Most Canadians are well aware that the government of Justin Trudeau increased the size and cost of the federal government immensely in less than 10 years. During the Trudeau years, government size increased by over 40 per cent in terms of the number of people employed and 70 per cent in terms of the cost of government. Looking back in time, the only occasion when the federal government increased in a comparable way was – surprise! – under Pierre Trudeau in the 1980s. Clearly Trudeaus like government big and expensive. In contrast, the Liberal government of Jean Chrétien and the Conservative government of Stephen Harper both presided over reductions in the size of the federal public service.
Considering the size of government, the question arises – are we taxpayers getting any more value or better services from government for all the extra tax dollars they are consuming? A recent report from the Macdonald-Laurier Institute (MLI) looks at this issue. The title of the report gives their conclusion away “Bigger, Not Better: How Canada’s Public Sector is Delivering Less for More.” It’s likely that conclusion would not surprise many Canadians, considering such things as the fiasco in the federal government’s ability to produce passports in a timely manner and the terrible experiences citizens have had when trying to deal with the famously inefficient Canada Revenue Agency.
The MLI study’s overarching conclusion is this: Canada’s government sector has grown in size while becoming less and less productive. While government’s share of the economy increased from 25.7 per cent of the economy in 2007 to 27.3 per cent in 2023, productivity fell with government employees producing seven per cent less output than their private sector counterparts. Average labour productivity growth in government over the last few decades has averaged only 0.2 per cent a year, as compared to 1.1 per cent in the private sector.
The MLI analysis introduced two new indicators to help assess government, the Size of Government Index to capture the scale of government activity and the Government Productivity Index to compare public sector productivity to that of the private sector. Using these measures, the MLI found that in the two largest government spending areas – healthcare and education – productivity was dismal while spending skyrocketed. The quality of public service also declined significantly in both important areas. Other key areas of government services were similar, except for defence, where productivity was actually found to have gotten better.
The MLI report makes a number of recommendations for improvement, including such things as better implementation of technology. Government is always woefully behind the private sector in incorporating productivity-enhancing reforms. Much of this is due to the high level of unionization in government, as unions always oppose the use of technology as it typically replaces jobs. Public sector unions are a huge problem in ensuring taxpayers receive value for money in public services. Other suggested reforms include such things as linking compensation to performance and pursuing sector-specific reforms in the big-spending portfolios such as healthcare and education. These types of things would be no-brainers in the private sector, where competition forces companies to be efficient.
One fact that emerged notably during the Justin Trudeau government’s regime was that government growth outstripped that of the private sector. When the growth of the wealth-consuming sector exceeds that of the sector that creates the wealth and pays for government, you know you’re in trouble. Government employees also earn more than their counterparts in the private sector, and enjoy much better benefits such as gold-plated, defined benefit pensions.
In the private sector, defined benefit pensions are on their way out, as they were never really affordable. These pensions in both private and public sectors were structured decades ago, when life expectancies were much shorter and market returns more predictable. Now that people are living much longer – a good thing – the math behind defined benefit pension calculations does not work anymore. The only reason they still exist in the public sector is because they can rely on the deep pockets of we agreeable private sector taxpayers to cover off the unfunded liabilities that would make these pensions bankrupt in a private company.
The recent federal budget promises to downsize the federal government, but only by attrition and generous buyouts. The last time this kind of downsizing was attempted took place under the Liberal government of Jean Chrétien in the mid-1990s when Canada was teetering on the brink of bankruptcy. What happened was the better-quality government employees were pleased to take the generous buyouts as they had other job possibilities, and the least competent employees stayed around as they lacked options. Hardly a recipe for improved productivity in government in the future.
As the MLI study demonstrates, and other research confirms, something has got to give on the issue of excessive government growth in Canada. The Carney proposals in the budget are not sufficient, especially in an economy with sluggish growth which can ill-afford more costly government. Given the protection of public sector workers by our tax dollars and their intransigent unions, the best way to accomplish change is to elect governments that are committed to downsizing government to a level affordable by Canadians, imposing accountability measures and implementing technology to improve productivity. All Canadians should hope this happens soon, before we become Greece.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
