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Payroll to lose 19,000 jobs as part of $5.2B trim
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Payroll to lose 19,000 jobs as part of $5.2B trim
About 19,200 of Canada's public servants will be wiped off the federal payroll over the next three years, in the Conservatives' "moderate" deficit reduction plan, which will cut $5.2 billion annually from departmental spending.
Finance Minister Jim Flaherty said the reductions, which will come primarily from "back-office operations," are "common sense" changes that will improve the efficiency and productivity of Canada's 400,000-strong public service.
"We will implement moderate restraint in government spending," Flaherty said Thursday. "The vast majority of savings will come from eliminating waste in the internal operations of government, making it leaner and more efficient."
The bulk of the job cuts will be in the National Capital Region, where the size of the public service has mushroomed over the past decade. The government estimates that 12,000 bureaucrats will be laid off and the remaining 7,000 cuts can be handled by attrition. The public service has an attrition rate of about five per cent; three per cent is retirements.
The growing executive cadre of the public service will be hit even harder, eliminating 600 of more than 6,500 current positions. The number of executives has increased steadily over the decade, growing by 18 per cent since the Conservatives came to power in 2006.
The reductions come at a time when departments are still digesting the cuts from strategic reviews that have been ongoing since 2006 and the $2-billion reductions from the 2010 freeze slapped on operating budgets.
David Macdonald, an economist at Canadian Centre for Policy Alternatives who has studied the impact of the cuts for several unions, estimates departments may have to reduce an additional 15,000 jobs as they absorb previous reductions, which are also kicking in over the next three years. That puts total job losses closer to 34,000 across the country and he estimates about 13,000 of those will be in Ottawa-Gatineau. Job losses in that magnitude could push up the Ottawa-Gatineau unemployment rate from 5.9 per cent to 7.8 per cent.
"They are digesting all these cuts at the same time. This is a recipe for indigestion," he said.
The cuts, however, are much lower than the worst-case scenarios projected by the federal unions, some of which were braced for 60,000 jobs to be eliminated. The unions, left in the dark about possible reduction targets, launched campaigns against the cuts, arguing they would put the health and safety of Canadians at risk. The budget documents, however, said many of the reductions would come from streamlining, efficiencies and revamping back office operations rather than reducing services.
The unions, however, didn't buy it.
"To say we can cut budgets without affecting services is delusional at best," said Patty Ducharme, executive vice-president of the Public Service Alliance of Canada. "The loss of 19,200 is huge and comes after five years of operational reviews."
The government also plans to rein in the overall $42-billion yearly compensation bill and "bring public service compensation in line with public and private sector employees."
The first steps are several major changes to the public service pension plan, forcing employees to boost their contribution rates so that they pay 50 per cent of the cost. They now contribute about 40 per cent and the government pays 60 per cent.
The most startling is a plan to open talks with the joint union-management advisory committee to increase the retirement age in the public service from 60 to 65 for new public servants beginning in 2013. This means a 25-year-old who joins the public service will have to work 40 years, rather than 35 years, for a full pension.
Ian Lee, a professor at Carleton University's Sprott School of Business, said raising the retirement age to 65 would have a major effect on the bureaucracy and send a signal to the private and public sectors to follow suit. Public servants today are retiring, on average, at age 59.
"That is the sleeper issue in the whole budget that will have farreaching implications," Lee said.
The government is also "eliminating" involuntary severance for the remaining public servants who have yet to negotiate a deal with Treasury Board on its surrender. Some 230,000 public servants have already given up severance for voluntary departures such as when they retire or quit.
The $5.2 billion a year in spending cuts are less than what many public servants had girded for. They expected the government would keep cuts at the upper end of the $4-billion to $8-billion range it set when it launched the spending review.
The Conservatives spent months sorting through hundreds of proposals from departments, offering up two scenarios, one for five-percent reductions and another for 10-per-cent.
