Growth in government employment outpacing private sector, especially in Ontario

This paper examines the evolution of public and private sector employment at both the national and provincial levels. While the public sector share of employment in Canada declined during the 1990s, its growth resumed dur¬ing the first decade of the 21st century. Specifically, there was a decline in the public sector share of employment starting in 1992, from 26.1 percent to 22.3 percent by 2003. Subsequently, an increase began, with a peak of 24.4 percent reached in 2010 and then a slight decline to 24.1 percent by 2013.

The public sector share of employment today has recovered to levels not seen since the early 1990s—an era of large government deficits, debt, and then fiscal restraint. The decline in the public sector share of employment in the 1990s was a response to the fiscal crisis brought about by large deficits and debts at both the federal and provincial levels. In the wake of the 2008–09 fiscal crisis and recession, deficits have again grown at the federal and provincial levels, resulting in some measures of fiscal restraint; but the public sector share of employment has to date remained stable at its recovered level.

With the exception of Newfoundland and Labrador, which saw a decline, all the other provinces have seen an increase in their share of public sector employment over the 2003 to 2013 period. The biggest increase was in Ontario, which saw its public sector share of employment grow from 20.0 to 23.2 percent. That 3.2 percentage point increase represents growth in the share of 16.0 percent.

The balance between public and private sector employment is of policy importance given the importance of private sector wealth generation as the foundation for resources that are used for public sector service provision and subsequent employment generation. An important dimension of this relationship is that public sector employment growth may crowd out private sector employment.

The public-private employment balance has an important influence on economic performance and needs further research that rigorously assesses causation and confounding factors.