(Photo by Clem Sim on Unsplash)

The changing size of government in Canada, 2007–2018

“The size of government in Canada is an important matter of public policy.”

By Alex Whalen and Steven Globerman

The size of government in Canada is an important matter of public policy.

It directly influences the allocation of society’s resources, with consequences for long-term economic growth and prosperity. While this study is primarily focused on the size of government in Canada between 2007 and 2018, it provides important context for developments in the size of government in 2020.

The study uses three measures to examine the size of government over the past decade in Canada and the provinces. First, we examine the size of government as a share of the national and provincial economies. Second, we look at the patterns of government expenditure, that is, the items on which governments are spending their money.

Finally, we look at public employment levels as a key driver of the size of government.

Economists have studied the question of whether there is an optimal size of government for decades. While there have been a variety of approaches to the question, with varying results, one comprehensive analysis of OECD countries between 1960 and 2011 found that the growth-maximizing government expenditure share was about 26% of GDP.

This provides context for discussing Canada’s current size of government.

In this study, we measure the size of government in Canada as a share of GDP, that is, government expenditure in relation to the size of the economy, so as to be able to compare levels of expenditure over time in a consistent manner. Between 2007 and 2018, the share of government in Canada has been growing.

In fact, our data reveal that it grew for Canada as a whole, as well as in eight of ten provinces during this period.

The share of the economy that government occupies varies widely across the country.

For Canada as a whole (including the federal government and the provincial governments), the share of government was 40.3% in 2018, up from 37.4% in 2007.

Among the provinces, in 2018 Alberta had the smallest government, 29.3% of its economy, and Nova Scotia, the largest at 61.6%.

Governments across the country have increased the share of spending in three of the four categories measured.

Spending on goods and services increased from 60.5% of total government spending to 61.5% between 2007 and 2018. Transfer payments increased from 25.9% to 27.4%. Capital transfers and subsidies increased from 3.1% to 3.8%.

These increases are mirrored by the reduction in debt-servicing costs as a share of total spending, from 10.5% to 7.2%.

While reduced debt servicing costs make it cheaper to increase spending in other categories, there is reason for concern going forward as debt levels rise. Furthermore, low real interest rates that have reduced the cost of financing government borrowings may not persist.

Government employment as a share of total employment in Canada has been increasing as well.

While this measure peaked in the 1990–1994 period, it has been steadily increasing for the country as a whole over the past 20 years, from 19.0% in 2000–2004 to 20.2% in 2015-2019.

The province where government workers made up the largest share of total employment in the most recent time period was Newfoundland & Labrador, at 27.5%, while Ontario had the smallest share at 18.7%.

The COVID-19 outbreak and ensuing recession is contributing to a dramatic expansion in the size of government in Canada in 2020.

Prior to the COVID-19 outbreak and recession, the relative size of government increased at both the federal level and in most provinces between 2007 and 2019.

Governments are spending more in all categories except debt servicing costs.

This growth in the relative size of government is reason for concern given estimates indicating that the pre-COVID size of government in Canada was already well above the percentage associated with maximum economic growth.

Authors: Alex Whalen, Policy Analyst, and Steven Globerman Resident Scholar and Addington Chair in Measurement, Professor Emeritus, Western Washington University. (Published Sept. 15 by the Fraser Institute)

Opinion

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Photo: Rose Karges
Blue about snow?

If you have a recent photo to share email it large or actual-size editor@trailtimes.ca

There has been COVID-19 exposures at two elementary schools in District 42. (Image courtesy CDC)
Interior Health reports 24 additional COVID-19 cases

This includes three school exposures in Kelowna

Some amendments have been made to the bylaw since it passed first reading. File photo
Second public hearing set for Rossland chicken bylaw

Amended bylaw would now require electric fencing to be put around yards with chickens

File
Cooperation needed so minority Parliament can function smoothly

“We will continue to work with the other parties to get answers … ”

Katrine Conroy has won for the fifth time in the Kootenay West riding. Photo: Submitted
Katrine Conroy ready to tackle challenges after election

Conroy won the Kootenay West riding for the fifth time

Provincial health officer Dr. Bonnie Henry arrives for briefing on the COVID-19 situation, B.C. legislature, Oct. 26, 2020 (B.C. government)
B.C. records 217 more COVID-19 cases, mask use urged

Infection spike continues, 21 senior facilities affected

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Seven-year-old Aaliyah Rosa was found dead in an apartment in Langley in July. (Langley Advance Times files)
Child’s body cold, no pulse: Off-duty cop testifies in Langley mother’s murder trial

The seven-year-old girl’s mother faces a first-degree murder charge

People march during a climate strike in Montreal, Friday, Sept. 27, 2019. THE CANADIAN PRESS/Graham Hughes
Judge rejects 15 youths’ climate change lawsuit against Canadian government

Justice Michael Manson has granted the government’s motion to strike the plaintiffs’ claim

A woman walks through check in at WestJet at Pearson International airport during the COVID-19 pandemic in Toronto on Wednesday, Oct. 14, 2020. THE CANADIAN PRESS/Nathan Denette
Strong support for pre-flight COVID testing ahead of upcoming WestJet trial: YVR

Airport is partnering with UBC, which is helping choose the method of pre-flight testing

Prime Minister Justin Trudeau provides an update on the COVID pandemic during a press conference in Ottawa on Tuesday, Oct. 27, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Trudeau says pandemic ‘really sucks,’ and that Christmas gatherings are up in the air

The prime minister encouraged residents to continue to follow the advice of local health authorities

The Williams Lake Indian Band is stipulating no-go zones for mushroom picking in areas burned by last summer’s wildfires. 100 Mile Free Press photo
Who controls mushroom harvesting on Indigenous lands?

‘We don’t necessarily know where the mushrooms grow, how old the stands need to be, those types of things.’

Canadian and American flags fly near the Ambassador Bridge at the Canada/USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. THE CANADIAN PRESS/Rob Gurdebeke
U.S. election results one factor that could impact immigration to Canada next year

The survey polled 1,523 Canadians between Oct. 23 and Oct. 25

Most Read