The cuts, however, vary from department to department, ranging from a low of 1.1 per cent and 2.7 per cent for Veterans Affairs and Aboriginal Affairs, respectively, to a high of nearly 17 per cent in Finance. A significant number of departments face cuts of 10 per cent or more: Agriculture, Natural Resources, Privy Council Office, Transport Canada, Shared Services Canada, Treasury Board, and Public Safety.
The government is banking on savings from three streams: a major refocus on programs and services; reducing red tape; and by modernizing and reducing the outdated back office systems departments rely on to deliver internal and external services. About 70 per cent of the $5.2 billion in savings is expected to come from operations.
However, the uncertainty hanging over public servants will drag on for months. The budget offered no details on where or when these cuts will hit. Departments, however, will have to move fast to get their savings, so employees could be getting written notices that their jobs could be affected within days.
The process for laying off workers under the workforce adjustment agreement is slow and could take as long as 16 months before surplus workers are off the payroll. The government has set aside $900 million to cover the salary costs, buyouts, waived pension penalties and education and training allowances that laid-off employees are entitled to under the workforce adjustment agreement. The government promised to use attrition to manage as many of the cuts as possible.
The public service has undergone unprecedented growth over the past decade, outstripping its size before the Liberals' historic downsizing in the mid-1990s that eliminated 50,000 jobs or 14 per cent of the workforce. The Conservatives continued that growth with a spending spree when it came to power in 2006. The job cuts will only reverse about 20 per cent of the job growth in the public service since 1999.
The reductions cut a wide swath, from eliminating programs, such as the Public Appointments Commission, Katimavik and the National Round Table on the Environment, to getting rid of the penny.
The government expects savings by getting public servants to use videoconferencing rather than travel and online documents rather than paper. The controversial and costly Advanced Leadership Program to groom executives has been scrapped and Public Works and Government Services is going to shrink the amount of office space public servants can occupy.
The government is pinning a lot of hope on efficiency savings from modernizing the back-office operations of departments and agencies, especially by consolidating and internal services such as human resources, finance, real estate, communications and information technology. Critics have long argued that efficiency savings are the most elusive and difficult to achieve, especially on the heels of earlier strategic reviews that were also aimed at improving efficiencies.
"How many times can you keep going back to the efficiency well," one long-time bureaucrat said.
MORE HIGHLIGHTS
The budget will:
- Reform regulation in the resource industry, including amending the Environmental Protection Act.
- Cap EI premium rate increases to 5 cents a year until the fund is balanced again.
- Give $5.2 billion over 11 years to the Canadian Coast Guard.
- Give $67 million to the National Research Council to refocus on "business-led, industry-relevant research."
- Streamline regulatory reviews of major economic projects.
- Pass legislation to create standards for First Nations education.
- Refund $130 million in application and processing fees to skilled foreign workers stuck in immigration limbo.
- Shut the Public Appointments Commission, Assisted Human Reproduction Canada, and the National Round Table on the Environment and the Economy.
- $205 million over one year for Hiring Credit for Small Business.
- Give $50 million over two years to Youth Employment Strategy.
- Give $150 million over two years on Community Infrastructure Improvement fund
- Give $105 million next year to Via Rail for operational and capital projects.
- Give $50 million over two years to protect wildlife at risk.
- Provide $450 million for sports facilities in the Greater Toronto Area for the 2015 Pan American and Parapan American Games.
- Provide $44 million over two years to the Canadian Grain Commission to reform their funding model.
- Provide $13.5 million over two years to improve pipeline safety.
- Give $35.7 million over two years to improve tanker safety and inspections, emergency preparedness related to oil spills and updated charts for shipping routes.
- Announce a new global commerce strategy in 2013 that sets trade priorities.
- Provide $9.6 million over three years to the RCMP to fight counterfeiting.
- Give $ 99.2 million over three years to help provinces create permanent flood mitigation measures.
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