The Problem with the Use of Economics in Labour Policy

A typical scenario plays out in the Canadian media yet again today.  It has to do with a theme I develop in many of my industrial relations courses.  I challenge students to doubt every statistic they come across that is being used to advance an argument about labour and employment law policy.  That is prudent because lawyers and policy-makers pick and choose statistics that fit whatever policy argument they wish to advance.  Rarely, do statistics drive labour policy.  More often, the opposite is true. Remember when leading American economists divided into two camps during the recent debates over labour law reform, with one group arguing labour law reform was necessary to save the American economy and the other camp arguing that labour law reform would kill the American economy.
According to one column in the National Post today, a paper that has never once said anything positive about unions and collective bargaining, unions “pad” politicians pockets, with the result that “the average municipal public worker earned more than 14% higher wages and benefits than the average private sector employee.” They are quoting a study by the corporate lobby group, the Canadian Federation of Independent Business, hardly a neutral observer.  When the National Post speaks about high wages, especially public sector wages, they mean it in a derogatory way, as in good wages and benefits are bad. I’ve made this point  before. The Post article is arguing for strong restraints on public sector compensation, and against tax increases.
In the Toronto Star today, an editorial notes that Mayor Ford’s promise to freeze taxes, to cut spending by $4 billion, AND NOT CUT SERVICES (good luck with that, buddy) depends on his ability to obtain “concessions” from the public sector unions.  That implies that  public sector wages are a central problem to be dealt with.  But then, on the next page, there is a comment by an ex-Deputy Minister of Labour for Ontario and labour arbitrator, Tim Armstrong. Here is what he writes:

Public sector wages are still below those of comparable wages in the private sector and over the least two decades, have increased at a marginally lesser rate than have private sector wages.  A two year government sector wage freeze would make only a minimal contribution to overall government expenditure.  The savings would be largely offset by the loss of purchasing power by those affected who are important consumers as well as wage earners.

Armstrong is arguing that, given the fact that freezing public sector salaries does little if anything to eliminate public debt, it is not good policy for governments to provoke strikes by demanding wage freezes.
So, what does a student take from these two articles?  Well, if you believe the Post and the corporate lobby group’s “study”, public sector compensation is out of control, a full 14% higher than comparable private sector wages!  Terrible.  But then the Star piece, written by an ex Deputy Minister of Labour and Chair of the OLRB, tells us that public sector wages are actually less than private sector wages, not more!  Who is right?
Maybe Statistics Canada can help sort this out.  This Globe and Mail article cites Stats Can’s November 2010 study, which found that public sector wage settlements are increasing at a rate of 1.3%  compared to 1.8% in the private sector.  Further, private sector employers are planning wage increases of 2.9% in 2011, compared to expected increases of only 2.3% in the public sector.
Oh, brother.  What does it all mean?  The Globe and Mail helps sum it all up for us:

Public pay increases have stoked plenty of debate between those who believe they represent serious government overspending, and others who say wage growth helped sustain the economy through the recession as many businesses were floundering. Both sides dispute each other’s calculations on the difference between private and public-sector salaries.

And that’s the point.  Never assume that a statistic cited in a labour policy debate represents some indisputable “truth”.  All statistics are open for debate and they are cited and often devised to advance a particular policy argument.  Doubt everything.  Challenge every point.  Think critically.