Job Killing Policies

Paid Sick Days: How Not to Spur an Economic Recovery

Peter Shawn Taylor
February 2, 2021
One might think that with Canada’s formidable array of pandemic restrictions, lockdowns, curfews, shuttered businesses and myriad other prohibited places and activities, the last thing Canadians need is another incentive to stay home and do nothing. And yet demands for paid sick days are now reaching a fevered pitch. Alongside labour and the political left, even some business groups claim to support the idea. As Peter Shawn Taylor finds, however, European-style sick-day benefits are no panacea. In fact, they threaten great harm to Canada’s post-pandemic economic recovery.
Job Killing Policies

Paid Sick Days: How Not to Spur an Economic Recovery

Peter Shawn Taylor
February 2, 2021
One might think that with Canada’s formidable array of pandemic restrictions, lockdowns, curfews, shuttered businesses and myriad other prohibited places and activities, the last thing Canadians need is another incentive to stay home and do nothing. And yet demands for paid sick days are now reaching a fevered pitch. Alongside labour and the political left, even some business groups claim to support the idea. As Peter Shawn Taylor finds, however, European-style sick-day benefits are no panacea. In fact, they threaten great harm to Canada’s post-pandemic economic recovery.
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“Money for Nothing” is not just a classic rock song title. It’s also a perpetual ideological demand. A wildly popular current flight of fancy. And a recovery-killing economic burden.

Early in the pandemic, it was popular among progressive thinkers to claim the federal government’s $2,000-per-month Canada Emergency Recovery Benefit (CERB) should be considered a first step in the creation of a universal basic income scheme. Such a thing would provide an annual wage to all adult Canadians whether they worked or not and, according to proponents, eliminate poverty forever.

Unfortunately, utopia does not come cheap. Studies quickly proved even a modest universal basic income program modeled on the CERB would cost taxpayers hundreds of billions of dollars per year ­– a chokingly-high figure even in these deficit-crazy times. And so, advocates have apparently lowered their sights. If a year’s worth of income without work is unachievable, why not start with a couple of weeks?

 

Everybody Loves Paid Sick Days

“Money for Nothing”: Having failed in their push for a universal basic income, Canada’s progressives are now pivoting to demands for paid sick leave, beginning with the Canada Recovery Sickness Benefit.

Last fall, as a condition of his support for Prime Minister Justin Trudeau’s Speech from the Throne, federal NDP leader Jagmeet Singh extracted a Liberal promise to provide ten paid sick days per year to all Canadian workers. This political contract was fulfilled with Ottawa’s $1.1 billion Canada Recovery Sickness Benefit (CRSB), unveiled in September. One of three new programs that replaced the CERB, the CRSB offers up to $500 per week for two weeks to any employee who has to call in sick due to Covid-19. Singh characterized it as the NDP’s “biggest” achievement of the pandemic. To date, this new program has paid out $303 million to 354,000 recipients.

Almost as soon as it was unveiled, however, the CRSB was attacked for being overly cumbersome and too stingy in its benefits. Having already bragged that he forced the Trudeau Liberals to create a national paid sick day program, Singh quickly found himself in the unusual position of criticizing his own signature achievement. In an attempt to extricate himself from this box of his own creation, Singh has since pivoted to criticizing the provinces for failing to duplicate the federal program. “There is no doubt that Conservative premiers like Doug Ford have completely failed people,” Singh said at a recent news conference on the sick day issue. “But that does not change the fact that we’ve got a program at the federal level that we fought for, that we raised concerns about, that can be fixed now.”

Since most employment law in Canada is set by the provinces, Singh’s shift in focus away from his own perceived failure at the federal level makes logical sense, despite the obvious hypocrisy. Indeed, most of the real debate on this topic is already occurring provincially. Ontario, for example, has seen a veritable frenzy of demands over the past two months from unions, municipalities, lobby groups and assorted left-leaning politicians regarding the alleged need for paid sick days.

His ‘biggest’ achievement? Federal NDP leader Jagmeet Singh forced the Trudeau Liberals into offering ten paid sick days per year to all Canadian workers; now he says it’s not good enough. (Credit: @polkshots, licensed under CC BY-NC 2.0)

The Toronto Board of Health recently demanded (without any actual authority) that the Ford government require all employers to “provide no less than five paid sick days annually to workers.” In December, Ontario NDP MPP Peggy Sattler introduced the “Stay Home If You Are Sick Act”, a private member’s bill that would require employers to offer seven paid and three unpaid sick days to all employees, even those with a mere week of tenure – meaning a new hire could potentially work five days and then be entitled to seven straight days off with pay. The mayors of the province’s large cities have also gotten into the act. “Right now too many workers across Ontario are having to choose between going to work sick or losing income,” the grandly-titled group Ontario’s Big City Mayors claimed in a media release, demanding an expansion of the existing CRSB.

Similar calls can be heard across the country. In Nova Scotia, provincial NDP leader Gary Burrill has asserted that “lots of people simply can’t afford to stay home” if they’re sick and thus need his party’s proposal for six employer-paid sick days per year. British Columbia Premier John Horgan has vowed to supplement the federal CRSB program with additional provincial benefits. And Alberta’s nurses recently negotiated a deal with Jason Kenney’s UCP government that provides them with paid Covid-19 sick benefits retroactive to July 2020.

