Governments could counter their deficit crises through civil service layoffs, but they would have to do so in accordance with Canadian law

In Canada, 83 per cent of hirings during the COVID pandemic were in the public sector (with little benefit to taxpayers), and civil service salaries have compounded our own deficit and debt. In addition, civil servants earn significantly more than their private sector equivalents, especially with the added costs of pensions and benefits. So, reducing the ranks of the public sector is obviously attractive as a means of fighting the deficit.

Could Canada replicate what Trump has done, and is it a good idea?

First, employment laws in the U.S. and Canada are very different. In the U.S., most employment is “at will.” In other words, an employee can be dismissed at the employer’s discretion (subject to not discriminating on human rights grounds) without severance. In Canada, non-union employees have the right to sue for wrongful dismissal if terminated, and obtain anywhere between two and 30 months’ compensation. That makes termination much more expensive here.

I have seen many voluntary retirement plans. None of them have been effective. In fact, every one of them has been ruinous to the corporations involved. If employees are offered the option to resign with generous compensation, the employer invariably loses its most marketable employees and retains those who are uncertain of their prospects of finding work elsewhere. Only the unmarketable deadwood remains.

As well, too many necessary employees may accept the offer, requiring the employer to hire new, inherently less experienced employees to replace them — thereby saving no money at all, and actually costing money once you factor in training and the other disadvantages of having comparatively inexperienced workers.

Companies also lose much of their institutional knowledge when this occurs. For example, in my own area, if you lose the managers who negotiated previous collective agreements, you are less able to argue both past practice and the intention and context of the words that found their way into the agreements in bargaining. Companies, in all departments, will be less familiar with what plans and strategies “worked” for that company in the past and which did not.

If employees offered a voluntary severance believe they are likely to be terminated anyway, they will hold out for more money than they would have been entitled to if dismissed, making the cost of a voluntary departure program particularly expensive.

For all of these reasons, it is far better to never offer voluntary retirement packages, and instead focus your severance dollars only on those employees you wish to terminate because they are redundant or less competent. You can also determine how many employees and in what positions you wish to downsize rather than rely on the happenstance of whoever elects to accept your offer.

The only time voluntary retirement ever makes sense is to ensure that the number of employees actually terminated falls below the mass termination limits in the Employment Standards Act, to avoid the costs and regulatory requirement of the Act.

How feasible is firing civil servants en masse as a means of fiscal deficit control?

As of 2024, less than 10 per cent of U.S. workers are unionized, whereas in Canada, the number is just over 30 per cent, including 76.6 per cent of public sector workers.

Although non-union public sector workers can be selected for dismissal, unionized ones can only be laid off in order of seniority. That does not prevent the government from reducing its unionized workforce, but it does prevent it from selecting those workers it wishes to terminate.

The advantage, however, is that unionized workers can be laid off with very limited severance, as wrongful dismissal law does not apply, so the government will not bear the economic costs of severance that it would if the workers were not unionized.

Can the government offer voluntary departure for unionized employees? They cannot without the union’s consent. Now, as a practical matter, if it made voluntary resignation offers without union approval, and employees opted for it in large numbers despite lack of permission from the union, there would likely be an overwhelming backlash from the membership, which might cause the union to back off and agree to it. However, making such an offer without the union’s consent would be an unfair labour practice, providing the union a remedy at the labour relations board.

In short, governments here, of whatever stripe, federal, provincial or municipal, could counter their deficit crises through civil service layoffs, but they would have to do so in accordance with Canadian law rather than following the example south of our border.