ARCHIVED - Expenditure Review of Federal Public Sector - Volume Two - Compensation Snapshop and Historical Perspective, 1990 to 2003

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4. How Structural Change Occurs

Change in the composition of the public service workforce results from a combination of classification and staffing decisions taken mainly by middle level managers in departments and agencies. The classification decisions establish what positions may be staffed and at what level, and the staffing process determines which positions actually get filled and how. The distinction is meaningful since at any given time there will normally be more classified positions on the books than there is salary funding available to finance them.

Managing occupational and classification shifts

On the classification side, there is strong reason to accept the reasonableness of the broad trend to increases in more knowledge‑intensive groups, as well as the movement to proportionately more employees at higher levels within certain classification groups. Growth in the area of Computer Systems (the fastest growing group), for example, is a natural consequence of the increasing centrality of information technology and the internet in all businesses. The hiring of more lawyers logically tracks the emergence of myriad Charter issues, as well as the expansion of aboriginal and other types of litigation. Other factors such as the growing complexity of managing programs and issues across jurisdictions, a renewed commitment to government science, the need to assemble and analyse disparate information rapidly to meet ever shorter news and issue cycles, all point in the direction of needing more highly qualified and typically more expensive talent.

At the same time, much routine work is simply disappearing. Changes in the world of work, for example, have almost entirely eliminated stenography, and most typing now falls to individual analysts and managers. So the shift of secretarial employees to groups with broader opportunities is not surprising. Electronic systems have greatly reduced the demand for routine clerical work.

However, we have no way to confirm that the overall scale of the shifts in occupational structure is fully justified by the powerful trends cited above. Because of its preoccupation with developing a new universal classification system over several years, the Treasury Board Secretariat discontinued for about a decade central audits of the quality of classification decisions in departments.^[34] Notwithstanding that there was no formal central auditing of classification decisions, there was ongoing consultation with departments on significant changes to classification group profiles or to bargaining agent representation as well as in cases where there were significant increases in salary expenditures.

In 2003–04, the new Public Service Human Resources Management Agency carried out reviews of the application of the Financial Management (FI) and Computer Systems (CS) classification standards across the public service, as well as the general application of classification standards in one department, Natural Resources Canada. The results regarding the assessment of positions in the CS group, and the general review of classification at Natural Resources were positive. In the case of the 500 CS files examined, 86% compared well to the CS standard and to other positions at the same level. The FI review was suspended when it was determined that too many files lacked important documentation. Attention shifted to working with departments and agencies to ensure that departments update their FI work descriptions. From this set of reviews we can take some comfort but we must still recognize that greater rigour is needed in classification management. In this vein, the new classification policy highlights the importance of ensuring that classification monitoring continues to be a departmental priority as a condition of delegation authority to deputy heads.

Staffing actions

The staffing side of the picture is fairly straightforward conceptually. The changing structure of the public service that we have described can be implemented in three ways:

• New employees may be recruited from outside the public service for a new position or to fill a vacancy.
• Individuals may be promoted to fill a new position or to fill a vacant position that has itself been classified at a higher level.
• An individual may be reclassified to a higher level within the same position.

Positions that are obsolete are eventually eliminated. Through these mechanisms over time, a quite different public service has emerged.

Tables 2029 and 2030 provide data on employee movement out of, into, and within, the core public service domain from 1991–92 to 2002–03.^[35] From this data we can comment briefly on the mechanisms underlying the shifting public service structure.

Table 2029 Population of full‑time, indeterminate employees, total separations and external hirings, core public service domain, 1991 to 2003
Fiscal year	Full‑time, indeterminate employees**
	Population*	Separations	External hirings	Indeter- minate hiring of Terms**	Hirings total	External hirings as % of separations	External hirings as % of total hirings
1991–92	162,772	10,692	3,002	6,263	9,265	28	32
1992–93	161,516	7,853	3,006	6,346	9,352	38	32
1993–94	163,019	7,440	1,847	3,842	5,689	25	32
1994–95	160,392	8,347	1,210	2,623	3,833	14	32
1995–96	153,143	17,550	1,028	1,825	2,853	6	36
1996–97	138,944	18,149	1,088	1,827	2,915	6	37
1997–98	124,205	10,224	1,405	2,496	3,901	14	36
1998–99	114,781	10,184	1,966	4,482	6,448	19	30
1999–00	111,488	3,755	2,800	5,463	8,263	75	34
2000–01	115,859	4,370	3,729	6,891	10,620	85	35
2001–02	121,606	4,505	5,147	8,389	13,536	114	38
2002–03	129,993	4,953	5,159	8,015	13,174	104	39
* Reflects the population at the beginning of the fiscal year and excludes employees on leave without pay and employees from Parks Canada, the Canadian Food Inspection Agency, Customs and Excise, Taxation, and the Canada Customs and Revenue Agency. ** Fixed‑term, casual, and part‑time indeterminate employees play an important role in the public service, but including them would become immensely complicated without adding to our understanding of trends. The complication is essentially that the length of term or casual assignments is highly variable, so finding a way to establish full‑year equivalents, and adjusting appointments and departures accordingly would be a huge and doubtful undertaking.