Qualified support: The Ontario Chamber of Commerce’s Rocco Rossi says he backs calls for paid sick days – just so long as government foots the bill and the program is temporary. (Credit: Rocco Rossi, licensed under CC BY 2.0)

Even the business community has apparently fallen into line. “The last thing one of our members wants is for a sick or infected employee having to choose between following public health orders and staying home, or putting food on the table,” says Rocco Rossi, president of the Ontario Chamber of Commerce (OCC) in an interview. For this reason, Rossi says his organization fully supports the notion of paid sick days. The OCC even put out a statement on its website in December backing the introduction of Sattler’s paid sick day bill with the headline, “Ontario Chamber Supports Protecting Workers When They Need it Most.” 

 

Stay Home if You’re Sick

There is ample and obvious logic in demanding that sick workers stay home to help prevent the spread of disease, particularly during a pandemic. But things get less obvious when it comes to deciding who should bear the burden of such a requirement.

Across Canada, sick days are traditionally a negotiated benefit rather than a universal entitlement. Only PEI and Quebec require that all employers provide a certain number of paid sick days to their employees. (One and two days, respectively.) Nationally, fewer than half of adult workers have access to such a benefit; public sector and unionized workers are much more likely to have this coverage than private-sector employees. Since Employment Insurance (EI) only covers long-term absences from work, in most provinces anyone without employer-provided paid sick days must take a day off without pay to get a Covid test and/or use vacation time to self-quarantine when required.

Sick? Stay home: While sympathy for workers caught between the demands of public health and the realities of their employment contract likely explains the current explosion of interest in paid sick days, fighting a pandemic requires sacrifices all around.

It is entirely natural to have sympathy for workers caught between the demands of public health and the realities of their employment contract. But they are not the only folks inconvenienced by the pandemic. Self-employed individuals and business owners have also been deeply affected. Governments across Canada simply ordered many businesses to close their doors for public health reasons, on pain of massive fines. This demand has never been predicated on a promise that business owners will be fully compensated for any lost income; temporary government programs aimed at businesses, including wage and rent subsidies, only cover a portion of losses incurred.

In many cases, owners have simply shut their doors for good – losing their jobs and whatever capital they’d invested in the business. And there’s no talk of them having to “choose between” defying public orders to put food on the table and meekly abiding by the rules. So why should workers be made whole when so many others aren’t? It seems reasonable to expect that everyone should make some sacrifices in the fight against Covid-19.

As for the business community’s apparent support for the concept of paid sick days, there are a few significant caveats. “To be clear,” says Rossi. “We support the notion of a temporary paid sick day program that is paid for by government,” making the intonation and distinction clear. Given that Sattler’s bill explicitly proposes a permanent program paid for by employers, such nuances have led to considerable confusion about the nature of the OCC’s support.

A heated debate: Left-wing economist Armine Yalnizyan (left) claims employers should pick up the tab for paid sick days while the CFIB’s Ryan Mallough (right) says this would create a “barrier to growth” in perilous times.

The Canadian Federation of Independent Business (CFIB), whose membership tends to be smaller and more vulnerable than that of the OCC, finds itself walking a similar line. “No one wants employees coming in to work sick, least of all small businesses,” says Ryan Mallough, the CFIB’s Ontario director of provincial affairs. “We all want this to end.” But he also wants to make it clear that any new paid sick day program should be funded by taxpayers, not employers. “Fundamentally, this comes down to cost,” says Mallough in an interview. “To add an extra cost on business at this time would be an untenable situation. It just won’t work.”

A recent CFIB survey suggests that up to 181,000 small businesses across Canada are on the verge of shutting permanently due to the pandemic. That accounts for nearly one in every six enterprises. Adding a new requirement to provide workers with five, seven or ten days of sick leave per year – along with the typical need to find replacement workers for all that time off – would seriously imperil any post-pandemic recovery and push many more firms into closure. 

But while the business community says it is willing to accept a temporary, government-funded paid sick day program to weather our once-in-a-century pandemic, the current crisis has become an excuse for labour organizations and the political left to revive their eternal demands for permanent, employer-funded sick day benefits as a de facto increase in worker compensation. Prominent left-wing economist Armine Yalnizyan, for example, described the federal government’s first moves on paid sick days last year as “40 years overdue.” Writing more recently in the Toronto Star, she added, “We’re not suggesting the province (that is, taxpayers) pick up the tab. Instead, Ontario should require workplaces to keep people on payroll for up to 10 paid sick days. This is true at the best of times, but critical during a pandemic.”

Absolute Job Killer?

As with nearly any public policy, paid sick days have both pros and cons. And regardless of what advocates might say, the cons in this case appear enormous. One of Ford’s first moves after he became premier of Ontario in mid-2018 was to remove a provincial requirement for two paid leave days per year for all workers. This innovation had been introduced in the final months of the previous Liberal government’s term as part of a suite of labour-friendly employment law changes.

