OTTAWA, ON (October 30, 2025):
Canada’s governments are growing – but Canadians aren’t getting more for their money.
A new report by Stephen Tapp, The Growing Government Gap: Rising costs, shrinking returns, and the productivity crisis in the public sector, reveals how Canada’s public sector has ballooned in size even as its productivity has slipped.
“Employment in the government sector grew faster than in the private sector (30 per cent versus 18 per cent), accounting for an increasing share of overall jobs,” explains Tapp.
At the same time, “labour productivity in the government sector has significantly lagged that of the overall business sector over the past decade.”
Why does this matter? Because when governments are plagued by lagging productivity, it “hurts the broader economy as well as workers’ compensation,” Tapp writes. “In fact, if government productivity had matched that of the business sector, Canada’s GDP in 2024 would have been $32 billion (or 1.5 per cent) higher.”
According to Tapp, simply cutting budgets across the board will only reduce service quality, not improve outcomes. Instead, federal and provincial governments should strategically reallocate resources to high priorities while also modernizing the public service. This can involve retraining existing staff but also engaging in targeted recruitment to inject crucial new skills in the public service.
“Closing the productivity gap between the public and private sectors has the potential to yield tens of billions of dollars in annual economic gains while improving public trust in government performance,” writes Tapp.
“This is certainly a very worthwhile Canadian initiative.”
To learn more, read the full paper here:
Stephen Tapp is the CEO and chief economist at the Centre for the Study of Living Standards (CSLS).
For further information, media are invited to contact:
Skander Belouizdad
Communications Officer
(613) 482-8327 x111
Skander.belouizdad@macdonaldlaurier.ca
