From the Fraser Institute

By Philip Cross

The legions of Canadians wanting to see government spending shrink probably look enviously at how Elon Musk’s Department of Government Efficiency (DOGE) is slashing some government programs in the United States, even if DOGE’s non-surgical chainsaw approach is controversial, to say the least.

Some problems are common to cutting any government’s spending. Ironclad job security for union employees with seniority means cuts are skewed disproportionately to junior staff still on probation, with the regrettable side effect of denying an injection of fresh blood into a sclerotic workforce. Cutting employees and not programs makes it easier for higher staffing to resume: as documented by Carleton University Professor Ian Lee in How Ottawa Spends, even prolonged bouts of austerity do not derail government spending from long-term trend of higher growth. Across the board cuts do not allow for the surgical removal of redundant or inefficient programs and poor performing employees.

Canada has some unique problems with federal government spending. Savoie documents how 41 per cent of federal civil servants are located in Ottawa, versus 16 per cent in Washington and 19 per cent in London, despite Canada having the most decentralized federation in the G7. The concentration in Ottawa partly reflects the exceptional influence exerted by central agencies on all departments. As well, University of Cambridge Professor Dennis Grube found Canada’s civil service was the most resistant to public scrutiny and the most risk adverse in a comparative study of public servants in the U.S., the United Kingdom, Australia, New Zealand and Canada.

Canada’s federal employees are among the most expensive anywhere. The average civil servant costs taxpayers $146,500 a year including all salary, benefits and costs such as computers and training. Multiplying this average cost by 366,316 federal employees yields a total labour bill of $53.7 billion, not including other spending such as $17.8 billion on consultants. All the recent increase in the ranks of the civil service happened in Justin Trudeau’s tenure, expanding 38.5 per cent after Stephen Harper had cut them 9 per cent between 2010 and 2015 in his determination to balance the budget.

While the cost of government employees has risen sharply, the services they provide to the public are dwindling as government spending increasingly is devoted to managing its unwieldy and bloated bureaucracy. As Savoie observes, unions like to paint civil servants as providing essential services such as food inspectors and rescue workers, when in reality most are involved in a vast web of “policy, coordination, liaison, and performance evaluation units.” The fastest growing occupations in the federal government are in administrative services and program administration, whose share of jobs rose from 25.1 per cent in 2010 to 31.9 per cent in 2023 according to the latest report from the Treasury Board.

A chronic problem is the fierce defense offered by public service unions in “protecting non-performers and insulating the public sector from effective outside scrutiny” as Savoie wrote. The refusal to acknowledge and root out non-performers depresses the morale of the average civil servant who’s unfairly tarred with the reputation of a minority. It also motivates the across-the-board chainsaw approach of DOGE, which critics then decry as not discriminating between good and bad employees. The latter could easily be targeted by senior managers, who know exactly who the non-performers are but cannot be bothered with the years of documentation and bureaucratic headaches needed to get rid of them. The cost of poor performers is substantial; if even 10 per cent of the civil service was eliminated as redundant non-performers, the government would save $5.4 billion a year. Potential savings are likely well over $10 billion.

The federal government potentially has enormous leverage in negotiating civil service pay and getting rid of non-performers, because it can unilaterally change the federal pension plan without negotiating with public-sector unions. The federal pension plan is so generous that it’s referred to as the “golden handcuffs” that tie employees to their jobs irrespective of their pay or working conditions. To protect their lucrative pensions, unions inevitably would be willing to make concessions that substantially lower the burden on Canada’s taxpayers and still improve morale within the civil service.

Philip Cross

Senior Fellow, Fraser Institute