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Bigger, Not Better: How Canada’s public sector is delivering less for more

The data reveals that the government’s footprint in Canada’s economy has grown steadily, that the compensation premium for government workers remains substantial, and that productivity is lagging behind the business sector.

November 20, 2025
in Domestic Policy, Latest News, Intergovernmental Affairs, Papers
Reading Time: 5 mins read
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Bigger, Not Better: How Canada’s public sector is delivering less for more

By Stephen Tapp

November 20, 2025

PDF of paper

Executive Summary | Sommaire (le français suit)

Canadians feel it – higher taxes, longer wait times, and public services that don’t serve us well.

Yet behind these frustrations lies a deeper problem: Canada’s government sector has grown in size while becoming less and less productive.

Over the past two decades, government spending has increased, but the return on our tax dollars has declined. From 2007 to 2023, the government sector’s share of the economy rose from 25.7 to 27.3 per cent of GDP, even as productivity fell. Today, government workers produce 7 per cent less output than their counterparts in the private sector.

Once more productive than private industry, the government sector is stuck in a multi-decade productivity malaise, averaging just 0.2 per cent annual growth, well below the business sector’s 1.1 per cent annual labour productivity growth.

The growing government footprint means the public sector commands a larger share of Canada’s economic resources and exerts greater influence on the economy. This expansion raises two fundamental questions: What are our tax dollars delivering – and how efficiently are they being spent?

This second report in a three-part series introduces two new composite indicators that together provide a more comprehensive picture of government performance.

• The Size of Government Index (SGI) captures the scale of government activity in the economy by integrating six key measures: employment, hours worked, compensation, value added, revenue, and expenditure.

• The Government Productivity Index (GPI) measures how productive the government sector is relative to the business sector.

Of course, Canada’s government sector isn’t a single entity. It’s a collection of distinct activities – from hospitals and schools to administrative agencies – each with different cost structures, workforce dynamics, and service mandates. The data reveal serious underperformance across many of these areas:

• Health care: In the largest government sector, productivity performance was weak (0.3 per cent annually from 2007 to 2023) despite surging employment and spending.

• Education: Productivity declined in primary and secondary schools – in line with falling student achievement scores. That weak performance contrasts with the much stronger measured productivity for universities (1.1 per cent growth) and colleges (0.6 per cent).

• Public administration: Productivity gains were modest (0.3 per cent annual growth) except in national defence, where productivity rose strongly (1.4 per cent annually) even as employment levels remained largely stable over decades.

The results from both the SGI and GPI indicators are sobering. They reveal that the government’s footprint in Canada’s economy has grown steadily, that the compensation premium for government workers remains substantial, and that productivity is lagging behind the business sector. The result is a widening disconnect between the growing scale of government activities and the efficiency with which they are carried out.

Yet, there is a path forward. To restore value for taxpayers and strengthen Canada’s long-term economic resilience, governments can implement meaningful reforms. Specifically, they can:

• Accelerate the digital transformation across all levels of government by redesigning workflows to improve service delivery.

• Modernize management systems by focusing on outcomes, not inputs, and embedding more productivity metrics into public reporting and budgeting.

• Link compensation to measurable performance wherever possible.

• Pursue targeted, sector-specific reforms in the largest service areas – such as health and education – where even modest productivity gains could yield major national benefits.

With an aging population, slowing economic growth, and mounting fiscal pressures, improving government productivity is mission-critical. Urgent reforms are required to ensure Canadians receive greater returns for their tax dollars.


La population ressent pleinement le poids des impôts élevés, des longs délais d’attente et des services publics jugés déficients.

Or, la frustration dissimule un problème plus profond : le secteur public canadien gagne en taille, mais devient de moins en moins productif.

Depuis 20 ans, les dépenses publiques augmentent, mais le rendement de chacun de nos dollars d’impôt baisse. De 2007 à 2023, la part du secteur public dans l’économie est passée de 25,7  % à 27,3  % du PIB, alors même que la productivité a diminué.

Actuellement, le produit des personnes employées par l’État est 7 % inférieur à celui de leurs homologues du secteur privé.

Autrefois plus productif que le secteur privé, le secteur public connaît depuis des décennies une crise de productivité, laquelle augmente de seulement 0,2 % annuellement, bien en deçà du taux de 1,1 % du secteur privé.

Le gouvernement contrôle de plus en plus les ressources économiques et influence de plus en plus l’économie. Cette expansion pose deux questions essentielles : que rapportent nos impôts – et dans quelle mesure sont-ils dépensés efficacement?

Ce deuxième rapport d’une série de trois introduit deux nouveaux indicateurs composites qui, ensemble, donnent une image plus complète du rendement d’un gouvernement.

• L’Indice Taille du gouvernement (Size of Government Index ou SGI) mesure l’échelle de l’activité gouvernementale dans l’économie via six variables clés : emploi, heures travaillées, rémunération, valeur ajoutée, recettes et dépenses.

• L’Indice Productivité du gouvernement (Government Productivity Index ou GPI) mesure la productivité du secteur public par rapport au secteur privé.

Bien sûr, le secteur public canadien n’est pas une entité simple. Il est constitué d’un large ensemble d’activités distinctes – qui vont des hôpitaux aux écoles en passant par les organismes administratifs – avec des coûts, une main-d’œuvre et un mandat spécifiques. Or, les données montrent de graves lacunes dans plusieurs des domaines suivants :

• Santé : Dans ce secteur le plus important, la productivité a été faible (gain annuel de 0,3 % entre 2007 et 2023) malgré la forte progression de l’emploi et des dépenses.

• Éducation : La productivité a diminué de pair avec les résultats des élèves dans les écoles primaires et secondaires. La faiblesse de ces résultats contraste avec la productivité mesurée nettement plus élevée dans les universités et les collèges (gains respectifs de 1,1 % et de 0,6 %).

• Administration publique : Les gains de productivité ont été peu élevés (gain annuel de 0,3 %), sauf pour la défense nationale, qui affiche un gain annuel de 1,4 %, et cela, malgré la stabilité de ses niveaux d’emploi depuis des décennies.

Les résultats des indicateurs SGI et GPI interpellent. Ils révèlent que le gouvernement est de plus en plus présent dans l’économie canadienne, que la prime de rémunération de ses salariés reste importante et que sa productivité est toujours inférieure à celle du secteur privé. Il s’ensuit un fossé croissant entre l’expansion des activités gouvernementales et leur efficacité.

Une voie de rétablissement est pourtant possible. Pour restaurer la valeur revenant aux contribuables et renforcer la résilience économique à long terme du Canada, les gouvernements peuvent mettre en place des réformes réelles. Plus précisément, ils peuvent :

• Accélérer la transformation numérique dans tous les paliers de gouvernement en repensant les flux de travail pour améliorer les services.

• Moderniser les systèmes de gestion en mettant l’accent sur les résultats plutôt que sur les intrants, et en intégrant de nombreux indicateurs de productivité dans les rapports publics et les budgets.

• Lier la rémunération aux performances mesurables, là où c’est possible.

• Réaliser des réformes sectorielles ciblées dans les domaines des services clés (santé et éducation), là où des gains de productivité même modestes pourraient générer des retombées nationales majeures.

Avec le vieillissement de la population, le ralentissement économique et les pressions budgétaires croissantes, il est crucial d’améliorer la productivité du secteur public. Il faut des réformes urgentes pour accroître le rendement de nos impôts.

Tags: Stephen Tapp

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