Tuesday, August 11, 2015

ORPP is a Better Deal than the CPP

Stephen Harper is "delighted" to make the implementation of the Ontario Retirement Pension Plan (ORPP) more difficult. At the same time, he is not proposing any changes to the CPP. However, the ORPP is a much better deal than the CPP:

- under the ORPP, workers contribute 3.8% of their earnings (1.9% themselves, 1.9% through their employer) in order to replace 14.24% of their income in retirement;

- under the CPP, workers contribute 9.9% of their earnings in order to replace 25% of their income in retirement.

In order words, for the ORPP to replace 25% of income, workers would only have to pay 3.8%*(25/14.24) = 6.67% of their income rather than 9.9%. Why?

- Part of the reason is that, while neither plans requires contributions on earnings up to $3,500/year and both still pay benefits on those earnings, the ORPP has a higher ceiling ($90,000) than the CPP (around $55,000 next year). But this difference is rather minor: with the same ceiling as the CPP, ORPP could still replace 25% of pensionable earnings with a contribution rate of 6.8-6.9%. There may be other minor design differences (I haven't done a full comparison), but it's pretty safe to say that ORPP could have the same design and pay the same benefits as the CPP with a contribution rate of around 7%.

- So why could ORPP offer the same benefit as the CPP with only 70% as much contributions? The answer is buried in the CPP actuarial report: even while (real) investment returns are assumed to be 4% going forward, the actual return for those born after 1970 is only 2%. This is because CPP contributions were too low for earlier cohorts as a result of inaccurate projections. Thus, younger workers are heavily subsidizing older workers and retirees: since contributions made to the CPP are withdrawn, on average, about 20 years after they are made, that 2% difference per year means that young workers have to pay 40-50% more than what they would pay if they didn't have to subsidize older workers. Lo and behold, that's roughly what you'd tack onto ORPP contribution rates to get to the CPP contribution rates.

In short, roughly 70% of the CPP contributions are actually retirement savings; the remaining 30% is a tax that makes up for insufficient contributions before 2000 - a tax of up to roughly $1,500 per worker each year. By contrast, because the ORPP isn't saddled with past mistakes, it is 100% retirement savings. Therefore, it is highly ironic that Stephen Harper is characterizing ORPP as a tax while doing nothing about the CPP.

Sunday, August 9, 2015

Vote Efficiency, 2015 Edition

No projection until Labour Day weekend, but I've started playing around with the numbers a bit to get a feel for things.

What would the seat count look like if the Conservatives, NDP and Liberals all get 30% nationally? Obviously, it depends on how that vote is distributed. Under the assumption that the swings to get from the current vote support (polls from late July) to 30% are uniform nationally, I get about 125 seats for the Tories, 110 seats for the NDP, and 100 seats for the Liberals.

Under the same assumption, what levels of popular support would translate to a three-way tie? In my model, it looks like 32% Liberals, 31% NDP and 28% Conservatives.

Obviously, the above numbers imply that when the race is tight, the Tories' vote is the most efficient, and the Liberals' vote is the least efficient.

Now, what vote share does each party need in order to achieve a majority? To answer this question, one needs to make assumptions about where each party's extra support comes from. I will assume that for every 3% gained by the NDP/Liberals, 2% come from the Liberals/NDP and 1% from the Conservatives. And I will assume that Conservatives draw evenly from the Liberals and the NDP (counterintuitive perhaps, but "2nd choice" questions in polls do not suggest that Liberals are much more likely to defect to the CPC than New Democrats). Under these assumptions, the majority thresholds are around 38.5% for the Conservatives, 41.5% for the NDP, and 40% for the Liberals.

Once again, the Conservatives have the most efficient vote, but while the NDP's vote is more efficient than the Liberals' when support levels are similar, the Liberals would actually have an easier time than the NDP cobbling together a majority.

Sunday, August 2, 2015

Campaign 2015: No Projections before Labour Day Weekend

The 2015 federal election campaign is underway! Due to professional obligations, I will not have the time to issue projections before Labour Day. My workload after that is not yet known: I may be able to provide daily updates after Labour Day, but I may also not be able to cover this campaign at all. In any case, I hope that you will check back then to see what's up on Canadian Election Watch.

I will say that, in my opinion, this year's Orange wave is increasing the chances that Stephen Harper would keep his job after all, though I still believe that they are low. Why?

- Orange wave or not, it was always going to be difficult for the Conservatives to secure a majority this year. But with the Orange wave, if the Liberals do not prove a viable option, disaffected Conservatives and Red Tories might conclude that Harper is still better than the NDP. That is, while the 2011 scenario is still not likely, it is likelier than it seemed before the Alberta election.

