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The role of the public sector and carework in wealth creation: Background for debates around the upcoming Ontario budget

Posted by Salimah Valiani
Salimah Valiani
Salimah Valiani is Associate Researcher with the Centre for the Study of Educati
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on Monday, 11 March 2013
in CHNET-Works!

Much like caring work, the role of the public sector in the creation of wealth is regularly undervalued and even disregarded. Due to this, the focus in policy debates is on public sector spending, with the 'necessary' conclusion that the amount of spending must be reduced within the context of provincial and federal budget deficits.

An entirely different approach is to begin with the assumption that carework and public services are part and parcel of wealth creation. Using the Statistics Canada database accounting for sales and purchases of all industries in the Ontario economy, a study by the Centre for the Study of Spatial Economics calculates the value of output generated by one dollar of spending in various sectors. This is one way of operationalizing the assumption that public services contribute to the creation of wealth.

The study shows that public spending in the areas of health care, social services and education creates more value added than private sector investment. To cite some figures, 87 cents worth of economic output is generated through every dollar spent on public health care, education and social services. This is considerably greater than the 61 cents added to economic output through private investment in machinery and equipment.

In turn, though public spending cuts in health, education, social services look good on the balance sheet in the very short term – they shrink economic growth, which isn't beneficial to the economy and society as the whole.

Along the same lines, for every dollar cut from public health care, the Ontario deficit is reduced by merely $1.95.  This compares with a deficit reduction of $2.60 for every extra dollar collected by government through the Harmonized Sales Tax, and $2.70 deficit reduction for every extra dollar collected through personal income tax.

Following this logic, the next question that arises is: Are health care and social service cuts worth it? Because we take carework for granted, we overlook the costs of cutting public health care services – which end up costing us more as the burden of increased illness arising from unmet needs falls on unpaid caregivers, over-extended RNs, and other paid care workers.

Another aspect of public services that is typically disregarded is the financial benefit of public services to citizens. This is likely why the effects of federal and provincial public spending cuts have been so little debated in public discourse.

On average, each citizen or permanent resident of Canada relies on $17,000 worth of public services annually. Health care, education, and personal transfer payments account for approximately 56 per cent of this amount. The rest includes water treatment services, parks, and road maintenance, to mention just a few.

Taking into account these economic and financial benefits of public services, the Ontario Nurses’ Association proposes that ‘social efficiency,’ rather than ‘market efficiency’ is the appropriate framework for health care and other public spending choices in Ontario. Market efficiency is the maximizing of short-term cost savings, while 'social efficiency' is the maximizing of public benefit. Social efficiency in health care is based on practical knowledge sharing and collaborative decision-making in the organization of care. RNs and other frontline care workers are central to formulating socially efficient reform measures – not private consultants working on the basis of short-term calculations. Beyond public services, citizens as a whole must be engaged in discussions of public spending and public revenue generation as part of the decision making process resulting in the 2013-14 Ontario budget.

Related resources

For an in-depth treatment of the ideas and analysis presented here, see the ONA research paper Easy to Take for Granted: The role of the public sector and carework in wealth creation.

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