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Federal cuts could push unemployment to 8%

February 2, 2012

2-minute read

Last Monday, the CCPA released my paper, The Cuts Behind the Curtain, which examined some possible scenarios for how the conservative government might cut $6 billion from program spending over the next 3 years.  The $2 billion from the 2010 program freeze and $4 billion from the 2010 Strategic & Operation reviews, in addition to the 6,300 jobs already slated for loss from the 2007-2010 Strategic Reviews, could add up to job losses of between 60,000 to 68,000 full time positions by 2014-15.

What a difference a week makes.  New Information has come to light that the government cuts will not be $4 billion for the Strategic and Operating reviews, but rather double that at $8 billion.  In addition, the cuts will be compressed into 2 years.  To top it all off, it now appears that departments will not be as protected as I had initially imagined.

Take all this new information, toss it into a blender (or rather a massive spreadsheet) and a much darker image emerges.  Potential job losses with an $8 billion Strategic and Operating review (and all the other overlapping cuts) now drive job losses to between 99,000 and 108,000 full time positions across Canada.  At this much higher level, the federal government could be single-handedly responsible for pushing national unemployment from its current 7.5% to 8.0%.  About half of those losses would be federal public servants and half would be in the private sector (crown corporations, non-profits and government contractors).

At the same time, a very recently obtained ATIP request reveals that in the best case, only 50% of the cuts could happen through retirements.  The rest of the cuts in the public service would come through layoffs.  The lack of any early retirement packages makes those layoffs unavoidable.  Some departments like DFAIT and the Department of Justice would be particularly hard hit with layoffs making up 82% and 72% of the cuts goal respectively

The situation would be much worse in Ottawa with between 16,000 to 34,000 full time positions lost in the public service.  These projections exclude any additional losses that might occur in crown corporations where geographic breakdowns are not available.

Mine is no longer the only voice on this topic.  My new figures have been independently validated by a study coming from government economists with direct access to internal figures.  The Canadian Association of Professional Employees calculated a loss of 110,000 full time positions in line with my figures (although no doubt with much better data sources).

Given the weakened economic environment, pushing unemployment over 8.0% is exactly the wrong move to make.  The initial Strategic Review cuts worth only $2 billion have already had a significant impact in service delivery for benefits like EI.  Another $10 billion in cuts will quintuple the impact.

The irresponsible drive to create a surplus through service cuts and higher unemployment is no doubt being driven by the need for fiscal room in time for 2014 election promises.  The subjugation of pressing economic circumstances to short term political goals is a very dangerous calculus which could well spiral out of the federal government’s control—to the detriment of all Canadians.

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