Public Expenditure in Ontorio qnd Quebec, 1950-1980: ExPlaining the
provincial services from citizens, interest groups, and economic elites; and the impact of heightened interprovincial communication and demonstration effects.r Moreover, they show that over the period 1956-1974 among all provinces total levels of expenditure and expenditures within key areas have indeed become more similar.2 They note that Thomas shoyama's analysis of overall provincial spending over the period 1939-1964 found the same process to be at work.3 As we shall see, in the subset represented by ontario and euebec alone there has been no such convergence. If anything, the trend over the last three clecades
DiTferences ANDRE BLAIS ANd KENNETH MCROBERTS
has been one ThepapercomparespublicexpenditureinOntarioandQuebecovertheperiodlg50tol9S0.-Ingeneral, of àiuergen.. in total expenditures and in major expenditure categories' This contrasts ,rr" riJiÀ it """ of convergence which oiher students have found among all ten provinces. Particular with the pattern This lead is traced attention is focussed upon quebec;s growing lead over Ontario during the 1970s. general role of primarily to differencesbetween the go*u"rr*"-nt, on .ajor policy questions, including the the public sector within provincial economies. pendant la période 195G1980' les dépenses gouvernementales en ontario et au Québec principales catégories, en Lâ tendance dominante, tant sur le plan des dépenses totales que sur celui des provinces qui a *i un" a" aiu".g"nce; cette tendanc" ,'oppor" uu -Ouvement de convergence entre les dix grandissant qui à l'écart eie oUser"e par-d,autres chercheurs. Un. att.ntion particulière est accordée des ;;";; b quetec de l,ontario depuis le début des années 70: cet écarr découle principalement grands enjeux politiques et en cl-ifférentes qu'ont prisei les deux gouvernements sur les ;;.iri;", 'particulier sur le rôle du secteur public dans le développement économique'
TABLE
4-7 5
2.70
2.07
l 879-80' i 884-85
2.61 2.54 3.40 3.23 2.75
1.33
130.4 196.2
I .86
168.2 l 82.8
1.7 6
183.5
3.21
5.07 7.14 28.94 41.54 62.84
i.
., ,_,
_
889-90
I 89'1-95 I 899- I 900
ontario-Quebec expenditures than have thus far been available and by delineating the a series of possible interpretations of the patterns which emerge, especially procan exercise This 1970s. the during expenditures relative surge of Quebec's
t939-40
Revue d' études csnadiennes Vol.
18. No.
I (Printemps
1983
Spring)
Quebec
d;ffii6
I .18
l 909-10 1914- l5
28
per capita ($)
1.05 1.37
journalists, and politicians alike have used expenditures as a rough measure of the But scope of governmental activity and of the degree of governmental efficiency' paper' we In this comparisons. such of flurry real a been in recent years, there has on data comprehensive more by offering discussion this will try to contribute to
of
0ntario Expenditures,
l 867-68 l 869-70
I
quarters. the single-factor interpretations which have beén popular in some that the level of comparisons Ontario-Quebec presumed in these Usually it is norm' [f implicit as the serves Ontario Typically, expenditures should be similar. is something presumed that is it then ontario's Quebec's expenditures exceed intended been have often comparisons amiss. In fact, recent ontario-Quebec precisely to show how "excessive" has been the growth of the Quebec state or how "overpaid" have been those who work within the public sector' There are, in fact, good reasons to expect that over recent decades the expenditure levels of all provincial governments should have become increasingly similar. ln their study of provincial government spending in canada, simeon and Miller point to a series of forces favouring convergence: federal grants to promote equivalence in provincial services; a parallelism in the demands for
Quebec Expenditures, per capita ($)
Year
187
vide no definitive answers. We hope it will at least demonstrate the inadequacy
I
Total Expenditures of Provincial Governments, Quebec and Ontario, l86E- 1945, per capita
L'article compare
AfrequentfocusofOntario-Quebeccomparisonshasbeenthelevelof expenditures of the two provincial governments. over the years, academics,
of divergence in spending levels. In fact, there have been enormous
divergences in spending levels between ontario and euebec throughout the history of Confederation.
1919-20 1924-2s 1929-30 I
934-3 5
1944-45
7.18 7.92 i 3.03 16.82
19.'t3 31.87 28.27
.96
l 5l l
98
26.81
37.80 36.17
fi9.3V0 1
I
16.1
38.9 63.3
100.6
27.4 31.4 26.8 73.6 84.3 78.2
Soarce-c.' The Ontario expenditure figures are calculated
from F.F. Schindeler, Responsible Government in ontario (Toronto: university of roronto press, 1969), Table l, using population estimates drawn from Quebec, L'Annuaire du euébec, rgii-78; p.252.The euebec expenditure figures are drawn from James Iain Gow, "Les dépenses du gouvernement du euébec (1g67-1970) comme indicateur d'activités étatiques," unpublished paper, June, 1980, Appendice I.
Beyond documenting this pattern of divergence, r. *il explore possible approacÏes to explaining it, especially over the last three decades. we will find that for the period 1950-1980 the divergence cannot be satisfactorily explained in terms of four variables (urbanization, personal income, equalization, and labour costs), which Simeon and Miller show are able to explain most of the variation among all ten provinces. In the specific case of ontario and euebec, additional factors must be at work. As we shall see, the ontario-euebec variation can be in part traced to changes in Quebec in the government party (a variable which is only barely significant when viewed among all ten provinces), but the steady divergence Journal of Canadion Studies
29
since the mid-1970s seems to reflect additional inf-luences. Here, we will explore two sets of factors. One deals with differences between Ontario and Quebec in the centralization of institutions, as found both in provincial-municipal relations and
in public sector collective bargaining. The other concerns differences in policy with respect to tax structure and perhaps more generally with respect to the role that government and the public sector should ptay in the lace of the economic crisis which has beset both provinces.
Historical Patterns of Expenditure in Ontario and Quebec Historically, levels of expenditure have varied enormously between the two provinces. Table I shows that, in the last three decades of the nineteenth century, Quebec usually outspent Ontario by wide margins. At the turn of the century, there was a certain convergence as Ontario caught up to Quebec's level, but from
at least
l9l0 onwards Ontario's expenditure rose much more quickly. In
1924-25,
its expenditure per capita was three times larger. The Depression apparently forced a sharp drop in its level of expenditure, resulting in a per capita rate which was relatively close to Quebec's. Thus, in 1939-40, Quebec's spending was 84.3 per cent of Ontario's. In 1944-45 both provinces remained at about their 1939 levels. In the immediate postwar years they undertook major increases in expendi-
ture, arriving again at similar levels with Quebec spending 89.3 per cent of Ontario's level in 1950-51. But with the late 1950s, once again spending levels began to diverge.
CHART 1 ONTARIO AND QUEBEC TOTAL EXPENDITURES, AS RATIOS, 1950.1980
TABLE 2 Totâl Expenditures of Provincial and Local Governments, Quebec and Ontario, per capita, 1950-1980r Year
1950 l95l 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 t962 1963 1964 1965 1966 1967 1968 1969 1970 tg't t 1972 t973 1974 19'75 t976 197'7 1978 t9'19 1980 t
Provincial plus local expend.
Provincial-level only Ont. Que' 182.66 179.41 190.88 180.88
190.30 209.53 208.89 214.85 224.67 240.91
284.89 336.02 367.58 397.00 482.65
533.84 549.54 575.37 579.01
628.12 740.47 825.45 859.34 899.92 923.83 980.15 994.69 1,017.46 1,067.35
Que.
433.83 488.62
5t4.23
552.57
657.9r 6s2.96
772.97 918.s7
1,116.35 1,22't.50 ' 1,230.81 1,317.72 1,270.42 1,332.09
I,304.25 |,334.23
855.
I
1 1
.57
I,130.25
,307.12
482.69 553.24 553.90 579.29 642.62 634.98 641.02 698.20 825.98 968.88
936.58 1,O44.22 987.29 I,118.15
856.43 867.79 887.90 853.22 851.16 831.79
|,l2l
361.tI 393.t7
124.78 325.28 344.77 400.29 387.83 391.75
798. l3 806.61
ont.
292.36 304.76 300.60 312.29 333.01 413.75 332.96 430.91 343.32 447 .35
266.61
746.13
Que.