- Without the NDP surge, the Liberals would have been at least second, and the third-place NDP would almost certainly have opposed a Conservative throne speech and supported a Liberal one.

- With the NDP surge, if the Conservatives finish first with a minority, the NDP second and the Liberals third, it is unclear what the Liberals would do. On the one hand, most of their voters would be pretty unhappy if they let Harper govern. On the other hand, if they hand the government to Mulcair, they may be sending Canada straight to a two-party system and making themselves irrelevant.

I believe that the Tories' goal, if they can't win a majority, is to keep the NDP second and the Liberals third - this gives them the best chance to hold on to power. This also happens to be the scenario corresponding to the current poll numbers, so look for Conservatives striving to maintain this balance over the next few weeks.

The most important thing for the NDP isn't really to win, but rather to make sure the Liberals are third and to avoid a Conservative majority. This will either put them in power or at least position them as THE alternative to the Tories. And if the NDP wins, they would rather face a Conservative Official Opposition going through a leadership campaign than a Liberal Official Opposition that could coalesce the anti-left vote. The NDP seems to have decided that, given their current momentum, it is better to marginalize the Liberals rather than to attack them directly. But if Liberal support starts inching back up, don't be surprised if Mulcair becomes more aggressive toward Trudeau.

Conversely, the Liberals' main goal is to avoid third place. As explained above, if the Liberals are second with a Conservative minority, they will likely seize power. But even if the Conservatives win a majority, the Liberals wouldn't be too sad at being the Official Opposition: the party would avoid death, a real danger given the current situation. Therefore, it is in the Liberals' interest to go after the weaker of the two other parties, and it is too early to tell whether the Conservatives or the NDP is the better target.

So, in short, short of winning a majority, the parties' main goals are:
- Conservatives: maintain a Goldilocks scenario where the NDP is second and the Liberals, third
- NDP: make Liberals finish last
- Liberals: avoid finishing last

This will be an extremely difficult campaign for the Liberals because both their opponents want them last, and because they are already last. A second-place finish would have been disappointing from their perspective last year, but I'm pretty sure Trudeau would take it in a heartbeat today.

Still, 11 weeks is a long time, and my next analysis in 5 weeks may already look completely different, so stay tuned!

Wednesday, September 17, 2014

Big Win for BC Liberal Government

The full details of the tentative agreement between BCTF and the government have not been divulged, but based on what we know, my sense is that:
- the government got the upper hand on all major issues: salary, signing bonus/grievances, and class size and composition;
- the BCTF had a small advantage on minor issues: non-salary benefits, concessions demanded by the employer.

In the end, there are about $550-600 M in new money over 5 years for salary, benefits, bonus and grievances. This is close to the $600 M that I was suggesting at the end of my previous post, although since I did not include grievances in the $600 M in that post, this deal is more favourable to the government. As for class size and composition, there is very little additional money right away - much less than what I suggested in late August - but the BCTF can renegotiate the language if it wins the court case. However, I'm highly skeptical that the BCTF will gain a lot more at that point, unless the province's fiscal situation markedly improves.

Therefore, overall, this deal is more favourable to the government that what I was expecting. If you're a BCTF supporter, you could argue that this shows that the government was the inflexible party all along. If you're a government supporter, you could argue that this shows that BCTF's original demands were wildly unrealistic. However, one thing's certain: due to the "re-opener" clause on class size and composition, don't be surprised if the five years of promised labour peace fail to materialize.

Detailed analysis below. Note again that Year 1 was last school year (2013-2014).

Salary
Year 1: 0
Year 2: 2%, and additional 1.25% on January 1, 2015 = $71 M
Year 3: no increase = $84 M
Year 4: additional 1% = $111 M
Year 5: additional 0.5%, and further 1% eight months into the school year = $129 M
5-Year Total: $395 M + 50% economic stability dividend
- August government offer: $356 M* + 50% economic stability dividend
- August BCTF demand: $601 M + 100% economic stability dividend
(The agreement also contains a Year 6, with increases structured like in Year 5.)

This is clearly a clear win for the government: for every dollar that it moved, BCTF moved more than $5. In addition, the government got the term and the size of the economic stability dividend that it wanted. However, the immediate 2% increase allows BCTF to save face.
*A previous post estimated this at $350 M on the basis of July 1-June 30 contract years, but I have now switched to September 1-June 30 school years.

Signing Bonus, Grievances
- A one-time $105 M payment to BCTF.
- Immediate increase of elementary preparation time from 90 to 100 minutes, and further increase to 110 minutes on the last day of the contract. (Cost = $9.6 M/year)
- Preparation time for secondary school teachers and adult educators to be examined by a committee.
5-Year Total: $143 M
- August government offer: None (but potentially large grievance liability)
- August BCTF demand: A one-time $375 M payment ($150 M signing bonus plus $225 M grievance fund) and $270 M worth of preparation time (not counting interaction with salary increase) = $645 M

Again, this is a clear win for the government. In fact, one might argue that teachers might be better off with holding out for court-ordered grievances, but that could take years.

