Avoiding the Catastrophic Consequences of a Two Speed Economy. It's the Education System, Stupid.

In response to a series of extremely challenging questions by Warren Potma in a previous post; https://www.dhirubhai.net/feed/update/urn:li:activity:7239292229440192514/ it appears that the best answer is another stand alone contribution. A few years back, I got a lifetime ban for exceeding the 45 comment limit on sarcastic exchanges with a single LinkedIn member (well actually it was more to do with bullying and harassment), and I have no intention of risking a back and forth with Warren's razor sharp intellect and serpentine wit. I have digressed already.

The main thrust of my previous contribution https://www.dhirubhai.net/feed/update/urn:li:activity:7239292229440192514/ is that Australia is an extremely wealthy nation on the world stage (Ranked 16th by per capita GDP, but with the United States as the only more populous nation ahead of us: the remaining 14 populations total only 38 million people). So, why is it that half of our nation, quite rightly, feels impoverished? Why do our much smaller, uber-wealthy peers like Ireland, Norway, Iceland, Switzerland and Singapore appear to spread their wealth more equitably?

I quickly got the answer at my local Socialist Echo Chamber; "It's the Education System, Stupid", but now that I've crunched some more OECD data, I have found that they might be onto something.

Before looking at education, we need to look at who pays for a first rate education, be it public or private, and it turns out that Mr and Mrs Bruce Taxpayer are shouldering a disproportionate part of that load. Our two speed economy has part of its origins in a two speed tax system. Figures 1 and 2 below show that, overall, Australia is one of the lower taxing nations in the OECD, but that the proportion of that total raised by income tax is all but the highest in the OECD. Jaxon and Brinella Pie Eater might tell you that the Australian economy rides on Gina Rinehart's back, but the uber-wealthy's true contribution, through company taxation, is shamefully small. If you are a PAYE employee, this ought to concern you. The resultant highly uneven flow of funds into a two-tiered education system means that half of our best and brightest don't get to recognise that they are even good enough and somewhat shiny, let alone best and brightest. Unfortunately, the wages teachers get paid, and the prestige that goes with it, also place our most important workers very firmly in the tent of the have-nots.

I bet that you won't be able to guess who pays teachers the highest salary with respect to the national average. You probably won't even know that they are in the available data. It's Mexico. Yes. Donald Trump's gift that keeps on giving. Mexico are miles out in front of everyone else, paying teachers a decent $64,500 USD, but that "decent" sum is more than three times the average salary in Mexico (Table 1). In relative income terms, Table 1 implies that a lowly teacher in Australia has less than one third the prestige enjoyed by their Mexican counterparts. Don't worry Queenslanders, NSW teachers are not getting triple what you do. You are both tragically underpaid.

The pattern only gets curiouser and curiouser. The so called "socialist" Scandinavian countries pay their teachers relatively poorly; not at all what I expected. From Sweden (1.05) to Iceland (0.54 times average salary), they are all shaded red, in the bottom half of the table. They have the same low ratios as some extremely not-socialist societies like the United States, Hungary and Australia where it is well known that teachers are chronically underpaid. The other end of the table is no more illuminating at first blush. Germany, Japan, Ireland and Switzerland lie alongside Greece, Portugal, Spain and Chile. With notable exceptions, the ratio of Teacher to Average Salary closely follows USD Teacher Salary. However, common metrics of national wealth like Average Salary or GDP per capita are absolutely no guide to what teachers get paid, not in gross, nor in relative terms. There are a lot of different things going on here which can be teased apart a bit further using trusty old ioGAS (Figs 3 -7).

Figure 3 shows that GDP and National Average Salary are closely related, so closely, that one makes the other a largely redundant variable. But with one very clear exception and that is Ireland, which has an extraordinarily low average wage with respect to per capita GDP. Warren. If you're listening, I don't know what this clue actually tells us, other than the fact that Ireland has always marched to the beat of its own drum.

Figure 4 is the same as Figure 3 but with the 1:1 line added. It shows that poorer nations commonly pay an average wage above their per capita GDP, richer nations more closely follow the 1:1 line line, and that the four richest nations in the dataset significantly "underpay" workers in comparison to per capita GDP: i.e., Norway, Switzerland, Luxemburg, and most markedly, Ireland. Beyond a certain wealth threshold, average wages do not seem to be able to keep up with per capita GDP. The United States and Australia are in the "middle ground", between 45,000 and 80,000 USD per capita GDP, where National Average Salary closely matches Per Capita GDP. Trends within trends within trends, aka nested trends.

