I am active in the Canadian Public Servant /Reddit forum, not the least of which for issues that I generally cover in my HR Guide. People share the link regularly, which is humbling, but the forum is about way more than simple HR. I often have views but I don’t often engage, deferring to others who have better insights and/or more palatable ways to explain some things. On a few topics, I try to avoid engaging because, well, there are too many idiots in the forum who have virtually no understanding of how compensation works in a formal system, and think whatever they “want”, the unions can and should get just by asking. FFS, really?

The latest started off innocently. Someone legitimately asked a question about costs of living, costs of commuting, etc., and then said, “Why don’t unions take this on and get us more money now that we have RTO?”. Then a bunch of people chime in saying something like “Right on, power to the people, man” having virtually no understanding of how labour markets work, or even how wages are set. They often make outrageous claims that they’re entitled to this or that, and generally make the PS look like a bunch of self-entitled idiots. And journalists troll the forum looking for articles to write about cuz if there’s conflict, there’s a story. Except it’s fake conflict, because the unions actually DO understand how all this works.

Maybe at least one f***muppet will read this and understand why we shouldn’t get more money with RTO. Or, rather, if we DO want more money, what would have to happen to do that change.

The basis of labour markets and wages

The simplest of labour markets is an individual hiring another individual to do something, like dig a ditch in his backyard. The Employer (E) hires a labourer (L) to dig the ditch, and both agree it will take about an hour. In the simple scenario, E could do it himself, but maybe they’re busy or lazy, and are willing to pay L to do it. The employer might think it’s worth about $30 if he did it himself, and thus is offering perhaps $25 to hire someone else to do it.

For the labourer, digging a ditch is hard work. He wants as much money as he can get, obviously, but all he is being offered is $15. Will he take the job?

If he stays at home and does nothing, he’s happy. To leave the house and give up his free time, he wants $5 for example. That’s his minimum Direct Fixed Cost. He won’t leave his house to do ANYTHING unless it is at least $5. Any job, at least $5 to get his interest.

But if he’s going to dig a ditch, he has to first get to the site, maybe use his own shovel and work gloves, and if he’s going to be there for an hour, maybe he wants a water bottle to take too. That all costs money. So, before he starts work, that “extra” cost of what he needs to do the job might be another $2 for wear and tear, and effort. This will be his Indirect Semi-Fixed Costs. Maybe the commute is higher cost across town instead of within the neighbourhood, maybe he needs a better shovel for a harder job. They will vary slightly, but not as little as his fixed cost or as high as his labour cost.

Then he actually has to do the work of digging. How much does he want to do the work? That’s his choice. He’s already looking for a minimum of $7 just to show up at the job site for that job. Let’s say there are four scenarios:

1. He wants at least $10 for his digging labour, or $17 overall.
2. He wants at least $18 for his digging labour, or $25 overall.
3. He wants at least $20 for his digging labour, or $27 overall.
4. He wants at least $25 for his digging labour, or $32 overall.

For the first two options, he’ll take the job. L asks E for $17 or $25, they’re willing to pay it or they have offered that much, there’s a deal. Done.

For option 3, there’s no initial deal, but maybe they can negotiate, as E thinks it is worth up to $30.

For option 4, there’s no deal. The employer isn’t willing to pay more than $30, and the employee won’t work for less than $32.

None of this is rocket science nor particularly hard to learn. Every economics text of the last 50 years that has broken wages down into constituent parts has some costs that are fixed, some that are semi-fixed, and some that are variable by job. However, you don’t get three cheques, you get one, and your overall wage has to compensate you for all three.

Most people don’t think about the fact that all three are embedded in EVERY pay rate. To be honest, most people don’t think, but it is similar to the people who wonder how something can cost $3 to make but be $5 at the store. The manufacturer had to make and package the product (relatively fixed per unit), companies had to transport the item (semi-fixed per unit), and then the store had to rent a space and hire employees to stock and sell the item (variable per unit). So $3 in costs to manufacture, costs for each of the segments with a little profit for each, and voila, it is $5 at the cash register. Everybody understands THAT, but think it is totally different for wages. It isn’t.

Markets generally self-regulate, including labour markets

Just about everyone understands regular markets. If you charge $10 per apple, you will sell none. Nobody is willing to pay that for one apple, unless there’s no other food available. But, in a supermarket, they’ll buy different things. If you price products above what people are willing to pay, then there’s “no market”. This will force sellers to either go out of business or lower their prices until someone is willing to pay that amount. They could charge $1M for an apple, if they want; nobody is regulating them. But if they have 10 apples at 50 cents, they’ll make $5 and sell all their apples; if they charge $10 or even $1M per apple, they’ll make $0 and eventually have 10 rotten apples. Instead, people offer, people counter-offer, and eventually they figure out what they’re each willing to spend.