Class Size and Composition
- Fund for teacher hiring: $80 M per year (except $75 M in 2014-15, and $85 M in 2018-19). This fund replaces the LIF, which was used for both teacher hiring as well as other improvements.
- Some sources suggest that there's another $80 M (total, or an average of $16 M per year) for other improvements, such as teachers' aides.
- Court case: After it is resolved, either side can reopen class size and composition provisions. Confusingly, they're supposed to bargain from the restored language (if any), but the default until a new deal is reached is the current language.
Average per year: $80-96 M + "re-opener" clause
- August government offer: $75 M per year LIF, and any language restored by the court only applies to past contracts (i.e. would lead to a grievance payout, but no ongoing costs)
- August BCTF demand: $225 M annual fund in addition to LIF, and any language restored by the court takes effect immediately in current contract (costed at $1.6 billion per year by the government)

This is a likely win for the government. Until the court case is resolved (and thereafter if BCTF loses, as I don't think the government would re-open the contract in that case even though they could), it will spend $5-20 M per year more than its original offer, which is much less than the $225 M demanded by BCTF. After a BCTF victory in court, the government would likely be in a position of strength in bargaining: as long as it does not agree to new language, the default is the current language rather than the restored language. Therefore, the government is insured against losing control of its budget.

However, BCTF can rejoice about two things:
- a guarantee that most of the money goes to hiring teachers rather than other forms of improvements, which was not there with the LIF; and
- if it wins the court case, and the fiscal situation has improved by that time, the province would likely agree to put more money into class size and composition. Of course, it is basically impossible that the government will agree to the 1998-2001 language, but at least the door is open to mid-contract improvements.

Other Benefits and Teachers on Call
According to BCTF's letter to members, the ongoing cost of benefits will be $11.85 M per year at the end of the contract, but these benefits will be phased in rather than immediate. There is also an increase in pay for teachers on call somewhat less than $4.6 M per year (which was the August demand).
- August government offer: None
- August BCTF demand: $24.4 M per year (not counting interaction with salary increase)

Here, the two sides met near the midpoint of their original positions, though the final ongoing cost appears closer to the BCTF demand.

Concessions Demanded by Government (Union Leave, Evaluation, Calendar)
All withdrawn, so a win for BCTF, but these are relatively minor issues.

Monday, September 15, 2014

BCTF vs. BC Liberals: Why Neither Side Has Been Reasonable So Far

The ongoing negotiating blitz is cause for optimism, but up until the parties got together for the current round, neither was being reasonable. (Of course, due to the media blackout, we don't know if either is currently being reasonable.) Here are the main problem areas:

Government
- The court ruled that the teachers have a right to bargain over class size and composition. The government's interpretation of "bargain"? "Accept our offer, which merely asserts the current illegally imposed language." It's not surprising that the BCTF views this as a slap in the face.

BCTF
- The court ruled that the teachers have a right to bargain over class size and composition. Because the 1998 language was the last negotiated language, it got retroactively inserted into past contracts. But the court never ruled that the teachers had the right to keep the 1998 language in future contracts, and in fact explicitly expressed an expectation that class size and composition would be subject to future bargaining. Despite that, BCTF's binding arbitration proposal seeks to avoid bargaining on these issues. Why? If it wins on appeal, the court might decide to insert the 1998 language not only into past contracts, but also into the 2013-2018/9 contract. BCTF is therefore attempting to circumvent the bargaining process and set education policy for the province without the input of BC's duly elected government.
- BCTF demands a $5,000 bonus after going on strike for a month. 'Nuff said.

I have to say that both sides' wage and benefits offers are reasonable. The government's sub-inflation 7% over 6 years offer is obviously stingy, but given the other settlements so far and the massive surplus of teachers (note that there's a surplus even in Ontario, where class sizes are quite small), this is a good-faith offer. Meanwhile, the teachers' demand of 8% over 5 years, which may not even outpace inflation, is obviously modest. It's true that their benefit demands (equivalent to a further 4% increase in compensation) are somewhat expensive, but as far as bargaining tactics go, these proposals are not outlandish and probably just there as bargaining chips.

Sidenote: While there's a surplus of teachers in BC, our teachers are indeed paid less than teachers west of Québec. How can this be? Simple: other provinces, like Ontario, are grossly overpaying their teachers, to the point that a 35-year-old teacher is likely to make as much as a 35-year-old professor. (Professors' wages have more room to grow after that, but they had to give up several years of pay to earn their Ph.D.)

