Al­berta's job re­cov­ery brings its own set of prob­lems

Prairie Post (West Edition) - - Opinion - BY CHARLES LAMMAM AND BREN­NAN SORGE THE FRASER IN­STI­TUTE Charles Lammam is di­rec­tor of fis­cal stud­ies and Bren­nan Sorge is a re­search in­tern at the Fraser In­sti­tute. The study, The Il­lu­sion of Al­berta's Jobs Re­cov­ery: Gov­ern­ment vs. Pri­vate Sec­tor Em­ploy

Pre­mier Rachel Not­ley's gov­ern­ment has re­peat­edly pointed to to­tal em­ploy?ment fig­ures as a sign that Al­berta has re­cov­ered from the re­cent re­ces­sion. For in­stance, the pre­mier re­cently said "our econ­omy is re­cov­er­ing ... and cre­ated 90,000 new jobs last year."

But to bet­ter un­der­stand the state of jobs in Al­berta, and whether the province is ac­tu­ally re­cov­er­ing, you can't sim­ply look at to­tal em­ploy­ment fig­ures. While it's true Al­berta's to­tal num­bers have re­bounded since the depths of the re­ces­sion, gov­ern­ment em­ploy­ment has driven much of that 're­cov­ery,' not the pri­vate job mar­ket.

A re­cent Fraser In­sti­tute study an­a­lyzed Al­berta's em­ploy­ment sit­u­a­tion, fo­cus­ing pri­mar­ily on July 2014 to May 2018. The study broke down to­tal em­ploy­ment into gov­ern­ment sec­tor, pri­vate sec­tor and self-em­ploy­ment. The re­sults are not re­as­sur­ing.

Since July 2014, a sub­stan­tial shift has oc­curred be­tween gov­ern­ment and pri­vate sec­tor em­ploy­ment. As of May of this year, there are 46,267 fewer Al­ber­tans em­ployed in the pri­vate sec­tor. That trans­lates into a three per cent re­duc­tion in pri­vate­sec­tor em­ploy­ment.

Dur­ing the same four-year pe­riod, em­ploy­ment in Al­berta's gov­ern­ment sec­tor (in­clud­ing pro­vin­cial, mu­nic­i­pal and fed­eral em­ploy­ees) grew sub­stan­tially, by 78,733 em­ploy­ees - a 21.5 per cent in­crease. As a re­sult, the gov­ern­ment sec­tor's share of to­tal em­ploy­ment (ex­clud­ing the self-em­ployed) in­creased from 19.5 to 23.2 per cent - a level not seen in Al­berta since 1994.

In­stead of a re­cov­er­ing labour mar­ket, Al­berta has sim­ply ex­panded its gov­ern­ment sec­tor.

Of course, the pre­mier will likely ar­gue this sig­nif­i­cant ex­pan­sion of gov­ern­ment em­ploy­ment was a nec­es­sary re­sponse to the oil price shock and re­ces­sion. But neigh­bour­ing Saskatchewan, an?other en­ergy-de­pen­dent province also af­fected by the drop in com­mod­ity prices, took a starkly dif­fer­ent ap­proach. In Saskatchewan, gov­ern­ment-sec­tor em­ploy­ment grew only 2.1 per cent over the same pe­riod - one-10th the rate of Al­berta.

So what's the prob­lem?

Re­search sug­gests the ap­proach taken in Al­berta to dra­mat­i­cally ex­pand gov­ern­ment-sec­tor em­ploy­ment will hurt the econ­omy and re­duce pros­per­ity for Al­ber­tans. It's not a sus­tain­able model be­cause a ro­bust pri­vate sec­tor is needed to gen­er­ate the wealth to sup­port gov­ern­ment ac­tiv­ity - in­clud­ing gov­ern­ment jobs - through tax­a­tion.

And be­cause tax­pay­ers in the pri­vate sec­tor fi­nance gov­ern­ment jobs, a crowd­ing out can oc­cur. Taxes leave in­di­vid­u­als with less money to save and in­vest, and leave en­trepreneurs and in­vestors with less money to grow their op­er­a­tions, hire new work­ers or in­no­vate. Taxes paid to fund growth in the gov­ern­ment-sec­tor come at the ex­pense of po­ten­tial in­no­va­tion, pro­duc­tiv­ity growth and em­ploy­ment growth in the pri?vate sec­tor.

While there's de­bate over the mag­ni­tude of this crowd­ing out ef­fect, ev­i­dence sug­gests it could be sub­stan­tial. One study of 17 Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) coun­tries (in­clud­ing Canada) from 1960 to 2000 found that the cre­ation of 100 gov­ern?ment jobs led to the re­duc­tion of 150 pri­vate sec­tor jobs - lead­ing to fewer jobs on net.

With a nearly 79,000 in­crease in gov­ern­ment-sec­tor jobs in Al­berta, the crowd­ing out could sub­stan­tially un­der­mine the province's pri­vate sec­tor.

So while Not­ley is tech­ni­cally cor­rect - Al­berta's to­tal em­ploy­ment level has re­cov­ered - a more de­tailed anal­y­sis re­veals that the true state of growth in Al­berta is much less re­as­sur­ing.

Pri­vate-sec­tor jobs are down and the gov­ern­ment sec­tor is driv­ing the jobs re­cov­ery her gov­ern­ment keeps talk­ing about.

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