Booming public sector jobs hurting Canada’s economic future

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One day late last year, Justin Trudeau took to Twitter to praise his government for job creation.

“Thanks to your hard work and the hard work of Canadians across the country, Canada’s unemployment rate is the lowest since the pandemic began. In fact, over 154,000 jobs were created last month – and… in the age of COVID-19, over a million jobs have been recovered,” he wrote in a tweet.

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Gratifying on his face. But utterly misleading about the damage Ottawa and other levels of government have done to job growth and the economy, using private sector taxpayers’ money to stifle its growth — just under Ring.

My employer clients, almost unanimously, are desperate to hire new employees. The pool of available workers is at its lowest in 50 years. One of the biggest obstacles to economic recovery and growth is labor shortages, which prevent businesses from taking advantage of the business opportunities available to them. We see it in restaurants and other industries that cannot open at full capacity or have to reduce their hours or days of operation due to lack of available staff.

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And now we know the reason. It is not that a white-hot economy has absorbed all the available labor as most of us assumed. It is that the government competes with the private sector for this labor, paying salaries and benefits so high that the private sector cannot compete.

What is the proof of this?

The Fraser Institute recently published a report with sobering implications. Private sector employment (including self-employment) in Canada increased between February 2020 and July 2022 by a negligible 56,100 jobs, essentially a steady increase of 0.4%. In contrast, job creation in the public sector increased by 366,800 jobs, an increase of 9.4%. The government sector was responsible for an astonishing 86.7% of all job creation in Canada during this period.

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Once the figures are corrected for population growth over this period (2.7% for people over 15), employment growth in the private sector is even worse. The share of adults employed in the private sector has actually declined.

As Gwyn Morgan wrote in these pages recently, public sector workers have not only kept their jobs, but added a two-year credit to their pension benefits, and many have even seen their pay rise during the pandemic. While January figures from Statistics Canada show that public sector employment has increased by 305,000 since the start of the pandemic and that the 206,000 jobs lost that month came from the private sector, Morgan correctly concluded. title that “two categories of Canadians have been created: those who have neither job security nor income”. concerns and those whose ability to support themselves and their families depends on creating value for the companies that employ them.

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Another Fraser Institute report found that average public sector salaries were more than 9% higher than their private sector counterparts at the start of the pandemic. In addition to full salaries and benefits, 88% of civil servants were covered by a pension plan, compared to less than 23% of private sector workers and a higher percentage of these public sector pension plans are wealthier, at recession proof, defined benefit plans. Exacerbating inequality, the public sector is more immune to layoffs due to weak governments that fear having strikes under their watch. The irony is that the lowest paid workers in the private sector pay the higher wages and benefits of their public sector counterparts.

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What a contrast to much of the rest of the world. When Greece was forced by its economic situation to cut spending, it did not increase its public workforce. Instead, it drastically reduced government employees through digitalization, so more work was done by far fewer civil servants. Why don’t we do this?

Instead, Canada is doing the opposite and we are all paying for this strategic error. And no one benefits except (usually) overpaid civil servants and vote-seeking governments. An interesting shell game that is wreaking havoc on our economic fortunes.

Howard Levitt is a senior partner at Sheikh Levitt, labor and employment lawyers with offices in Toronto and Hamilton. He practices labor law in eight provinces. He is the author of six books, including the law of dismissal in Canada.