That’s how markets self-regulate. Easy peasy lemon squeezy. Everyone gets that. But they think it is somehow different in labour markets as employers set the pay rate. Yes, yes they do.

But if the Employer above offered only $15 to dig a ditch, nobody would take the job. The Labourer above was willing to do the ditch digging for $10, but his other costs were $7. It wasn’t worth it to him to do it for $15, so unless it were the ONLY job, he wouldn’t take it. No deal. The employer would either have to increase the pay OR do it themself.

Now, as I said, nobody pays three amounts to the labourer. They offer a total, and if the labourer takes it, it means they are willing to do the job for that amount. Sure, they’d like more, but if they take it for $15, then that’s what the job is worth to him…and that has to take into account all of his costs, or it’s not worth his time. I don’t need to know what his “amounts” were, I need to see what amount he is willing to work for to know what the three pieces add up to, aka his wage.

The interesting wrinkle is when the market goes beyond 1 Employer and 1 Labourer, the system self-regulates even for Labour. If the Employer offers the job at $15 and NOBODY takes it, then they either increase the offer, do it themselves, or it doesn’t get done at all. No market deal. If someone else takes the job (say L2), great, they made the deal. Why? Because the combination of their three costs was lower than L1 above.

But the PS isn’t an open labour market, is it?

Yes, it is an open market. No one is forced to work for the PS. You can take the job at the rate offered or not. Totally your choice. As it is for 360K other workers who said yes, it is worth it to them.

However, while it is open — anyone is free to enter or leave the market — it is highly structured and semi-regulated.

In modern society, it isn’t easy to calculate the cost of each segment individually. For the first component, the fixed costs, that represents how much it would cost an employer to get you to leave your house to go to work. While that varies for everyone, there is a really good proxy for Western-style democracies with social structures. How much money would you get if you stayed at your house and DIDN’T go to work? About the value of social assistance aka welfare. If you do nothing, you will get $X from your province or territory (aka the disincentive to work). In Ontario, that would be $343/month for basic needs + $390 in shelter allowance or $733 per month. If you extrapolate that backwards to 22 business days a month with 8 hours per day, that’s about $4.15 per hour to leave the house as your minimum FIXED AMOUNT.

To figure out how much you need to do all the other parts between the house and the job site, all your extra but semi-fixed costs like childcare, clothes, and transportation, plus pay for any basic incidentals of going from point A to Point B, there are elaborate ways to calculate all of that. Economists have frequently estimated that it is about 15-20%, but methodologies differ considerably, with some overlapping the FIXED AMOUNTS and are also generally backwards-estimated (i.e. if you make $100, they estimate $20 of that was for commuting), and only works for small tiers (someone making $500K per year didn’t likely spend $100K on commuting).

However, there is another way to calculate it — with lost wages, we have employment insurance of $695/week. It replaces your income if you’re laid off. If we adjust that down to the hour, it’s about $17.38 per hour in Ontario. If you ignore benefit options like Working While on Claim, and if you are actually working and earning $1 in total, that will be taken off your EI claim (a clawback — note that I am drastically oversimplifying for illustration purposes, that is not how EI works). Which means we have an estimate of $17.38 as the minimum cost for you to get to a job site before doing any work at all. If we deduct the $4.15 previously, that would mean that your maximum PSEUDO-FIXED AMOUNT is $13.23 an hour. Economists treat EI as being a replacement for your wages, and thus some part of that $13.23 is actually replacing the pseudo fixed + partly labour, in about equal measures. Call it $6.62 in approximate FIXED amount and $6.61 in direct labour wage.

If you’re doing the math at home, this comes out to:

FIXED AMOUNT (to leave the house): $4.15 / hour

PSEUDO FIXED (to get yourself to the job site): $6.62 / hour

WAGE-ONLY SHARE (to do the labour): $6.61 / hour

MINIMUM PAY TO GET YOU TO START WORKING: $17.38

It is not magic that it came out to the EI replacement rate, as I used that as the initial max of not working and still getting income. I merely used it plus other estimates to break the other three pieces apart. However, if I had used minimum wage as the alternate rate aka the minimum amount to compensate you for all three things, it would be $17.60 in Ontario. So I know the first # is pretty close to $4, using the same methodology as most economists; I know the last number is the right total of the three pieces together.

The only question left open in my calc is whether the second and third elements are disbursed equally. By splitting it evenly between the two, I am being the most generous towards the piece people in the PS discussions want to argue is so important. As I said, economists in the field estimate it is 15-20%, which in this scenario would be about $2.60-$3.50 / hour. My estimate is closer to 38%, which I think is way too high, but well, it makes no difference how much that piece is when you do the later comparison.

So why does that piece of the total not really matter if it goes up?

