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Public Sector Wages
How to set a fair wage
Recently the federal government announced it would return about $20B in funding to Canada’s health care system. Most of this is likely to go to increasing the wages of the various professionals in the health care system. Doctors in New Brunswick want more; paramedics in Calgary want more; everyone in the health system wants more. It is hard to know if their demands or reasonable or not.
In the private sector, wages and salaries are set mostly by the law of supply and demand. If an employer wants a certain kind of worker, the employer has to pay a certain price for that worker. Otherwise that worker can go somewhere else to get the going rate.
Private employers also recognize that if they pay too much, market forces — namely the employer’s products and services becoming too expensive — will eventually lower the wage of these workers. These forces are part of the magic of a working free market.
When we look at the public sector, however, free market principles apply little to establish a wage equilibrium for an occupation. For example, a nurse cannot offer her talents and training to the private sector, where there are few positions available for nurses. Instead, we have come to some kind of understanding of what a nurse or any other public sector position is worth — and usually public sector…