Ont. 357.28 377.74 379"92 374.78 385.99
204.48 220.36 212.55 204.32 205.58 224.42 235.08 242.74
436.61 479.31 534.03 592.03 649.7'7
Consolidated provincial-local
I ,381 .02 I ,350.75
1,393.09 1,382.34
,435.14 |,328.4t
r ,501 .
l8
| ,337 .90
'-------
-
479.26 492.22 549.31 584.9'.t 710.56
5'71.26
573.3r 587.14 636.95 757.74 799.85 796.29 846.99 839.33 950.58 948.82 1,053.45 1,052.32 1,091.45
't9t.t6
I,097.07 I,i07.90 I
,r28.25
I,148.06
t,148.24 1,t40.20 1,203.14 1,161.22 I
,242.73
I ,121.37
1,300.13 1,129.22
1,548.39 1,340.50
r,353.70 I,130.18
I,299.07 | ,551 | .578.92 I,25't .98
1,378.25 1,09s.42
.87
The pattern for 1950-1980 can be seen in Table 2 and Chart l, which draw upon a more reliable data source, the standardized provincial government expenditures which have been published by Statistics Canada for each fiscal year since 1950.4 (To facilitate analysis over time, these data have been rendered in 1971 dollars according to an index of the price of government goods and services.5)
Here, it will be seen that the convergence persisted into the 1950s. Quebec's expenditure grew at about the same rate as Ontario's in the early and mid-1950s, although Quebec's per capita level was markedly lower in each of these years. But spending began to diverge in the late 1950s, as Ontario surged markedly. This gap was closed_in the early 1960s, as Quebec's total expenditures increased very rapidly, almost doubling between 1960 and 1965 (the period of the "Quiet Revolution"). But by 1963 Quebec was outspending Ontario. In 1965 it was spending 122 per cent of Ontario's level. This new gap was, in turn, closed in the late 1960s as Quebec's rate of spending growth declined, but Ontario's surged. By 1970, the two prôvinces were back at about the same level of expenditure. Then, as Quebec's expênditures grew at a moderate rate throughout that decade, Ontario's spending grew quite slowly and, after 1975, actually declined (in constant dollars). By 1980, Quebec's total provincial-level spending was 140 per cent of Ontario's.
All data in l97l dollars
30
Provincial-level Expenditures (Quebec/Ontario) Provincial and local Expenditures (Quebec,/Ontario)
Revue d' études canad ien nes
Journal of Canadian Studies
3l
In short, in the case of Ontario and Quebec, the period 1950-1980 has been one of divergence rather than convergence in provincial government spending levels. As such, it contrasts strongly with the pattern of convergence which Simeon and Miller found among all ten provincial governments. To be sure, their analysis was restricted to the period 1956-1914; but even there, the OntarioQuebec pattern is different. The convergence of the early 1970s is only a return to the similarity in spending levels which existed in the mid-1950s, before the period in question. Ideally, however, comparisons of government spending among the provinces should also incorporate spending at the level of municipalities and school boards. This is especially pertinent in the case of Ontario-Quebec comparisons since local TABLE Expenditures
as Per
in public expenditure in Ontario provincial-local in Data for total combined spending appear in than Quebec. bodies have played a significantly greater role
Table2 and Chart 1. During the 1950s Quebec's spending was clearly lower than Ontario's. With the 1960s, however, as Quebec's spending increased markedly, the gap was almost closed, and, over the next ten years, spending levels remained quite similar. In the case of provincial-local spending, one can indeed talk of convergence during the period which Simeon and Miller studied, 1956-74. But, just as with provincial-level spending, there has been over the last five years a steady widening of the gap which is now as great as it was in the early 1950s. Thus, one cannot characterize the period as a whole as one of convergence.
CHART 2 ONTARIO AND QUEBEC EXPENDITURES AS PER CENT OF TOTAL PERSONAL INCOME, RATIOS, 1950.1980
3
Cent of Collective Wealth, Quebec and Onlario.1950-1980 Consolidated
prov'l-local Prov'l expenditures as 9o of total Year
personal income
as 9o of gross domestic product
Que.
Que.
Ont.
7.69
6.
1951
'7.43
19s2
7.52
1953
^7.10
6.48 6.07 5.88
1954
7.6s 8.54
9s5 1956 I
8.
l4
8.49 8.82 9.55
1957
1958 1959 1960
n.2l
l96l
r
1962
3.14 14.00
1963
15.13
1964
17.90
I 965
t8.77
1966
19.28
1967 I 968 1969
expenditures as 9o gross domestic product
Que.
Ont.
6.l l
------'
6.63 5.90 7.06 7.66 9.40 9.47 10.37 I 1.63 tl .17
1
9.'72 10.31 I 1.16
7.59 8.5 3
8.18 8.03
13.44 r 3.84
12.21
t4.79
12.03
4.90
12.44
l4
14.78
16.04
l3 .00 13.60
8.5 3
I
14.03
9.35
18.
20.13
12.90 14.56
20.31
l5.81 16.64
10.71 11.73 12.52
20.63 20.98
21.47
1970
25.11
14.6t
I
27.09 26.56 25.87 26.94 28.27 28.49
18.95 19.85 19.23 19.35
5.00 15.26 16.20 18.99
20.9t
15.38 14.89 14.86 15.98 17.29 t6.'7 4 16.82 16.8'7
24.33 26.66 26.71 25.80 27.37 29.50 30.18 3l .99 32.42
15.92
3r.88
1972 19',t3
1977 I 978 1979
29.t1 30.7 5
20.50 21.24 20.88 20.80 20.62 19.80
980
30.80
19.31
19^t
4
197 5
1976
I
32
29.98
Provincial-level Expenditures as % of total income (Quebec/Ontario) Provincial and local Expenditures as % of lotal income (Quebec/Ontario)
-
l l.l8 l 1.85
197
Ont.
l0
950
r
Prov'l expenditures
I
20.92 20.58 22.02 24.04 24.15 25.03 25.56 25.94 26.s1
2t.65
12.
l0
16."79 l 8.32
20.63 21.03 20.4s 19.92 20"99 22.61
21.95 22.26 22.39 20.97
15.66
Revue d' é tudes canadiennes
955
1
960
1
965
1
970
1
975
This same conclusion also emerges when one compares Ontario and Quebec spending as a proportion of collective wealth. Since estimates of provincial domestic product are not available for years prior to 1961, we have adopted the total personal income of a province as a first approximation of collective wealth. It will be seen in Chart2 that the difference in proportions of provincial income devoted to public spending has not declined oVer time, In fact, it has grown. In the early 1950s, Quebec was consuming a substantially greater share of its total personal income in both provincial and provincial-local spending. The disparity fell in the late 1950s, reflecting Quebec's lower rate of expenditure growth. But with the 1960s, and the Quiet Revolution spending surge in Quebec, it reemerged and has grown steadily over subsequent years, In terms of provincial spending, the share of total personal income absorbed in Quebec is now one and one half times as large as Ontario's. (This difference far exceeds that of the 1950s.) This same general pattern is revealed in the more reliable indicator of collective wealth, provincial domestic product, for which we present data from 196l onward. Journal of Canadiqn Studies
33
w* Whereas the shares of gross domestic product were relatively close in 196l and 1962, they are now markedly different. In 1979, the share of Quebec's domestic product going to provincial-level spending was 163 per cent of Ontario's. The figure for provincial-local spending was 152 per cent. Clearly, in terms of propor-
CHART 4 RATIOS FOR PROVINCIAL AND LOCAL SPENDING FOR EDUCATION, HEALTH AND SOCIAL WELFARE, ONTARIO AND QUEBEC, 1950-1980
tions of collective wealth absorbed by public spending, the Ontario-Quebec pattern once again is one of divergence rather than convergence. With respect to specific categories of expenditure, divergence has again been the rule for these two provinces. Data for spending on the major categories in Charts 3 and 4. (pollectively, these education, health and welfare -.appear categories represent abciut 60 per cent of provincial spending.) In each of these areas, Simeon and Miller found convergence among all ten provinces. It will be
that spending for education by ontario and Quebec did converge somewhat over the period 1956-?4 (this appears more clearly in the combined provinciallocal data) but, over recent years, Quebec has pulled markedly ahead. Social welfare spending also converged over 1956-74, but once again this is misleading.
seen
CHART 3 RATIOS FOR PROVINCIAL-LEVEL SPENDING FOR EDUCATION, HEALTH AND SOCIAL WELFARE, ONTARIO & OUEBEC' 1950-1980
1955 """"--" 34
1960
1965
1
970
Health expendilur€s per capita (Quebsc/Ontario) Educalicn expenditur€s per capita (QuebecTOntarirl Soci.rl wslfare €xp€nditur€s per capita (Quebec,'Onwio)
Revue d'é tudes canadiennes
The two provinces stârted out at quite similar levels in the 1950s; over the late 1970s Quebec once again has pulled well ahead of Ontario. Only health spending seems to have converged over the full period 1950-1980.6 In addition to these three categories, Simeon and Miller examined four minor areas: transportation and communications, natural resources, trade and industry, and recreation and culture. Here they found a general pattern of convergence among all the provinces. This also appears in our data (not reported here) for Ontario and Quebec. The only exception is recreation and culture, where Quebec and Ontario spent at very similar levels (on a per capita basis) throughout the full period. In sum, in all major respects, a comparison of spending in Quebec and Ontario alone does not reveal the process of convergence which emerges when all ten provinces are compared. In the case of Ontario and Quebec, total expenditures are further apart than they were in the early 1950s. Moreover, within this thirty-year period, one can distinguish several sub-periods, each embodying quite different trends in total expenditures. During 1950-1955, expenditure is markedly lower in Quebec; the gap widens somewhat over 1956-1959. Quebec's spending rejoins and then exceeds Ontario's over 196l-1966, but then Ontario regains the lead over 1966-1969. Spending is roughly equivalent over 1970-1974, but with 1975 Quebec's spending pulls markedly ahead. It is striking that these six subperiods roughly coincide with changes in the party holding power in Quebec (the Conservatives remained the government party in Ontario throughout). This effect of change in government party is confirmed in Table 4. Journal qf Conadian Studies
35
the Ontario-Quebec case. The role,in Ontario and Quebec of the second variable, election year, is the subject of a separate paper presently under preparation.l0
TABLE 4 Mean Provincial Expenditures, Quebec and Ontario, by Periods of Party Tenure Party tenure in Quebec Government 1950-60 (U.N.) l96r-66 (Lib.) r967-69 (U.N.) 1970-76 1977-80
(Lib.) (P.Q.)
