Aiming for “Average” Could Help Manitoba

Commentary, Peter Holle, Public Sector

Recently I had lunch with a knowledgeable insider colleague who lamented over Manitoba’s lacklustre economic prospects.  Brian Pallister’s new provincial government had been dealt a terrible hand.  The deficit likely exceeds a billion dollars on top of an unneeded and financially disastrous Hydro expansion that threatens to take Manitoba into the poorhouse.

We agreed the new regime was taking its sweet time to figure things out. It began to “wear” the Bipole Keeyask fiasco by not pausing the construction, as was promised in the campaign. Painfully, he admitted the government was severely hampered by limited policy capacity and a micro-managing top-down culture.   And yes, higher taxes are on the way and will outrage the PC voter base Sounds harsh, but the last thing this government needs is fresh cash.  Call it the Manitoba Paradox – where its government spends the most resources only to achieve the least results.  Witness how the highest spending levels per capita for healthcare and education go hand-in-hand with the worst outcomes – the longest emergency room wait times, and Canada’s worst performing schools in international comparisons, etc.

Public sector staffing is way out of control as confirmed by Statistics Canada data, as detailed in the latest Frontier Centre paper: The Size and the Cost of the Public Sector in Western Canada.

The percentage of public employees as a proportion of the total workforce range from a low of 14.1% in Alberta to a high of 25.0% in Newfoundland and Labrador.  Manitoba comes in second highest at 21.6%. In other words, Manitoba   has 53% more public sector employees per capita than Alberta and 30% more than the national average (16.6%).

Using a slightly different measure – comparing the size of the public sector workforce with the population in each province – we find Ontario with a low of 73 government employees per 1,000 residents to a high of 111 in Manitoba.  Manitoba has the highest public sector staffing per capita in Canada – –34% larger than the national average, – 83 public sector employees per thousand.

A final statistic reveals how fast the government staff count was increasing under the now-departed Selinger Government. Manitoba’s public sector, including municipal employees, grew by 2,500 over the last two years  – up 2 employees per 1,000 residents.  Going back 5 years, the public sector has grown  by 15,000 – up 13 employees per 1,000 residents, equivalent to adding a city of employees the size of Steinbach to the public payroll in just half a decade.

At this point, our discussion got a little more interesting.   The average citizen and politician are mainly unaware of the scale of Manitoba’s budget challenges.  Chasing above inflation rate increases from federal healthcare transfers and,  conjuring up a carbon tax, he said, in the new post-climate change Trump era are not answers for Manitoba’s long-term success.  Neither will be rinky dink “Made in Manitoba” spending cuts like Filmon Fridays, consolidating departments, MLA pay freezes or inconsequential bureaucracy-directed reductions in management positions.

Which brings us to the concept of re-making Manitoba as an “average” province.  Consider a well-thought out plan embracing cutting edge, customer-focused public service models that deliver better services at substantially lower costs. A goal would be to converge the number of government employees over several years down to the national average.

If Manitoba was at the national average, there would be 28 fewer employees per 1,000 residents (35,000 fewer public service workers). Given that in 2015 the average salary of public employees was about $62,000, Manitoba taxpayers would then save about $2.2 billion per year.  To put this in perspective, this extra ‘dead weight’ spending would easily cover a $1 billion budget deficit and substantial tax cuts.

Admittedly, it would be politically difficult for even a prudent government to eliminate 35,000 provincial and municipal public service positions in the short term.  Government could start, however, by slowly reducing the number of positions through attrition – not replacing employees who resign or retire and not hiring new employees. If, for example, the public sector in Manitoba was reduced by 2 percent a year, and given about 1 percent growth in population, it would take only about eight years to reach the national average (83 per 1,000).

My internal colleague and I agreed that with proper leadership Manitoba could shed its position as a big-spending sleepy, public sector backwater, and prosper with a more dynamic economy based on lower taxes and higher performing public services.

Read the entire paper ‘The Size and Cost of the Public Sector in Western Canada’ here:

https://fcpp.org/2017/03/07/the-size-and-cost-of-the-public-sector-in-western-canada/