Gender pay gap double in private vs public sector, report says. Why?

The gender pay gap for female employees in Canada’s private sector is double that in the public sector, which is doing a better job of narrowing the wage inequalities, according to a report published Wednesday.

The Canadian Centre for Policy Alternatives (CCPA) analyzed hourly pay rates in 2023 and to make a fair comparison adjusted these for different factors like age, education, occupation, industry, years on the job, full-time or part-time and province. Data from Statistics Canada’s Labour Force Survey was used for this report.

The report found that men make almost 10 per cent more per hour on average than women in the private sector. By comparison, the hourly gender pay gap in the public sector is five per cent.

The private sector is also lagging behind in narrowing the pay gap for immigrants, the report found. Immigrants who came to Canada more than 10 years ago are paid nearly eight per cent less in hourly wages than non-immigrants.

In the public sector, the immigration pay gap is smaller, with immigrants earning five per cent less than non-immigrants.

“What’s clear even in 2023 is that wage discrimination is alive and well in Canada, but that wage discrimination is a lot smaller in the public sector, even though it still exists,” said David Macdonald, senior economist with CCPA and the report author.

In the lower-middle income level specifically, the public sector has managed to completely eliminate “discriminatory” gender pay gaps, but wage parity is not seen across the entirety of the income spectrum, Macdonald said in an interview with Global News.

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While the pay gap in Canada has been slowly narrowing over the years, overall, male employees continue to earn more than their female counterparts, according to Statistics Canada.

On average, women workers earn 11.1 per cent less per hour than men, the most recent StatCan data from 2021 showed.

Mira Kopanarov, chief storytelling officer of Mirable Marketing, a Toronto-based company, said even though there might be some progress on gender pay gaps, she is not seeing it necessarily affecting women on a day-to-day basis.

Kopanarov told Global News pay equality may be happening in entry-level jobs, but the gap is still widening as we go higher up the corporate ladder, particularly in private businesses.

“So, there’s less women in managerial positions, there’s less women in executive positions and I am pretty sure this will correlate with the pay,” she said.

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The CCPA report also found that women employees in the private sector often face what’s called a small “motherhood penalty,” where their pay drops when they have children. That discrimination was not seen in the public sector.

Women with children face a decrease in potential earnings due to “deeply entrenched gender stereotypes,” the report said.

“Women with children make less than those without children because they are treated in the workplace as less competent and having fewer loyalties to their job while the opposite happens to men,” the report said.

There is also often a massive “fatherhood premium” in the private sector, where men who have children get paid 15 per cent more in hourly wages than those men who don’t have kids. The “fatherhood premium” also exists in the public sector but is smaller at seven per cent.

“Men make more once they have children because they are treated by employers as more competent as a result of fatherhood,” the report said.

There are several explanations as to why Canada’s public sector, which includes all government-controlled entities, is performing better than the private sector in narrowing gender pay gaps.

One of them is an effect of what is called “wage compression,” Macdonald said.

Simply put, that means the public sector is bringing up the bottom and pulling down the top. It does this by lifting pay for lower-wage earners and constraining it for high-wage earners.

For example, women working in the public sector who earn around $20 an hour are paid the same as equally qualified men.

“It’s a very unusual circumstance for women to be paid the same as men in Canada and we see that in the public sector in that wage range of $20 to $30 an hour,” Macdonald said.

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Meanwhile, the public sector tends to reduce wages at the top for those making $55 an hour or $100,000 a year, meaning both men and women at this higher income level are paid less than their counterparts in the private sector. But the constraint is “slightly larger for men,” according to the report.

“The private sector pays senior executives much more than the public sector,” Macdonald said. “Think of Bay Street executives making $15 million a year on average. That’s just not something you see in the public sector.”

Another CCPA report from January found that Canada’s top CEOs make $7,162 an hour, which means it takes little over eight hours for them to make $60,607 — the annual pay of the average worker in Canada.

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In the private sector, it seems like “the sky’s the limit” when it comes to executive bonuses, whereas the public sector is “very averse to extreme pay at the top” and “fairly effective” at constraining it, Macdonald said.

“Even when you’re running big federal, provincial departments or big Crown corporations, you just don’t get paid nearly the same amount on the public sector side for senior executives,” he said.

For example, medical professionals get paid about a quarter less in the public sector than they do in the private sector, Macdonald said.

On the other end, there are female-dominated occupations, like primary school teachers, university professors, social workers and counsellors, that get paid 20 per cent more in the public versus private sector.

“So certainly, if we look at the data, I think there’s a good argument that the private sector should look to the public sector for how they could reduce income inequality,” Macdonald said.

Kopanarov believes any change will have to come from the top down and with the help of public pressure.

She said better female representation in leadership roles and managerial positions as well as pay transparency could help bridge some of these gaps.

Kopanarov said when she joined the board of Comtech Fire Credit Union, she was a minority, so she made it her mandate to get more women on board.

“Absolutely, I feel there’s there is a chance for a top-down influence on organizational changes because I’m living it. I can see it happening.

“We all need to be a part of this. We all have to promote each other.”

— with a file from Global News’  Eric Stober