To begin, we note in Table 2031 details on separations among indeterminate employees from the core public service domain over the course of 2002–03. Retirements amounted to 2,614, or 1.5% of the March 2003 population. Resignations totalled 1,698, or about 1% of the employee base. An additional 441 people left for a variety of other reasons (layoffs and terminations) plus there were about 200 deaths.

Table 2030 Total promotions and reclassifications among full‑time indeterminate employees, core public service domain, 1991 to 2003
Fiscal Year	Full‑time, indeterminate employees
	Population*	Promotions	Reclassifications	Promotions as % of population	Reclassifications as % of population
1991–92	162,772	17,278	–	10.6	–
1992–93	161,516	16,495	–	10.2	–
1993–94	163,019	13,827	–	8.5	–
1994–95	160,392	9,099	–	5.7	–
1995–96	153,143	7,707	–	5.0	–
1996–97	138,944	8,582	3,185	6.2	2.3
1997–98	124,205	10,321	3,846	8.3	3.1
1998–99	114,781	16,056	6,300	14.0	5.5
1999–00	111,488	14,847	4,965	13.3	4.5
2000–01	115,859	15,970	5,648	13.8	4.9
2001–02	121,606	16,432	5,064	13.5	4.2
2002–03	129,993	18,322	6,687	14.1	5.1
* The population excludes employees from Parks Canada, Canadian Food Inspection Agency, Customs and Excise, Taxation and Canada Customs and Revenue Agency for all the fiscal years and reflects the population at the beginning of the fiscal year and excludes employees on leave without pay.

Looking at the same data for the ten most populous groups in the core public service domain, we see a wide variation in the pattern of separations. Total separations not related to the end of a specified term ranged from a low of about 2% in the Computer Services (CS) group to a high of about 5.6% in the Clerical and Regulatory (CR) group and the General Labour and Trades (GL) group. Voluntary separations ranged from 0.6% in the Executive (EX) group to 3.2% in the Clerical and Regulatory (CR) group. These differences could reflect many factors such as the age structure of the group, and the availability of attractive employment alternatives.

Table 2031 Separations by cause — core public service domain 2002–03
Specified separations	Number	%
Retirements	2,614	52.8
Resignations	1,698	34.3
Deaths	200	4.0
Other	441	8.9
Total	4,953	100

External recruitment

Turning then to external recruitment, in 2002–03, 44,480 people were hired into the public service, as set out in Figure 2032. Of these:

• 5,604 (12.6%) were indeterminate or, in effect, permanent appointments.
• 13,269 (29.8%) were term employees hired for a specified period;
• 15,413 (34.7%) were casual employees, hired for a period of not more than 90 days, with a 125‑day limit within twelve months.
• 10,194 (22.9%) were students hired, usually during the summer period.

The specified‑period and casual appointments could count the same person more than once over the year, or more than one person in relation to the same job. So it is not meaningful to calculate the total of such appointments as a measure of the degree of change in the ranks of the core public service. Students are not counted in total employment.

As we see in Table 2029, the hiring of term employees into indeterminate positions has generally exceeded external hiring. In the early 1990s external hiring was less than half of hirings of term employees to indeterminate positions. Since 2000, the proportion has been more like two thirds of term hirings, even as the absolute numbers of conversions of terms to indeterminate employees have been significant, at 6,900 to 8,400. In effect, term hiring provided a means to accelerate the staffing process, and perhaps to provide a "try‑out" period for both employee and manager.

Figure 2032
Hiring and staffing under the Public Service Employment Act, 2002–03^[36]

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Numbers of applicants in external competitions can be an important indicator of the perceived desirability of working for an employer. The 2002–03 Annual Report of the Public Service Commission gives some data that suggests a high public interest in federal government employment. During an e‑recruitment pilot project in 2002–03, for example, there was an average of 173 applicants for national competitions. Visits to the Commission's Web site jobs.gc.ca were over 1.275 million per month.

Indeterminate external staffing has thus been a small influence on structural change in the core public service, especially before 1999–2000, when it was equivalent to between 6% and 38% of total separations. This is understandable in view of the downsizing in the mid‑1990s. More recently external recruitment has been running just behind or somewhat ahead of separations.

