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Trevor Tombe: The higher educated are benefitting the most from Canada’s economic recovery

Commentary

A recent piece in The Hub by Sean Speer identifies what at first glance is a puzzling (and to some concerning) development: public-sector employment accounts for nearly 85 percent of the total employment growth in Canada since February 2020.

Instead of an L-shaped or V-shaped recovery, he writes, this G-shaped (government-centric) one “paints a different picture of the labour market’s recovery than is commonly understood.”

It is a very well-researched piece and written with skill and clarity. And as Speer does all too well, he raises important questions about difficult political dynamics that may result. If you haven’t read it yet, you should.

But I have a slightly different perspective. 

Using the detailed Statistics Canada microdata on labour market conditions, I hope to shed more light on what’s behind the large growth in public-sector employment.

I’ll show that much of the increase is in areas where the “takers” versus “makers” distinction is particularly problematic. And the data reveals an even starker pattern: a massive gulf between employment growth for workers with higher education and those without. This is not only itself concerning but, it turns out, may account for much of the public-sector growth. I’ll explain.

The data

Statistics Canada makes available a wealth of labour market information to Canadians each month (see here). But there is another source that, while publicly available, is much more difficult to access and to work with: the raw microdata. But it reveals a lot.

First, who are these newly hired public-sector workers? I find the increase is mostly accounted for by young workers (56 percent are under 40) in professional and technical occupations (62 percent) who have a post-secondary certificate or degree (82 percent). 

In short, they’re young, early career, and highly-educated individuals. And mostly front-line. Only 7 percent of the increase is among those in middle or senior management.

They also largely work in the health and education sectors (nearly 60 percent). Growth in the health sector is, of course, not surprising. It is also likely to continue long past COVID is behind us as our populations age.

Even those classified as working within the “public administration” sector (32 percent) may not align very well with some intuitions. Only 12 percent are in Ottawa, for example, and there are over 12,000 new construction and trades workers and another nearly 10,000 new police and other front-line public protection occupations included in this category. 

And, finally, a large share of the increased public-sector employment may be temporary. I find well over one-third of the increase is by those hired on temporary or seasonal contracts. This compared to the 9 percent of private employees overall who are.

Takers versus makers?

Public-sector employment is not in and of itself a sign that a job is a drain on economic activity; often, quite the opposite. Producers of human capital, producers of health and wellness, producers of physical capital and infrastructure, producers of public safety, and so on, all add to productivity. These workers are clearly “makers”.

Instead of looking at public versus private as a guide, it may be better to ask whether the benefits of a particular job outweigh its costs. Some jobs in the private sector should not exist. Some jobs in the public sector should not exist either. 

All parties want to see higher public-sector employment in some areas and lower in others. 

Consider an example from a right-leaning government in Alberta, which increased government hiring in certain energy-focused public relations activities. This is in reference to the newly-created Canadian Energy Centre, sometimes referred to as the energy “war room”. The government, some argue, is better at promoting the interests of the energy industry than the energy industry itself. 

To be sure, the market has a natural (and usually well functioning) mechanism to destroy inefficient jobs while creating others: profits and losses. This natural pressure to employ individuals only where benefits exceed costs operates with much less efficiency in the public sector. 

Governments can and should review programs continuously—and some governments are more dedicated to this important task than others. They should also ensure compensation and work arrangements are appropriate. 

And, to be absolutely clear, we shouldn’t shy away from broader conversations about where public activities are warranted and where they are not. Exploring the pros and cons of additional private provision within our provincial health systems, for example, is warranted. 

But there’s another related development in Canada’s economic recovery that may be driving the public-sector growth, and one that should raise more important concerns.

An E-shaped recovery?

Even without the detailed microdata, one stark fact is clear in Canada’s recovery: those with higher levels of education have fared best of all. 

Graphic credit: Janice Nelson

This reveals the entire employment increase since February 2020 may be due to workers with higher levels of education. An E-shaped recovery, perhaps?

This is true in both the public and the private sectors. Of the increase in private employment between February 2020 and June 2022, I estimate fully 79 percent are accounted for by those with a post-secondary certificate or degree. That’s a similar proportion to the 82 percent among public-sector workers. These shares are not seasonally adjusted like the data in the figure.

Some occupations require postsecondary credentials more than others, of course, and some occupations are disproportionately found within the public sector. What’s interesting is that there is a strong correlation between these two. Across the 40 occupations tracked by the labour force survey data, the correlation coefficient between the share of each occupation’s employment accounted for by those with a post-secondary degree and the share who work in the public sector is 0.6. Occupations in nursing or education, for example, have among the highest share of employees with postsecondary credentials and are almost entirely within the public sector. 

I estimate the rising overall employment for those with a postsecondary degree—combined with the fact that employment of such individuals is not evenly distributed between private and public sector occupations—accounts for more than half the total increase in public-sector employment.

There is growing evidence that differences in education levels are developing into a new political cleavage throughout the developed world. Whatever the underlying cause, the stark differences in economic outcomes experienced by individuals of different levels of education may only amplify these pressures.

To be clear, I’m not making a normative claim about the relative merits of different types of credentials or occupations. Nor do I believe governments should always and everywhere promote postsecondary education as the best route for all individuals—it is not. 

But this data suggests (to me at least) that education levels and Canada’s E-shaped recovery may be both a key driver of its G-shaped one and a source of even greater concern. 

Howard Anglin: The Alberta Sovereignty Act is nothing but a sideshow scam

Commentary

The Alberta Sovereignty Act is a scam. It’s baloney, bunk, balderdash, and bunkum. Hooey, hogwash, and hokum. Flim-flam, tommyrot, poppycock, and fiddle. It’s the political equivalent of a sideshow tent painted with lurid images of wonders never before beheld by human eyes. And, like any successful carnival curio, it depends on the willingness of the marks to believe the unbelievable. 