So what about teachers? Teacher salaries are much more widely scattered on a plot against per capita GDP (Fig. 5) than Average Salary versus Per Capita GDP plot (Fig. 4). Again, the United States and Australia lie almost exactly on the 1:1 line alongside Sweden, Finland, Israel and New Zealand, but most nations pay teachers significantly more than per capita GDP, led by South Korea, Germany, Portugal and Mexico who pay them over 40,000 USD more than per capita GDP.

Figure 5 is useful, but the most meaningful comparison for teacher's earnings is against the National Average Salary (Figs 6 & 7). That ratio is the metric by which Table 1 is coloured. Prestige is is not measured in USD. Prestige is the ratio of your salary to that of the breadwinner living next door. Our financial wellbeing is not absolute; it is relative. We don't just want to keep up with the Jones', we want to be ahead of them. GDP might tell an economist something, but our salary relative to Mrs Jones is something that everybody can understand.

The raw dollar premium/discount paid to teachers above/below National Average Salary is subtly different to that for per Capita GDP. A plus 40,000 USD threshold in red (Fig. 6) highlights six nations who pay a very large USD premium to teachers. The four big spenders identified on Fig. 5 are joined by Luxemburg (+55,000) and Switzerland (+38,000 USD) on Figure 6.

The relative elevation of teacher's salaries above National Average Salary is revealed by presenting the same data in Figure 6, but on log-log axes (Fig. 7). This final graph ranks each nation in the same order as Table 1. Yes, we have come full circle back to what, I believe, is the most incisive metric to understand teacher's salaries in their proper context; one that quantifies the prestige afforded to different teachers around the world. The very large USD premium paid in uber-wealthy Luxemburg and Switzerland is put into proportion by Figure 7. Things are rosy in Luxemburg, but it is really Mexico that pays its teachers far more than anybody else, when it comes to the prestige that goes with their salary.

The top five nations by teaching salary prestige are Mexico and Portugal (hungry Latin up and comers) ahead of South Korea, Germany, and Luxemburg; disciplined societies who have managed education and their economies well for many decades. The next tier down comprise the same two-tone demographic of hungry Latin up and comers (Spain, Greece and Chile) alongside long term stable socioeconomic managers like Switzerland, Netherlands, Austria, Japan, and Ireland. Yes Warren. Ireland. By the most useful hybrid socioeconomic metric that I could come up with, Ireland is not that special. It's wealth is very greatly exaggerated by its AAAAA+ per capita GDP, but that rather blunt measure of wellbeing disguises more modest average salaries. Ireland is in good shape according to the relative premium that it pays to teachers, but it has a way to go to catch Germany and Portugal, and everybody, and I mean everybody, is chasing Mexico.

We've covered western Europe, east Asia and the Latinos. Where are the Anglophiles and the Scandinavians? They all lie very close to the 1:1 line which I would argue defines the baseline of educational neglect. Are every Anglophile and Scandinavian nation on the graph risking their long-term wellbeing by failing to afford teachers the financial prestige that they so richly deserve? I'd say yes, and that it's our children who are suffering, be it the rich well-educated ones whose houses get broken in to, or the poor badly-educated ones who do the breaking. I was not really surprised to see us Anglos wallowing in the mire - we are not well disciplined, not well managed and most definitely not hungry, but Scandinavia - like every single country in Scandinavia - really? That's a surprise to many I suspect.

Answers? You want answers? Sorry. I've only got a shitload of questions. I would be very grateful if anybody can illuminate the following:

1. What is going on in Mexico? Is it the largest artefact in the data that I've ever encountered, or, is being a teacher in Mexico are really good deal?
2. What is going on in Scandinavia? When my analysis landed on the front bar yesterday afternoon, my left leaning buddies toppled off their stools, over the Left Bank, and into the Swan River. The Scandinavians are our poster societies where everything is perfect!! Is it an embarrassment to say "I'm a teacher" in Norway, or is prestige bestowed in another way, that compensates for low pay?
3. Why does National Average Salary and per capita GDP have a very close correlation (albeit one that crosses the 1:1 line) up to 80,000 USD, but not beyond that? Why, in the "richest" of nations, does GDP manifest in places other than people's salaries? What are those other places? In other words, show me the money. I don't know where it's gone.
4. Is my assumption flawed, that the master key to the long-term economic well being is the quality of a nations education, and that the master key to the quality of its education is the prestige afforded to its teachers?

I have long argued that we need to double teachers salaries immediately. I've changed my mind. They need to be tripled. Shove that wrinkle in your economic stimulus package.

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