By JACKSON DOUGHART (AIMS Policy Analyst) and MARCO NAVARRO-GÉNIE (AIMS President)
• Chronicle Herald, 22 December 2016
The authors of AIMS’s study The Size and Cost of the Public Sector in Atlantic Canada, 2015 discuss the findings of their paper. They show how excessive and growing government employment in Nova Scotia constitutes a major expense for the province.
Nova Scotia will not likely correct its fiscal situation unless it curtails growing public sector employment.
In 1997, there were 86 public servants for every 1,000 Nova Scotians. In 2015, there were 101 per thousand, and 95,565 in total, according to Statistics Canada. A rise of almost one-fifth in 18 years shows a lack of discipline by governments of various stripes.
These findings are the subject of a recent paper at the Atlantic Institute for Market Studies. The Size and Cost of the Public Sector in Atlantic Canada, 2015, expands and updates an earlier AIMS study of the scope of government employment.
There are reasonable explanations why Canadian provinces have different service needs, requiring more or fewer workers. But the gap between Nova Scotia’s 101 public employees per 1,000 residents and the national average of 83 demands scrutiny. The province’s public-sector wage bill is a major factor in perennial deficits and growing public debt.
Those who rejoice in governments “creating” more jobs need reminding of economic realities. By investing in labour and increased productivity, private industry creates jobs and wealth. It contributes tax dollars to public coffers, without relying on the state to pay wages.
All public employment imposes cost on these coffers, requiring the removal of wealth from the economy to support public service positions. The call to mitigate public employment is also a prescription for greater private-sector economic activity.
In Nova Scotia, 25.5 per cent of all jobs are in civilian government and 21.8 per cent are with the province. Provincial employees earn 25.8 per cent of all compensation dollars.
The cost of funding provincial public service positions is borne by the local economy and tax base. Money that goes to supporting salaries in such high numbers can’t go to balancing the budget, covering non-wage program costs, reducing debt principal or lowering the tax burden.
Another important figure is the disparity in wages between public and private-sector workers. The average privately-employed person in Nova Scotia makes $43,414 per year. The average provincial government wage is $61,859 per year, or 42.5 per cent more.
This public sector wage gap makes government employment more attractive than its counterpart in the private sector. Important talent is drawn from the private sector to work for the state. In the long term, this hurts industry’s productive capacity. An economy will not soon thrive when government so strongly competes for its young talent with local enterprise.
The cost of a large public sector is immense, particularly when contrasted with the national norm. Proportionate to population, Nova Scotia employed 17,437 more people in 2015 than the Canadian average. Had the provincial government employed only the average number, it would have saved over $1 billion.
Employing fewer public servants is politically challenging, but the province needs to start somewhere. Neighbouring New Brunswick has managed to keep its government employment levels under control, dropping from a historical high of 93 public servants per 1,000 residents in 2010 to just 81 (two below the national average) in 2015.
Even if Nova Scotia committed to reducing its public sector employment level toward the national average by half or even a quarter, it could save hundreds of millions of dollars.
However thorny an issue, reducing the size and cost of the public sector must become a greater priority.