At the time, Ford called the Liberals’ workplace reforms  “an absolute job-killer.” And despite all the current clamour, Ford to his credit has so far resisted calls for the province to reinstate those paid sick days. “There is no reason for us to duplicate the $1.1 billion [CRSB program] from the federal government,” he said in January. With so many government policies in flux, it simply doesn’t make sense to double up on what Ottawa is already doing with sick days.

No need to duplicate what Ottawa is doing: Ontario premier Doug Ford is largely alone in pushing back against demands for provincial action on paid sick days. (Credit: BruceK, licensed under CC BY-SA 2.0)

Ford stands out as one of this country’s few public figures willing to push back against the tide of demands for more paid sick days. Despite the loneliness of his stance, however, there is plenty of solid evidence in his favour.

Because many employees appear to take unfair advantage of them, paid sick days constitute a significant drag on productivity. The CFIB’s Mallough recalls that immediately after the two paid personal leave days were instituted in Ontario in January 2018, his office was inundated with complaints from small business owners that their employees were going absent with alarming precision. “We heard a lot of cases of employees who were taking their paid days as soon as they could,” he says. “Not everyone is going to abuse an entitlement like that, but it does happen and we need ways to safeguard against it.” It was widely noted by Ontario employers that the Monday after the Super Bowl was unusually popular among takers of personal leave days. 

Evidence of sick day abuse goes beyond a few sporting event anecdotes, however. Until the 2011-12 school year, Ontario teachers could “bank” their already-generous paid sick day allocation; unused days were paid out at retirement as lump-sum bonuses that could reach tens of thousands of dollars. To put a stop to this practice, the government implemented a “use-it-or-lose-it” system. Starting in 2012-13 every teacher was given a fixed number of paid sick days per year. At the end of each year, any unused days were lost forever. Unintended consequences ensued.

Excerpt from the Auditor General of Ontario’s Annual Report 2017.

By 2017, the Ontario Auditor-General’s Office was reporting that sick day claims by teachers had risen by nearly 30 percent over the previous five years. The Toronto District Catholic School Board noted that its compensation costs were up more than $3 million per month as it  scrambled to hire substitutes to cover the classes of absentee teachers. “All the boards we visited told us that changes in the sick leave plan contributed to the increases,” the Auditor-General’s report stated plainly. Faced with the prospect of losing their sick days, teachers suddenly found themselves staying home a lot more often.

Neither are the observed behavioural effects of paid sick days limited to unionized teachers. As part of a review of provincial employment legislation in 2015, University of Toronto economist Morley Gunderson surveyed the breadth of international academic research on paid sick days. Among Gunderson’s conclusions: “Workers clearly respond to the incentives of sick leave in that the more generous the leave provisions…the longer the sick leave that is taken.” He further noted that “employees increasingly regard [sick days] as a ‘right’ rather than a privilege.”

A German study from 2007 cited by Gunderson found that the average number of sick days taken in the U.S., where there’s no statutory requirement, was a mere five per year. In Sweden and Poland, both of which have liberal paid sick leave provisions, workers access 20 and 26 days per year, respectively. Taking weekends and statutory holidays into account, that’s essentially a full month or more per year of paid time off outside of vacation time.

A right, not a privilege: Evidence from around the world suggests workers take as much paid sick leave as they’re given; in Sweden and Poland this amounts to four or five weeks per year.

Are Swedes and Poles four or five times more likely to get sick than Americans? Or are they simply more likely to choose to stay at home and get paid regardless of how they’re feeling? Ample Canadian evidence (such as here and here) that public-sector workers with access to generous paid sick day benefits take nearly twice the annual sick days as private-sector workers further bolsters the case that the unintended incentive effects are very real and very serious.

 

Temporary Only, Please

With plenty of evidence that workers tend to take as much paid days off as they’re given, two weeks of paid sick days per year can be considered equivalent to adding an extra 8 percent to every firm’s payroll without any impact on productivity – 10 days off with pay for all full-time workers plus the cost of replacing those workers while they’re away. “To put a new cost on top of all the other challenges small businesses are already facing is going to create a real barrier to growth,” says CFIB’s Mallough. “Now is not the time to add a new permanent program.”

No escape: With Canada’s EI system split 60/40 between employers and employees, even a permanent government-provided paid sick day benefit is likely to place a new burden on employers.

Plus, the business community’s hope that paid sick day benefits remain an entirely government-funded obligation seems utterly fanciful. If Ottawa did decide to convert the CRSB into a permanent program, it’s highly likely it would be operated through the existing federal EI system, the costs of which are split 60/40 between employers and employees. One way or another, a permanent paid sick day obligation will place an extra burden on employers. There is no such thing as a free lunch, or a free paid sick day. If the goal is to spur the quickest possible recovery from our pandemic-induced depression, governments should be encouraging maximum flexibility across the labour market, not larding on new obligations.

“Let’s not use the pandemic and the uncertainty surrounding it to introduce an entirely new problem for small business,” pleads Mallough. A temporary crisis calls for temporary measures. The CRSB is set to expire in September 2021. After that, the paid sick day debate should head into retirement.

Peter Shawn Taylor is Senior Features Editor of C2C Journal.

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