It looks like the following need to occur for a settlement to happen (some of these are from my post from August 31):

1. BCTF needs to accept language on class size and composition that is not as good as what they were given by the NDP in 1998. They need to realize that a right to bargain is very different from a right to keep copy past clauses and paste them in future agreements. Imagine if the government wanted to roll their nominal wages back to 1998 levels!

2. The government needs to make concessions on class size and composition. Their E80 proposal can't be a mere statement of what they illegally legislated. This can come in the form of a meaningful increase to the LIF (not just the $15 million increase in the latest public proposal), or specific language on class size and composition. As I've explained in a previous post, research shows that class size reduction is best targeted at lower grade levels (K-3).

3. BCTF needs to drop their bonus demand. I certainly don't see the government giving more than the $1,200 on offer in June. In fact, the government may well feel that any bonus would send the wrong signal and encourage future strikes.

If they get past these obstacles, I think they can come together on wages and benefits. As detailed in my August 31 post, the government is offering $350M over 5 years, while BCTF is demanding $600M over 5 years in wages, $150M in signing bonus, and $125M per year in benefits. Perhaps the sides can agree on something around $600M over 5 years in total compensation, which equates to about 1.3% per year, or 0% in Year 1 and 2% in each of Years 2-5.

Or at least, once they settle on class size and composition, the government might be more receptive to binding arbitration - the risk to the budget from the court case would become much smaller (just grievances).

Sunday, August 31, 2014

BCTF vs. BC Liberals: How Far Apart Are They?

Sept 2 Update: As reported by the Vancouver Sun, Peter Fassbender is saying that the parties are more than $300 million apart on compensation (wage plus non-wage benefits). The analysis below shows that the gap between their publicly stated positions is about $770 million ($401 M on wages, and about $369 M on benefits assuming they start fully in 2015-2016). This implies that they were privately willing to make concessions to bridge about half of the compensation gap, and the remaining difference is small ($300 M/5 yrs = $60 M/yr = 2% of current compensation). The real issue remains class size, composition and specialists: the government is offering almost nothing, while BCTF's demand would cost about $1 billion total if it loses the court case, and $1.6 billion PER YEAR if it wins the court case.

Based the following documents by the BCTF and the government, the math works out as follows:

Current wages and wage-related benefits: The government states that BCTF's proposal, which includes a 3.5% increase and three 1.5% increases, will cost $211.1 million in Year 5. This means that the current base is 211.1M/(1.035*1.015^3-1) = $2.566 billion.

Current total compensation: The government states that an increase of $335.8 million would correspond to a 11.2% increase. This implies a current base of $2.998 billion.

BCTF Salary Demand (Total amount above current wage)
Year 1 (2013-2014): $5,000 signing bonus = $150 M
Year 2: 3.5% = $90 M
Year 3: additional 1.5% = $130 M
Year 4: additional 1.5% = $170 M
Year 5 (2017-2018): additional 1.5% = $211 M
Total: $751 million, or $150 million per year on average + 100% economic stability dividend

Government Salary Offer (Total amount above current wage)
Year 1: 0
Year 2: 1%, and additional 2% seven months into the year = $47 M
Year 3: no increase = $77 M
Year 4: additional 1% = $104 M
Year 5: additional 0.5%, and further 1% ten months into the year = $122 M
Total: $350 million, or $70 million per year on average + 50% economic stability dividend

Difference between BCTF Salary Demands and Government Salary Offer (ignoring economic stability dividend)
Total over 5 years: $401 million
Average per year: $80 million (3.1% of wage base)
Ongoing difference at June 30, 2018: $67 million (2.6% of wage base)

Non-wage compensation: BCTF demands an increase costed at $125 M in Year 5 by the government.

Grievance fund: BCTF demands a one-time $225 M fund

Class size, composition, and specialists: Government offers a $15 M increase to the Learning Improvement Fund (LIF), from $60 M to $75 M. BCTF says that this is old money, and demands:
- a further $225 M per year until the court case is resolved, to be continued if the government wins;
- the restoration of the original 2001 language if BCTF wins, costed by the government at $1.67 B in Year 5 (if this replaces the LIF and the $225 M fund, the net cost is $1.37 B).

Difference between Total BCTF Demands and Government Offer:
Total over 5 years: $1.67 billion
Average per year: $334 million (11.1% of compensation base)
Ongoing difference at June 30, 2018: $417 million (13.9% of compensation base)

These numbers assume that:
- BCTF's non-wage compensation and class size/composition/specialists demands are to be implemented in Year 3 (2015-2016). An earlier implementation, during the current school year, would increase the total and average per year cost (but would not affect the ongoing difference in 2018).
- BCTF loses its court case. If it wins, then the total ongoing difference ballons to $1.79 billion in Year 5, or almost 60% of the current compensation base.
- The economic stability dividend is nil (it is likely to be small anyway).

