[La version française suit le texte anglais.]
INFLATION, BILL 124 COURT CHALLENGE AND STAFFING SHORTAGES
POSE SIGNIFICANT RISKS TO PROVINCIAL SPENDING ON EMPLOYEE COMPENSATION
TORONTO, September 28, 2022 – Today, the Financial Accountability Office of Ontario (FAO) released a report on Ontario Public Sector employment and compensation. The report provides an overview of public sector employment in Ontario, discusses upcoming collective bargaining negotiations and the application of wage restraint under Bill 124, projects provincial spending on employee compensation over the next five years, and discusses three key risks to this projection: inflation, the court challenge to Bill 124 and staffing shortages.
This report focuses on Ontario Public Sector employees, which totalled 654,641 workers in 2021 (about 10 per cent of total paid workers in Ontario), and consists of 236,584 workers in hospitals, 285,859 workers in school boards, 46,224 workers in colleges, and 85,974 workers in Ontario ministries and agencies.
Over the 10-year period from 2011 to 2021, Ontario Public Sector employment grew by 66,498 workers or 1.1 per cent per year on average, which was less than the average annual growth rate for all public sector workers (1.4 per cent) but higher than the growth rate for private sector workers (0.9 per cent). Over this period, the average annual salary for Ontario Public Sector employees increased by $10,385 (or 1.6 per cent on average annually). This was below the rate of inflation, which averaged 1.8 per cent, and below wage increases for federal government employees (1.8 per cent), employees of other provincially supported organizations (2.7 per cent), and municipal government employees (3.9 per cent).
In 2021, approximately 534,544 Ontario Public Sector workers were part of a labour union (about 82 per cent of all Ontario Public Sector employees). The FAO estimates that 375,273 (70 per cent) of these employees have either completed or are under an existing collective bargaining agreement subject to wage restraint under Bill 124, which limits base salary increases to one per cent per year, for a period of three years. The remaining 159,271 employees (30 per cent) are currently in the process of negotiating, or will soon be negotiating, collective bargaining agreements that will be subject to three years of wage restraint under Bill 124. These consist of 103,437 hospital employees, 33,822 employees of Ontario ministries and agencies, and 22,012 college employees.
The Province’s spending on Ontario Public Sector employee salaries and wages has grown from an estimated $36.3 billion in 2011-12 to $48.2 billion in 2021-22, representing average annual growth of 2.9 per cent. Looking forward, the FAO’s base case projection estimates that spending on Ontario Public Sector employee salaries and wages will reach $56.9 billion by 2026-27, representing an average annual growth rate of 3.4 per cent over the five-year period. The FAO’s base case projection incorporates the impact of Bill 124 wage restraint, which the FAO estimates will save the Province $9.7 billion in salaries and wages costs for both unionized and non-unionized Ontario Public Sector employees from the introduction of Bill 124 in 2019 through to 2026-27.
However, the FAO also identified three notable risks which could lead to higher spending than forecast in the FAO’s base case projection: inflation, the ongoing court challenge to Bill 124 and staffing shortages. Under the assumptions identified in the report, the FAO estimates that elevated inflation could lead to an additional $6.8 billion in provincial spending on Ontario Public Sector employee salaries and wages over the five-year period to 2026-27. Separately, if the court challenge to Bill 124 is successful, then the FAO estimates that the cost to the Province could reach $8.4 billion through to 2026-27, assuming retroactive pay increases for unionized employees and, going forward, the end of wage restraint under Bill 124.
To learn more, read the full report here.
Quick Facts:
- In 2021, there were 6.3 million paid workers in Ontario. Of these employees, the FAO estimates that 4.8 million (75 per cent) worked in the private sector, while 1.6 million (25 per cent) worked in the federal, provincial and municipal public sectors.
- In 2020 and 2021, settlements for base salary increases for Ontario Public Sector unionized employees averaged 1.0 per cent, due to the application of Bill 124. The 1.0 per cent rate of increase for Ontario Public Sector employees was less than settlements in the federal government (2.0 per cent), municipal government (1.6 per cent) and the private sector (1.8 per cent).
- From 2021-22 to 2023-24, under the FAO’s base case projection, average salary growth for Ontario Public Sector employees is projected to significantly lag behind inflation, resulting in a cumulative 11.3 per cent decline in real wages over three years.
- Vacancy rates, or the number of vacant jobs as a share of total jobs (occupied and vacant), have risen across most public and private sector job categories. In the Ontario Public Sector, this challenge is most pronounced in the health sector, where the vacancy rate has nearly doubled since 2019.
- The Province has implemented a number of measures to fill vacant positions and meet new staffing needs; however, the Province may still need to increase wages beyond the assumptions in the FAO’s base case projection to ensure sufficient staffing to maintain existing public services and meet program expansion commitments.
About the FAO
Under the Financial Accountability Officer Act, 2013, the Officer provides independent analysis on the state of the Province’s finances, trends in the provincial economy, and related matters important to the Legislative Assembly of Ontario. Visit our website and follow us on Twitter and LinkedIn.
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For further information, please contact:
Jessica Martin l 647.527.2385 l jmartin@fao-on.org l fao-on.org