by Christopher Smith
Tens of thousands of civil service positions are expected to be eliminated, but some still hold hope that cuts can be achieved through attrition and retirement. Similarly, layoffs could be a boon for staffing firms, while a clampdown on federal spending could put significant pressure on companies that are heavily dependent on government contracts.
The most likely scenario is a trifecta of increased unemployment, reductions in temporary staffing and large cuts in federal programs that benefit the public. The information that has so far been released is not particularly promising.
On March 6, the government published a document detailing options for those public servants who had received "surplus" notices. One of the options, "job-swapping," dates back to a policy that was first enacted in the 1980s and proved enormously popular during the relatively hale economy of the 1990s. Public servants who receive surplus notices may "swap" with a securely employed servant who wants to retire or cash in on a special bonus package.
During the 1990s, many employees chose to retire early without penalties in exchange for giving their jobs to surplus public servants. The program was so popular that the government actually ended up spending more in retirement packages than it saved in salary reductions.
However, it's unlikely that this round of "swapping" will be quite as invigorating for the economy. Public servants have three options. Those over 55 years of age with at least 10 years of service may retire early without stiff penalties. Others may resign and, based on their total years of service, take a cash payout of up to 52 weeks or an education allowance. Finally, bureaucrats can put themselves on a "priority list" for a year in order to find another job in the service.
Unfortunately, many federal agencies are already operating at minimal staff levels. For example, the Canadian Food Inspection Agency says it doesn't have enough funding to perform preventative food inspections, but rather acts only when citizens report illness. The agency also heavily relies on the food safety inspection standards of other nations, including the United States, India and China.
Food safety is only one department out of many. If the cuts are implemented across the board, the decline in Canada's public quality of life could be significant.
Additionally, this likely reduction across a broad spectrum of service sectors could result in a much higher unemployment rate. In Ottawa alone, approximately 40 per cent of the workforce is employed by a federal department or agency.
However, it may be government offices outside the National Capital Region that are hit hardest. During an economic high tide, new government offices are opened outside of Ottawa-Gatineau. When this tide recedes, these offices are the first to be closed down.
This is especially relevant to the IT sector, which has already seen a significant reduction in temporary staffing due to the Shared Services Canada consolidation initiative. In combination with specific project cuts, the unemployment rate among IT staffers could increase dramatically, especially in regions where IT forms a substantial portion of the economy.
While achieving a balanced budget is commendable, it will likely be at great cost to Canada's citizens and public servants. Ironically, while Finance Minister Jim Flaherty has delayed the release of the budget in order to better gauge the effect of the European debt crisis on Canada, his decisions to trim department staff may ultimately create a national slowing of growth and innovation.
As Steven Hess, the Moody's analyst for Canada explains, there is "no rush" to trim a deficit that is only two per cent of the national GDP. Rather, as the United States has proved recently, prolonged higher unemployment rarely benefits anyone.
Christopher Smith is the chief executive of local software company OPIN. He writes about open governance, technology and the public sector on Twitter @csedev.