Public service bloated

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This article was published 31/08/2011 (5492 days ago), so information in it may no longer be current.

Observers of Manitoba’s economy and politics have long noted that the labour market is characterized by high rates of government employment.

Analysis of recent Statistics Canada data confirms public-sector employment levels in Manitoba are significantly higher than the Canadian average, at a considerable cost to taxpayers. To slow the growth of the government wage bill, Manitoba’s provincial government and municipalities should aim to gradually bring public-sector employment levels closer into line with the national average.

In 2010, across Canada, there were 84 public-sector employees at the combined provincial and local levels for every 1,000 residents.

In Manitoba, there were 103 such employees per 1,000 residents. This means that there were approximately 23,400 more provincial and local government employees in Manitoba that than there would have been if the province’s rate of public-sector employment had been identical to the Canadian average.

The implications are significant. If public-sector employment rates in Manitoba had been in line with the national average (assuming no change in per-employee compensation costs), spending on combined provincial and local government wages would have been about $1.22 billion less in 2010.

To put this number into perspective, the entire Manitoba government budget was $13.2 billion in fiscal year 2010, while its deficit was $467 million.

Some may object that bringing Manitoba’s government employment rate into line with the national average is an unrealistic goal, since this average is influenced by larger provinces that may benefit from economies of scale in the delivery of public services.

However, even if Manitoba achieved the more modest objective of bringing government employment into line with New Brunswick, which has the lowest rate of sub-federal government employment among provinces with fewer than two million residents, substantial savings could be obtained. Manitoba’s public-sector wage bill, for instance, would have been be reduced by approximately $640 million in fiscal year 2010. That’s about $500 per resident, and more than the province’s budget deficit.

These data demonstrate that Manitoba’s high levels of public-sector employment come at a substantial cost.

Unfortunately, the current state of affairs has persisted for so long that some accept Manitoba’s large public sector as an almost immutable part of the province’s political culture. Many have come to suspect that bringing Manitoba closer into line with Canadian norms would require drastic and politically unrealistic cuts to government staffing levels. This is not the case.

Over the next 10 years, the government of Manitoba projects population growth of approximately 11 per cent. This means that the ratio of government employees to residents can be reduced significantly if the total number of government employees is maintained at current levels rather than being allowed to increase over time.

In fact, if the total number of public-sector employees in the province were maintained at 2010 levels, with no reductions whatsoever, the number of public employees per 1,000 residents would be reduced from 103 to 93 by 2020. This would cut the current gap between Manitoba and the Canadian average approximately in half.

If provincial and local governments were willing to pursue small, gradual reductions in public-sector employment over the next 10 years, the gap between Manitoba and the rest of the country could be reduced further.

A reduction in total public-sector employment of just five per cent over 10 years would trim about 6,000 jobs from the public payroll.

This reduction, combined with population growth, would mean that the number of public-sector employees per 1,000 residents could be reduced to 88 by 2020 — just four employees above the current national average.

Such a modest reduction could be achieved relatively painlessly through attrition, without any sudden or ill-considered cuts.

Manitoba’s high rates of public-sector employment significantly increase the cost of government for taxpayers.

These numbers, however, show that an incremental policy of reducing the size of the government workforce slowly and gradually over time would bring public-sector employment rates almost into alignment with the current national average in just 10 years.

By adopting this strategy, Manitoba’s political leadership can gradually streamline government, strengthening the province’s fiscal position, while contributing to the development of a more dynamic and productive market-driven provincial economy.

 

Ben Eisen and Jonathan Wensveen are policy analysts with the Frontier Centre for Public Policy and the authors of a new study on public sector employment in Manitoba, available at www.fcpp.org.