Let’s assume you are an AS-04 in the federal public service, and operating at just the first band, ignoring annual increases, band increases or level increases.

The first scenario would be June 21, 2020, just after the pandemic hit, with the rate of pay per year set as $71,599 when the pandemic hit (it was slightly less than that, but more than close enough). If I assume a 52-week year, ignore vacations and other leave, figure a 7.5 hour day, and assume the simplest of forms without deductions (I’ll come back to this later), the hourly wage comes out to $36.72 per hour. If you put that back to the parts above, that would mean:

$4.15 to leave the house + $6.62 to be work-ready at the site + $25.95 * in direct labour costs.

Two things you should notice about that calculation. First, I assume the first two are static, aka the same for everyone and every job. The level of expertise and cost of direct labour (* including any deductions for taxes, unions, etc.) are the pieces that move your pay rate up and down. Higher job, more pay; lower job, lower pay. Second, in this scenario, your middle cost drops to only 18% of the overall total…that’s partly why I was so generous above (38%), so that when the overall pay rate goes up, I keep it here in the middle of the 15-20% range that economists and others like to use.

Now, let’s fast-forward to scenario 2, two years later, still working from home, and assume RTO hasn’t happened yet for most people. It is June 21, 2022, and the same AS-04 job has risen to 75,217 in pay (as I said above, I’m ignoring that the same AS-04 would have risen with annual band increases to Band 3, 81,278 — I’m only going with the entry salary for simplicity to compare the jobs, not the person who got two raises). The new rate of $38.57 / hour would make the formula:

$4.15 to leave the house + $6.62 to be work-ready at the site + $27.80 in direct labour costs.

And now, let’s fast-forward to scenario 3, June 2024, and assume the AS-04 is back to the office three days a week. The starting pay rate has risen to 80,612. Throw that into the same formula and we get $41.34 an hour and:

$4.15 to leave the house + $6.62 to be work-ready at the site + $30.60 in direct labour costs.

Let’s make it simpler though and do it by day

If you convert that to a day rate, you get the following table.

	Scenario 1 – 2020 Pre-pandemic	Scenario 2 – 2022 Post-pandemic, WFH	Scenario 3 – 2024 RTO 3d / week
Base: 4.15 / h to leave house	$29.67 / day	$29.67 / day	$29.67 / day
Commute: $6.62 / h to go to job site	$49.65 / day	$49.65 / day	$49.65 / day
Direct wage: Varies	$194.63 / day	$208.50 / day	$229.50 / day
TOTAL per day	$273.95 / day	$287.82 / day	$308.82

For rough comparison, it was $275 a day in 2020, $290 a day in 2022, and $310 in 2024. We can quibble about all the various pieces, but the part that is the most interesting is the second row of the table — based on a generous calculation of how much the employer has to pay you to go to the office, it was about $50 / day when the pandemic started. That was already part of the base pay i.e., baked into your salary is about $50 a day to go into the office, assuming five days a week.

That’s the way labour markets work, that’s always been part of all calculations, and when that AS-04 said yes to that salary on April 1, 2020 (or the union did for all AS-04), that included about $250 a week to be at the office. It’s not broken out; it’s not three cheques; it’s all baked into all the considerations of anyone doing that AS-04 job. It includes your cost of getting out of bed, your cost of getting to the job, and the cost of doing the job. All in.

Sooooo, why is that cost per day important?

Because on March 12, 2020, we were all getting about $50/day in our pay cheque to be at the office five days a week. On March 13th, when we were all sent home, we CONTINUED TO BE PAID THAT $50 / DAY TO GO TO THE OFFICE EVEN THOUGH WE WEREN’T. The argument would have been, at the time, “Well, we’re locked out, in effect. You can’t cut our pay because we can’t go to the office!” Fair enough. So for Scenario 1, we got $50 a day to go, but well, we didn’t. So we just kept that money. We didn’t pay it back.

And people argue, “Well, why would we?”. Cuz the pay you got was to compensate you for all your other opportunity costs of going to the office, and while we’re still being paid for row 1 (get out of bed) and row 3 (doing the work), why do we keep getting paid for going to the office when we weren’t being “forced” to do that? Then we jump to Scenario 2, still getting paid to go, still working from home. And then finally, Scenario 3, still getting paid the “commuting premium” as if we were going every day, five days a week, but only actually going three days a week.

Now, I don’t want to give up salary any more than other PS members do. But there are f***muppets who keep writing on Reddit where journalists can see them that somehow we should get MORE money to go into the office under RTO. And so we should. That’s part of the formula. If you have to go to the office, you should get $50 more a day. Absolutely correct.

Except we’re already getting it. When we STOPPED going, we didn’t give the $50 back. It is still in our salaries. Built right in. That’s part of our original wage calculations, and every TBS and union analyst knows it.

