Staggering federal payroll costs help explain Ottawa’s runaway deficits

Canadians have been asking the Harper government some tough questions in recent months


Canadians have been asking the Harper government some tough questions in recent months. Questions like: why has Canada’s federal debt jumped over 30 per cent since 2008, to over $600 billion? Why did the government miss its deficit target by $1.4 billion last year, and what is pushing this year’s deficit forecast higher by more than $5 billion to $26 billion?

We got an important answer recently, not from the government, but from the Parliamentary Budget Office (PBO), an independent research team established to give MPs the straight goods on the nation’s finances.

Figures released by the PBO show that, contrary to all the talk we’ve been hearing about cutbacks, Ottawa’s payroll is getting out of control. Recent attempts to rein in federal payroll spending amount to the Conservatives bailing out the Titanic with a soup spoon.

The numbers don’t lie: when Stephen Harper took office in 2006, there were 336,831 people working for the federal government. Fast forward to March of 2011 – just before the Prime Minister won his coveted majority – and Ottawa’s full-time payroll had ballooned to 379,760, an increase of 42,929 staffers.

The all-in cost for this high-priced talent – including wages, benefits, pension contributions, extended medical, dental, disability insurance, and sick leave – went from $29 billion to $42.3 billion – a staggering increase of 46 per cent in just five years.

Even more troubling, especially to working Canadians who thought they elected a fiscally conservative government to Ottawa, is the spectacular jump in payroll costs for the average federal employee: from $86,000 in 2006 to $111,379 five years later.

There is hope on the horizon: the government cut the federal payroll by 4,200 positions last year, and Treasury Board president Tony Clement recently reported the elimination of another 10,980, on the way to cutting 19,200 by 2014.

But here’s the problem: even if the government succeeds in making the cuts they’ve committed to, they will still have 12,000 more people on the federal payroll than the day they took office. According to PBO projections, all the built-in inertia in Ottawa’s staffing system – union contracts, job reclassifications, pension increases and the like, will push the average cost of each of these people to $129,800. So Ottawa’s payroll costs will rise to $45.3 billion – $3 billion more than they were last year.

The government’s defenders will say that it simply isn’t possible for any government, even a conservative government, to grapple with the massive Ottawa bureaucracy and keep a lid on payroll costs. But the Parliamentary Budget Office says otherwise. When Jean Chretien took office in 1993, there were 345,942 full-time federal employees. Five years later, there were 288,484, a reduction of 57,458. And instead of boosting payroll expenses by $13 billion, as the Conservatives have done, Chretien actually cut payroll expenses by $2.3 billion, a savings of 13 per cent.

Sadly, Chretien and his successors failed to sustain the progress he made in his first five years in office. In fact, when the federal payroll dropped last year, it was the first reduction since 1998. Ottawa’s payroll costs have grown at an astounding compounded annual rate of 7.1 per cent since the Harper government took office, compared with 3.1 per cent for Canada’s business sector.

In recent years, the federal Conservative party has taken steps to legally protect its brand identity, even going to court to prevent other candidates in elections from using the word ‘conservative’ on their campaign signs.

Unless the Harper government takes serious steps to get its payroll costs under control, taxpayers should really consider a prosecution for false advertising.


By Gregory Thomas


Canadian Taxpayers Federation