Fairer pay in the public sector: Gender and new Canadian pay gaps in the public and private sectors, 2025

Summary

While economic theory assumes wages reflect productivity, real-world data reveals persistent pay gaps based on gender and immigration status. To isolate these disparities, this study analyzes 2025 Labour Force Survey data and controls for 15 worker characteristics like education, tenure, age, and location to isolates the residual gaps and a clearer look at wage discrimination between the public and private sectors.

Pay gaps based on gender and immigration persist in Canada. The public sector remains a fairer place for both women and new Canadians to work—pay gaps persist here but they’re much smaller than in the private sector. In no part of the analysis are women actually paid more than equivalent men or immigrants paid more than equivalent Canadian born workers, but the pay is closer in the public sector.

The gender pay gap among public sector workers is smallest in the health care and social assistance industry. It is widest in the education industry. But none of these are as bad as the gender pay for private sector workers across all industries.

In 2025, women in the public sector were paid 4.9 per cent more than equivalent private sector female workers. Men with equivalent characteristics in both the public and private sectors were paid much more than private sector women, at 10.2 per cent and nine per cent, respectively. The five-point higher pay between equivalent women in the public vs. private sectors ensures that public sector workers, broadly, are paid more than private sector workerss—because women face less pay discrimination in the public sector.

Gender pay gaps are also analyzed along the wage spectrum. For the lowest-paid workers, there is no gender or public/private pay gap because wages are largely determined by minimum wage laws. In the lower-middle, women in the public sector achieve pay equity with men in either sector. But women in the private sector are left far behind. From that point onward, the gender pay gap only grows in both the public and private sectors.

The analysis tracks a distinct “motherhood penalty” in the private sector, where women with children make 0.9 per cent less than those without. On the public sector side, women experience no such penalty, earning slightly more if they have children. Both sectors feature a large “fatherhood premium,” rewarding men with children with a seven per cent wage advantage in the private sector and a 5.1 per cent boost in the public sector.

The public sector side of health care and social assistance shows the smallest gender pay gap in 2025, with women being paid only 1.8 per cent less then equivalent men. Women working for the federal, provincial and municipal governments are still paid 4.8 per cent less than their male equivalents.

The worst pay gap in public sector is in education, where women are paid 7.4 per cent less than equivalent men.

Several occupations show large divergences between public and private sectors. Senior executives are paid 35 per cent more in the private sector and private health professionals enjoy a 20 per cent advantage on the private side. Educators and community service workers secure an eight per cent wage premium by working for a public sector employer.

New Canadians are another group that faces discrimination. Even after adjusting for all 15 characteristics, they are, on average, paid less, although the gap is lower in the public sector.

Systemic pay disparities endure into 2025, but the public sector remains crucial for curbing inequality. Realigning public sector pay to mirror the private sector would dismantle this progress, cutting pay for women and new Canadians working in public administration, health care and education. All the while, executive compensation would have to ballon to reflect levels in the private sector. Ultimately, the private sector should strive to emulate progress made in the public sector at paying similar workers more fairly.

Introduction

While economists are taught to rationally assume that workers’ wages are determined by the value they add to the economy, in the real world we can observe persistent differences in wages based on factors that shouldn’t matter to one’s value or productivity, like gender. We can better examine these unexplained differences by statistically adjusting away known differences between workers, including things like education, tenure, age, industry and so on. We can remove the impact of these known factors to isolate the gap in pay to only the unknown factors. This approach likely gets us closer to measuring discrimination or the pay gap due to a particular worker characteristic like gender or immigration status. A pay gap doesn’t necessarily mean pure discrimination because there may be unobserved factors that could explain such a gap, but conducting this adjusted pay gap analysis gets us much closer to isolating the cost in dollar terms to having a particular characteristic, like being a woman or being a new Canadian.

By examining different aspects of what may be driving these gaps, we may gain a better understanding of how can close them and make Canada’s labour market a fairer one for all.

The pandemic reshaped the job market in Canada. The mass business closures and resulting unemployment in multiple industries led to a significant rebalancing of employment upon the reopening. While disruptive, federal government created unemployment supports that were much more generous than before or after the pandemic. This allowed Canadians to conduct more thorough job searches, improve their skills and often switch industries to improve their prospects.¹Katherine Scott and Trish Hennessy, Canada Emergency Response Benefit: More than just an income program, Canadian Centre for Policy Alternatives, June 2023 (https://www.policyalternatives.ca/news-research/cerb-more-than-just-an-income-program/ ). The rehiring phase was a period of strong wage growth and low unemployment, giving workers more leverage in the hiring process.

By 2025, new threats have emerged to Canadian employment, with tariff threats emerging weekly and the federal government engaging in mass layoffs. Unemployment has been creeping up and slow economic growth in 2025 threatens even higher unemployment in 2026.

