By Marco Navarro-Génie
and Jackson Doughart
Atlantic Canada employs public sectors larger than the national average, to the detriment of the region’s economies.
Public policy choices mean that provincial and municipal governments have large commitments in civil servants’ salaries and benefits.
The task of shrinking provincial government expenditures will be difficult without addressing this problem.
Using Statistics Canada data on labour and population, our recently-published study confirms that Atlantic Canada’s public service is larger than most provinces to the west.
On average, 83 people are employed by sub-national governments in Canada for every 1,000 residents. This includes healthcare workers, education employees, provincial bureaucrats, deliverers of provincial and municipal services, and First Nations government employees.
Three of four Atlantic provinces employ more than the national average. Newfoundland and Labrador employs 109 per 1,000. Nova Scotia and Prince Edward Island employ 101 and 93 respectively. New Brunswick falls just below the national average at 81.
To boot, civil servants in Atlantic Canada earn more money than their private-sector counterparts. While the gap in Newfoundland and Labrador is small, the other regional provinces have far larger ones. Public sector workers on Prince Edward Island, for instance, earn on average more than twice as much as private industry employees.
Employing so many people in excess of the national average is a large expense for governments. The cost to sub-national governments in Newfoundland and Labrador equalled the province’s substantial budget deficit in 2015-16. Governments in Nova Scotia would have saved more than $1 billion had they employed only the national average of public servants relative to population. Had P.E.I. done so, it would have saved $108 million. Region-wide, the expense of these extra employees totalled over $2 billion in 2015. New Brunswick saves more than $100 million by dropping from 84 to 81 employees per 1,000 population.
Large government employment is not a problem endemic to the East Coast. Per capita, Saskatchewan and Manitoba have larger public sectors than Atlantic Canadian provinces.
And there is a trend toward greater public service employment in the last two decades. Relative to population, government employment in Newfoundland and Labrador and Nova Scotia has grown substantially. Since 1997, the first year for which these data are available, per capita public service employment has increased by 30 percent and 18 percent, respectively. Nationwide, such employment grew by 10 percent over the same period.
Clearly, money could be saved by paring the size of the public sector. This means delivering services more efficiently, privatizing or contracting some services performed by government employees, and controlling wage increases.
The call to limit the size of the public sector doesn’t imply a government firing binge. In many cases, holding the line on the number of employees and replacing fewer retiring workers would bring these provinces closer to the national average within a few years.
Certainly, reducing public sector employment is a political hot potato. With substantial numbers of people in government employment, calling for less such employment may seem heartless. But the trend toward larger government is not economically sustainable.
To thrive, Atlantic Canada’s economies need a large share of their labour forces engaged in wealth creation and industry growth (which incidentally underwrites the many public service wants of the population).
It’s time Atlantic Canada’s elected officials paid serious attention to the cost of their large public sectors. Closing the public sector employment gap would save hundreds of millions of dollars and encourage regional prosperity.
Marco Navarro-Génie and Jackson Doughart are policy analysts.