Given these numbers, it's no surprise that Vince Ready declared in impasse. At the end of Year 5:
- the government's proposal costs $159 million per year ($144 M in wages and $15 M for the LIF increase);
- BCTF's proposal costs $576 million per year ($211 M in wages, $125 M in other compensation, $15 M for the LIF increase, $225 M for class size/composition/specialists) if it loses in court;
- BCTF's proposal costs $1.95 B if it wins in court.

Another way to took at this is through the rate of increase of ongoing costs:
- government: 1.0% per year
- BCTF: 3.6% per year if lose court case, 10.5% per year if win court case.

The government's proposal is obviously stingy: it is likely to come in below inflation, which implies a real cut, following two years of wage freezes. On the other hand, other public sector unions have settled for similar increases.

BCTF's demand that if it wins the court case, the 2001 language be restored, is obviously unrealistic, and is probably a bargaining tactic to obtain the $225 million/year fund. A 3.6% annualized increase is normally not out-of-line, but in the context of agreements signed by other unions, it is quite high.

I believe that a reasonable settlement would be along the lines of:
- 1.5% increase per year in total compensation, with no signing bonus. The parties can decide how to divide this into wage and non-wage benefits. The price tag would be $688 M over 5 years, which is slightly above below the middle of the government salary offer worth $350 M and the BCTF compensation demand worth $876 M $1.12 B (assuming that the non-wage demands are enacted in Year 3). The total increase would be 7.7%, about zero after adjusting for inflation. This is more than what other public-sector unions got, but likely less than private-sector wage increases. The final ongoing cost would be $232 M per year.
- $200 million one-time grievance fund, but only if BCTF wins in the Supreme Court.
- Increase the LIF to $150 million. This is double the government's proposal of $75 million, and half BCTF's demand of $300 million ($75 M LIF plus $225 M fund).
- Replace the LIF with $225 million annual fund if BCTF wins in the Supreme Court.

Total ongoing cost of my proposal at June 30, 2018:
- If BCTF loses: $322 million per year (compared to $159 M and $576 M)
- If BCTF wins: $397 million per year (compared to $159 M and an unrealistic $1.94 B)

The annualized increase in ongoing funding would be 2.1-2.5%, which I think is a fair outcome for our education system, and right in the middle of the 1.0-3.6% cost of current proposals. It slightly outpaces inflation, and along with a decrease in enrollment, should allow for a modest improvement in services. At the same time, it is less than provincial GDP growth, so this is definitely an affordable plan, even if BCTF wins the court case. The total risk of the court case to the taxpayer, $75 million per year plus a one-time payment of $200 million, is manageable considering that it concerns more than a decade of education funding - keep in mind that the BC government spends over $5 billion per year on K-12 education, and over $44 billion per year overall.

Wednesday, August 27, 2014

BCTF vs. BC Liberals: Whose Proposal is Best for B.C.?

The school year is supposed to start next week in BC, but the labour dispute between teachers and the government has not yet been resolved. Here are my two cents on the issue.

The parties are not too far on salaries: the government offers 6.5% over six years, while the teachers demand 8% over five years. Given that, in its latest budget, the government is forecasting inflation of 9.4% over five years (9.8% compounded), and that wages generally increase faster than inflation due to productivity gains, the teachers' salary demand is very reasonable.

However, the real difference between the parties is on the issue of class size. The BCTF points out that the Liberals have unfairly increased class size in the past by illegally removing it from the bargaining procedure. It also points out that there is evidence that a class size reduction would improve student performance, and that BC has large class sizes compared to the rest of Canada. The Liberals reply that despite the class size increase, BC students' academic performance remain among the best in Canada. Moreover, the current fiscal situation is tight.

None of these arguments, from either side, get at the real issue: is reducing class size a good investment?
- Perhaps the class size increase was achieved illegally. But if it is the right policy, it should stand, and BCTF should be compensated for past wrongs through more direct and less costly means.
- Even if class size reduction does improve student outcome, if the improvement is small, it may be cost-ineffective.
- BC's classes being larger than other provinces' does not imply that they are too large: it could well be that other provinces are wasting money because smaller classes sound good to voters.
- Even if BC students' academic performance held up (and this is disputed), this is not proof that the class size increase did not have an adverse effect: perhaps if class sizes had remained low, our students would be doing even better.
- The surplus being small and revenues growing very slowly does not mean that we can't invest in education. If the return is high enough, then borrowing is the right thing to do for BC's long-run prosperity.

