One in Four Canadian Employees Now Works for Government, Approaching Pre-Debt Crisis Levels
New data from Statistics Canada reveals a significant shift in the nation's employment landscape, with public sector workers now comprising one quarter of all Canadian employees. This proportion approaches levels last seen in the early 1990s, just before Canada faced a severe sovereign debt crisis that required dramatic government intervention.
Current Public Sector Employment Statistics
The most recent labor force numbers show that 4.6 million Canadians now work in the public sector, compared to 13.8 million in the private sector and 2.7 million who are self-employed. This means public sector workers – those employed by government or government-funded sectors like healthcare – represent 21.8% of all Canadian workers and exactly one quarter of all employees.
Economist Charles Lamman, in an analysis for The Hub, first highlighted that Canada's public sector is approaching a size last seen just before the country plunged into fiscal crisis in 1994. During the early 1990s, the public sector briefly peaked just above 22% of the workforce before entering a period of rapid decline.
Historical Context and Recent Trends
The government of then Prime Minister Jean Chrétien dramatically slashed program spending in the late 1990s to avoid default, resulting in the public sector's share of the job market dropping to a low of 18.6% by 1999. However, recent trends show a reversal of this pattern.
Over the last six years, Canada has added 833,000 public-sector jobs while adding just 1.2 million private-sector positions during the same period. This creates an unsustainable ratio where each new government job is supported by only 1.4 new non-government jobs.
COVID-19 Pandemic Accelerated the Trend
The imbalance became particularly pronounced during the COVID-19 pandemic. Between February 2020 and July 2022, private-sector jobs increased by just 56,100 positions, while public-sector job creation reached 366,800. This means 86.7% of new jobs across those two years were in government.
Even in recent years, the national unemployment rate has often remained constant purely because massive job losses in the private sector were being offset by substantial job increases in the public sector. For instance, in July 2024, the Canadian private sector lost 42,000 jobs while public-sector employment rose by 41,000 – resulting in no change to the country's overall employment rate.
Self-Employment Declines as Public Sector Grows
Meanwhile, the number of self-employed Canadians has decreased from 2.8 million at the start of 2020 to 2.7 million currently. Analysts have long warned that Canada was masking the true state of its job market by using public debt to expand government payrolls.
The current hiring of public-sector workers represents highs not seen since the Second World War, while private-sector hiring remains largely stagnant. This growing imbalance in the Canadian labor market raises significant questions about long-term economic sustainability and echoes conditions that preceded previous fiscal crises.