Methodology

Comparing raw pay average between two groups, for example the average hourly pay of workers in the public sector versus those in the private sector, fails to adjust for obvious differences in those populations. The implication of these raw comparisons sometimes leads people to conclude that public sector workers should take a pay cut because their average pay is higher. However, there are almost no food preparation workers in the public sector and there are plenty of folks flipping burgers in the private sector. The public sector tends to employ workers with more education, on average. It makes little sense to compare someone with a medical degree to someone flipping burgers and say the doctor or nurse should be paid minimum wage, like the burger flipper. If the medical worker’s pay was reduced to minimum wage, they’d just quit.

It makes more sense to compare like with like on both sides of a pay comparison. To compare a worker in the public sector and one in the private sector, you’ve got to have equivalent education. However, there are plenty of other factors besides education that could affect someone’s pay. Using two statistical approaches—Ordinary Least Squares regression and Unconditional Quantile Regression²Sergio Firpo, Nicole M. Fortin, and Thomas Lemieux, “Unconditional Quantile Regressions,” Econometrica 77, no. 3, 2009: 953-73, http://www.jstor.org/stable/40263848.—it is possible to adjust for 15 worker characteristics. In each section, we’ll examine a particular pay gap by pulling out a specific characteristic and adjusting for the other 14 worker characteristics. We’ll be using the Labour Force Survey (LFS), which is the pre-eminent monthly survey of workers, and we’ll be examining all months in 2025.

The 15 worker factors available in the LFS are:

1. Location: Province
2. Location: Census Metropolitan Area
3. Age
4. Gender
5. Education
6. Marital status
7. Public vs private sector
8. Job tenure
9. Permanence of employment
10. Full time/part time
11. Size of workplace
12. Industry
13. Occupation (43 groupings of National Occupation Classification)
14. Union membership
15. Immigration status

The wages data collected in the LFS are hourly wages and those are the differences that we’ll be examining. However, differences in hourly wages aren’t the same as differences in annual pay. We may have two workers with the same hourly wage, but if one person works twice as many hours, this makes a big difference over the course of a year. We’re skipping those implications here. In terms of the gender pay gap, we’ll likely be underestimating it because the LFS can’t provide us with annual pay data.³Melissa Moyser, “Measuring and Analyzing the Gender Pay Gap: A Conceptual and Methodological Overview”, Statistics Canada, August 2019, ( https://www150.statcan.gc.ca/n1/pub/45-20-0002/452000022019001-eng.pdf ).

In this paper, we’re focusing on pay gaps based on gender and immigration status mixed across the public and private sectors. Those are the identities included in the Labour Force Survey Public Use Microdata file (PUMF). There are a variety of other identities and groups that have pay gaps well worth studying, they just aren’t included in the dataset used in this study. For instance, other research has calculated the wage gap for Indigenous workers in Canada at 20.1 per cent in 2022.⁴Marie Drolet and Mandana Mardare Amini, “Intersectional Perspective on the Canadian Gender Wage Gap”, Statistics Canada, 2023, (https://www150.statcan.gc.ca/n1/en/pub/45-20-0002/452000022023002-eng.pdf ) There are likely gaps for racialized workers and 2SLGBTQI+ people. We’d likely see wage discrimination there as well, but those aren’t variables in the PUMF (yet). The LFS does collect Indigenous and racialized identity data, they just aren’t included in the PUMF at present.

We’re examining the differences between public and private sector wages. The public sector means not just public administration, but also most of health care and education workers, although several of these sectors also have an important proportion of private sector workers. The public sector includes all levels of government: federal, provincial, municipal or First Nation’s governments.

The gender wage gap: Things are looking up

The gender section adjusts for our 14 known characteristics of workers and focuses on the difference driven by the 15th factor: gender. The gender pay gap continues to exist in both the private and public sectors in 2025.

The public sector gender pay gap remains roughly half that in the private sector. Women in the public sector are still facing discrimination compared to equivalent men, but they are somewhat more fairly paid than in the private sector.

We can look at the gender pay gap another way, by setting women in the private sector as our reference group. We can then compare the adjusted differences in pay to that reference group, by gender and sector.

Women in the private sector are paid the least of all four groups, even after our statistical adjustments. In 2025, equivalent women in the public sector are paid 4.9 per cent more than private sector female workers. Men with equivalent characteristics in both the public and private sectors are paid much more than private sector women, at 10.2 per cent and nine per cent, respectively. The five-point higher pay between equivalent women in the public vs. private sectors ensures that public sector workers are paid more than private sector ones—because women face less pay discrimination in the public sector.