Mean Total Prov'l Expenditures
Here, we question whether the remaining variables might explain the recent Mean Yearly
Differences
Quebec 209.81 444.44 594.17 889.12 1.084.16
Ontario
(Que./Ont.)
242.38 406.76 591.94 831.16 835.82
87.5lVo 108.6 100.8
r06.8 t29.9
divergence in provincial-level expenditures between the two provinces. For this to happen, Ontario and Quebec would have to become markedly different along these lines and in the expected direction. This is not the case. Levels of urbanization have been roughly the same in Ontario and Quebec over recent decades.rrWith respect to personal income, per capita income has
in Quebec than in Ontario throughout the period 19501980.t2 On this basis, one would not expeit Quebec to outspend Ontario. If
been substantially lower
it should be spending less. As we have seen, growth of Quebec's expenditures over Ontario's has meant that provincial expenditures have come to represent a much larger share of personal income (or of gross domestic product) anything,
The Role of Government Party It is not surprising that Quebec's relative level of spending should change so markedly between Duplessis' Union nationale regime and the Lesage Liberals. Under Duplessis, Quebec had failed to participate in some important federalprovincial cost-shared programs, to which Ontario had readily agreed. With the new Quebec-Ottawa arrangements of the 1960s, additional federal funds became available to Quebec and were reflected in a spending upsurge.T Also, under the administration of Maurice Duplessis, the Quebec government was much more adverse than Ontario to undertake public borrowing.t 1yi,n the Lesage Liberals this was not the case. Under the Liberals public borrowing grew rapidly, as the Quebec government exploited its relative attractiveness to lenders, given low past borrowing (see Michel Bellavance's discussion of the Lesage budgets, elsewhere in this issue). By the same token, high levels of borrowing and perhaps political factors as well meant that, by the late 1960s, the Quebec government found borrowing to be much more difficult and costly. Moreover, the Union nationale regimes of Johnson and Bertrand may not have had the same commitment to the political modernization initiatives of the Quiet Revolution (although Bellavance's analysis suggests that the commitment was nonetheless quite strong).e Thus, it might be expected that during the late 1960s Quebec's spending growth would taper off and Ontario should assume the lead. Nonetheless, change in government party does not seem to provide a ready explanation of the growing spending divergence from the mid-1970s' The trend emerged during the regime of the Bourassa Liberals; the Parti québécois did not assume control of Quebec's finances until fiscal yeat 1977-78' Here, in particular, we
will need to explore the impact of other
sets
of factors.
Aggregate Socio-economic lndicators In their analysis of expenditures at the provincial government level, Simeon Miller tested the extent to which six variables were able to explain variation and provinces taken as a whole (over the period 1956-1974): party in all len among power, election year, levels of urbanization, personal income, equalization, and manufacturing wages (which is used as a proxy of the cost of providing services). We have already seen that the first variable, party in power, is quite important in 36
Revue d' é tudes canadiennes
in Quebec than in Ontario. (This finding holds for consolidated. provincialmunicipal expenditures as well.) This, in turn, has been financed by a much higher tax rate. In 1981-1982 Quebec's provincial-local tax effort was l2l per cent of the national average (by far the highest of all provinces), whereas Ontario's was equal to the national average.l3
As for federal transfers, Quebec of course has enjoyed a source of revenue which is not available to Ontario: equalization payments. But this in itself appears unable to explain the relative surge in Quebec's expenditures. Over the last five years, Quebec's expenditures have exceeded Ontario's even after they have been reduced by the amounts secured through equalization, Nor has there been any sudden growth in the level of equalization payments (in constant dollars), which might have induced an expenditure surge.ra
With respect to the final factor cited by Simeon and Miller, the cost of providing services, the specific indicator which they use (manufacturing wages) cannot explain why Quebec's expenditures should now be higher. Throughout the period under study, manufacturing wages have been lower in Quebec than in Ontario.r: Nonetheless, as we shall see later, more precise measures of government labour costs may in fact furnish part, but only part, of the explanation.
Institutional Centralization An alternative approach to explaining the Ontario-Quebec divergence focusses not upon social and economic factors but upon differences in the structure of governmental institutions. The extent to which decisionimaking is lodged at the central level or at the local level may have real implications for expenditures. One might expect centralization or decentralization to be clearly reflected in overall expenditure levels. The difficulty, of course, is in predicting precisely what these effects might be. Plausible arguments can be made for both a downward pressure and an upward pressure on expenditures. For instance, one might argue that decisions from a central office would necessarily entail waste of funds as standardized services are provided to all localities, whether they need them or not. However, one could also argue that moving decision-making to the central level would bring about net saving through economies of scale and monitoring of the Journal oJ Canaclian Studies
37
waste which occurs in small, poorly-managed local organisms.
,
In his recent analysis of public expenditures in Quebec, Gérard Bélanger leaves little doubt that the effect of centralization will be to force up expenditures: "La centralisation apparaît donc comme un facteur négatif dans la productivité du secteur public puisqu'elle augmente les dépenses unitaires nécessaires pour atteindre un degré de satisfaction donné des consommateurs."16 Moreover, as he points out, contemporary Quebec is indeèd more centralized than Ontario in many different respects. Can this difference in levels of centralization explain the relative surge in Quebec's expenditure? One dimension of centralization is the relative roles of'the provincial government and of local governments and school boards. It will be seen in Table 5 that in contemporary Quebec the provincial government does indeed directly control a larger share of public expenditure than is the case in Ontario. However, this is not a new phenomenon: it existed before Quebec's expenditures began to surge. The provincial share was already greater than Ontario's in 1950, the earliest year for which we have data. A study of the development of the Quebec provincial government between 1867 and 1900 suggests that the same pattern existed then as well.lr The inactivity of Quebec municipalities, relative to their Ontario counterparts, apparently forced the Quebec provincial government to compensate with higher
Local Expenditures
Year
Local expenditures as 9o of total provincial and local expenditures
Quebec Ontario €ffi 1952 I 953 1954 I 955 l 956
38.63 37.37 39.85 39.06 37.08 37.27
1957
3'7.42
958 1959 l 960
37.78 3 8.73 34.33 31.23 28.52 28.15 26.63
195 I
I
I
961
t962 1963 1964 1965
Moreover, while Quebec became more centralized during the 1960s and 1970s, so did Ontario. Throughout the period as a whole, the difference in the relative roles of the provincial governments remained about the same. The same pattern emerges within particular categories of public expenditure. t8 Yet, even if the difference in relative levels of centralization has been constant, Quebec has reached a significantly higher level of centralization. For instance, in 1979 only 31.6 per cent of consolidated expenditures remained in municipal hands in Quebec, whereas 42.7 per cent lvere still in municipal hands in Ontario.re Perhaps the impact of centralization on expenditures is qualitatively greater at this levei. Quebec would have crossed a threshold which Ontario managed to avoid. Certainly, the image of an all-powerful provincial government is much more current in contemporary political debate in Quebec than in Ontario. Yet, our data do not support this possibility. With respect to Quebec's total expenditures, there is a certain congruence between centralization and expenditure growth. Presumably, centralization can be dated from the early 1960s. (1962 was the first year when Quebec's municipal expenditures fell below 30 per cent of combined provincial-municipal expenditures.) As we have seen, the early 1960s also saw a surge in Quebec's total expenditures, pulling well ahead of Ontario's. Yet there is no such congruence within the three major expenditure areas of health, education, and welfare. It is here that one would expect the effect of centralization of decision-making to be most pronounced. With respect to social welfare, Chart 4 shows that total public
1966
28.9t
t96"1
37.36
1968 1969
38.
38
Revue d' é tudes canad ie n nes
Local expenditurcs as of consolidated expenditures
Quebec
9o
Ontario
l 950
expenditures of its own.
expenditure for social welfare has been higher, on a per capita basis, in Quebec than Ontario from the early 1950s on. (The interprovincial difference is not as
TABLE5
Cent of Total Provincial-Local Expenditures, Quebec and Ontario, f950-f980
as Per
1970 197 I
1972 1973
1974 1975
1976 1977 1978 1979 1980
l8
36.38 33.67 32.93 32.36 31 .00 30.76 29.64 30.69 32.22 31.07 28.01 28.42
41.66 44.05 45.48 46.74 45.76 45.44 45.74 44.76
92.7 84.8 8'7.6
4t.27
83.6 8l .0 82.0 81.8 84.4 93.7 83.2
40.48
7'7.1
37 .71
75.6 72.3
30.60 31.60
68.4
31.91
68.9 83.2 88.2 86.8 85.8 83.5 82.0
31.44 43.38 44.90 42.79
4l.30
38.92 38.89 37.47 41.97 44.88 43.30 41.89 39.22 39.43 39.45 37.99 35.7 6
35.'.|7
35.63 36.22 36.50 35.97 35.84
39.61
I
38.52 37.47 35.83 15.74 34.32 35.44
89.0
31 .21
l
35.54 31.66
8r.6 86.0 82.9 86.
85.
