When you fail to clarify the context in which the money was used, disclosing the salaries of government employees becomes a counter-productive exercise.
Ontario’s Sunshine List has been released for 2015. If you are interested, it is available here. The annual Sunshine List is the result of the Public Sector Salary Disclosure Act, legislation brought forward by the Harris government in 1996. Simply put, the Act requires organizations receiving public funding in Ontario to disclose the names, positions, salaries and taxable benefits of employees who are paid annual salaries of $100,000 or more.
The Sunshine List release follows a predictable pattern. The opposition (regardless of their political stripe) will decry the government for the unrestrained growth of the public sector and the media will dutifully sort through the list and highlight the top earners, allowing the public to be temporarily outraged at the amount of money some employees are taking home. After a few days, the media frenzy dies down. Rarely do we take the time to consider the continued relevance of the Sunshine List.
What is the Sunshine List intended to accomplish? According to John Ibbitson, an early biographer of the Harris government, the Public Sector Salary Disclosure Act was introduced to provide support for the government’s desire to reduce the size of government and restrain the growth of public sector salaries. Simply put, the Sunshine List was designed as a political tool. The yearly release was supposed to stir outrage among the public, further lending credence to the government’s claims that the public sector had grown too large and costly.
Years after Harris left government, we are left with the Sunshine List and it presents us with a bit of a paradox: the release of the list and subsequent media attention temporarily creates outrage – or a the very least some indignation – about the size of the public sector payroll, but the List grows every year. What, then, does the Sunshine List actually accomplish? The problem lies in the design of salary disclosure mechanisms that the Harris government, perhaps, never intended.
First, the Sunshine List tells us where money was spent, but it does not give us any indication of value. We know how much certain university presidents and hospital administrators took home in compensation last year, but it does not tell us anything about their contribution to the public sector. Are they doing a good job? Or a bad job? The Sunshine List does not tell us, but gives us the impression (at least with a bit of media coaxing) that these salaries are undeserved or out of line with the private sector.
The second problem is that the Sunshine List gives us an inaccurate picture of public sector compensation. The most frequent conclusion reached by observers of the Sunshine List is that public sector compensation continues to grow unchecked. For example, if the 2010 disclosure shows a public sector organization with 100 employees earning over $100,000 but 200 in 2015, does this mean it is inefficiently managed? Not necessarily. These changes may be due to inflation and the changing nature of work in the province. The $100,000 threshold for salary disclosure has not been changed since the legislation was introduced in 1996. If the Sunshine List were indexed to inflation, the threshold for disclosure would be around $145,000. If an equivalent figure were in place today, the public sector salary disclosure list for many organizations may remain consistent over time.
Finally, the Sunshine List may actually be counter-productive, in that it may drive up wages and perhaps even drive down productivity. A 2012 study in the American Economic Review by David Card found that salary disclosure may lead to wage inflation. Simply put, salary disclosure allows workers to compare their salaries with others, ultimately leading to greater leverage in the negotiation process, as lower paid workers in similar positions have more credibility to demand wage increases. Additionally, research by Manning and Avolio in the academic journal Research in Higher Education found that salary disclosure among university employees led those who discovered they earned less than their colleagues to respond by getting angry and working less.
Listing public sector salaries does not provide much insight into how efficiently or wisely tax dollars are being spent. Its likely counterproductive and despite a few days of news coverage, the Sunshine List does not likely serve much of a purpose. With that said, its not going away any time soon. Imagine a government ending the yearly salary disclosure? The media, the public and the government’s political opposition would pillory them. Even raising the $100,000 threshold would be politically costly, meaning that the Sunshine List is not going anywhere anytime soon. However, that doesn’t mean we need to avoid questions about its relevance.