Fraser Institute News Release: Growth in Government Employment Outpacing Private Sector, Especially in Ontario

TORONTO, ONTARIO--(Marketwired - June 25, 2015) - The public sector in Canada (including federal, provincial and local government employees) is growing and reaching proportions not seen since the early 1990s -- an era marked by large government deficits and high debt -- finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

The study, An Analysis of Public and Private Sector Employment Trends in Canada, notes that, from 2003 to 2013, employment in Canada's public sector increased by 22.6 per cent, more than double the rate of increase in the private sector (10.7 per cent).

"There are important adverse economic and fiscal implications that may result from growing public sector employment," said Livio Di Matteo, study author, Fraser Institute Senior Fellow and Professor of Economics at Lakehead University.

"Empirical research has pointed to a so-called 'crowding-out' effect where employment through public sector job creation is offset by a reduction in private sector employment elsewhere in the economy. This is a concern because it's the private sector -- through investment and innovation -- that largely generates the wealth and taxes needed to provide the public services that we all hold dear."

Government sector employment, as a share of total employment, peaked in 1992 and started to decline after governments responded to the fiscal crisis brought about by large deficits and debts both federally and provincially.

But since 2003, the share of government employment has increased: In 2013 (the latest year of available data at the time of writing), 24.1 per cent of employees in Canada (excluding the self-employed) worked for government, compared to 22.3 per cent in 2003.

The study also examines the growth rate of public sector employment -- at all levels of government -- in each of the provinces.

By a considerable margin, the largest increase (relative to private sector employment growth), took place in Canada's most populous province: From 2003 to 2013, public sector employment growth in Ontario (27.6 per cent) dramatically outpaced private sector employment growth (5.6 per cent) by a whopping 22 percentage points.

Interestingly, Ontario's 10-year increase in the number of people working for the public sector coincides with a period of increases in provincial government spending, ballooning government debt and sluggish economic growth.

"Preliminary statistical analyses suggest that, for Canada's provinces over the 1990 to 2013 period, larger public sector employment shares are accompanied with lower growth rates of private sector employment and show a flat relationship with economic growth rates," Di Matteo said.

Livio Di Matteo is in Toronto and available for media interviews.

Public and private sector employment growth rates between 2003 and 2013 (by province):

*Percentage point differential between public sector and private sector growth rates

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.