In all four Atlantic provinces, the public sector workforce is significantly larger, relative to population, than the national average. Furthermore, the gap in average compensation between public and private sector workers is larger in the region than in most other parts of the country. As governments across the region seek to identify strategies to control deficits and net debt, working gradually to reduce the public sector wage bill is one option that deserves careful attention.
According to recent data from Statistics Canada, in 2013, the civilian public sector in Canada accounted for 18 per cent of all jobs nationally. By comparison, this figure is 23 per cent in Atlantic Canada, where all provinces exceed the national average on this metric. In Prince Edward Island, the figure is 23 per cent, in Nova Scotia it is 22 per cent and in New Brunswick it is 20 per cent. In Newfoundland and Labrador, 28 per cent of all jobs are found in the civilian public sector, the highest level in the country.
When federal employees are removed from the metric, the public sector workforce is still significantly larger in this region than in the rest of the country. Across Canada, the sub-national (local and provincial combined) public sector represents 16 per cent of all jobs, compared to 20 per cent in Atlantic Canada.
Comparing the size of the government workforce in each province relative to its population shows similar results. Across Canada, there are 84 sub-national public sector employees per 1,000 residents. In Atlantic Canada, there are 96 such employees per 1,000 people. In Nova Scotia, for example, there are 99 sub-national public sector employees per 1,000 residents.
These sub-national figures, which exclude federal workers, are particularly important from a public finance perspective, since governments and taxpayers in the region primarily shoulder the costs of employing these workers whereas taxpayers across the country carry the cost of employing federal employees.
Maintaining many additional employees represents a significant expense for taxpayers. If governments aligned the public sector employment rates in Atlantic Canada with the national average relative to population, they would reduce the regional public sector wage bill by $1.9 billion. To provide context for what this figure might mean, the combined regional provincial-level budget deficit was $1.1 billion in fiscal year 2012-2013.
In addition to high levels of public sector employment, the regional government wage bill is also driven up by the fact that the gap in average compensation between public and private sector workers is larger in Atlantic Canada than in the rest of the country. Public sector workers, on average, earn more than private sector workers in all 10 provinces, but the difference is larger in the Atlantic region. The large gap between average compensation for public and private sector workers, combined with high employment levels, means that the government sector plays a much larger role in the labour market in Atlantic Canada than in other regions of the country. Examining the share of all labour compensation that governments pay to public sector workers demonstrates this fact. Nationally, government sector workers receive 22 per cent of all labour compensation. In Atlantic Canada, this figure is 31 per cent. In Newfoundland and Labrador, Nova Scotia and New Brunswick, this metric on the provincial level ranges from 30 to 32 per cent. In P.E.I., public sector wages account for 40 per cent of all compensation.
All Atlantic provinces face significant economic and fiscal challenges. Net public debt, for instance, is approximately $15,000 per capita in Atlantic Canada. Federal transfers to the region are declining and the population is aging, which has troubling implications for future revenue generation and health-care spending. Given these fiscal challenges, all of the factors that drive government spending in the region, including high levels of spending on public employment, warrant serious scrutiny and governments need to pursue savings wherever possible.
Ben Eisen is the director of research and Shaun Fantauzzo is a policy analyst at the Atlantic Institute for Market Studies (www.aims.ca). They are the co-authors of the new study, The Size and Cost of Atlantic Canada’s Public Sector
*This piece appeared in the opinion section of the Chronicle Herald
