Over the last five decades, Atlantic Canada has trailed the rest of Canada in economic growth - with a few exceptions – and there are at least two structural reasons for this weaker performance.
The first is population distribution: Atlantic Canadians are more than twice as likely to live in rural areas, relative to the rest of the country, leaving many with limited economic opportunities and overly dependent on seasonal work. This reduces overall economic output and growth.
The second problem is the composition of the workforce, which is proportionately more likely to work in public sector. In Canada, one-in-five jobs are in the public sector, according to the latest Statistics Canada numbers for 2018, but in the Atlantic region, that number is one-in-four. This means, proportionately, the private sector is smaller and can’t grow the economy in the same way as elsewhere in Canada. This is analogous to playing a man short on a hockey team for the whole game and hoping to at least tie the other team. This is important if you believe, as I do, the private sector is most responsible for growing the economy through job creation and capital investments.
There are civil servant jobs with the federal, provincial and municipal governments, not to mention various Crown corporations, as well as jobs in public education, universities and colleges, healthcare, policing, fire protection, and the military, among others. These are, mostly, well-paying jobs and do contribute to the economy. But these jobs must be balanced with the economy’s ability to afford them.
The higher proportion of public sector jobs in Newfoundland and Labrador has been funded by transfer payments, debt financing, and higher taxes. Without real economic growth, increasing the population and more taxpayers, the tax burden will only increase in a region that already has some of the highest taxes in the country.
The best jobs in many communities are often in the public sector, which offer better job security, competitive salaries, generous pensions and many benefits not available in the private sector - including generous sick time policies (currently a minimum of 12 days a year for provincial workers, with the ability to bank at least a year of sick time).
In the increasingly competitive talent market, the public sector has a distinct competitive advantage, particularly for federal jobs, which are paid at national rates. In Newfoundland, the average weekly salaries are actually about two per cent higher than the national average, according to May 2019 Statistics Canada data. This is largely driven by the higher proportion of public sector jobs, as well as the oil and gas sector, and places significant pressure on the rest of the private sector to compete for talent.
Nearly 29 per cent of Newfoundland jobs are public sector – the highest percentage in Canada - according to 2018 Statistics Canada numbers. The gap between the percentage of public sector jobs in the province and the rest of Canada has remained largely constant since 2004. The percentage of public sector jobs peaked following the Great Recession and seems to be declining, although it’s still higher than before the recession.
The workforce composition must be rebalanced, over time, if Newfoundland’s economy is to grow at national rates.
Public sector growth should be aligned with population growth. In the past, public sector job growth exceeded population growth. This will be challenging, given the population-driven healthcare demands of an aging population. The priority focus must be on growing the private sector. A more streamlined regulatory environment would help, and some of this work is happening now.
It’s also essential to ensure the tax environment is competitive. Consideration should be given to outsourcing non-essential services to the private sector on a competitive basis. We already do this for garbage services in most municipalities - what else is possible? The Newfoundland and Labrador Employer Council (NLEC) has outlined several opportunities for the province.
We must establish an objective for the province going forward: for every new public sector job, four private-sector jobs must be created. Alternatively, limiting public sector growth to match population growth will re-balance the workforce over time and allow the economy to grow at least at the same rate as the national average. Our ability to afford and sustain public services will increase and the tax burden will be more equitably shared among an increasing number of taxpayers.
MORE FROM DON MILLS:
- How can the government keep Newfoundlanders from poverty in their retirement?
- Newfoundland and Labrador's health system nearing the breaking point
- Newfoundland and Labrador’s ‘aging and stagnant population’ about to turn labour force around
- Newfoundland and Labrador's poor job of attracting immigrants curtailing economic prosperity
- Is seasonal employment Newfoundland’s downfall?
Don Mills is the former owner of Corporate Research Associates and a recognized expert in data trends in Atlantic Canada. He can be contacted at [email protected] or on Twitter at @donmillshfx