The above gender differences are the average adjusted differences across all workers at all wage levels. Averages can be skewed by big differences at the top or bottom of the income spectrum. A different statistical technique⁵Sergio Firpo, Nicole M. Fortin, and Thomas Lemieux, “Unconditional Quantile Regressions,” Econometrica 77, no. 3, 2009: 953–73, http://www.jstor.org/stable/40263848. can allow us to examine adjusted pay differences at different hourly wage levels. Figure 3 examines the gender pay differences at the 10th, 25th, median, 75th and 90th percentile in 2025.

This allows us to examine the pay gaps for lower-paid workers, higher-paid workers and workers in the middle of the income spectrum.

In Figure 3, private sector women are the references group and represent the zero per cent line, with the other three groups compared to them. In both years, and at almost all income levels, private sector women are the worst paid among these statistically equivalent groups. The only case where private sector women aren’t the worst paid is at the highest-pay levels examined (p90), where public sector women are slightly worst paid, particularly in 2025.

At the bottom of the income spectrum, at the 10th percentile, there is little difference in pay between men or women working the public or private sector. Private sector women are the worst paid, but not by much. In both years, the equivalent hourly wage at p10 is just above the minimum wage. For instance, in 2025 the p10 wage was $18 an hour. Here, pay is determined by the statutory minimum wage in each province or territory, which is the same no matter the sector or gender. Other characteristics of the worker have little to no role in determining a worker’s wage.

Once we move up to the 25th percentile, these are workers making around $22 an hour in 2025—not a tremendous amount, but well above minimum wage. Here, we find that public sector workers are roughly at gender parity, men and women in public sector make roughly the same. At p25, public sector men and women make roughly 14 per cent more than private sector women. Private sector men also make 7.4 per cent more than private sector women, but they don’t make as much as equivalent public sector workers at this point in the income spectrum.

The patterns change as we move to the higher-pay levels. At the 75th and 90th percentile for workers making around $45 and $60 an hour, private sector men’s pay is the highest. This trend accelerates the higher up we go: at the 90th percentile, private sector men make 13 per cent more than equivalent private sector women.

The gender pay gap in the private sector is worse than the situation in the public sector at every point along the income spectrum. However, for both sectors, the gender pay gaps get worse the higher up the income spectrum we go. Gender pay inequality rises with income, a trend at play for some time.⁶Nicole Fortin, “Increasing earnings inequality and the gender pay gap in Canada: Prospects for convergence”, Canadian Journal of Economics, Volume 52, Issue 2, April 2019, (https://doi.org/10.1111/caje.12386 ).

In the public sector, we see wage parity for women in lower-income levels. But this is eliminated at higher levels, where women are consistently paid much less than equivalent men. As we reach the highest incomes, the gender pay gap in the public sector is wide, at 10 per cent.

The motherhood penalty and the fatherhood premium

The presence of children has shown an impact on pay rates, but with opposite effects for women and men. Men with children tend to benefit from the perception that they are more stable and more worthy of advancement and, therefore, of higher pay. Women, on the other hand, often take more time off to care for a new child in the first year. The demands of parenting often force women to choose more flexible jobs, which often come with compensation compromises.

The result is a motherhood penalty and a fatherhood premium when we compare equivalent men and women with or without children. The presence of children isn’t a variable that we adjusted for in the other regressions, but we introduce it here and study its effects. Also, this isn’t an age effect whereby older people are more likely to have children and make more due to age. Age is part of the regression and so its effects are adjusted away.

In the Canadian context, using the LFS data, we find that there is a motherhood penalty for women in the private sector. Put another way, women working in the private sector who have children make 0.9 per cent less than women without children.

In the public sector, we don’t see a motherhood penalty. Instead, women with children make slightly more than women without children.

The fatherhood premium is much larger in our analysis. Men with children in the private sector were paid seven per cent more in 2025 than men without children. In the public sector, men with children received 5.1 per cent more in 2025 than men without children.

Public sector pay gaps by main industries

Thus far, we’ve examined all public sector workers across all industries, grouped together. There are three main industries in the public sector that can be further differentiated. We can use those to better understand what parts of the public sector are doing better or worse at reducing the gender pay gap, after our statistical adjustments.

The main industries for public sector workers are

1. Public administration,
2. Education workers, and
3. Health care and social assistance.

Public administration involves employees of federal, provincial, municipal or First Nations governments who are administering public spending and public programs. The second industry is education workers in public K-12 schools, public universities and colleges. A portion of this industry is also on the private sector side, but those are excluded for this analysis. Third is the health care and social assistance industry. These are public sector workers in hospitals, physicians’ offices, public child care and food or housing supports, often municipally. Again, there are private sector workers who work in health care, but they are excluded from this group. This broad health care and social assistance category spans very difference service types.

There are other public sector workers across almost all other industries, but they make up a small proportion of any individual industry; they are grouped together in a broad “other public sector” category.

