Toronto Public Sector - Out of Control Spending

Many blame the public sector in Toronto for out of control spending, high salaries, high taxes, and government waste. There are multiple problems to solve such as infrastructure in need of repairs, need of more social services, increased expenditures, growing gap between the rich and poor, and changing demographic makeup.

Public Employees Earning More Than Private Ones

A recent report by the Fraser Institute reveals that municipal, provincial, and federal employees in Ontario are paid 10.6 percent more than private sector employees. They also enjoy non-wage benefits such as registered pension plans, and the majority of employees or close to 95 percent are covered. In comparison, only 41.5 percent of employees in the private sector have a registered pension plan. Public sector servants in Ontario also have a greater job security and are more likely to be able to take more days off work. On average, public employees retire at the age of 61.9 while private sector workers retire at the age of 63.7. The gap is even higher in provinces such as Quebec (3 years) and Prince Edward Island (3.3 years) but lower in Alberta (1.7 years). Public servants retire earlier than private sector employees, which means that they receive a retirement pension over a longer period, which money, however, is funded by taxpayers.

Government Wasting Money

In a move to cut expenses, the Progressive Conservative government announced plans to reduce the city council’s seats from 47 to 25. This would result in substantial savings of $25 million and would increase efficiency at the same time. Urban Policy Lab director Gabriel Eidelman disagrees, pointing out that performance is not related to size. In his view, better delegation of work will result in improved performance. It becomes clear now that the smaller council costs more than a larger-size council. The problem is that the operating budget increased substantially in an effort to manage larger-size wards. Each councilor was allocated $482,000 to spend on staff compared to $241,000 spent by councilors in the 47-seat council. The operating budget of the smaller council is much higher than projected, wasting taxpayers’ money.

In 2019, Toronto’s council voted to increase property taxes by 3.58 percent in an effort to make up for a $79 million deficit. While the smaller council actually spends more, taxpayers foot the bill by paying higher utility bills. Households pay more toward property taxes and for water (3 percent) and garbage removal (2.2 percent). The tax hike can be explained with the fact that the mix of revenue sources has not changed, including sources such as fees, permits, and licenses, federal and provincial grants to finance infrastructure improvements, land transfer tax, user charges, and property taxes. Given the larger operating budget of Toronto’s council, the tax hikes aim to fill a hole.

The government of Ontario is not doing better when it comes to spending taxpayers’ money. A recent report by the Financial Accountability Officer reveals that government spending on corporate welfare amounts to $1 billion a year. Wasteful spending is not limited to corporate welfare, however. The government invested $1.1 billion in a project to build gas plants that was never implemented. The government also approved a provincial pension plan that was never implemented and incurred some $70 million in costs.

High Taxes

In addition to lower earnings for private employees, high income taxes are another problem in Toronto. While the Trump administration voted in favor of considerable personal and corporate income tax reductions in the U.S, Ontario’s rate jumped to 20.53 percent, up from 17.41 percent (applicable to incomes above $220,000). This makes Toronto a less attractive location for both investors and skilled professionals. In fact, Ontario has the second highest tax rate after Nova Scotia compared to 50 U.S. states and 10 Canadian provinces. The combined tax rate is 54 percent in Nova Scotia and 53.33 percent in Ontario.

The public sector in Toronto faces multiple problems such as high salaries of public servants and wasteful spending. New tax hikes have been approved instead of devising policies to better delegate tasks and discussing public sector pay cuts.

Visit for more insights on how to set finalcial goals during COVID

The Trouble with Public Sector Unions in Canada

The main argument against public sector unions in Canada is that collective bargaining should not be allowed in the public realm. But there is more to it. As an unwritten rule, public sector employees are considered to be working in a less challenging environment, enjoy a relative job security, but are paid less than those working for private companies. The problem is that they are not only entitled to early retirement and large pensions but are paid high wages that private sector employees pay as taxpayers. The salaries of union members are set through collective bargaining which is one of the main issues that Canadians have with public sector unions.

Unions, Benefits for Members, and Transfer of Resources

While public sector unions in Canada are plagued with problems, all unions offer benefits such as better workplace safety, ability to minimize favoritism at work, and assurance that employees have a voice in the decision-making process. Unions are often seen as important outlets for advocacy at different levels of government. At the same time, strong public sector unions that have a voice in decision-making may actually have the power to influence policy making to the extent of policies being crafted to the disadvantage of the rest of society. Many believe that this results in a huge transfer of resources from the private sector to the public sector.

Salary Levels of Public and Private Sector Employees

Multiple studies have shown that the private sector maintains lower wage levels compared to the public sector. A study conducted by the Canadian Federation of Independent Business found that public employees not only enjoy higher wages but also receive significant non-wage benefits. They are paid between 8 and 17 percent more than employees working for private companies. When taking into account shorter working hours and paid benefits, the authors conclude that they are paid 30 percent more than private sector employees. In an era of population ageing, there are fewer tax payers to support high wages for federal employees and retirees, especially in light of the fact that technology has replaced many traditional private sector jobs. Many also believe that high debt loads and overspending are the result of paying high salaries to police officers, firefighters, teachers, politicians, and civil servants, many of whom are union members. What is more, pension plans for public servants are underfunded, and taxpayers will be the ones to foot the bill.

Union Membership

While union membership is in decline across all of Canada, only 16 percent of employees in the private sector are union members compared to over 70 percent of employees at the federal and provincial level. Provinces such as Saskatchewan and Manitoba have the highest number of union members and public employees while Alberta has the lowest. This makes many to believe that public sector unions are too powerful. Sixty present of Canadians in a survey shared that unions have too much power. Nearly half of respondents /46 percent/ also believe that public sector strikes should not be part of collective bargaining. Public sector unions, however, including engineers, academics, teachers, and nurses have struck throughout the years. Many consider that striking is virtually the same as holding the public hostage. Public employees are responsible for providing essential services that are important for the security, safety, health, and wellbeing of all people. Giving unions too much power and the right to strike also gives them power to withhold essential services such as healthcare and education.