Time for Public Sector Adjustment

Commentary, Public Sector, Graham Lane

Brian Pallister likely knows that his time as Premier of Manitoba, now still leading a solid majority government, is coming to an end.  Fortunately for Pallister, his party and Manitoba, if he retires soon, by bringing in a new PC leader he could be remembered for making Crown corporations and the overall civil service much leaner than it was under the NDP.  From 2016 to 2020, the civil service went from 14,876 employees to 12,371, a drop of 2,505 employees (a decrease of 16.8%).

Give Pallister credit for resisting public sector pay hikes that the province cannot afford.  Pallister did not bring COVID-19 on us and he zealously worked to bring it under control (with western Canada’s most over-the-top lockdowns). Pallister didn’t start Hydro’s boondoggle expansion (though he failed to stop it when he could), that ‘credit’ goes to the NDP.  Where he failed was not in implementing long-overdue deep-seated reform of other parts of the public sector heartland – education, healthcare, crowns, municipal, etc.

Ending the education levy will remain Pallister’s most significant achievement on the tax front, though Manitoba still badly lags most provinces on having competitive income tax.

His tenure has been complicated by the Covid crisis and his government’s economically debilitating lockdowns. Manitoba is headed for financial disaster.  While many private-sector workers struggle to return to full-time employment – thousands laid-off in the still-challenging COVID-19 saga, public sector workers mostly maintained their jobs.  And, now, led by their unions, expect public sector workers to seek significant wage hikes after years of futile bargaining with the Pallister government.

The Pallister government is now mired in deficits and is forecasting more of the same. If the current situation doesn’t magically improve significantly soon, taxpayers are looking at continuing provincial deficits that will prevent any more substantial tax reductions. And, without tax reductions to attract companies, Manitoba will remain in a downward spiral of deficits, borrowings, and growing social discontent.

Without a miracle, if Pallister – who is almost universally reviled for his economy crushing lockdown policies – continues as is – with all of western Canada now lockdown free (including ending mask mandate, and Saskatchewan and Alberta both rejecting the idea of vaccine passports) –  he and his crew will go down in flames in the next election. The lockdowns will have killed innumerable businesses, postponed critical surgeries, and harshly disrupted the education paths of our school children.  As it is this would return the NDP, with large wage hikes for the public sector, driving even higher provincial government deficits.

If Pallister retired this year, his party would have a chance to find a new leader, one with the skill and vision to expand Manitoba’s beleaguered private sector, by combining real public sector reform with reduced taxation.

Manitoba’s vast public sector has largely kept its jobs, with thousands of workers in health care garnering large overtime wages.  The situation for many in the private sector is significantly different.  With thousands of private-sector full and part-time workers praying to get their jobs back, the wage hikes to come for the unionized public sector under a new NDP government will not come easy.

Canada’s Parliamentary Budget Office’s 2021 Fiscal Sustainability Report assesses the sustainability of federal and provincial government finances.  While, surprisingly, concluding that the federal government can recover from the half a trillion cost of COVID-19, its forecast is that Manitoba’s future finances are not sustainable.



Graham Lane, a retired CPA/CA, and a member of the Frontier Centre for Public Policy’s expert advisory panel.

Photo by Arnold N-chris on Unsplash.