CCPA Policy Note

The disconnect between economic growth and teachers’ wages

June 19th, 2014 · · 10 Comments · Education, Poverty, inequality & welfare, Provincial budget & finance

A number of recent articles on the BC teachers’ strike have suggested that teachers could get the wage increases they want to see, as well as the needed investments in reducing class size and improving class composition, if only they supported resource development.

Jordan Bateman of the Canadian Taxpayers Federation summed up the line of argument (and took a jab at teachers’ math skills) in his recent blog post title “Simple math for teachers: economic growth = higher wages”.

The theory is indeed very simple: resource development would lead to economic growth and economic growth would lead to higher wages for everyone, including teachers.

But does it actually work in practice?

Let’s take a look at what has happened to economic growth and teachers’ wages post-recession.

The BC economy was in recession in 2009, but it has grown in every year since then. Adjusting for inflation and population growth, real per-capita GDP has increased in every year since 2010 and is projected to continue to grow in the next few years (historical data from BC Stats, forecasts from BC Budget 2014 p. 84).

Yet, the last collective agreement the BC government struck with teachers forced them to accept zero wage increases in 2011/12 and 2012/13. Inflation ate away 3.5% of the teachers’ purchasing power over the course of those two years. It seems pretty clear that economic growth over the life of the BCTF’s last collective agreement did not benefit teachers.

What about going forward? As you can see in the chart below, the current wage increases proposed by the BCTF are well below the BC government’s real per capita growth forecasts in every year except 2014/15. If the contract were signed today, by the end of the contract in 2017 BC teachers can expect a 3% decline in the purchasing power of their wages from 2010. And all that while BC enjoys real per capita growth of 8% over the period.

Teachers-wages-and-econ-growth

This chart does not include the one time signing bonus that’s also on the table if a contract is signed before June 30th because it does not increase baseline wages. The BCTF is asking for $5,000 but even that won’t even come close to bridging the gulf between economic growth and teachers’ wages.

It turns out economic growth has had very little to do with teachers’ wages in this bargaining cycle and the one before it.

There’s no mechanism in the economy to ensure that growth benefits everyone. The distribution of the gains from growth across sectors and individuals within them hinges on the relative bargaining power and the ability of workers to organize. And that’s precisely why we’ve seen such a dramatic rise in income inequality over the last 30 years.

It turns out the real world is not as simple as the Taxpayers Federation would have you believe.

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    10 Comments so far ↓

    • David Walmsley

      I calculated that if the minimum wage had been indexed when it was introduced in 1966, it would now be close to $30 an hour. The calculation was based on chocolate, coffee, beer, cigarettes, gasoline and apartment rental rates.

    • David Huntley

      Here is a clear demonstration of government faulty math (actually the BC Public School Employers Association mathematics).

      https://www.youtube.com/watch?v=bJkx9Yz1p44&feature=youtu.be

      It would be hilarious if it were not sad.

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    • Sean Michael

      I can’t take this article seriously. If you’re main point is the disconnect between wages and growth you can’t start your analysis right after the period of economic decline/wage increase vs inflation.

      I don’t know what an actual historical comparison of the actual wages/inflation/growth would show, but it would be much more interesting than cherry picking numbers and comparisons to projections.

      • Dave Moroz

        Hi Sean,

        How then can you believe the government that does the same thing? Most people realize that the numbers can always be presented to tell your story. The government hides behind these types of numbers all the time. This is as honest a representation as I’ve seen. We must bargain in the present. If things are good then government won’t increase wages to pay down the deficit. Things are bad, no money, can’t increase wages. Yet increasing their own salaries, pensions and benefits the entire time. I look forward to your in depth analysis on what the government has cherry picked the last few months for stats and YOUR actual historical comparison that says something other than what is presented here. Are you familiar with the articel “Simple math for teachers: economic growth = higher wages” ? I would love to hear your keen insight on this. Look forward to your response.

    • Scott Andrews

      Thanks for this Iglika! The disconnect is staggering. It looks as though this is already making its rounds on social media, and rightfully so :)

      Scott

    • Lenore Clemens

      The term “economic growth” has become a meaningless catch-phrase used by government in two main areas.
      When it wants an excuse to not put money into what citizens need and deserve to create a healthier society, for example: to end legislated poverty, create affordable housing, fund education or health care, it will say “we need more economic growth before we have the funding to do that.”
      The other meaningless use of the catch-phrase usage is when government says “the economic growth this business will bring us is necessary before we “. And then it becomes the excuse for agreeing to business demands for far lower taxes than the business needs and much larger subsidies than the business should get. Both of which the businesses really don’t need to the extent they demand IF they are truly so “good at business”.
      History here shows no matter what the apparent level of “economic growth”, nor actions taken to supposedly improve it, improved growth when reported by the government does not and has not changed the government’s spending in the areas of citizens’ needs.
      A better economy does not mean a better society for all.

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