Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
On October 6th, 51,000 members of the Alberta Teachers’ Association went on strike to protest the lack of progress in their negotiations with the Alberta government. The strike will impact over 730,000 students across the province. Without delving into the details of where both parties stand in negotiations, the strike is expected to have an economic impact on the province.
The impacts of the strike
The impact of the strike on the Alberta economy will come from both direct and indirect channels:
- The direct impact of the strike on the economy will be a drop in economic activity in the educational sector as schools are closed.
- Loss of income for teachers. We estimate that teachers are set to lose about $80 million collectively in salaries per week the work stoppage continues, especially without a strike pay. While this decline is partly reflected in the decrease in activity in the education sector mentioned above, teachers are likely to reduce their spending accordingly, thereby negatively affecting other sectors of the economy. This will also reduce government tax revenues.
- Spillovers to other sectors that depend on providing goods and services to schools such as transportation services, the arts, entertainment and recreation sectors, and others.
- Parents and caregivers taking time off work to care for their children who are not in school, resulting in a decline in hours worked in other industries and lower revenues for some households.
- Increased childcare costs, as parents will also need to make new childcare arrangements, resulting in additional expenses these households and potentially reducing spending elsewhere in the economy.
- The Government of Alberta announced that it will provide $30 per day per child aged 12 and under to help offset the additional costs incurred during the strike. The measure is estimated to cost up to $55 million per week of the strike, which will somewhat mitigate some of the negative impact of the strike on the economy, but not all of it.
The Quebec experience
In late 2023, teachers in the province of Quebec went on a prolonged strike that lasted 36 days (22 school days) from November 23rd to December 28th. Similar to the current situation in Alberta, Quebec teachers did not receive strike pay. However, the Government of Quebec did not provide financial support to parents to help them cope with the additional childcare costs resulting from the strike.
The impact of the strike on the Quebec economy was significant, albeit temporary. As such, the monthly GDP estimate for Quebec, as estimated by the Institut de la Statistique du Quebec, showed that economic activity in the education sector declined by 2.3% month-over-month (m-o-m) in November and by 17.5% m-o-m in December, resulting in a total decline of 19.4% m-o-m.
For the overall economy, the declines were 0.2% m-o-m in November and 1.6% m-o-m in December. The decline in the education sector is responsible for 0.1 percentage points (pp) of the contraction in November and 1.1pp of the contraction in December. The impact on other sectors of the economy is negligible, with little to no impact detected.
However, as soon as teachers returned to work in January, activity in the education sector jumped 23.6%, while the overall economy expanded 1.7% m-o-m. Interestingly, it took until March 2024 for the level of activity in the sector to return to the pre-strike level, suggesting some longer-lasting disruptions.
Overall, the experience in Quebec suggests that the 2023 strike reduced activity in the education sector by approximately 4.4% per week, resulting in a reduction of about 0.26 percentage points per week in GDP growth.
Estimated impact on Alberta
Using the Quebec experience, which shows that each week of strike reduced activity in the education sector by 4.4%, we estimate that each week of strike will reduce economic activity in Alberta by about 0.17 percentage points. This means that, if the strike lasts a month, the province’s economic growth will be reduced by approximately 0.7pp on that month. However, as the experience in Quebec showed, the negative impact will be temporary and economic activity will rebound once teachers are back to work. The impact of the strike on the overall economy is smaller in Alberta than in Quebec because the share of the education sector in GDP is smaller (6% in Quebec vs 4% in Alberta).
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.