Municipal Employment in Thunder Bay: An Analysis

 

The last post presented an overview of what for lack of a better term can best be described as higher tier municipal employment in northern Ontario – that is individuals in the five major municipalities of northern Ontario who earned $100,000 or more in annual salary (let's call them Listers) thus placing them on the public sector salary disclosure list.  What was interesting in the overview was that Thunder Bay in 2021 had the most municipal Listers at 547 followed by Sudbury at 540, then the Sault at 246, North Bay at 187 and finally Timmins at 142.  This ranking roughly parallels population size with the exception that based on population, one would expect Sudbury to exceed Thunder Bay.  The per capita cost of municipal employees on the public sector salary disclosure list was also the highest in Thunder Bay of the five cities.  As a result, a more detailed look at trends for Thunder Bay is of interest.

 

Figure 1 plots the number of Thunder Bay  municipal employees earning $100,000 or more over the period 2017 to 2021 and shows that the number was relatively stable over the 2017 to 2019 period but took a large leap in 2020 (to 558 from 452) and has remained at approximately the same level (at 547 in 2021).  The percentage increase in the number of employees over $100,000 in 2020 was approximately 24 percent and at the time was attributed to a large number of employees in protective and emergency services who had been just under the threshold for a number of years going over.  However, this is only part of the story as the increase in the total wage and salary bill of municipal Listers (see Figure 2)  in Thunder Bay from 2019 to 2020 was nearly 30 percent.   That is the salary bill for those on the list  increased more than the number of employees on the list  suggesting compensation increases drove a portion of the increase.  And indeed, compensation particularly of higher tier administration and management was an issue last year with some increases approaching 12 percent.  This could be seen as particularly annoying by others in the broader public sector - particularly  front line workers in health and education - who were limited to one percent annually by Bill 124 while the municipalities were exempt.

 

 

 

 

Depending on what you think is the total municipal employment of the City of Thunder Bay, those making over the list probably make up anywhere from one-fifth to one-third of the City’s municipal employment though given the absence of readily accessible municipal employment numbers, these are estimates at best.  One thing that does not need to be estimated however is the ratio of the total wage and salary bill of Thunder Bay municipal employees earning $100,000 plus to the total value of the tax levy as illustrated in Figure 3.  Between 2017 and 2019, this share averaged 27 percent but in 2020 it took a leap to 36 percent  and then declined to about 34 percent in 2021.  In any event, one could make the case that the value of the wage and salary bill accounted for by those Thunder Bay municipal employees earning $100,000 plus represents over one third of the tax levy.  

 

 

 

Figures 4 and 5 round out the analysis by presenting first the average salary of Thunder Bay municipal employees on the List and then the per capita cost of these employees.  Again, 2020 – the pandemic year – is the crucial point in time.  In 2020, the average salary per List member rose just over  5 percent  - going from $121,002 to $127,091.  Meanwhile, the per capita cost of those on the municipal salary list rose from $494 to $640 – an increase of nearly 30 percent.  Between 2019 and 2020, the number of municipal Listers grew from 452 to 558 (24 percent) while their salary bill went from $54.7 million to  $70.9 million (30 percent increase).  Thus the average salary rose by about the difference.  However,  when you spread that salary bill across the entire population of the municipality you get a somewhat different result - salaries rose 30 percent but population growth was flat. 

 

The List get a lot of attention every year.  While accountability is important, it remains that the real accountability measure is not how much is being paid out but the value received for that money as well as its sustainability over the longer term.  It is not that people on the list are making too much given what they may or may not do or that their salaries rose too much or even that there are a lot more of them.  In the end, you do get what you pay for even in the public sector.  The real issue is that the cost of services has grown dramatically but the tax base and population of Thunder Bay have not.  Thunder Bay’s official population has stayed flat at about 110,000 people over the period 2017 to 2021, the value of the tax levy grew from $184 million to $204 million – an increase of 11 percent  but the wage and salary bill of its municipal list employees has grown from $50.1 to $69.6 million dollars – an increase of nearly 40 percent.  

 

No one is saying that those employees are not worth what they are being paid or are not deserving of their pay especially given the travails of the pandemic.  However, ultimately  the money does have to come from somewhere and to date the solution has simply been to pass the bill onto municipal ratepayers - something that was aided by the Ontario government under the provisions of Bill 124 which exempted municipalities because they had "own source revenues" - that is a municipal tax base.  It would appear a number of fiscal and budgetary chickens are coming home to roost.

