The federal public service has become a "stealth equalization" program that overwhelmingly favours the Maritimes and Manitoba at the expense of Ontario and the rest of Canada, a new study shows.
In a 24-page report prepared for Winnipeg’s Frontier Centre for Public Policy to be released Monday, author Ben Eisen uncovered astonishing disparities among the various provinces when it comes to employees on Ottawa’s payroll.
"Equalization transfers have become so large that they result in the subsidization of relatively high levels of provincial spending on government programs in the have-not provinces," writes Eisen, referring to the national wealth-sharing program.
"This has contributed to the development of disproportionately large public sectors in recipient provinces, and created disincentives for rational public policy that could increase own source revenues," he continues in "Stealth Equalization: How Federal Government Employment Acts as a Regional Economic Subsidy in Canada."
Prince Edward Island leads the way with 3,657 federal bureaucrats working in that province for every 100,000 residents.
Nova Scotia is second with 3,210 per 100,000 people followed by New Brunswick at 2,655 and Manitoba at 2,619. Newfoundland comes in at 1,823.
While Ontario is slightly above the Canadian average of 1,602 federal public servants per 100,000 residents – at 1,742 – that’s largely because the national capital is here.
Quebec, the largest equalization recipient and traditionally the greatest benefactor of federal largesse, lags behind the national average with 1,378.
But oil-rich Alberta – which, with Ontario and British Columbia, pays the most into equalization – has the lowest rate of federal public servants at just 936 per 100,000.
"Factors such as demographics and the varying sizes of the provinces do not explain this phenomenon," writes Eisen.
"For example, despite being a similar size and having a similar demographic profile, have-not province Manitoba has more than twice as many federal employees as a proportion of the population than does neighbouring Saskatchewan."
While Ontario is technically a "have-not" province, because it receives equalization, the amount pales in comparison to what taxpayers here contribute to the federal program.
In 2009-10, Ontarians forked over some $5.7 billion to Ottawa and Queen’s Park got a $347 million equalization payment when the money was redistributed.
In the foreword to Eisen’s study, Frontier Centre president Peter Holle and Ontario Public Policy Institute chair David MacKinnon warn that regional subsidy schemes can have a "disastrous impact … on national productivity."
"The federal government uses the disproportionate employment of public servants in most equalization-receiving provinces to convey an extra and invisible layer of subsidies that are a very large fraction of equalization receipts in those provinces," they note.