'r7.9
42.27 43 .tr 42.46 41.07 45 .7 5 54.37 53.39 49.27 45.70 47.6t 47.43 45.69 42.36 42.58 42.21 42.92 43.30 42.65
72.4 73.3 75.1 68.7
79.8 84.1
86.8 86.7 80.9 79.O
78.4 84.4 80.6 84.0 86.7 82.1
74.2
'19.3
great as the study by Simeon and Miller suggests, however, since its data deal with provincial governments alone.2o) The gap grew in the course of the 1950s, primarily as a result of a levelling off of Ontario's expenditures. By t957, Quebec's per capita expenditures were only two-thirds of Ontario's. Yet, centralization of expenditures at the provincial level did not begin until the 1960s. As for health,
Chart 4 shows that total expenditures in health are almost always higher in Ontario than Quebec throughout the period under study (even though municipal expenditures for health in Quebec had virtually disappeared by l97l and the municipal proportion actually grew in Ontario during the 1970s). In the case of education, Quebec's relative lead did not emerge until the early 1970s, well after the centralizing reforms of the Quiet Revolution. Journal of Conadian Studies
39
Perhaps this line
of
analysis
will be more fruitful if it is focussed upon
another dimension ofcentralization: public sector collective bargaining structures.
As it happens, Quebec and Ontario differ markedly in this respect as well. (In fact, in his own analysis Bélanger places his primary emphasis here.2r) By the end of the 1960s, collective bargaining in hospitals and in elementary and secondary education had been effectively transferred to the provincial level in Quebec, whereas in Ontario bargaining continued to take place at the local level. For his part, Bélanger sees the centralization of bargaining as a powerful force for increased expenditure. Centralization of bargaining favours expenditures, he claims, because standardization tends to be focussed upon the alternative which is most advantageous to labour, As well, it freezes out popular participation, which will be sympathetic to the position of employers.22 We will explore this proposition with comparative Ontario-Quebec data on both hospitals and elementary and secondary education. TABLE
6
Expenditures on Hospitals by Quebec and Ontario Provincial Governments, 1950-1980, per capital Quebec
Year
Quebec
Ontario
950
21.55 24.63 27.80
134.OVo
t{ ot
1955
28.83 21.45 20.89 21.25 24.79 23.s9
I 956
22.t6
t957
24.00 25.90 29.74 36.57 67.79 77.80 78.85 93.36
89.75 94.23 87.58 97.25 l 03.85
82.0 93.2 86.7 82.3 91.3 88.5 40.4 45.0 7 5.5 82.5 90.0 96.0 t 05.0
106.24
110.8
l I 5.45
109.2 98.4
I
195
1
l9s2 l9s3 1954
1958 1
959
l
960
1961
t962 r
963
1964
108.72 117.76 126.04 123.54
1965
1966
t967 I 968
l4r
1969
1970
.
.51
151.62 146.42
26.61
27.20 26.92 26.28 29.26 7 3.46 81.11
125.55 129.13 129.87
onEm 87. l 75.1
109.6
tt6.7
t43.15
1972
r6l.09
153.98
1o2.3 104.6
1973 197 4
161.06
l
58.68
l0l.5
197
1
'r60.90
106.2 r 18.3
l5 8.39
t45.39 t44.92
t62.98
l 39.84
I16.6
165.35 154.62
I
36.56
tzt.l
t37.23
1t2.1
17
1976
t71.94
1977 I 978 1979 I 980
40
l0l.l
64.03
4.16
197 5
I
159.08 l
109.3
l97l dollars Revue d'études canadiennes
With respect to hospitals, the two provinces differed in collective bargaining 1966 onward, Ontario retained the same structure throughout the period
from
under study: a decentralized system in which bargaining takes place at the level.of individual hospitals, between hospitals and union administrators. Quebec started with the same decentralized system as Ontario. But in 1966 negotiations moved to
the provincial level where union representatives bargained first with an association of Quebec hospitals and, later in the year, with the Quebec government itself. The Quebec government has remained in charge of collective bargaining ever since. With 1972, yet another stage in the centralization of bargaining was reached when the three public sector unions formed a common front. Collective bargaining for hospitals was thus linked to bargaining for all other areas of the public sector.23
The comparative pattern of government expenditures for hospitals does not seem to reflect this progressive centralization of collective bargaining in Quebec. Table 6 shows that Quebec's expenditures already exceeded Ontario's in 1965 (105 per cent), the year before collective bargaining moved to the provincial level. They rose somewhat further in 1966 (to 1l I per cent), but the settlement that was reached in mid-1966 probably did not have a full effect until fiscal year 1967. Throughout the next ten years, even though bargaining was centralized at the provincial level and, in 1972, was linked to bargaining in all other sectors, Quebec's expenditure lead over Ontario rarely exceeded this level. Usually it was less. In fact, data for consolidated provincial-local spending on hospitals, which became available in 1970, show that there was virtually no diff'erence at all between the provinces during the early l970s.za (The substantial widening of the gap after 1975 may reflect the freeze on hospital wages which the Ontario government imposed that year.) On this basis, then, it was not centralization of the bargaining process which led Quebec to spend more per capita on hospitals than did Ontario. Quebec was already doing so before centralization could have an effect. Once underway, centralization did not accentuate Quebec's lead over Ontario. A more precise test of the impact of centralization of bargaining upon hospital expenditures would, of course, be the salaries paid to hospital workers. Houde and Leforet have prepared comparative data on salaries paid in Quebec and Ontario hospitals between 1969 and 1975. Throughout this period Quebec salaries are in fact higher than those of Ontario. But it is striking that, despite the greater centralization of, bargaining in Quebec throughout the period 1969-1975, the average increases in salary are essentially the same: 9.1 per cent in Quebec and 9.3 Per cent in Ontario.zs To summarize, on the basis of our data, it is clear that centralization of collective bargaining in Quebec does not explain the higher level of expenditures for hospitals.
As with hospitals, so in education Ontario has maintained a highly decentralized system in which collective bargaining takes place at the local level, between school boards and union representatives. For its part, Quebec mainJournal oJ Canadian Studies
4l
tained a similarly decentralized system until 1966 when negotiations were transferred to the provincial level, with the government itself representing employer interests. ln 1972 bargaining in this area was linked to bargaining in all other areas, through the Common Front. Quebec's overall expenditures for elementary and secondary education, relative to Ontario's (Table 7), did increase substantially in 1968 (by about 17 percentage points), as Bélanger's thesis would predict. But this increase may have been much more directly linked to another factor: the strikes which marked Quebec schools in 1966. In fact, one can even argue that centralization of negotiations in this case should have restrained rather than fueled expenditure increase. In this instance, centralization had been sought by the provincial government in order to counter a union strategy of settling with particular school boards where its position was strongest and then seeking to generalize these settlements to all other school boards. In effect, then, centralization was intended to accompiish TABLE
7
Expenditures on Elementary and Secondary Education by Quebec and Ontario Provincial Governments f950-1980, per capital Year
Quebec
I 950
17.72
I
16.20
1952
18.27
1953
17.84
Ontario 26.69 26.20 27.47 27.22
Quç!çq Ontario 66.4V0
1954
19.98
29.41
61.8 66.5 65.5 67.9
1955 1956 1957 I 958 I 959 1960
20.41 25.14 26.77 28.58 30.47 35.65
28.68
1t.2
30.31 14.41
196i
5l .09
52.38
t962
99.49 79.92
1964
54.66 59.71 80.95
82.9 78.0 66.6 65.8 74.4 97.5 54.9 74.7
I 965
't9.93
1966
85.90 90.55
84.68 97.49
195
1963
1967
19'73
103.83 116.71 143.07 149.7 6 140.91 144.7 |
1974
15
197 5
t57.79
1976
187.02 184.07 179.08
968 1969 1970 I
197
,
1
1972
1977 I 978 1979 I 980
I
3.7 8
95.88 205.83 I
42.94 46.28
47.93
76.3r
112.07
106.44 120.09 I 30.66 142.18 148.14 142.37 122.89
124.50 115.12
106.