The following is a back-of-the-envelope analysis on whether class size reduction is desirable in BC, given its costs. The starting point is this review of the evidence on class size reduction, by the Brookings Institute, a highly esteemed non-partisan think tank (think, not Fraser Institute or CCPA) in the US.

- The largest effect of class size reduction found in a well-designed, credible study is as follows: reducing average class size from 22 to 15 for four years (K-3) resulted in an improvement of academic performance equivalent to 3 months of extra schooling. This "STAR" study was done in Tennessee, across schools in different socio-economic settings.

- Other studies have found smaller effects, or no effects at all. Generally, class size reduction is most effective when applied in early grades (like in STAR) and in low-income settings.

So let's assume that the real effect is as measured in STAR. What would be the costs and benefits of such a policy for BC? (Note: Obviously, the class size reduction contemplated in BC is different, but in principle, both the costs and the benefits would scale.)

Cost of 4 years of class size reduction from 22 to 15 students
- Government expense: Reducing class size from 22 to 15 students requires 46.7% more teachers. According to a Statistics Canada report, the average spending per pupil in BC in 2010/2011 was $11,832, 40.5% of which was spent on educator remuneration. Assuming that this class size reduction increases educator remuneration by 46.7% (it might be a little less since educators include some non-teachers), and that no other costs change (obviously in reality, some other costs, like classrooms, would go up), the increased cost per student is $2,236. Over four years, this adds up to $8,945 per student.
- Of course, spending an extra $8,945 per student requires extra taxes (now or later), which would cause an economic loss. It is difficult to quantify such a loss, but fortunately, the Québec government has estimated it for various forms of taxation. In the long run, the most efficient way to raise taxes is via a value added tax, and the economic cost is estimated at $0.54 per dollar of revenue in Québec. The cost in BC could be lower because we start from a lower level of taxation, but it could be higher because we have an inefficient sales tax as opposed to a value added tax. Taking the $0.54 estimate as such, the additional economic cost would be $4,830 per student.
TOTAL COST: $13,775 per student

Benefit of 3 additional months of schooling
This is obviously difficult to measure, but one way to look at it is that this should equal the cost of 0.3 years of postsecondary education.
- Direct cost of education: It is not easy to disentangle teaching from research costs in our postsecondary institutions, so this can only be very approximate. A reasonable estimate is that a year of postsecondary education costs about $15,000 per student. 0.3 years = $4,500 per student.
- Opportunity cost of forgone work: Having to spend 3 extra months in school will result in foregone wages. Assuming that the average starting wage is $20/hour (it's less for high school grads, but more for university grads), this works out to 12 weeks*40 hours/week*$20/hour = $9,600 per student.
TOTAL BENEFIT: $14,100 per student

Obviously, these are very rough calculations, so the conclusion to draw is only that the costs and benefits of reducing class size in K-3 are comparable. There is no strong case for either side. Given that most studies show smaller benefits at high grade levels, it is likely that the costs of reducing class size exceed the benefits in secondary school.

Teachers may argue that reducing class size carries not only academic benefits, but also behavioural benefits. This argument certainly has merit, so the above benefits may be understated. On the other hand, these estimates of benefits are based on the most favourable credible study (at least according to Brookings). So on balance, it is not clear in which way the above numbers are biased.

Moreover, the Brookings summary referenced above mentions evidence that other forms of investment in education tend to yield higher returns than class size reductions.

Based on this evidence, my opinion is:
- I support a targeted class size reduction for elementary schools in disadvantaged areas.
- I am neutral toward a general class size reduction for K-3. Perhaps this should be given as a concession to make up for the government's past illegal actions.
- I mildly oppose a general class size reduction for grades 4-7.
- I oppose class size reductions for secondary schools.

On balance, if the choice is between BCTF's proposal and the government, I would choose the government's, as I believe that current class sizes are fine in most settings. But ideally, the two sides can come together and do the right thing, which is to focus resources on those that would benefit the most: the youngest and most disadvantaged students.

Tuesday, April 8, 2014

Québec 2014: CAQ Vote Efficiency Up From 2012

The complete preliminary results are in:
LIB - 70 (41.5%)
PQ - 30 (25.4%)
CAQ - 22 (23.1%)
QS - 3 (7.6%)
With a uniform swing from last election, the seat distribution would have been LIB 76, PQ 35, CAQ 12, QS 2. Thus, from a projection modeling standpoint, the big news of this election is that the CAQ vote got much more efficient, allowing it to win 10 extra seats.