Figure 5 compares the pay gap in those public sector industries but also includes the private sector pay gap for all industries from Figure 1 for comparison.

The public sector side of health care and social assistance shows the smallest gender pay gap in 2025, with women being paid only 1.8 per cent less then equivalent men. Women working for the federal, provincial and municipal governments are still paid 4.8 per cent less than their male equivalents.

The worst performance is delivered by the public sector in education, where women are paid 7.4 per cent less than equivalent men.

However, none of these broad sectoral groupings of public sector workers shows the same gender pay gap as women experience in the private sector, where they are paid 9.2 per cent less.

These smaller gender pay gaps in major public sector industries result in public sector workers being, on average, slightly better paid than private sector workers. But this is because women working in public administration and health care aren’t quite as heavily discriminated against as they would be in the private sector. And women working on the public side of the education sector are being similarly discriminated against as women in the private sector.

If we forced more gender discrimination in public administration and the public side of health care and social assistance, public and private sector pay rates would be equivalent, although this is not a desirable direction.

Largest pay differences, by occupation, in the public and private sectors

There are several occupations where there are substantial pay differences between public and private sector workers, even when adjusting for the other 14 characteristics. Here, we’re using the Labour Force Survey list of 43 National Occupation Classifications (NOC), which are two- to three-digit NOC codes.

There are two occupations that stand out, where public sector workers are paid more than the equivalent private sector workers: Educators (NOC 412) and those in community service (NOC 413). However, the wage premium of these public sector occupations was eight per cent in 2025.

On the other hand, there are two occupations that stand out as having much better pay in the private sector than in the public sector, even after adjusting for our 14 worker characteristics. The biggest gap is among senior executives (NOC 0). In 2025, the gap was tremendous, at 35 per cent. The pay in among Canada’s top-paid private sector CEOs would make a public sector executive in any industry blush. You can’t make $16.2 million in public life like you can as a CEO on the private sector side.⁷David Macdonald, Living the high life: A record-breaking year for CEO pay in Canada, Canadian Centre for Policy Alternatives, January 2026, ( https://www.policyalternatives.ca/news-research/living-the-high-life-a-record-breaking-year-for-ceo-pay-in-canada/ ). The extreme pay for senior executives is also reflected above when we look at the pay differences at the high end of the income spectrum.

Health professionals (NOC 311)—like doctors, dentists, pharmacists, veterinarians and optometrists—are also paid more in the private sector. Here, we’re seeing that overpayment hit a 20 per cent premium in 2025.

The immigration pay gap

While much of the above analysis has examined the gender pay gap, the other worker characteristic we can study with the LFS data is the public-private pay gap for new Canadians.

New Canadians are another group that faces discrimination. Even after adjusting for all 15 characteristics, they are often still paid less. This is often related to the education and experience outside Canada being less valued and resulting in lower pay.

Figure 7 breakdown differences in pay for recent immigrants and immigrants who landed over 10 years ago versus people born in Canada. The immigration pay gap in either sector is the worst for those who arrived recently. Those who have been in Canada longer seem to face less pay discrimination. The public sector has a smaller immigrant pay gap, but it still does pay equivalent new Canadians less than people born in Canada.

The public sector is better able to reduce the immigrant pay gap and better recognize immigrant potential—but pay discrimination still exists in the public sector and it is worse for those arriving within the past decade.

Conclusion

Pay gaps based on gender and immigration persist in Canada in 2025. The public sector remains a fairer place for both women and new Canadians to work—pay gaps persist here but they’re much smaller than in the private sector. Women aren’t paid the same as equivalent men in the public sector, but their pay is much closer. This is particularly the case in the bottom of the pay spectrum, where women in the public sector are paid almost the same as men in the public sector, a rarity in Canada.

The gender pay gap among public sector workers is at its smallest in the health care and social assistance industry. It is at its widest in the education industry. Although none of these are as bad as the gender pay for private sector workers across all industries.

When we look at different occupations, we find that some are heavily overpaid in the private sector, notably senior executives. Health professionals are also paid more in the private sector. Some occupations are better paid in the public sector, notably educators and community service workers, although the premium is much smaller.

It is certainly possible to have public sector pay mirror that of the private sector, but that would be the wrong way to go. Achieving this kind of parity would mean adopting the private sector’s wider gender pay gap, leading to pay discrimination against women—most notably in health care and public administration. It would also mean requiring a 30 per cent pay increase for public sector executives while cutting the salaries of educators and social workers by eight per cent. That would clearly be a step in the wrong direction.

There is a clear need to continue to reduce gender and new Canadian pay gaps in the public sector.

Regression tables

Complete regression tables are available in an Excel file

Acknowledgements

The author would like the thank Katherine Scott for her review of an earlier version of this report.

About the author