Balancing Act: Gradually Reducing The Size and Cost of Manitoba’s Public Sector

Ben Eisen, Equalization, Manitoba, Public Sector, Publications, Uncategorized

EXECUTIVE SUMMARY

Many observers of Manitoba’s economy and politics have suggested that Manitoba’s public sector is abnormally large by Canadian standards and that the province’s high level of government employment hinders economic performance.”1 In this policy series, we empirically assess the claim that Manitoba’s public sector is unusually large. Specifically, we examine patterns of public sector employment in Manitoba compared with other Canadian jurisdictions. Our analysis of Statistics Canada data shows that Manitoba’s government sector is indeed much larger than that of most other provinces. Specifically, the rate of government employment at the combined provincial and local levels relative to population is high by Canadian standards. This paper also examines the cost to taxpayers of maintaining this high rate of public sector employment and finds that it is significant.

Specific findings include (all data is from year 2010):

• Twenty-six per cent of jobs in Manitoba are in the civilian public sector (all levels of government). In the country as a whole, just 20 per cent of jobs are in the civilian public sector.

• There are 103 provincial and local level government employees per 1,000 residents in Manitoba. In Canada, there are 84 provincial or local government employees per 1,000 residents.

• There are approximately 23,400 more provincial and local government employees in Manitoba than would be the case if Manitoba’s rate of government employment were in line with the Canadian average.

• If Manitoba’s rate of public sector employment were in line with the national average the wage bill for government employment in the province would have been reduced by approximately $1.2- billion in 2010. This is equivalent to savings of approximately $985 for every man, woman and child.

• New Brunswick has the lowest rate of government employment of the six small provinces (population under two million residents). If Manitoba’s government employment rate were in line with New Brunswick’s (assuming no change in compensation per employee), Manitoba’s government wage bill would have been reduced by $640-million in 2010. This is equal to $520 per resident.

The current state of affairs has persisted for so long that many observers consider Manitoba’s large public sector as an immutable fact of its political culture. However, our analysis shows that over the next decade, the size of Manitoba’s government sector can be brought much closer to the Canadian norm without drastic cuts to the public service. Specifically, this paper shows the following:

• Today, there are 103 provincial and local government employees per 1,000 residents in Manitoba compared with a rate of 84 employees per 1,000 residents nationally.

• Manitoba’s population is projected to grow by approximately 11 per cent over the next 10 years.

• If Manitoba simply maintains government employment at 2010 levels without further growth for the next 10 years, its rate of government employment will fall to 93 employees per 1,000 residents by 2020. In other words, the current gap between Manitoba and Canada in terms of government employment rates can be cut in half over the next decade without cuts to government employment levels.

• If governments in Manitoba are willing to reduce government employment levels by just 5 per cent over the next decade, Manitoba’s provincial and local government employment rate can be reduced to 88 employees per 1,000 residents.

• A reduction in government employment levels of 10 per cent over the next decade combined with the population growth would reduce Manitoba’s provincial and local government employment rate to 83 employees per 1,000 residents—below the current national average.

This study shows that Manitoba’s public sector is significantly larger than that which exists in most provinces and that maintaining high rates of government employment creates a substantial expense for taxpayers. In Section 5, this paper also discusses several other possible negative effects that a large public sector may have for Manitoba’s economic performance.

This paper also shows that Manitoba can bring the size of its public sector much closer to the Canadian average in the medium-term without imposing drastic cuts to the government sector or imposing large-scale layoffs. If Manitoba is able to prevent further growth in the size of government or achieve minor reductions in public sector employment levels through attrition, the province will go a long way toward bringing the size of its public sector into line with Canadian norms over the next decade.

View entire study as PDF (18 Pages)