In 2007, there were 3.2 million people employed (on average) in the public sector in Canada, according to a report recently released by Statistics Canada. This was an increase of 1.9% versus the year before. (By the way, a 2.0% annual increase in jobs is a benchmark figure that indicates good, but not excessive, growth.)

The proportion of public sector employees among the total labour force in Canada has been about 18% since 2000. In other words, nearly one in five workers is employed by government or one of its agencies. Expressed a little differently, there is one government employee for every four private sector jobs.

These ratios have declined somewhat versus sixteen years ago. The peak of government employment was reached in 1992 at 23% of the total labour force or almost one-quarter of all workers.

Statistics Canada’s definition of public sector employment is all-encompassing. It includes general government employment and ministerial and departmental employment for the three major levels of government: (1) federal; (2) provincial and territorial; and (3) local, which is municipal and county-level. It also includes jobs managing non-autonomous pension funds. There is also a category (4) for jobs at government business enterprises.

Within some of the sub-categories set out above, jobs at colleges and universities and in health care and social services add to general government employment at the provincial level and working for a school board is included with local government employment. The percentage breakdowns of (1) through (4) above in 2007 were as follows: (1) the federal government, 12.0% of total public sector jobs; (2) the provinces, 46.7% or nearly half; (3) local government, 32.3% or close to one-third; and (4) government business enterprises, 9%.

Within provincial government employment, health and social service jobs made up about one-half of the total in 2007, while universities and colleges accounted for one-quarter, as did general government employment. Within local government employment, the split was almost two-thirds for school boards versus one-third for all other jobs.

Over the past ten years, the category that recorded the largest percentage gain in employment was universities and colleges (+28.8%). Next came local government school boards (+19.6%), followed by provincial health and social service institutions (+15.8%). At the bottom end of the spectrum was provincial general government employment (only +5.6% over the whole ten years.) This moderation has undoubtedly been due to the off-loading of responsibility for many social programs onto the municipalities.

As for the percentage increases in the latest full year, 2007 versus 2006, the greatest gain was recorded by health and social services (+2.7%), followed by universities and colleges (+2.6%), then general government at the local level (+2.3%).

As for provincial general government employment, it is interesting to note that the largest year-over-year percentage gains in 2007 were recorded in the resource-boom provinces of Newfoundland and Labrador, British Columbia, Saskatchewan and Alberta. There were small declines in general government employment in Québec and New Brunswick.

Can governments keep up a good hiring pace while the economy is mired in the present economic slowdown? There are factors impinging on government revenues already in 2008. There were two cuts in the Goods and Services Tax (GST) last year, reducing the level from 7% to 5%, and the federal government will feel this loss, even though it has been largely budgeted.

Furthermore, the feds (particularly on the corporate side) and the provinces have introduced some other tax cuts that will reduce their revenues as the year progresses, aside from any declines that will come as a result of the underperforming economy. Plus there is another factor at play. Governments will have to deal with some significant cost increases. A prime example is the run-up in asphalt prices that has occurred as a result of record-high international oil prices. This will have an impact on roadbuilding budgets.

The aging baby boomer population will demand that spending and employment be maintained for health care. Also on the demographic front, it is the children of the baby boomers that are driving spending, as well as employment, at the level of higher education (i.e., colleges and universities) in this country.

For contractors and money managers providing expertise and building skills to the public sector, it is important to know the various levels of government and what is motivating them. For example, alternative financing proposals for construction projects may meet with more success under current circumstances.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.

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