Canadian Manufacturing

Belt-tightening in federal spending the focus of two separate reports

The C.D. Howe Institute looked at rising federal employee salaries, while a Fraser Institute report examined historical per person program spending


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TORONTO—Studies by the C.D Howe Institute and the Fraser Institute point to government spending trends that the two right-leaning think-tanks see as troublesome.

According to a new C.D. Howe report, total compensation per federal employee has risen by 5 per cent per year on average over the past decade, and this expenditure accounts for more than $50 billion of federal spending.

C.D. Howe says that at $64 per hour, average payroll compensation in the federal government is higher than in professional, scientific and technical service jobs ($40 per hour) or finance and insurance jobs ($46 per hour).

According to the report, pay-roll expenses—wages and salaries, benefits, pensions, and social-security contributions—have been growing 3 per cent annually, while non-payroll expenses, the value of future benefits earned in a given year, are rising by 23 per cent annually.

The report’s authors, Alexandre Laurin and William B.P. Robson, argue fiscal pressures will eventually require the feds to tackle these costs.

“The federal government is paying more than necessary to attract and retain good workers. Containing federal borrowing and avoiding future upward pressure to raise taxes will require Ottawa to curb the cost of its own employees,” said Laurin and Robson.

Historic Spending

A new study by the Fraser Institute explores another issue of government spending the think-tank believes could cause problems in the future.

Fraser concluded that the 2017 federal budget contained the second highest per person program spending of all time, at $8,337.

The highest recorded federal per person spending in a single year occurred in 2009 under Stephen Harper, at $8,375.

However, according to Fraser, what differentiates the two years is that 2009 was in the midst of the Great Recession.

Fraser says most significant per person spending increases throughout history can be explained by wars or recessions, except for this year’s expenditures.

“Looking back at government spending in Canada since Confederation, this year stands out because unlike most other spending spikes, there’s no recession or war to explain it,” said Jason Clemens, executive VP of the Fraser Institute.

Clemens continued, “While wars and recessions obviously affect government spending, the rapid increase in spending observed recently coupled with deficits and growing debt can have real negative consequences for Canadians and the economy.”


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