The economic value of job security

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Michel Kelly-Gagnon, QMI Agency

, Last Updated: 12:53 PM ET

What is job security worth? What is the dollar value of the guaranteed lifetime employment enjoyed by some public sector employees?

This is not an easy question to answer, and part of the answer is by definition subjective and will vary depending on the individual. However, it is a question that becomes more and more relevant in the context of the current financial situation of the various levels of government in Canada.

It is not my purpose here to debate whether job security for public sector employees (noting that many of the newer ones are actually hired through temporary contracts) is a good thing. My concern here is simply to try to estimate the approximate economic value of job security.

Clearly, job security is worth something. And it's important to estimate what it's worth, because when it comes time to negotiate contracts with public sector employees, it is (or should be) part of the discussion.

Again, different people will value job security differently. Nonetheless, we can at least get some idea of a ballpark figure.

For instance, a major study carried out in Australia that included interviews with more than 2,000 workers from both the private and public sectors came to the conclusion that workers placed a significant value on job security. On average, workers were willing to be paid 11% less in exchange for job security.

Closer to home, a natural experiment was carried out 2006 when l'Agence des PPP, a para-governmental provincial agency that existed at the time in Quebec, offered certain public sector employees the opportunity to come work for it along with a 17% pay raise. The catch: they would have had to give up their job security in exchange for that pay raise.

Almost none of the Quebec civil servants that were approached accepted the offer. In the end, they preferred to keep their current salaries, along with their much-beloved job security.

Admittedly, more work needs to be done before knowing whether we can generalize such numbers. But clearly we should do that work, because a virtual guarantee of lifetime employment is worth more than just 1% or 2%, more than just a rounding error.

Michel Kelly-Gagnon is president of the Montreal Economic Institute (www.iedm.org). The views reflected in this column are his own.

 


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