Promotions

Promotions can be awarded with or without competition, and occur when an employee is appointed to a position whose pay range maximum is at least 4% higher than his or her previous position. Any given departure can lead to a chain of promotions as successful candidates in turn create vacancies needing to be filled, potentially through promotions. As set out in table 2030, except for the Program Review period from 1994 to 1998, approximately 14,000 to 18,000 promotions have been awarded each year.

The total number of promotions among indeterminate staff, and the increase during the period of rapid growth, suggest that they are the largest driver reshaping the public service.

Reclassifications

As an important subset of promotions, reclassifications bridge the worlds of classification and staffing. We use the term "reclassification" to describe the promotion of an employee to a higher level in the same position, based on an assessment that the work requirement has changed sufficiently to warrant the change. It is important to note that where there is a significant increase in the demands of the job, reclassification is appropriate.

Reclassification is a term most often used to describe an increase in the level at which an employee is appointed (and therefore compensated). This happens when an evaluation of the position's work description results in an adjustment to either or both its occupational group and level because of a significant change^[37] in the work assigned to it. A reclassification may be upward if the work becomes more demanding, or downward, if the work becomes less demanding.

There can easily be confusion in the use of the term. Strictly speaking, it can apply to the re‑evaluation of a vacant position which has no effect on compensation until an employee is appointed to the job. Sometimes people even refer loosely to promotions (i.e. appointment to a higher level in a different position) as reclassification. Here we intend to use the narrow interpretation presented in the previous paragraph.

In part because of such varying interpretations, and in part because of uncertainty about individual personnel specialists' accuracy in coding specific transactions, the available figures must be taken as imperfect. Nevertheless, experienced compensation analysts believe that the available figures are likely to be a reasonable reflection of reality, with tendencies to overstate or under‑report balancing each other overall.

An analysis conducted jointly by the then Classification Branch of the Public Service Human Resources Management Agency of Canada (PSHRMAC), and by the Appointments Information and Analysis Directorate of the Public Service Commission indicates that for 2002–03 there were about 6,700^[38] reclassifications affecting full‑time indeterminate employees in the core public service domain, equivalent to about 5.1% of relevant employees. As summarized in Table 2033, there were 15 classification groups with 75 or more reclassifications. In 2001, the pay lines for three existing classification groups within the PA bargaining group were harmonized, giving rise to perceived anomalies among employees affected. Thus, it is not all that surprising to see over 60% of all cases affected four groups (which together represent 42% of the full‑time, indeterminate staff of the core public service):

• the Program Administration (PM) group,
• the Clerical and Regulatory (CR) group,
• the Administrative Services (AS) group, and
• the Secretarial, Stenographic and Typing (ST) group.

As per the data in Table 2033, it is evident that the highest proportion of employees reclassified in 2002–03 was in the Secretarial (ST) group, at about 26% of the total full‑time, indeterminate population of the group. This remarkable figure appears to represent part of a trend towards the virtual disappearance of the ST classification group. This displacement is in large part attributable to the changing demands of the modern automated office environment.

Other groups with more than 5% reclassification were:

• Personnel Administration (PE),
• Program Administration (PM,
• General Technical (GT),
• Purchasing and Supply (PG),
• Administrative Services (AS),
• Scientific Research (SE),
• Clerical and Regulatory (CR) and
• Economics, Sociology and Statistics (ES).

It should be noted that some groups (such as the PE, ES, GT and PG groups) use recruitment programs that include promotions in position based on satisfactory progress in a recruitment or developmental program. Also, some groups may experience an unusually high level of reclassification as a result of a particular decision affecting a large set of employees.

Table 2033 Reclassifications in the core public service domain by occupational groups reporting at least 75 reclassification cases, 2002–03
Occupational group	Reclass- ification from PICS*	Percentage of all reclass- ifications	Beginning population**	Percentage of group population reclassified	Group as percentage of population
Secretarial, Stenographic, Typing, (ST)	670	10.0	2,591	25.9	2.0
Personnel Administration (PE)	304	4.5	2,803	10.8	2.2
Program Administration (PM)	1,341	20.1	13,563	9.9	10.4
General Technical (GT)	157	2.3	1,821	8.6	1.4
Purchasing and Supply (PG)	157	2.3	2,062	7.6	1.6
Administrative Services (AS)	1,056	15.8	14,959	7.1	11.5
Scientific Research (SE)	102	1.5	1,668	6.1	1.3
Economics, Sociology and Statistics (ES)	228	3.4	4,246	5.4	3.3
Clerical and Regulatory (CR)	1,155	17.3	22,850	5.1	17.6
Engineering and Scientific Support (EG)	208	3.1	4,781	4.4	3.7
Information Services (IS)	76	1.1	1,852	4.1	1.4
General Labour and Trades (GL)	140	2.1	4,219	3.3	3.2
General Services (GS)	76	1.1	2,345	3.2	1.8
Executive Group (EX)	91	1.4	3,454	2.6	2.7
Computer Systems Administration (CS)	119	1.8	8,336	1.4	6.4
Other Occupational Groups	807	12.1	38,443	2.1	29.6
Total	6,687	100.0	129,993	5.1	100.0
* Full‑time indeterminate employees only. ** Populations refer to populations at the beginning of the fiscal year and exclude employees on leave without pay. PICS = Position Information Classification System