l
94.4 88. I
.0 97.5 81
9't.2 109.5 105.3 95. I
101.6 t25.1 126.7
18.48
162.0 155.0
tl4.t9
156.8
09.66
178.6
103 .49
198.9
1
I
l97l dollars
42
Revue d' études canadie n nes
not a standardization "vers le haut," as Bélanger's argument would suggest, but a s@ndardization awoy tiom the highest possible reference point.zo To be sure, the efficacy of this governmental strategy would be better tested if we were to have data on salaries, rather than overall expenditures, for the 1960s. Comparative data on expenditures which are directly tied to salaries for elementary and secondary teachers are available for the 1970s. They have been aflalyzed by Marius Demers.27 Here, Bélanger's thesis appears to have stronger support. Demers shows that in 1972-73 Quebec was paying about the sarne in salaries, per student, as was Ontario. By 1976-77 this difference had risen to 18 per cent; in 19'19 it was 32 per cent. Demers traces this growing difference to nlodification not only of salaries but of teacher/ student ratios. In 1972, salaries of Quebec teachers were 16 per cent lower than Ontario teacher salaries, but by 1979 tbey had reached the same level. The teacher/student ratio was already 14 per cent more favourable in Quebec in 1972. But by 1979 the difference had grown to 3l per cent. Demers sees this greater decline of teacher/student ratios in Quebec as a direct function of centralization. Apparently, centralization meant that Quebec teachers were better able to protect their members from layoffs due
to declining enrollment. Whereas in Quebec this issue was dealt with in a single agreement applying to the whole province, in Ontario it was dealt with in only a portion of the individual agreements reached. In short, centralization of bargaining meairt that Quebec, unlike Ontario, was not able to reduce the number of teachers to correspond with declining enrollments. As Ontario reduced the growth in its education expenditures, so the gap between Quebec and Ontario grew. Ultimately, Ontario was able to decrease its expenditures (in constant dollars) whereas Quebec's continued to increase, In sum, our data provide only partial support for the proposition that differences in the structure of collective bargaining explain interprovincial differences in expenditure levels. If there is an effect, it should be visible within the first decade during which the centralization was in effect. In the case of hospital expenditures, centralization appears to have no impact. In the case of education, it may have served to force up Quebec's expenditures in the late 1960s (alternatively, it may have served to reduce potential expenditure increases). And, in the 1970s, apparently it produced differences both by forcing up wages and preventing layoffs in line with declining enrollments. Perhaps with more refined data, especially-more complete data on actual salaries; the centralization thesis would receive cleârer support. Even then, however, there would be the problem of disentangling the effects of central bargaining from another feature of iabour relations which distinguishes Ontario and Quebec for most of the period under study: the right to strike. Whereas Quebec teachers and hospital workers secured the legal right to strike in 1965, Ontario teachers did not secure it until 1975 and Ontario hospital workers still have not secured it. To the extent that Quebec public sector workers have been more effective than their Ontario counterparts, producing a greater upward pressure on expenditures, the explanation may lie with the fact that they could Journal oJ Canadion Studies
43
of "labour productivity," which have come into vogue in recent years, have their pitfalls. For instance, differences in salary expenditure may in fact reflect differences in the quality of services provided. As we saw in the case of education, Quebec's higher expenditure for teachers' salaries in the 1970s was a function of both higher individual salaries and smaller teacher/student ratios. One could easily argue that a smaller teacher/student ratio means better quality teaching. ln 1972, the interprovincial difference in ratios was already too substantial to be ignored : I I 20.0 as opposed to I / 25.4. As well, differences in hours per unit may conceal real differences in the quality of
legally strike, and did so frequently, rather than with the fact that they bargained centrally. Or the upward pressure may come from the combined effect of both factors. This possibility is suggested by Yves Rabeau's analysis of collective agreements in health and education sectors throughout Canada, over the years 1964 to 1978. He found that possession of the legal right to strike produced a significant upward pressure on salaries. This pressure was especially clear when bargaining was centralized (as, of course, was the case in Quebec),28 Finally, events in Quebec over the past few months demonstrate the extent to which, under certain conditions, centralization of bargaining may be a force against increases in labour costs. In the fall of 1982, after the refusal of public
precisely the same tasks. Notions
sector unions to renegotiate existing collective
Nevertheless, even ifthese estimates are accepted, labour cost differences can explain only a small part of the Ontario-Quebec difference on overall expenditures. For instance, on the basis ofstudies conducted by the Quebec government, Lacroix has estimated that Quebec public sector salaries average about l0 per cent more than Ontario's.33 In recent years, salary expenditures have represented about one-half of Quebec's total expenditures (52 per cent in l98l).34 Thus, a reduction of Quebec salaries by 9 per cent (bringing them to the Ontario level) would mean a decline in Quebec's total expenditures of about 4.5 per cent. If Quebec's expenditures are altered in this fashion, provincial-level spending (19808l) is still 133 per cent of Ontario's and provincial-local spending (1979-80) is still 120 per'cent of Ontario's.35 It is not difficult, moreover, to locate areas of spending in which the difference has surged but in which salaries are not a major expenditure item, As Charts 3 and 4 demonstrate, the expenditure difference has become very marked in "social welfare" (where salaries are relatively unimportant), whereas expenditures on health (where salaries are much more important) have remained about the same.
agreements, the Quebec government passed legislation (Bill 70) to recover part ol the salary increases provided in the agreements, once the agreements had expired. Thus, over the period from January to March 1983 salaries were to be reduced by over 20 per cent. Since the collective agreements of not only civil servants but all teachers and hospital workers had been negotiated directly with the Quebec government, so the Quebec government was well placed to alter them. In the process, the government was expected to recover about $500 million from public and para-public employees.2e
In sum, our findings suggest that centralization of decision-making structures has no clear and siinple relationship with expenditure. Under some conditions if can intensify expenditure growth bur, under others, it can serve to attenuate growth. In many cases, it will have no net effect at all. Differences in Labour Costs To the extent that centralization of bargaining, if not of provincial-municipal relations, does explain Ontario-Quebec expenditure differences then, of course, it focusses upon a factor which, as we saw, was also,cited by Simeon and Miller: differences in public sector labour costs. As it happens, differçnces in labour costs, whatever may be their cause, have becôme a popular way of explaining the growing divergence of the 1970s. In some cases they have served as the sole basis of explanation. Moreover, some recent studies suggest that, on the whole, Quebec public sector workers now are indeed better paid than their Ontario counterparts.3o While the differences vary from one category to another, apparently they average about l0 per cent. Also, studies have shown that, in recent years, Quebec public sector salaries have outstripped salaries in the Quebec private sector.3r The Quebec government, for its part, has used these studies to support its claim that major salary cuts should be a key element in its expenditure curtailment strategy. Nonetheless, there are real limits to explaining the Ontario-Quebec differential exclusively in terms of labour costs, or of the relative strength of public sector unions. It is difficult to determine with any precision the extent to which labour costs are in fact different in Ontario and Quebec. In comparing salaries, one is always confronted with the problem of deteimining whether salaries are being paid for
M
Revue d'études canadie nnes
service rendered.:z
The Policy Response to Inflation and Economic Crisis Expenditure growth has in turn been facilitated by quite different policies regarding the bearing of inflation upon tÉx structures. From 1974 onward, the Ontario government has indexed to the rate of inflation the brackets of its
personal income tax. For its part, Quebec has failed to do so. (As a partial compensation, the Bourassa government did increase personal exemptions and created a new transfer payment program: provincial family allowances.) But it was only in 1980 that indexation was introduced to the'Quebec income tax in the form of partial indexation of tax exemptions.3e Ontario had been bound to indexation (with some reluctance) by a decision of the federal government whereas Quebec, within its own personal income tax system, was free to decide this question for itself. By avoiding indexation, Quebec continued to enjoy the additional revenue which arises when inflation pushes incomes into higher tax brackets.rT It was gjuaranteed that the share of collective wealth drawn by government (and the capacity to augment expenditures) inevitably would increase more rapidly in Quebec than in Ontario. (It would be interesting to trace how Quebec was able to resist the inevitable pressure to follow the example of Ontario, Ottawa, and Journal of Conadian Studies
45
other provinces.) This effect was, in turn, reinforced by a more global policy difference between the two governments regarding the size and role of the public sector per se.
