Government Employment Reductions in the 1990s

Commentary, Economy, Ben Eisen

Lately I’ve been playing around with public sector employment statistics in Canada, and I created this graphic. Looking at the data from the 1990s, it is pretty clear that reducing government employment rates seems to have been an important component of Canada’s success at reigning in costs at the federal and provincial levels during the austerity era.

This is total government employment, at all levels. It includes just about the entire broader public sector, except for crown corporations (so public school teachers, university profs, nurses etc. are all included along with the bureaucracies at the local, provincial and federal levels).

Note that total government employment reached 2, 800, 000 people in February 1993 before coming all the way down to about 2, 554, 000 in February 2000 (and then much lower in the summer of that year – it goes down every summer). That’s about a 10 percent reduction in total government employment across Canada in 7 years. And we’re talking about real reductions in the actual number of public servants – not just as a share of the population. When you think about the fact that the population was growing during this period, this rapid reduction in the number of government employees in such a short period really seems pretty striking to me.

Austerity isn’t easy, and when Canada had to slash its deficits in the 1990s it looks like part of what that meant was a real reduction in the number of people employed by government across the country. Perhaps there’s an important lesson here for our American neighbours, who face a budget crunch that might be even worse than what we faced in the 1990s and are going to need to implement some pretty serious austerity measures themselves once they finally get out of the economic mess they’re currently mired in.

For anybody who is interested in Canada’s successful deficit reduction story from the 1990s, FCPP is releasing a paper next week authored by David Henderson that discusses what he calls “Canada’s Budget Triumph” of the 1990s and the policy lessons that we should learn from it today. It’ll be available at