It is interesting to explore the pattern of reclassification within groups. We have looked at three groups from this perspective, keeping in mind the caution required in interpreting the data as previously described. Figure 2034 illustrates the pattern of movement out of the Secretarial (ST) group. The largest movement by far was from ST‑SCY 3 to CR 5 and AS 1. Such a move represents a salary increase at the maximum of about $4,400 or 11.4% for CR 5, and about $5,300 or 13.7% for AS 1. Very few reclassifications (only about 4.3% of the total) were within the ST group itself.

Figure 2034
Overview of reclassifications within and from the Secretarial (ST) group, 2002–03

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Appendix M provides similar pictures of reclassifications in 2002–03 for the Clerical and Regulatory (CR) and Economics, Sociology and Statistics (ES) groups. Reclassification in the CR group was in line with the public service average incidence. In contrast with the ST group, about 70% of the cases were moves up the chain within the CR group. The most numerous advances were from CR 3 to CR 4 (30%), and from CR 4 to CR 5 (36%). The only other substantial patterns were from CR 4 to AS 1 (11%), and from CR 5 to AS 2 (8%).

The trend to reclassification within the group is even more pronounced for the ES group, as seems natural for a highly specialized group. All but a handful of the of 228 cases in 2002–03 occurred within the group. The most frequent advances were from ES 2 to ES 3 (31%), from ES 3 to ES 4 (20%), and from ES 4 to ES 5 (24%).

Across the three groups studied, jumps of more than one level or equivalent were fairly rare, ranging from less than 1% for the ES group to about 7% for the ST group.

Table 2035 shows the incidence of reclassification in 2002–03 for various major departments and agencies with at least one percent of full‑time, indeterminate employees reclassified that year. Overall it is evident that the extent of reclassification varied widely across government institutions. Some large departments such as Human Resources Development Canada (1.2%), Statistics Canada (1.9%), Public Works and Government Services (2.6%), and Veterans' Affairs (2.8%) exhibited comparatively low rates of reclassification over the year.

Among departments with a relatively high incidence of reclassification, we need to recognize two special types of situations. First, in the cases of Finance and Justice, among others, there are well‑defined ongoing recruitment and development programs in place. At Finance, for example, economists with at least a Masters degree are recruited at the ES 2 level, with progress by reclassification through to the ES 5 level based on performance assessments.

Second, there can be exceptional reclassification decisions that affect a large number of employees during a particular year. In the case of Citizenship and Immigration (CIC), for example, the department decided, in 2002, to reclassify a significant group of front‑line officers (likely in the order of 1,100^[39]) from Program Administration (PM) level 2 to level 3 to reflect changes in the level of complexity of their work.

Job reclassifications constituted a substantial and stable proportion of total promotions throughout the seven years for which we have reasonable reclassification figures:

Reclassifications as a % of all promotions
1996‑1997	37%
1997‑1998	37%
1998‑1999	39%
1999‑2000	33%
2000‑2001	35%
2001‑2002	31%
2002‑2003	36%

 

As noted earlier in Table 2030, between 1996–97^[40] and 2002–03, reclassifications fluctuated from a low of around 3,200 in 1996–97, to highs of about 6,300 in 1998–99 and 6,700 in 2002–03.^[41] The proportion of full‑time indeterminate staff reclassified each year was more variable than the absolute numbers, rising quickly from 2.3% in 1996–97 to 5.5% in 1998–99, and then falling to 4.2% in 2001–02, before increasing again to 5.1% in 2002–03. In general, reclassifications constituted between 31% and 39% of all promotions in the years from 1996–97 to 2002–03 (years for which we have data). They clearly figured prominently in the personnel management system of the core public service domain. From this data we conclude that reclassification has been a significant factor in changing the composition of the public service.

Separate employers

With respect to separate employers, at CCRA permanent employee recruitment in 2002–03 totalled 3,563 or 8.8% of the Agency's permanent employee population. Retirements numbered 714 among permanent employees (1.8%), and other departures were 625 for a further 1.5%.

At CFIA, 193 indeterminate employees were hired (4.2%) and 1,169 term employees, a figure that counts some individuals more than once. In that year, 64 employees retired (1.4%), and 85 permanent staff resigned for other reasons (1.8%).

