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Employment Effects of Restructuring in the Public Sector in North America

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This paper examines whether restructuring in the public sector contributed to the slower cyclical recovery in Canada than in the United States during the 1990s. Changes in public sector employment are used to investigate this question. The pressures that led up to the restructuring are explored and the resulting changes in employment are documented. A standardized definition of the public sector is proposed that allows for a consistent comparison of changes in employment in Canada with those of the United States. These changes are examined by level of government and by function. The analysis reveals that, in Canada, changes in employment in the "standardized" public sector were negative during much of the 1990s, in contrast to the continued, steady expansion of this sector in the United States. Evidence presented from longitudinal surveys indicates that certain workers who were displaced from the public sector in Canada experienced difficulties regaining employment. A key conclusion is that public sector restructuring contributed to the slower recovery in employment in Canada in the 1990s.

Topic(s): Labour markets
JEL Code(s): J, J4, J45