In a previous post, I argued that most rhetoric espoused by some of the f***muppets (i.e., a narrow group of PS who disseminate ill-informed opinions on blast and crowd out more productive conversations) doesn’t accurately reflect how wages and labour markets work, not even in the public service context.

My original argument is that the PS combines three wage elements (reworded here for simplicity) that are already baked into wage rates:

• R — The “rack” rate, i.e., how much it costs for you to get out of bed;
• C1, C2, C3, C4, C5 — The commuting compensation to leave your house to go to a job site; and,
• L — the cost for actually expending energy to do the “physical” labour of the job.

I should probably apologize if any academic specialists read this post. Not only have I chosen my own names for the components over the terms in the literature, but each of these three categories has multiple sub-elements with an extremely rich and diverse analytical history over the last 50 years. I know, I get it. But I’m not writing an academic article, I’m blogging. I converted the technical terms into more easily understood phrases like rack, commute and labour expended, and I don’t have room for the 50y history. Heck, I barely hold the interest of my readers as it is! (Man, I’m wordy!).

For non-academics, you should know that each one of those terms is addressed in literally hundreds of articles across the globe for different sectors, occupations, geographical regions, and even demographics. What are the key elements of the basic income level for single women in rural communities in Australia? What is the overall income replacement rate for men aged 55+ in trades in Poland? Students can and do write entire Ph.D. theses on a reinterpretation of the econometric models for wage rate setting in the coal mining industry in eastern Kentucky from 1921 to 1927, relying on new statistical techniques such as wavelets. I understand about 10% of the assumptions that underpin their math; shhh, don’t tell the academics.

Setting that all aside, let’s talk about what our negotiations might more productively consider within the three wage components. It might be helpful to picture our overall wage rates in the PS as a stacked area graph over time, showing a relatively stable but slowly growing rack rate at the bottom, a relatively stable but slowly growing Commute rate in the middle, and a dynamic but growing Labour rate on the top.

If ANY one of the three components needs to be adjusted upward, then the evidence for those adjustments will be the evidentiary basis for wage negotiations.

Let’s talk about the rack rate first

As I mentioned above, there are entire Ph.D. areas focused on what I call the rack rate. Some want to use a living wage rate (usually too high for just the rack rate), a base poverty line (a bit too low), or a combination of the two with some estimates in between. Some academics and practitioners hate the entire concept as it can act as a disincentive to work or because they think it is an individual, case-by-case calculation, not something that can be aggregated and averaged. I confess that I chose social assistance rates because it’s considered a valid proxy, even by those who don’t like it, and the Ontario one was easily found. But it is very important to know that social assistance rate IS only a proxy, it is NOT the actual rack rate. You’ll see why that’s important in a moment.

Admittedly, the actual amount may not be as important as the evidence of change. For example, if you want to argue wage rates should increase because the rack rate has increased, you’ll need to show evidence of what’s changed:

• Cost of living (CoL) increases for basic human needs like groceries, basic transport, and direct childcare expenses;
• The usage of social assistance decreased? This is really complicated, and hard to explain. As I said, social assistance amounts are not really the rack rate, just a proxy. The rack rate operates as a two-fold “signal”. It is not only the minimum amount to leave the house, it is also the minimum amount to be able to stay home. If usage drops, it means the current social assistance is now below the actual rack rate because the rack rate went up — people start leaving the house because they don’t get enough to stay home, so they’re off seeking money above their rack rate just to survive.
• Food bank usage went up? While a survival effort, in econometric terms, this is a way to meet or “reduce” the rack rate by offsetting basic expenses.

The challenge with this component of the overall wage rate is that there is very little “appeal” for discussion of rack rate-related increases in wages.

It is hugely important for social assistance rate discussions, as it means the SAR has dropped below the rising poverty line and/or the rack rate. People have to leave the house to better themselves, they cannot subsist on what the rack rate or SAR is paying them. Yet very few people who are working and negotiating wages are influenced by the social assistance rate — almost by definition, they are not on social assistance.

If you want to include the evidence in a wage discussion for PS wages, you’d have to have examples of workers who were earning less than social assistance.

However, that does NOT mean you have nowhere to go for negotiations.

Focus on expenses for basic human needs

For context, the biggest relevant item in the “rack rate” for those negotiating wages is the cost-of-living increase aka inflation.

But it is not about ALL inflation. Car costs, new housing prices, luxury items, vacations, etc. are part of larger rates of inflation, but the rack rate ONLY cares about the inflationary pressures on the “must-haves” for personal budgeting. Food, shelter, health and personal care are the main ones that everyone agrees on for the category.

In my previous post, I noted that overall inflation over 4 years was about 16 percent, according to the Consumer Price Index. That is based on a large basket of goods intended to provide a representative sample of the types of expenses that average consumers typically face.

Yet the question for bargaining would be … while everything went up by 16 percent overall, is it fair to say food, rent (not mortgages), health care costs for self and dependents, and basic personal care also went up by 16 percent? Or is it perhaps more likely, as many have said, that food went up by MORE than 16 percent?

In effect, you’re looking for evidence to see if the components for the rack rate that are prone to inflationary pressures stayed consistent with overall CPI (as they should) or was there something particularly disruptive that increased food by say 22% or rent by 25%?

On a more painful but sexier note, do you have any evidence that individual PS employees and their families are being hard hit? It can’t be generic “everything is so expensive”, that’s what CPI/CoL adjustments address. This would be more extreme like food bank usage rates for PS employees, default rates on mortgages or evictions for not paying the rent, or back in the day, increased use of salary advances due to Phoenix problems.

Complaining about the high cost of everything (as many FMs put on blast), or that Loblaws is evil, or Big Pharma is out to get everyone, or ranting that you can’t afford Subway, does NOT move the conversation forward. It instead crowds out those who might have some really substantive things to say about living on a starting salary, for example, while contending with inflation, student debt, taking care of parents, and not being able to afford food.

Those are the elements that can be persuasive in negotiations. At least for the rack rate, even if it isn’t sexy.