Says smaller government footprint could benefit region's economic growth
The federal government's latest budget will result in federal workforce reductions across Atlantic Canada, but the impact will likely be far less severe than some regional leaders have warned, according to analysis from the Fraser Institute.
Ottawa plans to eliminate roughly 40,000 federal positions by 2028-29 as part of broader fiscal restructuring. However, Alex Whalen, Director of Atlantic Canada Prosperity with the Fraser Institute, estimates the region will experience personnel cuts of between 1,300 and 2,000 federal workers over four years—substantially lower than initial projections that suggested 2,600 to 4,000 positions could be eliminated.
The moderated outlook stems from the concentration of federal employment in the military sector. Atlantic Canada currently has 37,200 federal workers, representing 10.4% of the national workforce. However, nearly half of those positions are located at CFB Halifax and CFB Gagetown, which are expected to see staffing increases rather than reductions due to the government's enhanced defence spending.
"When the government's footprint is very large, as it is in Atlantic Canada, it tends to crowd out private-sector investment and economic activity," Whalen stated in the analysis. Federal employment in the region has grown by more than 10,000 workers over the past decade—a disproportionate increase given that Atlantic Canada represents only 6.5% of Canada's population.
Previously, Quebec’s Minister of the French Language criticized the federal government’s approach to temporary foreign workers.
Positive impact of smaller footprint
The Fraser Institute analysis contends that a smaller government footprint could ultimately benefit Atlantic Canada's economic growth. Research examining the period from 1961 to 2019 shows that when government spending increases at all levels, the region "tended to economically stagnate or fall behind the rest of Canada." During periods when government spending declined, the region "tended to perform better economically."
Government spending in Atlantic Canada currently represents between 44% and 63% of each provincial economy annually—substantially above the 26% to 30% range that economic research suggests is optimal for growth.
With the 2026-28 Immigration Levels Plan, Ottawa is reducing Canada’s temporary population to less than 5% of the total population by the end of 2027. Targets for new temporary resident arrivals are set at 385,000 in 2026, and 370,000 in both 2027 and 2028. While the official targets may seem static, the real flow of new permanent residents—and thus, potential talent—will actually increase in the near term, according to Rachel Battaglia, economist at RBC.
The budget reductions will be phased in over four years, providing employers and workers time to adjust. For the Atlantic region's 1.2 million employed persons across government and private sectors, the anticipated adjustments represent a modest workforce shift rather than a labour market shock, according to Whalen.
The human resources sector faces implications from the reductions. Whalen acknowledged that "losing one's job is an unpleasant experience and it's important for workers to be treated fairly in the process." HR professionals managing layoffs will need to ensure equitable severance arrangements and transition support for affected employees, he said.
Ottawa’s Atlantic Immigration Program is a pathway to permanent residence for skilled foreign workers and international graduates from a Canadian institution who want to work and live in one of Canada's four Atlantic provinces—New Brunswick, Nova Scotia, Prince Edward Island or Newfoundland and Labrador.
The program helps employers hire qualified candidates for jobs they haven’t been able to fill locally.
The federal government has been working on further changes to the Temporary Foreign Worker Program (TFWP).