Consider the following:
- The CAQ gained 8 of the 9 ridings where it lost by less than 8% to the PQ in 2012 and that the Liberals did not win this time. The only exception was Rousseau, where outgoing Finance Minister Marceau held on. The only other CAQ gain was Masson, next door to Legault's riding. Therefore, it's as if the CAQ gained 8% on the PQ, even though the actual swing was only 2.6% (from a 4.9% gap to a 2.3% gap).
- The 5 CAQ losses to the Liberals were exactly the 5 ridings that it won by less than 8% over the Liberals in 2012. (The only other CAQ loss was Saint-Jérôme, where star CAQ incumbent Jacques Duchesnau, who did not run, was replaced by PQ star Pierre-Karl Péladeau.) Therefore, it's as it the CAQ fell by 8% relative to the Liberals, even though the actual swing was 14.3% (from a 4.1% gap to a 18.4% gap).
Taken together, the increased efficiency of the CAQ vote was worth a whopping 6% to the party! That is, if swing were uniform, the CAQ would have had to get about 4% more, equally from the Liberals and the PQ, to achieve its seat count of 22.

The increased efficiency of the CAQ vote is evidence that people do vote strategically when they can. It was hard to do in 2012 because both the CAQ and the electoral map were new. This time, however, potential CAQ voters had some guidance as to whether it was worth voting for Legault's party. This might have made the CAQ lose votes where it is uncompetitive, and gain votes where it is the main alternative to the PQ.

Of course, one could also attribute the increased CAQ vote efficiency to the CAQ leading a more focused campaign based on data from 2012. However, the PQ also had a very focused campaign, which did not prevent them from doing poorly where it focused.

How about the Liberal/PQ vote efficiency? It basically did not change compared to 2012. The PQ to Liberal swing was 16.9%, and there were 16 ridings that the PQ won by less than 16.9% over the Liberals in 2012 and that the CAQ did not carry this time. Of those, the Liberals won 14, the only exceptions being Bonaventure and Taschereau, which were both close. The only other Liberal gain from the PQ was Roberval, the riding of Premier-elect Couillard. Thus, the basic uniform swing model would have, as is often the case, done a fantastic job predicting seat changes between the two main parties.

Sunday, April 6, 2014

Québec 2014: Last Polls, Four Scenarios, Prediction (just for fun), and Around the Web

Five firms have released polls conducted in the last week of the campaign (UPDATE: Changed the 3/31 Forum poll to the 4/3 Forum poll, released on 4/6):

Ipsos: 3/28-4/1, sample size 1012
EKOS: 3/27-4/3, sample size 1422
Léger: 4/2-3, sample size 1220
Forum: 4/3, sample size 1536
Angus Reid: 4/2-4, sample size 1410

Their numbers:

Ipsos:   LIB 37,    PQ 28,    CAQ 19,    QS 13 (committed: 40-28-18-12)
EKOS: LIB 40.0, PQ 26.3, CAQ 21.0, QS 9.6 (likely: 39.8-27.0-21.1-9.4)
Léger:  LIB 38.1, PQ 29.0, CAQ 23.4, QS 8.0
Forum: LIB 44,    PQ 24,    CAQ 23,    QS 6
Angus: LIB 39,    PQ 27,    CAQ 25,    QS 7 (likely voters only)

The big question is: will there be a "ballot box bonus," as there was in the three previous elections? If so, who gets it? In 2007, the ADQ (predecessor of the CAQ), third according to polls, finished second and almost formed the government. In 2008, the PQ unexpectedly won over 50 seats and almost prevented the Liberals from winning a majority. In 2012, the Liberals were four seats short of retaining power and ensured that the PQ was well short of the majority threshold, even though the last polls appeared to suggest a slim PQ majority.

I should note that in both 2007 and 2008, the "bonuses" noted above were relative to the last CROP and Léger polls, while Angus Reid actually turned out quite accurate. In 2012, Angus Reid did not publish a pre-election poll, while all four firms in the field underestimated Liberal support.

So, let's look at what each of these scenarios would imply. In all cases, I'm assuming 7% support for QS, whose result was at the lower end of the last polls in the last 3 elections. I did not build a seat projection model, so I will use the one provided by Too Close to Call, which was the best model in 2012.

1. Angus Reid is right again: LIB 39, PQ 27, CAQ 25
LIB - 70
PQ - 40
CAQ - 13
QS - 2
The CAQ saves most, but not all, of its seats. The Liberals win a moderate majority, while the PQ has its second worst showing in the last 7 elections.

2. Liberal ballot box bonus (2012 scenario, exemplified by Forum poll): LIB 44, PQ 24, CAQ 23
LIB - 87
PQ - 27
CAQ - 9
QS - 2
Best Liberal since 1989 and worst PQ result since 1985 - would be a terrible shock for the PQ.