In the mid-1970s, the Ontario government decided that the public sector was already drawing an unhealthy share of collective wealth and that this share had to be contracted. Thus, it set for itself the goal of not simply avoiding further growth in the public sector but of actually reducing the size of the public sector. In his 1975 Budget Speech, Ontario Treasurer Darcy McKeough declared: I am convinced that one of the root causes of the current inflation problem in Canada is excessive government spending and unnecessâry growth in the size and complexity of the public sector. This has shifted an increasing share of our total resources out of private production uses in the economy, and has eroded the taxpayer's hard-earned income. With this budget, therefore, Ontario continues and extends its tough measures to curb the growth of government.3s These "tough measures" involved severe cuts in low-priority programs, reduction in the number of civil servants (by 5.7 per cent over the period 1975-1981), various forms of internal cost-cutting, and an attempt to reduce Ontario Hydro's capital requirements.3e A year later, in his 1976 Budget, the Treasurer applauded his government for keeping expenditure growth to 10.4 per cent. Recognizing that this restraint had entailed widespread protests, he forthrightly maintained: "This government has taken these tough decisions because we are convinced that the size of the public sector must be decreased."ao This same objective, of reducing the public sector, figures in succeeding budgets as well. In his 1979 Budget, Treasurer Frank Miller took pains to point out that the campaign to restrain expenditures reflected a clear policy choice of his government; it was not imposed upon the government: I want to make it abundantly clear what our expenditure control policy is all about. We are not trimming the growth of Government spending because we cannot find the money to pay for high rates of growth. Ontario's credit is sound and its economy is strong.4r As for the Quebec government, concern over the growth in expenditures was evoked in Raymond Garneau's last budget, 1976-77, but without the kind of program cuts and personnel reductions to which Ontario had committed itself the previous year. A more aggressive stance did come a year later, in the first budget
Government. How can the new programs, such as the job creation program, required for the well-being of Quebeckers be carried out without making the tax burden and Quebec's debt yet heavier? There are no two ways about it: in order to obtain a manoeuvring margin, we must slash into existing programs and reform the rate systems of certain public services so that they give a truer reflection of the expenditures incurred by the Quebec community.+3
Accordingly, Parizeau set goals of reduced growth in expenditures and no growth in public service personnel. This program, of course, had much more limited results than did Ontario's (as can be seen in Table 2). Thus, in his l98l-82 budget, Parizeatt declared that more drastic measures would be necessary, involving major budget cuts. Nonetheless, over l98l-82, Quebec provincial expenditures increased by 16 per cent (in current dollars), virtually identical to the previous year's 16.6 per cent.4 Not only was Quebec's program of expenditure curtailment later to be established and less successful in reducing expenditure growth, but its underlying rationale apparently was quite different. In Quebec budget speeches of the 1970s and even early 1980s, there is little of the Ontario rhetoric of an overgrown state stifling economic development and of the need for "freeing resources for more productive use in the private sector."45 Rather the focus is on how expenditure growth has placed a heavy tax burden upon citizens. For its part, government is to be reformed rather than reduced. Thus in closing his 1979 budget speech, Parizeau declared:
Il y a moyen
de réduire le chômage, il y a moyen de redonner aux citoyens une partie de ce que I'expansion insidieuse du secteur public avait fini par leur enlever. Il y a moyen aussi de rendre à ce secteur public la vitalité qu'il doit avoir et d'y jouer le rôle de catalyseur qu'il doit assumer. Il n'est pas nécessaire que les pouvoirs publics soient lents, lourds et sourds. L'Etat peut et doit définir les objectifs de croissance, de justice sociale et de qualité de vie que les citoyens lui ont demandés.ar
the Quebec government and its institutions.qz (In effect, then, Quebec couldn't find the money to pay for high rates of growth.) In the process, the government had lost the margin of manoeuvre needed for new initiatives: The high cost of public services, the heavy tax burden and Quebec's considerable debt all constitute a burdensome inheritance for the new
Conclusions Clearly, there are strong pressures for similarity in the spending activities of provincial governments. Interprovincial competition for investment limits the levels of taxation which provinces can impose. Federal-provincial fiscal arrangements serve to equalize revenue and to condition spending priorities. Demonstration effects lead to similar demands for public goods and services. Yet, the comparative experience of Ontario and Quebec over the past thirty years shows that there are limits to these and other pressures for convergence. To a large extent, these limits appear to have been set by distinctly political processes within the two provinces. As we have seen, changes in the government party in Quebec were sufficient to reverse Quebec's position relative to Ontario's. Under the Duplessis regime spending was markedly lower in Quebec. Not only did the Duplessis government
46
Journal of Canadian Studies
of Jacques Parizeau. "Assaisonnement" of Quebec's public finances was declared to be essential for two main reasons: the tax burden on individuals had become intolerable (in part because of the decision not to index personal income tax), and borrowing had reached "unacceptable" levels threatening the credit of speech
Revue d' études canad ien nes
4'7
refuse to participate in some federal-provincial fiscal arrangements, but in areas such as education it provided a significantly different set of public goods and services than did Ontario. With the Lesage regime spending rose sharply, catching up to and then exceeding Ontario, as public borrowing and new federal-provincial fiscal arrangements were used to support a major redefinition of public goods
and services. During the 1970s spending diverged once again, reflecting major differences in policy. Ontario and Quebec pursued different taxation policies, especially regarding indexation. And they seem to have reacted differently to the economic crisis besetting them. In 1975, Ontario determined that provincial spending was itself a source of the crisis and embarked upon a quite successful campaign not only to reduce but to reverse growth in government spending. For its part, Quebec set for itself the more modest goal of simply curtailing expenditure growth. This goal seems to have resulted more from revenue constraints, both public indebtedness and relatively high tax rates, than from alarm about the role which government had assumed within the economy. The Quebec government was relatively unsuccessful in pursuing even this more limited goal. Political processes seem to be more important in explaining these variations in spending between Ontario and Quebec over the last three decades than are the particular institutional factors or aggregate socio-economic indicators which we have examined. As we have seen, expenditure variation does not appear to be closely related to differences in the relative role of provincial governments vis-àvis local governments and school boards or in the centralization of public sector
collective bargaining. Aggregate socio-economic indicators such as levels of urbanization or income also seem unable to explain the variations between Ontario and Quebec. But these indicators may conceal important differences between the provinces in demographic structure. They may also conceal important differences in the configuration of social and economic forces, which in turn could furnish an understanding of differences in political processes between the two provinces, and within the same province over time. The differences in spending of the Duplessis and Lesage regimes, with thq associated different approaches to public borrowing and federal-provincial fiscal relations, clearly reflect major contrasts in the social and economic composition of the electoral clienteles of the two'governments. The Lesage government's caucus drew more heavily from urban areas than did the Duplessis regime's, and it was closely linked to both the urban new middle class and some elements of organized labour (C.S.N.). The different stances which the Ontario and Quebec governments assumed regarding government expenditure in the 1970s most certainly reflect differences in the social and economic influences brought to bear upon each government. Given its close links with business groups, it is not surprising that the Conservative Ontario government should have diagnosed government spending as the cause of inflation and should have embarked on such an aggressive campaign to cut expenditures. Conversely,
it might have been expected
that in Quebec both Liberal and PQ governments would be less effective in curtailing expenditure growth. The linguistic distinctiveness of Quebec Francophones 48
Revue d'é tudes canadien nes
probably means that the provincial public sector has an importance, as a source both of employment and of services, which it does not have for most Ontarians, And Quebec's historically higher levels of unemployment and lower levels of income ensure more widespread dependence upon welfare services, and this may mean a more deeply entrenched resistance to cutbacks. Finally, higher public sector labour costs in Quebec, whatever their precise contribution to Quebec's higher spending in the 1970s, evoke a complex of social and political factors. On various occasions, Quebec public sector unions have displayed a greater militancy and organizational strength than their Ontarlo counterparts. But their greater effectiveness must also reflect their possession, from the mid-1960s, of the right to strike. The Quebec government was, in fact, the first provincial government to grant this right. It would be interesting to learn how this concession was secured from a party (the Liberal Party of Jean Lesage) which had no organic link with the union movement. This,was, in any event, a precedent which the Conservative government of Ontario, with its close links to the business community, has shown little inclination to follow. Only teachers have been given this right in Ontario, in 1975 after a protracted series of illegal strikes.
With the 1980s there may be a convergence between the two provinces. The constraints upon the Quebec government's spending clearly have tightened. Pressure has mounted in Quebec for reduction in income tax levels, especially for higher incomeS, with Ontario as the implicit and often explicit norm.rT Public borrowing has become increasingly costly with high interest rates and a declining Canadian dollar (coupled with a downgrading in Quebec's credit rating which was attributed to Quebec's mounting deficit;.+a
These pressures have in turn redirected political processes in Quebec. In its
new determination
to control
expenditure growth, the PQ government has
adopted measures which one would not expect of a party whose clientele tends to be concentrated in the public sector. Under Bill 70, the PQ government in effect nullified salary increases which it itself had granted in the existing collective agreement. At the same time, it withdrew the right to strike in the public sector. In December of 1982, the Quebec government proceeded through Bill 105 to decree changes in public sector working conditions. In the case of teachers, these changes involved both increases in workloads and reductions in job security. Finally, in the face of a massive teacher walkout to protest these measures, the PQ government passed Bill lll, which imposes unprecedented penalities upon teachers who stage, or appear to be staging, strikes. Ironically, the measure was aimed at the group which over the years has provided the Parti québécois with its most active and loyal core of supporters. To have formulated such a policy, the Quebec government must indeed have lost the margin of fiscal manoeuvre which it had enjoyed in the 1970s. NOTES
* This paper is
based upon research conducted with a grant from the Social Sciences ancl Humanities Research Council (No. 410-80-0391), with a Minor Research Crant from York University and with a
Journal of Canadian Studies
49
several grant-in-aid programs had cost it $82,031,000 (Donald V. Smiley, Couslilz/ional Adaptation ond Conodion Federalism Since 1945, Documents of the Royal Commission on Bilingualism and Biculturalism lOttawa: Queen's Printer, 1970]l, p.72).
grant from le Fonds annuel de soutien de I'Université de Montréal. We would like to thank Dâniel salée who assiduously collected much of the data analyzed here, Mary warren who updated some of the data, and Donald Naulls who has done an excellent job of processing the dâta. We would like to thank Daniel Drache, Jay Kauffman, Richard Simeon, Robert Young and Kenneth Woodside for their comments on earlier drafts of this paper. l. Richard Simeon with E. Robert Miller, "Regional variations in Public Policy," in David J. Elkins, Richard Simeon et al, Small Worlds: Provinces snd Parties in Canqdian Political Life (Toronto: Methuen, l98O), pp.
2.
3.
4.
5.
6.
7. 50
27
4-77
Allegedly, it was the resistance of financial institutions to new Quebec government bonds which had led Duplessis to call his disastrous 1939 provincial election. Upon his return to power, Duplessis
.
