Federal government cutbacks
Economic Impact of Federal Workforce Reductions in Prince Edward Island
May 2012
Executive Summary
Since the current governing federal party was elected in 2006, it has been the policy of the Government of Canada to actively pursue reductions in government expenditures with the goal of achieving a balanced budget by 2015-2016. Drivers of expenditure reduction have been:
- Strategic Review 2007;
- Strategic Review 2008;
- Strategic Review 2009;
- Strategic Review 2010;
- Personnel Budget Freeze 2010;
- Strategic and Operational Review 2011.
Expenditure reduction action plans developed between 2007 and 2010 have and will continue to be implemented through to 2013-2014. The 2011 Strategic and Operational Review culminated in the announcement in the 2012 federal budget on March 29 of an additional $5.2-billion in permanent expenditure reductions between 2012-2013 and 2014-2015.
Expenditures that have been targeted are focused on direct operating costs and capital expenditures; transfer payments to other levels of government, organizations or individuals; and payments to Crown corporations.
On average, wages and benefits paid to federal employees represent 43% of the expenditure group above. Consequently, job cuts have been identified as a primary action step in reducing expenditures and it was announced in the 2012 budget that 19,200 federal jobs, or about 4.8% of the federal workforce, would be cut. These cuts will be in addition to any job cuts announced in prior expenditure reduction initiatives.
To date, limited specific details have been released about the geographic impact that federal job cuts will have. With the notable exceptions of Veterans Affairs Canada (VAC), Parks Canada in Prince Edward Island and Service Canada in Montague, more speculation than official confirmed numbers of job cuts exists.
In order to be better prepared for the federal government's ultimate expenditure reduction action plan, McInnes Cooper LLC was commissioned to more accurately estimate the depth and breadth of potential federal job losses in Prince Edward Island. Sponsors of the project are the Government of Prince Edward Island, the City of Charlottetown, the Public Service Alliance of Canada (PSAC) and the Professional Institute of the Public Service of Canada (PIPSC).
The scope of work for this assignment included:
- estimating the current size of the federal government workforce in Prince Edward Island;
- estimating a range of what the potential federal workforce job losses in Prince Edward Island may be; and
- estimating the provincial economic impact associated with potential federal workforce job losses.
The work was completed through desk research, key informant interviews, analysis and estimating, and the generation of provincial-level economic impact estimates by Statistics Canada using the department's input-output economic model.
Findings from this research will be used in developing strategic approaches to mitigating the impact that federal job losses may have on federal workers in Prince Edward Island, other residents of PEI and the provincial economy.
Some 35 federal government units (departments, agencies, crown corporations, etc.) have a staff presence in Prince Edward Island. In total, it is estimated that the federal government employs 3,827 individuals in the province in permanent positions. This ranges from government units with a ‘handful' of staff (i.e., less than five), to Veterans Affairs Canada with approximately 1,400 staff.
The federal government's employment presence in Prince Edward Island is also impacted by non-permanent contract, casual and student hires. While the size of this cohort can vary significantly, primarily due to seasonal hiring, it is estimated that 700 or more positions annually could fall under the contract, casual and student categories. This group is significant as most collective agreements state that the employer should make a reasonable effort to replace nonpermanent employees with displaced permanent employees under any workforce adjustment measures.
Different information sources indicate that the federal workforce has increased steadily since 2000 and peaked in 2008. Since 2008, there has been a slight decline to date in the size of the federal workforce in the province.
Overall, the federal government is the largest employer in the province next to the provincial government with an estimated 11,043 employees, inclusive of core government, health and education. With an estimated 72,200 employed individuals in Prince Edward Island, permanent federal government employees represent approximately 5.3% of the provincial workforce. The federal workforce in PEI also greatly exceeds any individual private sector or institutional employer.