In the sideshow, dim-lighting and deft patter create the atmosphere, but it’s the patrons’ desire to be deceived that lets them see a mermaid rather than a mangy monkey-torso artfully attached to half a dried fish. The same is true for the Alberta Sovereignty Act—a political and legal hoax that has become the signature policy of the frontrunner to be the next premier of Alberta.

For those who don’t follow Alberta politics, the Alberta Sovereignty Act is the centrepiece of a broader Free Alberta strategyThe Free Alberta Strategy https://www.freealbertastrategy.com/the_strategy that has two stated goals: “Establishing complete Provincial Legislative Sovereignty within Canada” and “Ending Equalization and Net Federal Transfers out of Alberta.” Notably—and this is the strategy’s novelty—it doesn’t ask permission from Ottawa or any other province. It just asserts whatever powers are necessary to protect the province’s interests, whether they are constitutional or not.

The appeal to many Albertans is obvious. The Free Alberta strategy claims to be a solution to the hitherto insoluble problem of how Alberta can get everything it wants from Ottawa without actually separating from Canada. It appears to square the circle of independence without secession. Best of all, it lets Albertans claim what is rightfully theirs (or what they would like to be rightfully theirs) without having to go begging to Ottawa or to BC or Quebec or the Maritimes. 

At the heart of the strategy are two radical proposals.About the Free Alberta strategy https://d3n8a8pro7vhmx.cloudfront.net/albertainstitute/pages/337/attachments/original/1637104983/Free_Alberta_Strategy_-_Web_Version.pdf?1637104983 The first is the Alberta Sovereignty Act, which would prohibit government employees from enforcing federal laws or court decisions that, in the opinion of the provincial legislature, exceed Ottawa’s constitutional jurisdiction or, more vaguely, “unfairly attack the interests of Alberta’s People.” The second is to effectively opt-out of the Canadian judicial system. Both ideas are, to use a technical term from constitutional law, nuttier than a squirrel turd.

The strategy’s authors know, of course, that this would be flagrantly unconstitutional—for them, that is its major selling point.The Alberta sovereignty act is unconstitutional on purpose https://nationalpost.com/opinion/barry-cooper-the-alberta-sovereignty-act-is-unconstitutional-on-purpose They believe that forcing a constitutional crisis is the only way to remedy the ongoing constitutional injustice that Alberta suffers under the current system. It is a deliberately brute assertion of political power intended to cut the constitutional Gordian knot. But even on these dubious political terms, the Alberta Sovereignty Act is a dead end. Unconstitutionality aside, the Act is unworkable. 

The provincial government can’t just tell public servants not to enforce the law or individuals that they won’t face any consequences for acting illegally. It can’t tell businesses and employees they don’t have to remit taxes that they legally owe. It is one thing for eccentric academics and aspiring politicians to fantasize about ad hoc independence, but the Alberta Sovereignty Act would put all the real legal risk—CRA fines, court orders, and legal penalties—on ordinary people and local businesses. It asks too much of individuals to shoulder the burden of this constitutional frolic.

The Act would be an economic disaster. What business would trust a government that doesn’t recognize constitutionally-appointed judges and is committed to making up the law as it goes along? There is a reason rogue states aren’t exactly magnets for foreign investment. Companies would relocate their headquarters out of Alberta faster than they moved from Montreal to Toronto in the 1970s when Quebec separatism was ascendent. The Act’s answer to this anticipated chaos is to create a new Alberta-based banking industry, but that would just leave all Albertans on the hook financially for the government’s risks.

Albertans have genuine economic grievances. They contribute billions of dollars more each year to the rest of Canada than they get back and, in return, the governments that benefit from their largesse conspire to shut down Alberta’s most valuable industry. And successive federal governments have used provincial transfer payments to curry favour with vote-rich provinces at Alberta’s expense. That’s frustrating, but it’s no excuse for making the situation worse. There is a perverse irony in a policy responding to economic frustration that, if implemented, would bring economic ruin. 

Until recently, the Free Alberta plan and the Alberta Sovereignty Act were just obscure thought experiments with a website. But now that Danielle Smith has endorsed it,Alberta UCP leadership candidate Danielle Smith promises immediate sovereignty act https://edmonton.ctvnews.ca/alberta-ucp-leadership-candidate-danielle-smith-promises-immediate-sovereignty-act-1.5960598 we have to take this deeply unserious idea seriously. I like Smith. She is smart, curious, and refreshingly open-minded about politics and policy. What made her radio show (on which I was an occasional guest) so good was her willingness to listen to and debate almost anyone about almost anything. Sometimes this meant indulging cranks and kooks, but more often it resulted in stimulating conversations that challenged the narrow elite Canadian consensus. 

The Alberta Sovereignty Act comes straight out of the camp of the cranks and kooks. Promises of police forces that won’t enforce the law and a parallel court system that will apply a parallel constitution are just the latest in a long tradition of Prairie snake oil. You can file the Act alongside Social Credit’s “funny money” Prosperity Certificates

There is a hypnotic power to wishful thinking. We all want to be persuaded of the truth of what we want to see and hear, even when deep down we know it is too good to be true. That is why carnival barkers will always draw crowds to pay to be amazed by what, in the clear light of day, would be transparent fakery. And it is why politicians have to be careful to keep their rhetoric in line with reality. 

Because, in a sideshow, the deception leaves its victims a little poorer but harmlessly entertained; but in politics, scams like the Alberta Sovereignty Act have real-life consequences. If Smith or any other leader is foolish enough to follow this fraudulent scheme, real jobs will be lost and real people will suffer. It will be the Alberta Suicide Act.