Parks Canada recruited a total of 428 employees, including 57 indeterminate staff, 360 term and 11 seasonal employees. A total of 125 permanent employees at Parks Canada resigned in 2002–03, and 40 retired. There were 10 deaths.

At the NRC, 127 continuing (permanent) employees were hired, as well as 175 term employees and 378 for a term of less than a year. In 2002–03, 59 employees retired (1.5%), and other voluntary departures amounted to 111 (2.8%) including 22 returning to school. There were 6 deaths.

Parks Canada, subsequent to its establishment as a separate employer, undertook a complete review of its classifications, believing they were not generally current. During its first phase, the review led to a reclassification of about 1,000 employees in the General Labour and Trades (GL) and General Services (GS) groups. About 20% of these positions were revised upwards.

CFIA recently examined its use of reclassification; for 2002–03, there were about 99 cases, the majority of which occurred as part of formal developmental programs. This rate is in the order of 1.8% of the employee population. At the National Research Council, reclassifications numbered 69, also about 1.8% of the population.

Overall impact of structural shifts on average salary

The structural shifts that occurred between 1991 and 2003 had the cumulative effect of increasing the average salary by something like $5,000 in 2003 dollars in the combined core public service and separate employer domain.^[42] This amounted to an increase of about 10.6% in the 2003 constant dollar average salary in the combined domains. For the period of public service employment growth from 1997–98 to 2002–03, the impact of these structural changes on the average salary amounted to about $2,600, or an increase of 5.3% in 2003 constant dollars.

This conclusion is necessarily based on various assumptions but can be taken as fairly accurate. Our method was to use average March 2003 salary rates by group and level, and apply them to the populations, groups and level structures of earlier years. In this way we were able to estimate what it would have cost in "our" dollars to pay for the very different public service workforce compositions of the past. Table 2036 provides the year‑by‑year results.

Table 2036 Evolution of average salary in the combined core public service and separate employer domains attributable to changes in workforce composition, 1991 to 2003*
	Average salary ($2003)	% Change from 1991
1991	47,670	–
1992	47,798	0.3%
1993	48,317	1.4%
1994	48,932	2.6%
1995	49,294	3.4%
1996	49,565	4.0%
1997	49,550	3.9%
1998	50,072	5.0%
1999	50,690	6.3%
2000	51,333	7.7%
2001	51,584	8.2%
2002	52,044	9.2%
2003	52,715	10.6%
* Using March 2003 average salaries for the comparison. the calculation. Again, only the three largest separate employers are included in the calculation.

This change in average salary is broadly the result of two sets of changes:

• the rise of more highly paid and the decline of less highly paid groups, and
• changes in the distribution of employees among pay levels within groups.

With respect to the distribution of employees among pay levels within a group, the impact on average salary has been modest. Even for the Clerical and Regulatory (CR) group, which has seen substantial declines in the share of employees at the lower levels and corresponding increases at the higher levels, the resulting change in average salary was about $1,600—just over 4%—between 1991 and 2003. Bearing in mind that the structure of most other large groups was stable or experienced less change than the CR group, it would be reasonable to estimate the overall impact of distribution changes as not greater than 1 or 2% of average salary.

Accordingly, the relative growth of more highly paid groups likely accounts for about 8 to 10 percentage points (out of the total of 10.6%) of the increase in 2003 constant dollar average salary between March 1991 and March 2003.

Retrospective—Salary changes for Executives and other unrepresented employees

For executive compensation, the Government matches total compensation at the EX 1 level to a sample of the Canadian private sector and the broader public sector, and then sets pay ranges for higher level EX and Deputy Minister (DM) positions as fixed multiples of the first level. The differences between maximum pay at successive levels is either 12 or 15%. The comparison, updated each year by Hay Associates, includes an allowance of 7% on the federal public service executive side for variable pay to be re‑earned each year, with the individual amount depending on that employee's performance.

Over the years, the Government has normally sought the advice of an independent Committee chaired by a prominent private sector figure on salary levels for senior personnel, and their terms and conditions of employment, including performance pay. Committees chaired in succession by J.V. Clyne, Allen T. Lambert and James W. Burns ran from 1968 until 1993. After a hiatus during the period of salary freezes, the current Advisory Committee on Senior Level Retention and Compensation was established in 1997 under the chairmanship of Lawrence Strong, and since 2002 of Carol Stephenson. The Committee reported six times between January 1998 and May 2003.

In most of this section we focus principally on the period since 1990. In this section, we provide earlier data (back to 1980) because of the usefulness of giving a longer perspective in light of controversies over executive compensation, especially performance pay.

Table 2037 provides a 20–year perspective on federal public service executive compensation in the core public service. We note that the average salary grew from about $59,500 in 1983–84 to about $107,000 in 2002–03, an increase of nearly 80% in current dollars, or about 5% in 2002–03 constant dollars. Using the 1997–2003 timeframe, executive salaries rose on average from about $85,000 to $107,000. This represents an increase of about 26%, or just under 13% with the effect of inflation removed.