Federal workers in Prince Edward Island represent a considerable economic force. In addition to the sheer number of employees, Statistics Canada data estimates that one federal full-time equivalent (FTE) job in Prince Edward Island is valued at an average of $78,730 (wage and benefits). As Gary Corbett, president of the Professional Institute of the Public Service of Canada noted, it will be smaller communities and jurisdictions where federal employees represent a disproportionate share of the workforce who will be most affected by job cuts: “A loss of five jobs in Charlottetown can be much bigger than 15 in a big centre,” he said.
In estimating a range of what the potential federal job losses might potentially be in Prince Edward Island, consideration was given to cuts that have been announced and what the potential implications may be for different government units in terms of future reductions. Consideration was also given to out-of-province transfers that have been announced since these represent job losses to the Prince Edward Island economy.
At the time of the writing of this report, the federal workforce situation was in considerable flux with new job cut announcements coming on a weekly basis. As such, the full extent of the federal government's workforce reduction initiative will not be known for several months. In addition, it is particularly challenging to differentiate between cuts that are a result of pre-budget announcements versus those that represent new workforce reduction measures.
Two job cut scenarios, low and high, were developed. In the low scenario, a base reduction of 3% of the existing federal workforce was applied. In the high scenario, a base reduction of 6% was applied. These base numbers were then adjusted unit by unit to reflect known or anticipated changes that would likely impact the base numbers.
Based on available information at the time of writing, it is estimated that planned and near-term future cutbacks in the federal workforce could account for between 379 and 458 positions in Prince Edward Island, which represents approximately 10% to 12% of the current permanent federal workforce in the province. Note that positions are not FTEs, although it is estimated that some 94% of the federal workforce in PEI would be employed full-time.
By any measure, PEI appears to be shouldering a disproportionate share of federal job cuts. According to the Government of Canada, the planned overall reduction of 19,200 positions Canada-wide amounts to 4.8% of the federal workforce. Even on the low side of the estimate of cuts in PEI noted above, likely reductions amount to 10% of the federal workforce.
The range of job loss estimates are considered to be conservative as it is not possible at this point in time to accurately estimate the potential job loss impact on the contract, casual and student categories in terms of positions and FTE equivalents. For example, the degree to which workforce reduction targets can be achieved by the elimination of these non-permanent employees is not known. However, for the purposes of economic impact analysis, a job loss is a job loss.
As part of the research, Statistics Canada was contracted to generate an economic impact estimate based on the loss of 100 full-time equivalent federal government jobs in Prince Edward Island. As the outputs are scalable, the impact of 100 FTEs can be adjusted for any job loss estimate. And as the Statistics Canada estimates are also presented in terms of total positions lost, the positions lost estimates could be utilized.
It is important to recognize that an economic impact estimate focuses on the financial aspects of the presence of a federal government workforce in Prince Edward Island. The economic impact estimate does not attempt to measure the significant impacts associated with the considerable social, cultural and skill development contributions of a federal workforce in the province.
The economic impact to the provincial economy associated with the range of federal job loss estimates is summarized in the table below. Based on the two federal job loss scenarios used, Prince Edward Island could experience a total provincial loss ranging between 576 and 696 FTE jobs. This equates to an economic loss of between $50.5- and $61.0-million, or 1.01% to 1.22% of the provincial 2010 GDP.
| L | H | |
|---|---|---|
| PEI federal job loss estimate (positions) | 379 | 458 |
| Federal FTE equivalent | 357.4 | 432.3 |
| Non-federal job losses (positions) | 247 | 298 |
| Nonfederal job losses (FTE) | 218.0 | 263.7 |
| Total provincial job loss (positions) | 626 | 756 |
| Total provincial job loss (FTE) | 575.5 | 696.0 |
| PEI GDP impact -basic prices ($millions) | (50.46) | (61.02) |
| % of provincial GDP (2010) | 1.01 | 1.22 |
Once again, these estimates are considered conservative as they do not fully account for losses that will occur among the contract, casual and student staffing categories. However, by any measure, job losses of this magnitude and the associated impacts are a cause of serious concern for the overall provincial economy.
Date Modified : 2012/06/13