Big Numbers, The Public Finances and Salary Lists

Well, in what has become almost a form of annual homage to Gilbert and Sullivan, Ontario released its public sector salary list yesterday and there are a lot of "victims" on this year's little list - 131,741 to be precise.  The number has grown steadily since the list was first published in 1996 with 4,576 names on the list and since the $100,000 threshold remains the same without any inflation adjustment, twenty years of salary progression has increased the number of names above the threshold.  Indeed, if you adjust for inflation, the threshold today would be about $150,000 and about 85 percent of names currently on the list would be eliminated bringing it down to about 20,000 which still is nearly a quadrupling of numbers since 1996.

However, there is a reluctance to adjust the threshold to account for inflation and as the Premier of Ontario herself has noted, the people of the province have a right to know what public servants are earning because after all $100,000 is still a significant amount of money to the "vast majority" of Ontario residents. This is a somewhat curious statement given what seems the Premier's lack of concern about other big numbers when it comes to Ontario's public finances.  For example, the provincial net debt is at about $312 billion which is indeed a significant amount of money as is the nearly $12 billion dollars annually required to service it.

Perhaps the problem is the difficulty many have in dealing with numbers that are so large that they are outside their daily experience.  After all, most people deal with numbers in the thousands when it comes to salaries and annual living expenses rather than billions.  What is needed here is perhaps some type of currency conversion mechanism that translates these large numbers into something the public can more easily grasp.

So, how many "Listers" at a threshold of $100,000 would make up  the Ontario public debt? That number comes out to 3,120,000 - which is still a very large number - and represents just under half of total employment in Ontario which is at about 7 million people.  However, a number in the millions is still very large.  Ontario this week will deliver a budget and the expectation is that the deficit may reach $8 billion.  How many "Listers" would make up an $8 billion deficit? Well, 80,000 which is a much more manageable number but as a number still higher than the median income of Canadians.  How many Presidents and CEOs of the Independent Electricity System Operator fit into the net public debt? About 416,000.  Ministers of Northern Development and Mines? You can get 1.89 million of those.  But I digress...

It remains that the list is needed as an indicator of public sector spending as well as to provide transparency as to what the public sector spends notwithstanding what has become an exercise in showmanship without any effort to gain some additional insight and understanding about public sector spending.  Indeed, the fixation on the large numbers in the annual release masks the fact that there should be some serious concerns expressed about how the list is constructed, transparency and indeed what it tells us about people and what they are paid and how that information is used.

First, while the "List" was supposed to be an accountability device that would somehow restrain the growth of public sector salaries it remains that it has not.  Indeed, I would venture that making the salaries public has actually provided a basis of individual comparison that has resulted in driving salaries up in the broader public sector not just in Ontario but across the country.  You don't hear about private sector salaries being driven up in part because that information is usually considered proprietary or confidential and its absence hinders the ability of individuals to make comparisons and decide they deserve more and make use of it to negotiate a higher salary.

Second, the list is inequitable because it separates public servants based on an arbitrary threshold that was selected because at the time it seemed like a big, round number - $100,000.  However, for true accountability, all public sector salaries should be reported.  There should be two lists released every year - a public sector salary disclosure list with those making over $100,000 and another with those making under $100,000.  Yes, the list would be very very large but that would be the point.  There are a large number of broader public sector workers and public  sector spending in Ontario is not just driven by the 131,741 people making over $100,000 but also by the over 1 million people in the broader public sector making under $100,000.  Would it be an invasion of the privacy of those individuals making a more modest income of say $80,000.  Well, what do you think releasing a list of the salaries of someone making $100,000 actually is in a town with only 100,000 or 5,000 people?  We don't all have the relative anonymity of living in the GTA.

Third, the list also needs to be expanded to truly reflect the spending of public sector money on compensation. A case in point, universities must report all of their employees making over $100,000 because they are a public sector agency but it remains that universities in Ontario today only directly get between 40 and 50 percent of their funding from the Ontario taxpayer. The rest is own source revenue generation and tuition and while you can argue that many Ontario students get loans or even free tuition from the taxpayer that still does not sum up the public sector funding share to 100 percent.  University professors do not get 100 percent of their salaries from the Ontario taxpayer and yet 100 percent of their salary is reported.  On the other hand, physicians who are nearly 100 percent taxpayer funded are not on the list (unless they are directly salaried or employed by a public agency) because they are independent contractors.  Two points here: 1) a taxpayer dollar is a taxpayer dollar no matter how it is spent and 2) I'm surprised universities have not been more enterprising in redefining how their faculty are paid thereby removing large numbers of them from the list.

So, there you have it.  I think the list released under the Public Sector Salary Disclosure Act is important and part of the mechanism of accountability and democracy in government.  However, by focusing only on salaried employees of public sector agencies and government making over $100,000 a year misses the point as to how large the public sector actually is when it comes to employment and the spending of taxpayer dollars.  The list should be expanded.  As the song goes, the task of filling in the names I'd rather leave to you.