These advances in average salary resulted from independent advice from the Strong and Stephenson Committees. Most importantly, after five years of freezes from 1991 to 1996 the Government accepted Advisory Committee recommendations to increase salaries, based on Hay Associates' assessment of total compensation as described above. Range adjustments of 5.1% in 1998 and 8% in 2000 set the stage for more modest general raises of 3.1% in 2001, 2.3% in 2002 and 2.5% in 2003.

Unlike unionized employees, executives do not receive automatic annual increments to advance through the pay range for their level. Beginning in 1995–96, the Government permitted increases for executives within the salary ranges, based on performance assessments. Average salary increases during these years, based on performance assessments, were in the range of 1% to 2%.

Performance Pay

Performance pay has had a bumpy history over the past two decades. In 1981, the existing four‑level Senior Executive (SX) group was replaced by a new five‑level Executive (EX) group, and a Senior Manager (SM) group was created. As part of this conversion, a new performance pay plan was adopted. The details of the new salary ranges and the lump sums that became available for executives whose performance was rated as superior or outstanding but who were at their new range maximum were complex. Overall, many executives received smaller salary increases than were current among unionized staff, and in effect contributed to establishing the salary pool from which performance pay was financed.

Table 2037 Changes in salaries and performance pay for federal public service executives, 1980 to 2003
Fiscal Year	EX Population*		Salaries			Performance pay			Estimated average value of lump sum per EX	Average salary + Average lump sum
			Average salary (Current $) (a)		Weighted average EX salary range increase (b)	Estimated total value of performance pay Current $ ($M)
1980‑81	1 272	$48 630		◊			$2.7	$219			$48 849
1981‑82	1 596	$58 239		6.50%			$0	$0			$58 239
1982‑83	3 594	$56 976		6.00%			$0	$0			$56 976
1983‑84	4 000	$59 506		5.00%			$8.9	unknown			unknown
1984‑85	4 308	$61 460		3.50%			$4.2	$1 045			$62 505
1985‑86	4 274	$64 198		3.25%			unknown	unknown			unknown
1986‑87	4 345	$66 169		1.40%			$8.2	$1 079			$67 248
1987‑88	4 302	$70 827		6.40%			$10.5	$1 027			$71 854
1988‑89	4 280	$74 755		4.60%			$10.3	$1 316			$76 071
1989‑90	4 614	$78 456		5.70%			$17.6	$2 722			$81 178
1990‑91	4 759	$81 945		4.15%			$17.9	$2 999			$84 944
1991‑92	4 392	$83 013		◊			$0	$ 0			$83 013
1992‑93	4 155	$85 489		3.00%			$0	$ 0			$85 489
1993‑94	3 878	$85 512		◊			$0	$ 0			$85 512
1994‑95	3 735	$85 278		◊			$0	$ 0			$85 278
1995‑96	3 214	$85 030		◊			$13.0	$2 712			$87  742
1996‑97	3 258	$85 350		◊			unknown	unknown			unknown
1997‑98	3 235	$84 961		◊			$10.9	$1 759			$86 720
1998‑99	3 421	$92 642		5.10%			$14.0	$2 631			$95 273
1999‑00	3 278	$93 511		◊			$19.4	$4 002			$97 513
2000‑01	3 637	$101 095		8.00%			$29.9	$7 077			$108 172
2001‑02	3 903	$104 509		3.10%			$33.9	$7 316			$111 825
2002‑03	4 403	$107 040		2.30%			$40.5	$7 172			$114 212
* Population does not include DMs; Members of the Senior Manager (SM) group are included until they were merged with the EX group in 1992. The large jump in the number of executives between 1981–82 and 1982–83 reflects a significant change in the manner in which senior managers were defined.

The lump sum awards in 1981 equalled an average 0.45% across the whole group. But almost immediately the new plan was suspended (for fiscal years 1981–82 and 1982–83) by the Public Sector Compensation Restraint Act. For 1983–84 the plan was reinstated, but the original plan design of a 5% maximum for the combination of salary increases within the range and lump sum payments was reduced to 4%. Also beginning in 1983–84 employees with at least a fully satisfactory rating, who were at their pay range maximum, could receive lump sum performance awards.

From 1984–85 to 1989–1990 performance pay was applied with only minor modifications to the original plan design. In 1990–91, the plan was again adjusted, with the maximum for the combination of in‑range increases and lump sum payments being reduced to 4.75%. For the next four years, the system was again suspended. When it was finally reinstated in 1995–96, base salary increases were limited to 2.5% of the 5% combined increase permitted.

