The Growth of the Local Public Sector

The rising expense of local government services is increasingly capturing the attention of pundits and policy makers alike.  The rising cost of policing and fire services in particular and their effects on local budgets and ratepayers, has drawn the attention of Canadian municipal leaders.  What is also interesting is the overall growth in local government employment in general over the last decade at rates much greater than the growth in total employment.

Figure 1 presents total provincial local general government employment as reported by Statistics Canada and available for the period 2001 to 2012.  Over this period, local general government employment (employment in local business enterprises such as a hydro or phone utility is excluded) for Canada’s provinces rose from 456,035 to 584,999 – an increase of 28 percent.  Over the same period, total employment in Canada’s provinces only grew 17 percent. There does seem to be the start of a decline in local government employment in 2012.

 

Figure 2 presents the growth rates in both local government and total employment by province over the same period and ranks them by growth in local government employment.  During this period, local government employment grew the most in Ontario at 36.5 percent – nearly three times the rate of growth of the provinces total employment.  Next came Alberta at about 31 percent but slightly below its total employment growth rate of 33.5 percent.  Newfoundland & Labrador and British Columbia came next at 28 and 26.4 percent respectively with their growth in total employment at 18.2 and 17.8 percent.   Saskatchewan, Nova Scotia, and Manitoba display lower local government employment growth but it still exceeds their total employment growth.

Quebec, New Brunswick and Prince Edward Island are exceptions.  In Quebec, local government employment grew 14.9 percent while total employment grew 16.4 percent.  In New Brunswick, local government employment grew 4.1 percent while total employment grew 7 percent.  Meanwhile, Prince Edward Island saw its local government employment shrink by 15.6 percent while total employment rose 16.4 percent.

Local government employment in Canada has grown at a much faster rate than total employment which when combined with rising salaries in this sector further fuels the rising cost of local government.  The question is whether this growing employment reflects external forces such as downloading from the provinces or whether municipalities are engaging in local expansionary fiscal policies to stimulate their civic economies.  Have municipalities all become Keynesians now?

Comments

[Majromax]

Does Statistics Canada provide results for pre-2001? Ontario is the biggest outlier, but given politics of the time it may have been starting from a lower-than-trend level, as the successive NDP, PC, and OLP governments had different ideas about the optimal level of public-sector spending as a share of the economy.

[Chris]

It would be interesting to chart local government employment against non-local provincial government employment as well (not just against total provincial employment). This would give some insight into which is rising faster, though I suspect that both are rising substantially faster than private sector employment in most provinces.

[Livio Di Matteo]

@Majromax:
Actuslly, the data goes back to 1981 but I was leery of going back because there is a large jump between 2000 and 2001 for all the provinces and I was not sure why that was - if it was a reclassification of employees or what. Any insight on the data would be appreciated.
@Chris:
Good suggestion.

[Henry Cunha]

I think downloading is the basic reason. A more complete analysis might look at trends in employment levels at other levels of government, particularly in areas where there is high intensity in public worker-public interaction. Or one might ask the question: how many man-hours per year does each level of government dedicate to the maintenance of my human needs?

As an example, Toronto's all-encompassing non-emergency 311 service centre received about a million calls in 2010. Emergency 911 I'm estimating at 1.2 million (also for Toronto in 2010). In terms of work hours, I doubt there is anything even remotely comparable for other levels of government.

[Neil]

What portion does policing make up of these numbers? I know a major gripe the City of Edmonton has is that our police force deals with regional, national, and international problems (drug smuggling, child pornography rings, that sort of thing), but is almost entirely funded locally. Law enforcement could also be a big part of the 2000-2001 jump, since I vaguely recall something happening around then resulting in a significant increase in desired policing levels.

[Mark]

Livio, interesting post and great data tables. Too bad they are terminated. I would be reluctant to draw a conclusion based on 2012 since data is only available for Jan to Mar.

Henry, I'd be reluctant to attribute the pattern Livio shows to downloading. Over a big portion of this period the ON gov't was doing a significant amount of uploading. I suspect this opened up fiscal room for municipalities to spend on other areas. For example, Toronto 311 was an enrichment of services. Rather than uploading, I'd more likely define it as municipalities moving in to fill (or create) demand for services the provinces were no longer willing to assume - I think about recycling/green programs, all the festivals in Toronto or the guy that came and told me my downspout was not connected properly. I think you have a point that local services (firemen/police etc) scale less than say provincial government. Provincial lack of scale is in health/education which is separate from provincial employment.

Sometimes when digging a little deeper, it's interesting to compare BC and ON. Growing provinces, positive demographics and no oil. What I found interesting is that between 1994-2011, provincial employment fell 9% in both BC and ON. Local gov't employment rose 64% in both BC and ON. Remarkable considering the divergent politics among the two provinces over this period. In QC prov. emp. rose 9% and local rose 34%.

However, it seems as if employment in education has risen far more quickly in ON than BC, especially if considered relative to health. In 1994 the ratio of health/social-to-education fell from 0.64 in 1994 to 0.60 in 2001 to 0.58 in 2011 in ON while in BC it went from 0.80 to 0.75 to 0.88. This was almost entirely due to local school boards, where employment rose by 24% in Ontario since 2001 while it FELL by 3% in BC. I was shocked by that number.

[Barnaby]

I hope someone at WCI can look at the 5-year sabbatical that Statscan took to re-jig the Government Financial Statistics to the 2001 UN COFOGgy standard.
It's now nigh impossible to track spending on construction and maintenance of roads, waterworks and other infrastructure - they are all rolled up into "economic development" or some such nebula and Statscan does not seem keen on restoring the detail that they used to provide.
In the interim, there was no data published at all (!!!), and neither SNA investment data nor upcoming CAPEX survey releases appear to have the details either.
Odd.

[Barnaby]

And to be on-topic, I'd say Baumol's disease, mainly. Only the biggest cities have the scale to provide meaningful on-line services, and there are no robots smoothing out asphalt over pot-holes... yet.