Federal Job Cuts: The Real Numbers

The federal budget has started to fill in some of the details of its latest round of spending cuts. In particular, it now estimates 19,200 positions lost due to its latest round of cuts (Federal Budget 2012, pg 221). While they have provided this initial estimate, it hardly shows the full picture as it excludes the other two rounds of cuts that will overlap with those announced in the budget. See Table 1 for the full cut details.

Table 1: All Cuts ($mil)

The same is true for the number of jobs that will be lost. While the government has been repeating that only 19,200 positions will be lost, what it is not saying is the 19,200 figure only includes the core public service impact of this round of cuts. For instance, any jobs lost as a result of the 10% cut to CBC will not be included in that 19,200 figure, as the CBC is not the core public service. In addition, any job losses caused by previous strategic reviews are not included.

First, we need to get clear on the core public service impact. The 19,200 is the largest of the 3 rounds of job cuts that will hit between 2012-13 and 2014-15, but it certainly isn’t the only one.  The two other rounds will likely push the figure from 19,200 to over 35,000 positions lost.

Table 2: Job Impacts of the Three Waves of Cuts

How are the job impacts of the other two waves calculated?  The 2007-2010 Strategic Review impacts were already reported in the 2011-12 Reports on Plans and Priorities. By adding up the Full Time Equivalent (FTE) changes for all departments between 2011-12 and 2012-13 the workforce was projected to fall by 6,300 positions. This was prior to the 2010 budget freeze or the 2012 budget cuts.

In the 2010 Federal Budget, each department was instructed to freeze its personnel budget. That meant any inflation pressures would have to be dealt with by cutting positions or by cutting spending in other areas. To figure out the likely impact on employment, I assumed that of that $2.0 billion cut, 45% would come from the salaries and benefits line, the other 55% would come from the rest of the $80 billion operations envelop. These proportions match the overall spending, so 45% of the $80 billion operations spending is spent on salaries and benefits. The number of positions by department was the cut value in that department divided by the average cost per employee including salary and all benefits. This resulted in an aggregate cut of 9,700 positions across the public service to make up for inflation.

When it comes to the 2012 budget cuts, the government estimates that the impact of that wave is going to be 19,200.  I’ll take them at their word that they’ve done the analysis, although it is likely based on a similar method as my own but with better internal data. Interestingly, using the methodology for the 2010 freeze above, but inputting $4,858 for the Canadian impact of the 2012 cuts {$5,236 (total cuts) -$377.6 (International Assistance cut)=$4,858} I get job cuts of 22,000 positions. Not exactly the same as the 19,200 figure from the government but fairly close.

One of two things may be happening here: 1) the federal government is hitting better paid positions harder and therefore slightly fewer positions need to be eliminated; 2) less than 45% of the cuts may be coming from the Salaries and Benefits line.  If that percentage were reduced to 42% of the cuts then we get pretty close the 19,200 figure of the government.

Now remember, the 19,200 figure is only one wave of cuts but even the 35,200 estimate in Table 2 misses the job impact of over half of the cuts—those that fall on crown corporations or the private sector. Table 3 estimates the impact on the private sector vs the public sector. As is clear, despite the job losses in the public sector, even more money will be pulled out of private sector transactions by 2014-15.

The 2007-2010 Strategic Review are excluded from Table 3 as much of these cuts that impacted the private sector were complete before 2012-13 making the remainder difficult to estimate.

Table 3: Private & Public Sector Impact of cuts ($mil)

Translating the jobs impact to the private sector is more difficult, and the job losses are much less visible. However, there will surely be an impact  Informetrica Ltd. does calculate economic multipliers for these types of cuts.  They estimate that for every $1 million in cuts to government expenditures on services, 9 positions are lost.  If we apply this ratio to the $4.1 billion in public sector cuts, we arrive at another 36,900 positions that will be lost in the private sector and crown corporations.

If we put all the job losses together, the full picture is very different than what the federal government is reporting (see Table 4).  In total, federal spending cuts could lead to the elimination of over 70,000 full time equivalent positions.

Table 4: Job Impacts by 2014-15

What does this mean in terms of regional impacts? Unfortunately, the private sector impacts are not something that can be modelled regionally. However, the federal government impacts can be modelled regionally. Table 5 shows the regional impacts of all of the cuts between now and 2014-15.

Table 5: Job Impacts by region by 2014-15

For a breakdown by department and by region, see the more extensive spreadsheet here. It is interesting to note that, despite all of the cuts over various years, Corrections Canada is the only department that added over 1,000 positions over this period.