The current system was phased in, as proposed by the Strong Committee, over the two years 1998–99, and 1999–2000, and has been in operation since. This system permits salary advances within a pay range based on performance with regard to ongoing commitments that relate essentially to the regular challenges of the position. In addition, performance in relation to key commitments—intended to be substantial change or stretch goals—can earn an executive as much as 10%,^[43] either as an increase in base pay or, if the executive is at the maximum for his or her level, as a lump sum. The average value of these lump sums is not to exceed 7%, which corresponds to the provision made by Hay Associates in comparing federal public service EX‑1 total compensation with that for private sector and broader public sector executives.

Average lump sum payments under the plan grew from nearly 3% to just over 4% during the two‑year phase‑in period. For the first year of the phase‑in combined in‑range increases and lump sum payments were capped at 4.4% of the EX payroll; for the second year, the lump sums alone had a 4.4% cap. Since 2000–01 approximately 7% has in fact been applied to such payments.

Table 2037^[44] gives the average value of lump sum payments as well as the total of average salary and average lump sum, which we might call "average total earned income." We note that using this combined measure, average EX income grew from 1997–98 to 2002–03 by about 31%, or around 18% if we remove the effect of inflation.

Re‑earning base pay

Over 90% of executives have received performance pay since the new plan was introduced. Some commentators have criticized this result as excessive, arguing that only a much smaller proportion of executives perform exceptionally. This critique in effect proposes that the Government should adopt a different performance pay plan, which only rewards top performers. The existing plan, however, sets aside a portion of pay (7%) and then says that individuals will re‑earn more or less of this pool of funds, according to senior management's assessment of their performance. The resulting combination of regular salary and performance‑based lump sum is intended to ensure cash compensation at the EX 1 level is equivalent to what executives with similar responsibilities in the private and broad public sectors receive. Only those executives receiving more than the 7% (about one‑third in 2002–03) should really be thought of as receiving a performance bonus, as opposed to re‑earning their full base pay.

Non‑represented employees

The Treasury Board sets the pay levels for non‑executives who are members of groups represented by a union, but who themselves are excluded from union membership because their duties would create a conflict of interest (for example, dealing as a manager with union member grievances). The Board also determines the terms and conditions of employment for certain unrepresented groups such as the Personnel Administration (PE) classification group, and the vast majority of the Law (LA) group.^[45]

By convention, for the first set of excluded employees the Treasury Board applies the same pay rates as would prevail if the employees belonged to the relevant union. For the PE group, pay increases have traditionally tracked those for the Program Administration (PM) classification group, and after 1999 the broader Program Administration (PA) bargaining unit. For the Law group, before the pay freezes of the early 1990s, the Treasury Board used information on provincial Crown attorneys as a general guide in determining pay increases. Immediately after the freeze period, the Board tracked the much smaller unionized LA bargaining unit increases. From 2000, the Board used a survey by Hay Associates on lawyers' pay across Canada to assist in determining pay raises.

Summary of the growth in average salaries

Average salary is the broadest possible measure of change in individual remuneration. Table 2038^[46] and its accompanying Figure 2039 illustrate the evolution of average salary in both the core public service and the separate employer domains, individually and combined.

What stands out in this data is the marked change in the evolution of the average salary after 1997–98. From 1990–91 through 1998–99 the constant dollar (2002–03 price level) value of the average salary remained in the relatively narrow range of $46,300 to $48,100. It might be thought that this stability was an anomaly resulting from the impact of pay freezes during this period.

Figure 2039
Graphical presentation of the evolution of average salaries

Display full size graphic

However, we were able to calculate average salaries on the same basis for the period from 1982–83 to 1989–1990 as a way to test this view. Collective bargaining was fully operational for all but two of these years. Throughout this period, the average salary (expressed in constant 2002–03 dollars) for the core public service remained between $45,400 and $47,200.^[47] Thus, for the fifteen years prior to 1997–98, through periods of both collective bargaining and salary controls or freezes, the average federal public service salary remained essentially unchanged in terms of real income.

In the following five years, there was a pronounced upward trend, with the 2002–03 average salary reaching $52,800. The change from 1997–98 up to 2002–03 for the combined core public service and separate employer domains was 27.3% in current dollars, which is equivalent to 14.1% in constant 2002–03 dollars.

Among the key factors affecting the growth in average salaries from 1997–98 to 2002–03, salary increases covering inflation (in effect) was the largest single factor underlying change in current salary levels. During these five fiscal years the cost of living rose by about 11.6% in total. Changes in line with inflation, however, serve to maintain the purchasing power of a given level of income. What was unusual in these years, compared at a minimum with the previous decade and a half in the federal public service, was the sustained increase in real average salaries. So our analysis concentrates on trying to describe the factors driving this real increase. Figure 2040 portrays the relative size of the key drivers of change.

