Government Spending, Public Sector Employment, and Labour Market Crowding Out in Canada

Government Spending, Public Sector Employment, and Labour Market Crowding Out in Canada

• Between 2015 and 2025, public-sector employment grew 29%, while non-public-sector employment increased by only 15%, leading to rising shares of public-sector employment and crowding out of non-public-sector employment.
• There is a demonstrable inverse relationship over time between the public-sector share of employment versus either private sector or self-employment.
• Canadian public-sector employment in 2014 was 19.5% of total employment compared to non-public-sector employment (both private-sector employees and self-employed) of 80.5%. In 2025, public-sector employment was 21.6% and non-public-sector employment 78.4%.
• In 2025, the public share of total employment was highest in Newfoundland & Labrador (30.5%) and Prince Edward Island (29.6%), and lowest in Ontario (19.7%) and Alberta (18.5%).
• Private-sector employment shares are highest in Alberta (67.9%), followed by Ontario (66.8%), and are lowest in Prince Edward Island (59%) and Saskatchewan (58.4%).
• Self-employment shares are highest in British Columbia (15.4%) and Alberta (13.6%), and lowest in Newfoundland & Labrador (7.3%) and New Brunswick (9.4%).
• Rising public-sector employment shares at all levels of Canadian government have implications for long-term Canadian productivity and economic growth.