Manitoba’s Rapidly Growing Public Sector

Canada, Commentary, Peter Holle, Public Sector, Uncategorized

Manitoba employs considerably more local and provincial public sector workers per capita than the rest of Canada. In an increasingly lower-income province facing a convergence of high debt, structural budget deficits, and flat or declining equalization payments, policy makers in Manitoba need to seriously explore options for reducing the public sector wage bill.

The most recent Statistics Canada data (2013) reports that 18 % of all jobs are in the public sector; that is, government employees at the federal, provincial and local levels excluding defence and Crown corporations. Manitoba’s figure is almost 30% higher than the Canadian average, at 23.35 % of its total workforce.  Only Newfoundland and Labrador has a higher proportion of public sector employment, with 27.5 % in the government sector.

Removing federal employees from the equation reduces the national average from 18% to 16.3%.   This is a more useful metric since the cost of employing federal employees is borne by all Canadian taxpayers, whereas the cost of employing sub-national public sector workers is a direct expense for local and provincial governments and their respective private sector tax bases. Here again, Manitoba ranks second with 21.6 % of all jobs in the sub-national public sector, 32.5% above the national average.

A third measure simply compares a province’s sub-national public sector employment to its total population, and in this metric, Manitoba is number one. Nationally, there are 84 sub-national public sector employees per 1,000 residents. Compared to all provinces, however, Manitoba has the highest number of sub-national public sector employees relative to its population, with 114 employees per 1,000 residents.  Troublingly, this is up from 103 in 2010 – in just three years, the size of Manitoba’s sub-national public sector has increased by 11 employees per 1,000 residents.   While the national average has remained static, Manitoba has become more of an outlier by increasing public sector staff by 11% in just 3 years.

How do these rather boring statistics relate to the average citizen’s pocketbook?

Manitoba employs 30 additional employees above the national average per 1,000 residents, or 37,788 additional sub-national public sector employees in total. Based on average government salaries, Manitoba spent an additional $2.154 billion dollars on the public sector wage bill more than the average province in 2013, or $1700 extra per resident.    Statistics Canada data does not lie, so if we connect the dots the rapidly expanding public sector payroll underlies the NDP government’s growing structural deficit and its relentless push for more taxes and revenues.

Given the outsized impact the public sector unions have on the province’s political class, is it possible to move towards a more balanced and sustainable public sector payroll?

A politically cautious route forward would be a simple staff freeze. It would allow Manitoba to reduce the size of its public sector and save millions or billions over the long term, without any drastic cuts to its public sector. The projected growth in population would lower the average simultaneously and allow significant reductions in the sub-national public sector size.

The provincial government projects that Manitoba’s population will increase from 1.265 million in 2013 to 1.431 million in 2023. If Manitoba were to maintain the number of its public sector employees at its 2013 levels, the province would have 101 employees per 1,000 residents in 2023, bringing it slightly below the ratio of 2010. However, modest reductions using retirements, attrition, technological innovation, and a return to merit-based hiring, would accelerate convergence with the national average. To achieve that, Manitoba would have to reduce the size of its sub-national public sector by 16.5 %, 1.65 % annually, which represents an entirely feasible and modest option compared to much more aggressive adjustments made by private companies.

The harsh reality is that the province may have little choice. Manitoba currently finds itself in a precarious fiscal situation. The Canadian Taxpayers Federation has calculated Manitoba’s debt to be exceeding $30-billion in 2013, with the present provincial government intent on adding another $24 billion in debt for Manitoba Hydro alone, this to build dams and transmission lines for shaky export markets against prevailing expert advice.   A recent joint-study by the Frontier Centre for Public Policy and the Atlantic Institute for Market Studies found that equalization payments to Manitoba are falling because fiscally challenged Ontario is increasingly crowding  out the traditional have-nots at the federal transfer payment buffet table.

The obvious answer is to bring, over time, provincial public sector employee complements down towards the national average sooner rather than later and save a very useful $2 billion annually.