High Rates of Public Sector Employment Are Costly For Manitoba Taxpayers: Over time, Manitoba’s relatively large public sector can be significantly reduced without resorting to drastic cuts

Ben Eisen, Commentary, Manitoba, Public Sector, Uncategorized

Observers of Manitoba’s economy and politics have long noted that the provincial labour market is characterized by high rates of government employment.  Analysis of recent Statistics Canada data confirms public sector employment levels in Manitoba are indeed 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.

First, the numbers. 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 of these statistics for taxpayers 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 public sector wages in the province would have been approximately $1.22 billion less in 2010. To put this number into perspective, the entire budget for Manitoba’s provincial government 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 entire budget deficit.

These data demonstrate that Manitoba’s high levels of public sector employment come at a substantial cost to taxpayers. 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.  However, this is not the case.

Over the next ten years, the government of Manitoba projects population growth of approximately 11 percent. 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 in Manitoba 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 in Manitoba were willing to pursue small, gradual reductions in public sector employment over the next ten 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 percent over the course of a ten year period would trim approximately 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. However, these numbers show that an incremental policy of reducing the size of the government workforce slowly and gradually over time would be sufficient to bring public sector employment rates almost into alignment with the current national average in just ten 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. 

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Feedback:

The Sept. 3 Free Press editorial Time to reign in the civil service was based on misleading statistics and assumptions that should by no means be considered fact, yet are presented as such.

For instance, it quotes a study by the Frontier Centre for Public Policy, which states Manitoba has 103 people in local or provincial government positions per 1,000 residents, compared with 84 for Canada as a whole. This study is a classic example of comparing apples to oranges.

The Frontier numbers make no allowance for the fact that corporations such as Hydro, Manitoba Public Insurance and the Manitoba Liquor Control Commission are all counted as "public" in Manitoba, while in other provinces they are not. The Frontier numbers also make no delineation between full-time and part-time employees, counting every nurse or teaching assistant who works a 0.4 week. And there is no consideration given to the reality that the four largest provinces have the smallest public sectors. Coincidence? No, common sense. More people means greater economies of scale.

The article argues, without providing any stats, that "while private companies are becoming leaner, the civil service at all levels seems bloated." If the writer had done his homework, he would know that, in realty, while the number of federal public employees may have gone up, the number of provincial public employees has dropped 12 per cent since 1999.

Finally, I'd like to point out that Manitobans, or Canadians, or economists, are by no means in agreement about the "problematic" wage gap between public-sector and private-sector workers. It is still very much up for debate how best to emerge from these recessionary times. We at the Manitoba Government and General Employees Union believe there is nothing to be gained by a race to the bottom of the employment heap. Government has a role to play in maintaining stable workforces in times of uncertainty and ensuring reliable and efficient public services when Manitobans need them most.

Lois Wales, MGEU president

Ben Eisen's Response:

Manitoba Government and General Employees Union president Lois Wales' critique (Letters, Sept. 8) of our Frontier Centre study on public-sector employment in Manitoba contains inaccuracies and omissions.

First, Wales accuses us of comparing "apples to oranges." This charge is based on the oft-cited statistic in our report that there are 103 provincial and local government employees per 1,000 residents in Manitoba compared to 84 nationally, which she claims included workers at publicly owned corporations delivering services provided privately in other provinces.

In fact, we did not include employees from Manitoba's government business enterprises in this calculation. If we had, Manitoba's public sector would loom even larger.

Wales next accuses us of giving "no consideration" to the fact that the four largest provinces have the smallest public sectors relative to population, perhaps due to economies of scale. However, we do address this issue in our paper and in the Aug. 31 Free Press article, Public service bloated. There, we show Manitoba's public employment rates are significantly higher than those of New Brunswick, which enjoys no advantages related to economies of scale.

Last, Wales writes that the number of provincial public employees has dropped by 12 per cent since 1999, giving the false impression the public sector has been shrinking. But she is looking narrowly at the Statistics Canada "provincial general government" category and ignoring employment levels in health and social service institutions, school boards and post-secondary education that have increased by 33, 21 and 21 per cent, respectively.

— Ben Eisen