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Authors: Ian Brinkley
25 June 2010
The experience of Canada in the 1990s is often cited as an example of how governments can cut large deficits without endangering economic recovery.
Many people have pointed out that the Canadian experience took place in very different circumstances, with a strong US economy and falling interest rates offsetting cuts in public spending.
But less well known is what happened to public sector Canadian employment once the deficit had been addressed. The Canadian authorities put all the jobs back in the next five years. By 2005 public sector employment was higher than it was in 1995.
And it was central government that took the biggest hit in percentage terms rather than regional and local government. We don’t yet know how the distribution of job loss will play out in the UK, but it is a reasonable bet that town halls will be required to deliver a large part of the pain in terms of job losses.
The chart below shows the estimates from the OECD using common definitions of the public sector ( click on the chart to enlarge image).
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