There are two economies in Canada right now. In one, employment rebounded smartly after the pandemic maelstrom in the spring of 2020, recovering lost jobs by September of that year. In the other, it took until November, 2021 to rebound.
In one, the number of jobs has jumped by 18 per cent between February, 2020, and last month. In the other, the number of employees has risen by a third of that amount, just 6 per cent.
That first economy is the public sector; the second is the one that has to pay for the rapid expansion of the first – the private sector. The most recent data from the Labour Force Survey from Statistics Canada underscore the outsized growth in the number of public sector employees, particularly since the onset of the pandemic.
In July, the number of employees in the private sector (a measure that does not include the self-employed) fell by 42,000 from June. Public sector employment rose by nearly the same amount, 41,000, in July.
Compared with the same month last year, however, private sector employment rose by 86,000 in July. That sounds somewhat impressive – except that public sector employment surged by 205,000 over the same period. For every 10 jobs gained in the private sector, 24 jobs were added to public sector payrolls.
So who is on a hiring spree? Another set of Statscan data, the Monthly Survey of Employment, Payrolls and Hours – which distinguishes between levels of government – gives some insight. That survey shows that the federal government is responsible for nearly half the increase in public administration employment from 2019 to 2023, and just over two-fifths between 2015 and 2023. (The public administration category excludes such jobs as nurses or teachers, and gives a clearer picture of the relative growth of bureaucracies at various levels of government.)
There may be some trimming in order at the provincial level, but the bloat within the federal government stands out. The federal government’s own measurements indicate steady increases since the Trudeau Liberals took power, with the vast majority of government departments expanding. (The pruning that the Liberals proposed in the spring budget will reverse only a small fraction of that expansion.)
Unsurprisingly, Ottawa’s personnel costs have skyrocketed, rising from $27.5-billion in fiscal 2017 to $37.4-billion in fiscal 2022, according to a 2023 report from the Parliamentary Budget Officer. That same report points out that compensation per employee rose an average of 3.3 per cent in fiscal 2021 and 2022, much higher than the historical average of 2 per cent between fiscal 2008 and fiscal 2020. The uptick in compensation predates most of the inflationary spike in 2022 and 2023 – and the wage settlements that followed in its wake.
It’s an obvious point, but one still worth making: that pattern is not sustainable, neither fiscally nor politically. The private sector has to generate the wealth to fund all those new hires in the public sector.
Long before that golden goose is cooked, however, there will be political heat over bureaucracies growing relative to the private sector. “That’s not a healthy combination,” Donald Savoie, Canada Research Chair in public administration and governance at the University of Moncton, said in an interview.
Prof. Savoie says there is already frustration among Canadians, creating the danger that a future government may simply take an indiscriminate hatchet to the federal civil service. That would be a mistake, he says, and a missed opportunity to rethink the role of the federal bureaucracy. He lays out a framework in his book to be released next month, Speaking Truth to Canadians About Their Public Service.
There is no doubt that the federal bureaucracy can be cut, he says, and well within the mandate of the next government. Such reductions need not mean a degradation of service levels. Prof. Savoie says a leaner civil service, with fewer management layers, could be more responsive, better able to make use of technology – and perhaps even see a boost in morale.
That trifecta of happy outcomes won’t be easy to achieve, and will require a clear strategy and no small amount of political steel to face down public service unions. But it is a fight worth having, not just to free up fiscal capacity but to ultimately create a more focused and effective public service.