We need to find ways to provide more income equity in Canada and market forces are unsufficient to achieve that objective. That said, a very strong supporter of free markets in this country, the Canada West Foundation, has even published recently on the issue of civil servant pay and the performance of governments and economies. Holding onto skilled workers requires paying them a decent living and it is not cost effective to try and suppress wages or salaries in pursuit of illusory tax savings. Governments, like any business in the private sector, are delivering a product or a service, and key to provide value for money is having that skilled, experienced workforce. Losing staff or having to rehire, train up etc. is a costly strategy for any organization.
As living wage discussions take centre stage, some of the other discussions around compensation are worth looking at. Here's the Canada West piece; good reading on the subject: http://cwf.ca/_webapp_1198328/Cutting_Civil_Servants_Pay_a_Bad_Idea