Teachers are exhibiting symptoms of the “Wealth Effect”

Sep 09, 2018 Letters

Dear Editor,
Teachers were on strike demanding more compensation, not because students are doing well in their exams or on a national standardized testing for kindergarten through secondary, but because they want a raise based on government’s future cash flow.
That is, I believe teachers were striking for more money because of the pending significant wealth that would be created by the massive oil finds – this is tantamount to the economic term known as “The Wealth Effect.”
The “Wealth Effect” refers to the premise that consumers feel wealthy when asset prices rise because of a dynamic shift in the economy, in Guyana’s case, the inevitable boom from oil beginning two years or earlier from now. This effect causes people’s desire to spur personal consumption. For instance, the news recently reported that a local businessman earned billions selling a piece of real estate to an American oil service provider. This transaction is highly likely to have a knock-on effect on everyone’s personal and property values.
Teachers are no different from other members of society; besides, they are a crucial cog in the local economy both as consumers and producers of the next generation of talent i.e. very important group that is also unionized. Therefore, if the government would not agree to give every Guyanese a piece of the oil action (monetary), teachers are making the first move to get their share (40% cross the board and 5% increase through 2020) They intuitively believe that the government can afford their demand given the potential windfall from oil finds (future cash flow to service debt). My suggestion, issue IOUs (inflation adjusted) to the teachers to be cash in 2021.

Keith Bernard

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