,.The overwhelming finding of this chapter is the very high degree of convergence among the provinces in their spending patterns over a nineteen-year period. The growing similarity is strongest in total government activity, and in the largest and most expensive fields of health, education and welfare." (Ibid., p. 274.) In fact, Shoyama did not find a single patrern of convergence throughqut the period 1939-64 as a whole. Rather he found "a substantial increase in relative interregional dispersion Iin expenditure] between 1939 and the early 1950s; and...a significant relative narrowing of interregionai differeÉces over the past t€n years" (T. K. Shoyama, "Public Services and Regional Development in Canada," Journal of Econo mic Hist ory, 26 [-1966l, p. 504.). Hisindexof dispersionwasar l8.4in 1939/41 butgrewto23.5in l95l/52and27.3in1956157, falling back ro 14.3 in 1961162 and in 1963164 (ibid., -Îable 2). lt should also be noted that unlike Simeon and Miller, who analyzed provincial-level expenditure, Shoyama analyzed combined provincial-municipal expenditures. Within his data, there was a growing divergence between Ontario and Quebec in the 1950s but wirh the 1960s convergence as a result of a surge in Quebec spending. Interestingly, Shoyama sees Quebec's surge as a parallel to high expenditure levels in postwar Saskatchewan when "the above-average tax effort associated with a radical political administration appears to have offset the influence of a more modest-income-base" (ibid. ' p. 504). The provincial expenditure data are published in Statistics Canada, Provincial Governmenl Finonce Revenue ancl Expenditure (68-21). While data are published for scattered years before 1950, they -appear on a regular basis only from 1950 onward. Here, and in all other analysis of government eipenditures, we use "gross" expenditures rather than "net" expenditures. Also, with all provinciallevel data, expenditures for "universal pensions" have been eliminated since Ontario corires under the Canada Pension Plan. (ln doing this, we are following the procedure adopted by Gérard Bélanger, ,,Etude comparative du secteur public québécois," cahier l80ll, université Laval, euébec.) However, we have not followed Bélanger's procedure of eliminating family allowance payments. ln the case of Quebec, family allowance payments by the provincial government are a supplement to the federal program rather than a substitution for it. Finally, it should be noted that Statistics Canada modified substantially the expenditure categories in 1970. Thus, in the data we present, any abrupt changes between 1969 and 1970 should not be taken at face value. Over the period 1950-1980, the definition of "fiscal year" remains constant. Thus, we will refer to fiscal years in terms of the primary year alone. Estimates of provincial domestic product are drawn from Statistics Canada, System of Notional Accounts: Provincial Economic Account (13-213).
9.
10.
The index for "government expenditures on goods and services" is published by Statistics Canada, National Income and Expenditure Accounts (l30ll). We followed the procedure outlined by David Foot in his study of Ontario public finances (Provincial Public Finance in Ontario: an empirical
analysisof thelastlwenty-fiveyears IToronto:Universityof TorontoPress, 1977],p. ll).Afiscal year average was developed by combining the second, third, and fourth quarter of one calender year with the first quarter of the subsequent year. For our purposes, the base year is 1971. In uing this government expenditure index rather than the personal expenditure index, we are following Foot's contention (ibid., p. ll) that the former is the best available alternative. See also Iain Gow, "Les dépenses du gouvernement du Québec (1867-1970) comme indicateur d'activités étatiques." This interprovincial convergence in health spending is coupled with a decline in expenditure growth. Bélanger sees this process of "plafonnement," which âpparently is unique to Canada, as a function of the high government control over health spending which resulted from the creation of a public hospital and medical insurance scheme. In this instance, apparently Bélanger sees no difference between Ontario and Quebec in the levels of centralization. But, contrary to his general thesis, the Canadian experience in health spending seems to constitute a case of centralization curloiling rather than reinforcing spending growth: Durant cette période, les gouvernements ont commencé à développer des politiques de contraction relative de I'offre des soins de la santé. Les gouvernements provinciaux pouvaient plus facilement le faire puisque les systèmes d'assurance publique avaient provoqué une centralisation plus étendue ici qu'ailleurs des décisions en matière de sanlé. Le planificateur pouvait y avoir un rôle très important. (Gérard Bélanger, "Les dépenses de santé par rapport à l'économie du Quêlsec," Le médecin du Québec, décembre l98l) Donald Smiley has calculated that in the fiscal year I959-1960 Quebec's failure to participate in
Revue d'ëtudes canodien nes
was anxious that he should never again be vulnerable to such pressure, and sought to minimize public borrowing. In fact, according to our data, during the period 1950-1959 Quebec's per capita expenditures (constant dollars) on debt service fell from $10.09 to $5.99. Ontario's expenditures remained far above Quebec's throughout the period (they averaged $28.51 over 195G56 but for some reason fell to a lower level in 1957-1959, averaging $18.16). As this would suggest, over the period 1952-1959 Quebec's annual government borrowirlg averaged only 4890 of Ontario's (calcuIated from Bank of Canada data provided in Ted Gerrard, "Quebec/Ontario Access to Capital Markets, 1867-1980," unputrlished paper, York University, p. 37). In 1959, Quebec's outstanding bonds were on â per capita basis, only half of Ontario's (Douglæ Fullerton, Quebec's Accest to Financiol Markets, Understanding Canada Series lottawa: Supply and Services, ln9l, p, 2l), Duplessis' difficulties with financial institutions in the late 1930s are discussed in Conrad Black, Duplessis (Toronto: McClelland & Stewart, 1976), p. 199; Cérard Boismenu, Le Dilplessisme: politique économique et rapporls de force, 1944-1960 (Montréal: Presses de l'trJniversité de Monlréal, l98l), pp. 262-63; Dominique Clift, Ivlontreal ^S/ar, March 5, 1977; and Kenneth McRoberts and Dale Posgate, Quebec: Social Change and Polilical Czsij, Revised Edition (Toronto: McCielland & Stewart, 1980), p. 77. In their comparison of Ontario and Quebec along a great range of indicators, Caldwell and Czarnocki discuss the comparative growth of total provincial expenditures. They note that there is a certain surge in Quebec's relative expenditures in the early 1960s, the time known as the "Quiet Revolution." But they contend that, when placed in a longer time perspective, this change is not "revolutionary" (Galy Caldwell et B. Dan Czarnocki, "Un rattrapage raté. I-e changement social dans le Québec d'après-guerre, 1950-1974: une comparaison Québec/Ontario," Recherches s,riographiques, XVIII: l, 19'77, p.34). ln this they affirm the inrerpretation of Daniel Latouche, "l-a vraie ilature de...la Révolution tranquille," Canadiun Journal o;f Politicdl Science, Vll, 3 (September l9r-4), pp. 525-36. Nonetheless, as our data show, in putting Quebec's spending ahead of Ontario's, rhe growth of the 1960s did reverse a pattern which had existed for several decades. ln any event, we would argu€ that a rest of the distinctiveness of political change during lhe Quiet Revolution would have to extend beyond expenditures to the structures of government, and the scope ol their decision-making authority, where very substantial changes (if not "revolutionary") did occur in the early 1960s. Over the period 1959-1969 Quebec's per capita bond indebtedness rose from $248 to $863, almost equalling Ontario's $877 (Fullerton, Quebec's Accejs, p.2l). For an analysis of the difficulties which the Quebec government experienced in borrowing on the Canadian market, and its consequent dependence on its own Caisse de dépôt et de placemenl to purchase Quebec banks see Ted Gerrard, "Quebec/Ontario Access," pp.22-21 . André Blais, Kenneth McRoberts and Richard Nadeau, "Dépenses gouvernementaux et cycles électorauxau Québec et en Ontario, 1950-1980," unpublished paper.
lJ.
According to the Census definition of urbanization, Quebec was in l95l somewhal less urbanized than Ontario: 67Vo versus 73.40/o-'lhe difference has narrowed over subsequent decades, but Ontario was still slightly more urbanized in 1976: 8l.2Vo versus 79. I 90. (These tigures were calculated from Canada, 196l Censas, Vol. I, pt. l, Table 13 and Canada, 1976 Census, Yol. l: Populalion and Geogrsphy Statistics, Table 7.) According to our data, per capita personal income in Quebec has oicillared between 60q0 and 6590 of Ontario's throughout the period 1950-1979. (The percentages were 62.9Vo for 1950 and 64.1 9o for 1979.) Our data are drawn from Statistics Canada, National Income and Expenditure Accounls, 1962-74 (13-531.) and, Notional Income and Expenditure Accounts, 1965-1979 (13-201). OntaÀo, 1982 Budgel, Appendix, Table 4, p. 5l.
t4.
These calculations are based on Canada, Federal-Provincial Fiscol Arrangetnenls
12.
in lhe Eighlies
(Department of Finance, l98l), Table V-2. 15.
This assertion is based on Statistics Canada, Manhours and Hourly Earnings (72-003): 1963-6a, Table 5A; 1966, Table 5A, 1970-71, Table l0; Statistics Canada, Employment Earnings and Hours 2-002): 973- 1980, Table 3. Gérard Bélanger, L'Economique du secteur public (Chicoutimi: Gaetan Morin, l98l ), p. 34. James Iain Gow, "L'administration québécois de 1867 à l90rC: un Etat en fornration," Canadian Journal ofPolitical Science, XIl, 3 (September 1979), p. 596. (7
16.
17. 18.
1
In both health and social welfare, the centralization of expenditures in Quebec was paralleled by centralization in Ontario. Only in education does the relative role of the local institutions remain the same in Ontario.
