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Philip Cross: Private sector still key to Canada’s prosperity

Public-sector employment grew twice as fast as private over the past 10 years but the private sector is still where 80% of jobs are

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Over the past decade, Canadian economic policy has been based on the assumption that large-scale government borrowing and an expanding public sector would boost economic growth. So: did the burst of government-sector hiring after 2015 deliver this promised stimulus to overall economic growth? Based on the results of my recent study on public employment, the short answer is: no.

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Over the past 10 years, economic growth was slower than in any decade since the 1930s. In terms of raw numbers, private-sector job creation remained the dominant factor in every province’s overall employment growth, despite faster growth in the government sector. Variations in job growth across provinces were more correlated with differences in business investment than the trend in government payrolls.

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Employment in Canada’s government sector jumped 27 per cent between 2015 and 2024 — the largest increase ever over a nine-year period and twice the 13.4 per cent increase in private-sector jobs over the same period.

Government employment’s faster growth was a departure from Canada’s historic norm. Private-sector job growth outpaced government employment for every nine-year period from 1985 to 2006, after which the global financial crisis starting in 2007 hampered private-sector growth. The largest increases in private-sector jobs, exceeding 24 per cent, were in the mid-1990s and early 2000s. The biggest excess of private over government-sector growth was 20.9 percentage points between 1993 and 2002.

Starting in 2015, however, government-sector job growth leapfrogged past the private sector, creating a record excess over private-sector job growth of 13.6 per cent by 2024. The faster growth of public-sector employment raised its share of total employment from 19.7 per cent in 2015 to 21.5 per cent in 2024.

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Provinces with traditionally large government sectors, notably in Atlantic Canada and Quebec, all posted above-average increases in government-sector payrolls after 2015. Most provinces with a smaller government sector to begin with, notably on the Prairies, recorded below-average gains. These variations in government-sector job growth after 2015 had little impact on the ranking of total employment growth by province, however. It instead bore a striking resemblance to private-sector employment gains, both in terms of growth rates and the ranking of provinces from fastest to slowest growth.

That close correlation is not especially surprising. Canada’s public sector tends to monopolize the news but its private sector dominates the economy and labour market. Even after a decade of rapid growth in the government sector, in 2024 78.5 per cent of all jobs were still located in the private sector, with its share ranging from 70.6 per cent in Newfoundland and Labrador to 82 per cent in Alberta. All the Atlantic provinces have a below-average share of private-sector jobs in total employment, followed by Manitoba, Saskatchewan and Quebec. In contrast, the private-sector share in each of British Columbia, Ontario and Alberta is above the national average.

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Despite the praise lavished on the government sector by leaders such as former prime minister Justin Trudeau, Canada’s economy simply cannot prosper without a buoyant private sector. As former British prime minister Boris Johnson put it in his memoir, Unleashed, “Governments have billions, or tens of billions. The private sector has trillions.”

Given the private sector’s key role in employment, it is surprising, not to mention harmful, that economic policy in Canada focuses on satisfying the needs of the government sector instead of cultivating a buoyant private sector. This simple truth is often ignored in Canada’s public discourse, which focuses obsessively on the need for government solutions to our collective problems when most of our jobs, ideas and innovations come from the private sector.

Philip Cross is the author of Public and Private Sector Job Growth Across Canada, 2015-2024, published by the Fraser Institute.

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