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Economic theory Workers

Someone is making slightly more than you and this report says it’s time for it to stop!

Here’s a familiar refrain: “Someone’s wages rose faster than someone else’s: report”. This depersonalized version sounds about as cynical as it should especially since the first someone is usually not a CEO whose wages are actually rising faster than everyone else’s – it’s that fat cat across the street, like you know, the garbage collector or maybe the admin assistant at your community centre. Or at least that’s who it is in this case as the headline actually reads, “Municipal employees’ wages rose twice as fast as provincial public sector: report.”

The report in question is one commissioned by the British Columbia government to put pressure on the wages of municipal workers, or even bring centralized bargaining to the still-autonomous municipal sector. The specific claims in the report as well as the shortcomings of its method have been thoroughly debunked by interested parties, both CUPE and the Union of BC Municipalities.

I want to use this as an example of something I seem to come across a lot lately… For beyond the wage comparisons, the economic indicator most prominently referenced in this report is the rate of inflation. More and more, it seems like any wage gain over and above the rate of inflation just isn’t fair. This is not a new argument and it is most easily applied to the public sector that has the stereotype of fat cattery stuck to it. Regardless whether it’s just me noticing it more, it turns out to be an odd one.

The basic problem is that this argument is out of line with the mainstream economic theory to which most of those making it ostensibly subscribe. That not-unfamiliar “go back to Econ 101” argument can be made here against those usually making it. In short, Under a whole array of conditions relating to the competitiveness of markets (perfectly so!) and the structure of production (very particular!), wages should be directly related to labour productivity.