The analysis summarized in Figure 2040 does not purport to be exact. Nevertheless, the approximate relative size of the components of change in average salary emerges clearly from the analysis.^[49] The adjustments that are shown in the Figure relating to compounding and the timing of increases are necessary to take account of the fact that the various drivers of change interact over time.

The largest factor impacting change in real average salaries, accounting for over half of the increase, is the extent to which collective bargaining outcomes went beyond matching the rate of inflation. Table 2041 presents these outcomes.^[50] The cumulative increase in average salaries above inflation arising from collective bargaining was about 7.9% between 1997–98 and 2002–03. This in turn combines two aspects. The first is the extent to which economic increases during the period exceeded actual inflation.^[51] Based on the cumulative economic increase of 15.7% as shown in Table 2041, and cumulative inflation of 12.4%, we can calculate that the cumulative difference between 1997 and 2002 was about 3.7%.^[52] The second aspect is the total of restructure increases, which had the cumulative impact of raising average salaries by about 4.1%, all of which was real salary increase. Restructuring increases are discussed in more detail in Chapter 4 of Volume One.

Figure 2040
Components of change in average current dollar salaries for the combined core public service and separate employer domains,¹ 1997–98 to 2002–03

Display full size graphic

* Percentage point

¹ Approximation based on available data.

² Adjustment to account for the fact that a number of negotiated increases introduced in 2002 are not fully reflected in the average salary growth for 2002–03 because they were introduced late in the year.

^3,4 To account for the fact that overall impact of the components' growth rates (except pay equity) is multiplicative (rather than additive).

⁵ The ongoing salary impact from pay equity settlements of $190M during the period, on per capita basis (divided by 2002–03 employment), represents a growth of 2.0% from the average salary in 1997–98. Since this ongoing impact has already included negotiated salary increases, this is an additive component (rather than multiplicative).

⁶ Impact of the profile change (or composition effect) in the old core public service (i.e. PSSRA 1.1 plus CCRA, CFIA and Parks Canada) from March 1998 to March 2003.

⁷ Restructures exclude Special Pay Adjustments (SPA).

⁸ Later in the chapter reference is made to a 1.1% net real increase attributable to upward movement through the salary grid. This amount is incorporated primarily into the 5.3% associated with "change in workforce composition", though there may be a slight overlap into the 4.1% related to the restructuring increase.

The other relatively large factor was the change in the composition of the workforce over the period. Earlier in this section we sketched what has amounted to a transformation in the nature of the public service, as occupations associated with relative knowledge intensity in the nature of their work have come to occupy a larger and larger place in the overall structure. We used 2003 period average salaries by group and level to estimate the cost of the population distribution of earlier years.

We conclude that the change in overall average salaries between 1997–98 and 2002–03 attributable to a more knowledge‑based workforce was approximately 5.3%. We need to emphasize that this latter figure cannot be considered a precise measurement. In effect it is the result of a thought experiment: what would the public service of an earlier year have cost if we paid 2003 salaries then, and how does that differ from the cost in 2003? Using average salaries by group and level ignores changes in the actual distribution of employees within salary ranges, for example. Nevertheless, it is clear that change in workforce composition was an important factor in raising the average salary.

Two smaller factors merit notice in this summary. As we described in Chapter 4 of Volume One the first is the net effect of salary increases as employees advance through the pay range for their classification level, counterbalanced largely by the reduction in salaries as people leave and are replaced by employees at the bottom of the relevant pay range. During the period from 1997–98 to 2002–03, we estimate the net combined effect of these phenomena to be about 1.1%. This is largely included already in the compositional change discussed in the previous paragraph.

The second smaller factor is pay equity. As we also described in Chapter 4 of Volume One, the federal government has invested substantial sums both in one‑time payments relating to past obligations under the Canadian Human Rights Act, and in ongoing increases to the salary levels of various groups. We have estimated that the total of this latter component of salaries was at least $277 million (including compounding from subsequent economic increases) in 2002–03 across the combined core public service and separate employer domains.

Salary increases resulting from various settlements or interim measures to implement equal pay for work of equal value occurred at various times, as described in Appendix H. We estimate that approximately three quarters of the ongoing salary impact (or about $190 million) came into effect during the 1997–2003 period that we are assessing. This would amount to about 2.0% of the 2002–03 salary mass of the combined core public service and separate employer domains. Likely about half of this was implemented through collective bargaining agreements, mainly the Special Pay Adjustments agreed to in 1998.

With a complete picture of the transformations occasioned in the employment and salary levels of the core public service and separate employer domains, and the forces underlying those changes, we now turn to an examination of the budgetary shifts that made it possible to pay for the noted changes in the total salary mass.

 

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