Now people say, “Well, we should get it as “new”, particularly if we started during the pandemic.” Okay, then give back the $250 a week that you get now, and then they’ll give you $50 a day for the three days you go into the office. For those not keeping score at home, that segment of your pay will drop by 40% if you argue for more money for RTO over WFH — $250 given back, $150 in new costs.

Others argue, “Well, no one thinks that way.” Economists do. They know that you don’t want to go to the office; they know they had to pay you enough to go and do that; and they paid you enough to do it. How do they know? Cuz the free and open labour market had you take the job and do it. And unions agreed to the rate on behalf of the members. And people are not turning down government jobs because of pay. They may not like RTO, but people aren’t leaving in droves over their pay, so it is still covering their commuting costs. When it drops below that rate, everyone will quit. That’s the way markets work.

If you think about it like economists — and guess what? TBS has them in droves as do all the unions — when the pandemic hit and we got sent home, we didn’t give the money back for in-person working that ended, which was the equivalent of an instant 15-20% raise / pay cut we didn’t process.

If unions start talking changing rates for RTO, the immediate response from TBS will be: “Yes, let’s do that!”.

And they’ll want to discuss ALL of the pieces. Like, for example, you’re not going in five days a week like you are being paid to do, so everyone should immediately take $250 off per week and then get $100 or $200 back based on what they have to do. And then they’ll want to look at our wage rates and see if not physically having to be in an office, walk around to meetings, sit in board rooms, etc. and instead being on Teams sitting in our living rooms, etc., lowers the cost of getting out of bed or of doing the actual work.

If you want to disrupt the existing model and say it doesn’t reflect the world, great, but be prepared for ALL three elements to be discussed in an environment where the public that pays your salary thinks you’re entitled, useless and way-overpaid. Not a good environment to start with.

But we’re worse off, right?

So, let’s go back to that actual AS-04 at the start of the pandemic. In June 2020, they were making 71,599. In 2021, they moved up a band as an annual band increase to band 2, and again to band 3 in 2022. That tops them out for the AS-04 category, and in 2024, they would be at the top of the band still with a pay rate of 87,108. That’s 21% higher than the pay in 2020, or roughly 5% a year. However, the entry-level position rate only went up to 80,612, or 12.5% higher.

Inflation rates in Canada for the four subsequent years to go to the end of 2024 were generally 3.4%, 6.8%, 3.9% and 2.4%, or cumulatively, 16.5%. If you compare those to the “position”, yep, it went down which is what the union says every day to the press. But if you compare it for the individual who got two band increases plus all the COLA increases, they are 5% better off. Plus, going back to the daily in-office rate, they got a 15-20% bump, and then had three-fifths of that clawed back, so still an 8% benefit of not having to commute for WFH days. And that 8% is ongoing, not once. We’re 8% better off working three days / week in RTO than five.

Now, we can go dance on the head of a pin about whether it should be the same base rate to get out of bed (maybe lower, maybe higher), we can debate what the “piece” is for the direct wage component at any given level or not, and we can even debate if it is $50 a day or should be $60, 70, 80 per day.

But people want to argue about that third component? Great, then give back the money you’ve received since WFH started, $13K per year that we weren’t entitled to that TBS knows we got and didn’t claw back. See how it goes asking TBS for them to ignore that they didn’t claw it back and now give you more money for the SAME THING AGAIN.

And for those f***muppets who don’t think TBS thinks like this? It’s baked into every single aspect of the collective agreements, as well as procurement and a host of other scenarios.

If you have the same job at noon as you have at midnight, they have to pay you more. Is the work different? No. Is getting out of bed different? A little, but mainly they pay you MORE because they HAVE to incentivize you to overcome bucket two. If you work shifts, they pay premiums. If you work OT doing the same job, they pay more per hour to compensate you for those other components. ALL of the pay elements that shift because the hours or form change are all based on that second component. The job is the same at 2:00 a.m. as at 2:00 p.m. They just have to pay you more to do it.

Even in procurement, they have always had different rates to pay consultants based on whether they are in the office or working remotely. However, the odd thing is that it worked differently for them — on the assumption that a consultant onsite was using their office and computers, they were paid less (outside of the IT or other physical plants worlds). Now people want to argue it works the other way? More to go to the office and use their heat, hydro, computers, desks, etc.? Yeah, good luck with that, particularly after they already reimbursed you for home desks and chairs, AND let you claim office on your taxes, AND give you a computer to use.

So, if this is REALLY what you want unions to talk about with TBS, you’d better give them something else to chew on. Because TBS’ opening statement will be “Yes, let’s talk about clawing back $13K from everyone for WFH and then we’ll talk anything else you want to discuss.” Unions are stupid in many ways, but this isn’t one of them.