trickier.

Putting aside all reasonable reservations concerning either the ethicality or efficacy of such an approach to wage setting, the methodology employed in these work of equal value calculations is, to put it charitably, hotly disputed. As labour economist Morley Gunderson has written, "While comparisons across quite dissimilar jobs are possible in theory ... the results of evaluation procedures become more tenuous the more dissimilar the jobs."

Unsurprisingly, then, the federal Treasury Board and the Public Service Alliance of Canada spent 6 years arguing before the Canadian Human Rights Tribunal as to the respective value of each public service job. Under the highly arbitrary "point system" eventually employed by the tribunal, public service jobs were classified according to four official categories: skill, effort, responsibility, and working conditions. Using these criteria, each job was assigned a certain number of points purportedly indicating the value of the job. By this method, for example, a typist was magically judged to be of equal value to a Canadian Forces sailor.

Given the illogic of such wage-setting-by-bureaucratic-infighting, the marketplace remains the only practical arbiter of what is equal value. Competition between alternative suppliers and demanders of labour should be the sole determining variable in what jobs are worth. After all, a fledgling novelist may expend as much, if not more, time and effort than does John Le Carré producing a manuscript, but is the former's work of equal value to the latter's? Only the publishing marketplace is in a position to determine that. Therefore, the only appropriate way to sort out public sector pay issues is through the use of comparability to jobs in the private sector. As is the case in the UK, public sector wages should be set and adjusted on the basis of comparability with private sector wage levels. In this manner, the public service will maintain and recruit employees of comparable skill and experience to their private sector counterparts.

Beyond this comparability wage-setting role, there's no logical role for the government to internally and arbitrarily determine that certain jobs are or are not of equal value to others. Such action would only be appropriate if public sector salaries and wages diverged widely from those in the private sector.

Even under such conditions it would be necessary to take into account that the conditions of public sector employment aren't the same as the conditions of private sector employment— greater job tenure and more extensive benefits are only two of the advantages of public sector employment.

In the coming months, this decision may have a domino-like effect through federally-regulated employers, such as Canada Post, Bell Canada, Air Canada, as well as other Crown corporations, airlines, and banks, many of whom are already being subject to pay equity litigation.

Increasingly, then, $7 billion is starting to look less like compensation and more like a down-payment on another unnecessary and intrusive piece of social engineering.

Patrick Basham is The Fraser Institute's Director of the Social Affairs Centre. He is completing his Ph.D. in Political Science from Cambridge University.

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