3. PQ rebound (2008 scenario): LIB 36, PQ 32, CAQ 23
LIB - 57
PQ - 57
CAQ - 9
QS - 2
We'd be up very very late (even on the West Coast)! The efficiency of the PQ vote allows it to challenge for government status, even while the Liberals clearly win the popular vote.

4. CAQ momentum continues (2007 scenario): LIB 36, CAQ 29, PQ 26
LIB - 62
PQ - 33
CAQ - 28
QS - 2
Another scenario where we'd be up late, both to see if the Liberals win a majority, and to see who forms the official opposition. What would it mean for the PQ if it ends up as the third party for four years?

So there's an outside chance of a PQ minority, and an outside chance of a CAQ official opposition with a Liberal government. However, it is by far most likely that the Liberals will form Québec's next government, while the PQ as the official opposition. A majority appears more likely than a minority, but the latter would not be surprising.

Just for fun, here's my totally unsystematic prediction (not projection):
LIB - 67
PQ - 36 (same as 2007)
CAQ - 19 (same as 2012)
QS - 3

Here are some projections from the usual suspects around the web (UPDATE: Too Close to Call's projection is now available. UPDATE 2: Blunt Objects (Kyle) projection added, and ThreeHundredEight projection updated.):
Blunt Objects (Teddy): LIB 72 (38.2%), PQ 35 (28.0%), CAQ 14 (23.0%), QS 4 (9.2%)
Blunt Objects (Kyle): LIB 69.5 (39.8%), PQ 47.5 (29.4%), CAQ 6 (21.0%), QS 2 (7.7%)
ThreeHundredEight:     LIB 69 (40.1%), PQ 45 (26.9%), CAQ 9 (22.8%), QS 2 (7.9%)
Too Close to Call:        LIB 72 (40.2%), PQ 40 (27.4%), CAQ 11 (23.3%), QS 2 (7.4%)

Happy election watching!

Saturday, February 1, 2014

Elections Canada Publishes Official Transposition of Votes

Yesterday, Elections Canada published the official transposition of the 2011 General Election results onto the new electoral map. The seat changes by province are as follows:

Reconfiguration of Existing Seats
- NL: Liberals lose Avalon to Conservatives
- QC: Bloc loses Ahuntsic (now Ahuntsic--Cartierville) to Liberals, NDP loses Gaspésie--Îles-de-la-Madeleine (now Gaspésie--Les Îles-de-la-Madeleine) to Bloc
- ON: Conservatives lose Don Valley East and Nipissing--Timiskaming to Liberals
- MB: Liberals lose Winnipeg North to NDP
- SK: Conservatives lose two ridings to NDP due to former urban-rural ridings being reorganized into separate urban and rural ridings
- BC: NDP loses British Columbia Southern Interior (now South Okanagan--West Kootenay) and Burnaby--Douglas (now Burnaby North--Seymour) to Conservatives
- PE, NS, NB, AB: no resulting party change
Net: LIB +1, CON -1

New Seats
- QC: NDP +3
- ON: CON +12, NDP +2, LIB +1
- AB: CON +6
- BC: CON +5, NDP +1
Total (new): CON +23, NDP +6, LIB +1

Although ten seats changed hands due to reconfiguration, the net effect was minimal. Virtually all the action comes from the allocation of new seats, which would have heavily favoured the Conservatives in 2011. This is unsurprising: most of the seats were added in Alberta, suburban Vancouver, and especially suburban Toronto, three areas that the Tories virtually swept in 2011. However, if the Liberals keep their current strength into the 2015 elections, many of those suburban Toronto and Vancouver seats could instead fall into their hands, so the redistribution will not necessarily heavily favour Conservatives going forward. However, since the Tories win an overwhelming majority of the new seats when they do well, we can conclude that while the new seats may not make Conservative governments that much more likely, they do make Conservative majorities much more likely.

I have not been tracking polls lately, and likely won't until closer to the election. However, using ThreeHundredEight's current polling averages and applying uniform regional swings yields:
LIB - 133 (+97 from transposed 2011 results)
CON - 122 (-66)
NDP - 78 (-31)
BQ - 4
IND - 1

The fact that the Liberals manage only an 11-seat edge with a 5.9% lead is bad news for them: their vote appears to be distributed very inefficiently. (Consider that the Tories won by 63 seats with a 9.0% advantage.) This is true both in Québec and Ontario, where 4-to-5-point leads only give them virtual ties in the seat count (with the NDP and the Tories, respectively). Still, a gain of almost 100 seats is nothing to sneeze at. More importantly, Liberal support is up so strongly that its current distribution, even within each region, may differ significantly from its 2011 distribution.