Canada’s public sector workforce grew 14 percent faster than the private sector’s between 2015 and 2025, reflecting a decade-long trend of increased government hiring, a new study suggests.
Public sector employment grew by 29 percent over the decade, while private sector employment, which includes self-employed individuals, increased by 15 percent, according to data reported by the Fraser Institute.
Government and public sector jobs represented 19.5 percent of total employment in Canada in 2014, rising to 21.6 percent by 2025. Meanwhile, the share of private sector employment declined from 80.5 percent to 78.4 percent over the same period.
Study author and Fraser Institute senior fellow Livio Di Matteo said the rise of public sector employment relative to the private sector threatens Canada’s long-term productivity and economic growth.
“Public-sector employment levels with higher wages and benefits are factors attracting labour away from the private sector reducing private-sector employment,” said Di Matteo, who is also a professor of economics at Lakehead University.
Di Matteo’s analysis indicates a negative correlation over time between public sector hiring and the well-being of the private sector. He said that increased government spending can lead to a “crowding out” effect in the labour market, reducing both private and self-employment opportunities.
He also identified high-risk zones as part of this growing trend. The study found that Atlantic Canada was hardest hit, with public jobs accounting for 30.5 percent of employment in Newfoundland and Labrador, and 29.6 percent in Prince Edward Island.
The research compared these regions against economically robust areas such as Alberta, which boasts the lowest public-sector employment share at 18.5 percent and the highest private sector employment share at 67.9 percent, suggesting a link between a larger private sector and strong economic performance.
Ontario was just behind Alberta with 66.8 percent of its economy being private sector jobs. On the opposite end of the spectrum, the private sector in Prince Edward Island accounted for 59 percent of the provincial economy, while in Saskatchewan, it represented 58.4 percent.
Self-employment shares were highest in British Columbia at 15.4 percent and Alberta at 13.6 percent, and lowest in Newfoundland and Labrador at 7.3 percent, according to the study.
Di Matteo said a disproportionately large public-sector workforce can place greater fiscal pressure on a relatively smaller private sector that generates much of the tax base, and argued that the public sector should not serve as the primary driver of job creation.
“Canada faces a productivity and per-capita GDP growth crisis,” he said. “The deficit financed expansion of public-sector spending and employment since the mid-2010s is yet another trend that stands in the way of an overdue economic rebalancing that would see the private sector playing a larger role in driving both GDP and employment growth in Canada.”