Journal of Canodian Studies
5l
19. SeeTable4. 20. See Simeon with l\4itler, p. 258. 21. Gérard Bélanger, L'Economique du secteur public, pp. 30-35. 22. Ibid.,p.34. 23. Accounts of the development of public sector labour relations in Ontario
fundamental: "le phénomène de la.,faible productivité des services publics au Québec demeure très réel et ne peut être glissé sous le tapis par ces considérations" (Gouvernement du Québec, Conseil de planification et de développement du Québec, Les défis du développemenl socio-ëtonomique du Québec dans les années 80, Collection: Etudes et recherches, I 98 I, p. 6). The same analysis was presented by Fortin in "Les finances publiques: un coup de barre radical s'impose," Le Devoir, January 14, 1982, p. 19. There Fortin contends that: La croissance trop rapide des dépenses budgétaires réfiète en partie une croissance plus rapide qu'ailleurs du niveau des services publics offerts, mais dépend dans une très large mesure du nombre trop élevé des ernployés fémunérés par unité de service rendu et des conditions de travail exorbitantes accordées aux fonctionnaires par les deux dernières conventions collectives (Bourassa et Parizeau). in effect, he distinguishes two aspects of labour "productivity": manpower per unit of service and level of remuneration of manpower. But, as we have already noted, dift'erences in the t'irst factor may well involve differences in the level of service (Fortin himself cites differences in leacher/student ratios as an instance of this first factor). As t'or the more clearly "valid" nreasure of labour productivity, remuneiation, we argue below thal most of the difference in total expenditures between Ontario and Quebec (at least in 1980-81) would remain even if Ontario and Quebec workers were to be equally "productive." (Also, see the critique of F-ortin's analysis in Diane Bellemare and Lise Poulin-Simon, "Le piège de la solution unique," Le Devoir,5 April, 1982, p. 7.) In short, it appears that the difference in overall expenditure between OntaJio and Quebec can be best explained in terms of differences in the type and level of services, and in the demand for
and Quebec appear in Jean Boivin, The Evolution of Bargaining in the Province of Quebec Fublic Sector (1965-i972) (Québec: Université Laval, 1975); Carol Levasseur, "De I'Elat-providence à l'Etat-disciplinaire," in Gérard Bergeron and Réjean Pelletier (eds.), L'Etal du Québec en devenir lMontréal: Boréal Express, 1980), pp. 285-330; J. Crispo, The Canadian Indusîial Relations Sl^t/€m (Tôronto: McCrarv-Hill Ryerson, 1978); Gérard Bélanger, I-'Economique du secteur publicl and Diane Ethier, Jean-Marc Piotte and Jean Reynolds, Les travailleurs contre I'Etot bourgeois (Montréal:
I'Aurore,1975).
24.
25. 26.
27. 28. 29. 30.
3I
.
32.
52
Dara on consolidated provincial-local expenditures on hospitals are available for the years 1962 to l!)65 and fiom 1970 to the present. The 1960s data, unlike the 1970 data, are "net" experditures (federal-provincial transfers have been removed) and thus are not fully êppropriate for interprûvincial comparison. Nevertheless, they too show that in 1965 Quebec's expenditures had already pulled âhead of Ontario's. As for the 1970s the ratios (OntariolQuebec) are: 1970 113.8%; l97l *
[email protected]; 1972 l9l3 - 99.4V0:1974 - 99.'lû/o;1975 - lM.lslo; - l0l.09o;114.990. 1976 -- 116.59o; 1977 * l0'1.8%;1978 All data are taken from Statistics Canada, Co nso lidated G overn men r Fina nce (88-202). Cilles Houde and Jacques Leforet, "Performance des hôpitaux, 1969-19"16: établissements publics de soins généraux," Ministère des Affaires sociales, Québec, 1977, p. 59. Jean-Marc Piotte documents how the C.E.Q. was able to exploit to its advantage this decentralization of negotiation. He notes that: Le Bill 25 a pour objectif de briser cette stratégie de la C.E.Q. Le Gouvernement Johnson permettra à la C.E.Q. de négocier certaines modalités du décret qui leur tiendrait lieu de convention collective, décret qui enlevait le pouvoir de négociation aux unités locales, qui retirait des avantages qui avaient déjà été consentis aux tables de négociation en cours par diverses commissions scolaires....(Jean-Marc Piotte, "L,e syndicalisme au Québec depuis 1960," in Ethier, Piotte and Reynolds, Les tavailleurs, p. 15.) Marius Demers, Les eflorts financiers en éducation: une comporsison Québec-Ontario, 1972-1973 à 1979-1980(Quêbec: Ministère de I'Education, janvier 1982). Yves Rabeau, "Une analyse du processus de détermination des salaires dans le monde des conventions collectives des s€cteurs de la santé et de l'éducation au Canada," Canadian Public Administotion"Vol.25, No. I (Spring, 1982), p.55. Le Devoir, lS February, 1983.
This apparently is the conclusion of two confidential studies of the Quebec Government's Bureau de la recherche sur la rémunération: Comparaison de la rémunéralion de cerlains emplois repères principaux de la lonction publique du Québec et du gouvernemenl de I'Onlario, January, 1981, and Comparaison entre la rérnunération des enseignants au Québec et dans les principales provinces canadiennes, December 1980. They are both cited in Robert Lacroix, "Les disparités de salaire entre les secteurs public et privé québécois," Cahîer 8226, Centre de recherche en développement économique de I'Université de Montréal, May 1982, p. 71.
A study condncted by the Quebec government's Bureau de la recherche sur la rémunérâtion found that between July l, 1981 and June 30, 1982, there was an ll.89o difference between the total remuneration of public sector workers (civil service, education, and social affairs) and a sample of private sector workers (Gouvernement du Québec, Bureau de la recherche sur la rémunération, Comporoison de lo rénunératian enrre les secteurs public et poropublic et le secteur priré québëcois, ler juillet 1809 au 3A juin 1982, févner 1982, Table l). For the period July l, 1978-June 30, 1979, the comparable frgure was 16.390 (Gouvernement du Québec, Bureau de la recherche sur la rémunération, Comparaison de lo rémunération entre les secteurc public et parupublic et le secteur privé québécois, /er juillet 1978-30 juin 1979, undated, Table 2). lf taken at face value, these documents would suggest that the public sector/privale sector gafJ has declined tretween 1978 and 1982, contrary to general impressions. ln an article in Le Devoir, April 2, 1982, economist PaulMartel Roy noted this decline wirhin the Bureau's own studies (he compared findings for 1978-79 and 1980-8i). He went on to show that other comparative measures produce quite different results. Also, see Lacroix, "Les disparités de salaire." The comparative rise of public and privale sector wages is traced in Quebec, Rudget I 982, p. 16. In a rext publishecl by the Conseil de planitication et de développernent du Québec, prior to a ntajor "summit" on the state of thc Quebec econorny, lwo Universilé Lavai economists, Fierre fiorlin and Pierre Frechettf;, recognize that interprovincial expendilure dift'erences might in part reflect differences in the type and quality of service, but they insist that clifferences in labour costs are
Revue d' é tudes canad
ie n n
es
scrvices.
33.
Robert Lacroix, "Les disparités," p. 7. Lacroix does not attach any specific date to this estimate. His remarks appear to be geared to the time of the preparation of the texl, which was delivered in May, 1982. The two documents which he cites (listed in our note 30) were published in December,
34. 35. 36.
Quebec, Budgel 1982-1983, renseignements supplementaires,
l9S0andJanuary,1981.
37.
This question is discussed in André Blais and Kenneth McRoberts, "Dynamiques et contraintes des finances publiques au Québec," Politique,3, p.40. Also, see the data on evolution of personal tax exemptions in Qtebec, Budget 1982-1983, Appendix II-1. In his 1977-1978 Budget, Parizeau noted thât "the decision not to index personal income tax rates produced an unprecedented growth in revenue" over 1974-75, which in turn was followed by "an astonishing increase in expenditure" (Quebec, Budget 1977-78, p. 20). For irs part, Ontario claims that in 1980 alone indexation cost it over $1.6 billion (Ontario, 1982-83 Budget, Budget paper ts,
p.7).
38.
Ontario, 1975-76 Budget, p. 16. For
39. 40.
Ontario, 1976-77 Budget, p. 4.
41. 42.
p.6.
CalculatedfromTable2.
a discussion of this reorientation in Ontario's budget policy see Kenneth Bryden, "The Politics of the Budget," in Donald C. MacDonald (ed.), Government and Polilics oî Ontario (Toronto: Van Nostrand Reinhold, 1980), p. 434. Ontario, 1981-82 Budget, paper C, p.4.
ontario,
1979-80 BudSet, p. 8.
Quebec, Sudget 1977-78, pp. 20, 35.
43. Ibid.,p.23.
44. 45. 46. 47. 48.
Quebec, Budget 1982-83,p.1. ],980-81 Budget, paper C, p. 6.
Ontario,
Quebec, Brdget 1979-80, p. 47
.
Theseratesare.compared in Quebec, Budget 1982-83, p. 13. In announcing their decision, Moody cited both the slowness with which Quebec acted to bring its deficit under control and the decline in federal transfers to Quebec. Moody's decision was echoed byStandard& Poor's. See Le Devolr, l7 July, 1982, p. 5.
André Blais est professeur agrégé de science politique à I'Université de Montréal. Il est I'auteur du texte "Le Public Choice et la croissance de I'Etat," dansla Revue canadienne de science politique 15 (décembre 1982). Kenneth McRoberts is Associate Professor of Political Science at York University. With Dale Posgate he published Quebec: Social Chonge and Potiticat Crisr.s (Rev. ed., 1980).
Journal of Canadian Studies
53
