Tim Hudak’s public sector cuts more extreme than Harris years
TheStar.com – Opinion/Commentary – Impact of cutting 100,000 good jobs out of Ontario’s economy would result in the loss of an additional 50,000 private sector jobs.
May 18 2014. By: Kaylie Tiessen Kayle Hatt
Progressive Conservative Leader Tim Hudak’s pledge to demolish 100,000 public sector jobs has stirred a hornet’s nest of opinion in the Ontario election race.
It appears that the main issue in this campaign is firming up to be job creation, with all parties proposing various policy options (with varying credibility).
Hudak is the only candidate whose starting point would be to cut jobs. It’s a plan that’s even more extreme than the cuts made by former premier Mike Harris in the 1990s.
Between 1995 and 2002, Harris cut about 7,000 public sector jobs, thrusting the province into a period of labour turmoil and eroding public services.
At the federal level, Prime Minister Stephen Harper has also had a bull’s eye on the back of public sector workers, but even his attempts to cut jobs pale in comparison to Hudak’s pledge.
The parliamentary budget officer estimates 20,000 federal public service positions have been cut since March 2010, with an additional 8,900 positions scheduled to be eliminated by 2016-17.
So who would be affected if Hudak made good on his pledge?
Statistics Canada indicates there were 88,483 Ontario public servants in the general government category in 2012, the most recent year of data available.
This includes the core public service, agencies, boards and commissions (such as Metrolinx, the Ontario Municipal Board, the Niagara Falls Bridge authority and several hundred other organizations), provincial police and judicial employees.
Certainly, not every job in the provincial government would be axed. That means the job cuts would have to reach into the broader public sector and impact service areas such as public education and health care. At his press conference last Friday, Hudak confirmed that teachers would be on the chopping block saying, “Will it mean fewer teachers? It does.”
Eliminating 100,000 jobs would amount to 15.3 per cent of Ontario’s provincial public servants — 1.5 per cent of the total jobs in Ontario.
And the effects wouldn’t be limited to the public service, because government decisions to cut or spend have a multiplier effect on the economy.
The federal ministry of finance estimates the multiplier effect of government spending is approximately 1.5. That means every dollar the government spends generates an additional 50 cents in economic activity through increased consumer spending, business activity and other second order effects.
Using that multiplier, we estimate the impact of cutting 100,000 good jobs out of Ontario’s economy would result in the loss of an additional 50,000 private sector jobs — because those who used to be employed in the public sector would no longer have the money they need to participate in the local economy, go to movies, eat at local restaurants and shop in local stores.
And this is a conservative estimate. Others have estimated private sector job losses to be as high as 67,000.
In 1995, the Ontario Progressive Conservatives estimated that the $10.5-billion withdrawal from the Ontario economy — due to a combination of spending and tax cuts — would act as a fiscal drag on economic growth of 0.4 per cent annually for five years.
The cuts proposed by Hudak are significantly larger.
This demolition plan would also decrease government revenues because all of those laid-off workers would stop paying taxes.
Ontario’s already giving up a cumulative of $19 billion in foregone revenue due to a political tax cut agenda that started in the 1990s. Additional tax cuts on Hudak’s agenda would further erode Ontario’s fiscal coffers and the quality of public services.
Put simply, firing 100,000 public servants would likely jolt Ontario’s economy into a period of decline. That runs counter to the need for more and better jobs. And it certainly isn’t how to slay a deficit.
Kaylie Tiessen is economist with the Canadian Centre for Policy Alternatives’ Ontario office. Kayle Hatt is a research associate with the Canadian Centre for Policy Alternatives.
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