By Fred Morley
With the federal budget set to be tabled this afternoon, how expenditure review will roll out regionally should be on the minds of business and government in Halifax. Good fiscal numbers recently have reduced the likelihood of massive cuts. However, there will be some cuts as government reallocates funding to priority areas.
Rumblings of major federal employment and reallocation of efforts to national priorities harkens back to the mid-1990s when deep and disproportionate federal spending cuts significantly undercut Nova Scotia`s economy.
A tale of two cities
In the early 1990s close to 6000 federal jobs and about a quarter of a billion dollars in annual income and consumer spending disappeared permanently from the province. These cuts continue to have a big impact on Nova Scotia`s economy even 15 years later. Now that we seem headed into another period of belt tightening, it’s worthwhile to understand what happened last time when a surprisingly high percentage of cuts and resulting pain came to Nova Scotia.
In 1990, over 21,000 federal public servants were employed in Nova Scotia, compared to 104,000 in Ottawa in the national capital region. As expenditure review took hold, federal employment fell to a low of 91,000 in Ottawa in 1997. The low point for Nova Scotia was 15, 730 a couple of years later. By this time Ottawa had begun to rebuild and federal jobs had surged by 4,000…even as cuts were still happening elsewhere in the country.
Over the 1990s (1990 to 2000) Ottawa lost a total of 5,372 jobs, while Halifax lost 5,247. From the low-point of expenditure control in 1997 to 2011, Ottawa added 45,240 jobs, while Halifax added a total of 480.
Even in recent times, Ottawa has continued to add federal employment. In the six years from 2005 to 2011, the National Capitol Region added 24,544 jobs compared to 140 in Halifax over the same period.
It took Halifax 10 years to recover from the federal job cuts. And our recovery came primarily from sustained job creation in the private sector.
If history is any measure, the bottom line for a new fiscal imperative to cut federal jobs doesn’t look very good for Nova Scotia. As deficit reduction efforts roll out, it is my hope that government has a mind to past pain and retaining key regional innovation capacity. Fingers crossed.
Author: Fred Morley
Fred Morley is the Executive Vice President and Chief Economist at the Greater Halifax Partnership.