Unintended consequences of Bill 124’s public sector wage restrictions during COVID-19

By Senthujan Senkaiahliyan, Smith School of Business at Queen’s
with Christopher Cotton, Queen’s Economics Department and School of Medicine

As the government and society works to address the challenges of COVID-19 pandemic’s Omicron wave, there has been a lot of discussion around the capacity of the healthcare system to deal with the increased number of cases. Much of the public discussion around these issues have focused on well recognized contributing factors such as vaccine hesitancy and the emergence of increasingly-contagious variants. However, there are many other less-discussed factors that have reduced the capacity of the healthcare system to deal with COVID.

Some of Ontario’s policies have contributed to reduced healthcare capacity in this time of crisis. Bill 124 is one of the measures enacted by the Ontario Government to limit wage increases in the public sector. What was first introduced as a fiscally responsible management plan to protect the sustainability of public services has, however, impacted the ability of the health system to respond to staffing shortages and capacity needs during the COVID-19 pandemic.

Bill 124 applies to most organizations under the public sector, including most provincial healthcare institutions. It effectively limits salary and wages increases for public sector workers including healthcare workers. An excerpt from Bill 124 (Article 10 (I)):

“No collective agreement or arbitration award may provide for an increase in a salary rate applicable to a position or class of positions during the applicable moderation period that is greater than one per cent for each 12-month period of the moderation period, but they may provide for increases that are lower.”

This effectively caps annual pay increases to 1%, substantially below Ontario’s annual rate of inflation, which was estimated at 4.9% this past October. This cap is in place for the moderation period of three years starting in 2019.

This legislation means that real wages for healthcare professionals are falling even as the demands of the job and workload are increasing. It is little wonder why Ontario has seen a rising shortage of nurses and other healthcare workers, which some experts have predicted will be `beyond anything we have ever experienced‘ and which likely contributes to the inability of the system to keep up with need.

The labour market constraints have contributed to a mass exodus of nurses either leaving the profession or utilizing their clinical skills in non-bedside roles. The bill was introduced prior to the onset of the pandemic and claims to be investing in a sustainable Ontario however we can see through this graph, that Ontario is well on its way to a severe nursing crisis exacerbated by this bill.

Sustainable health care is the appropriate balance between the cultural, social, and economic environments designed to meet the health and health care needs of individuals and the population without compromising the outcomes and ability of future generations to meet their own health and health care needs. Under Bill 124, the marked increases for the next three years are highlighted for nurses.

Newly graduate nurses are the most inclined to take on bedside roles due to their willingness to get direct patient experience. However, with these wage forecasts for the next three years and no discrepancy in pay between patient facing and non-patient facing roles, new graduates will choose the less burdensome route, which is what we are witnessing in Ontario with new graduates being employed at vaccination centres and in care coordination roles. With every passing year, we will begin to witness a skills gap in which these nurses will not be equipped with the right clinical skills to take on bedside care. Without direct action, such as incentivizing bedside care, prioritizing nursing mental health, and providing adequate support, Ontario is heading towards a very unsustainable healthcare future. 

Senthujan Senkaiahliyan is an MBA and Masters in Artificial Intelligence candidate in the Smith School of Business at Queen’s. He has worked in the healthcare sector since 2017. Christopher Cotton is a Professor at Queen’s with appointments in the Department of Economics, the School of Policy Studies, and the School of Medicine. He has worked on COVID-19 policy since 2020.

Featured photo: Dr. Annalisa Silvestri during the Covid-19 pandemic, 2020. Creative common license, source https://commons.wikimedia.org/wiki/File:Covid-19_San_Salvatore_09.jpg

The Canadian Government’s pandemic transfers have been generous, but let’s not exaggerate

By Huw Lloyd-Ellis, Queen’s University

In the Globe and Mail’s Report on Business (December 2, 2020), Patrick Brethour suggests that the increase in Ottawa’s transfers to private-sector households during the pandemic so far amounted to $7 for every $1 of income lost.

To calculate this number, the article compares the change in government transfers to the change in primary household income between the first and third quarters of 2020. However, these values from Statistics Canada represent quarterly flows, not stocks, meaning that such an analysis misses the employment losses and transfers in the second quarter, when both values were at their highest levels.

Read More »

The Economic Costs of COVID-19 for Ontario: How bad is it so far and how bad could it get?

By Huw Lloyd Ellis, Queen’s University

Huw Lloyd Ellis is a Professor of Economics at Queen’s University. Here, he discusses the new STUDIO model developed by Queen’s University economists and Limestone Analytics for assessing the impact of COVID-19.

We all know it’s bad. COVID-19 and the lockdowns needed to counter it have created a global economic storm whose impact on Ontario since mid March has been more disruptive than any downturn that most of us have seen in our lifetimes. We’ve seen large downturns in the level of employment. A large fraction of those still employed are working from home and many of those still employed were working reduced hours.

Understanding the economic costs in terms of lost production from these adjustments is important for many reasons. Firstly, these costs translate into major losses in household incomes that may never be recouped. These losses are far from equally distributed and depend crucially on where people live and the industries in which they work. Secondly, the resulting loss in the tax base adds an additional strain on government finances over and above those created by increased spending to offset the size and impacts of layoffs and business distress. The ongoing losses in production today represent a permanent loss in economic wealth that will impact our future after-tax incomes for many years.

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Shutdown policy ignores economic consequences in order to minimize Covid-19 infections at any cost

By Christopher Cotton

Christopher Cotton, Ph.D., is a Professor of Economics at Queen’s University, where he holds the Jarislowsky-Deutsch Chair in Economic & Financial Policy and is the Director for the John Deutsch Institute for the Study of Economic Policy.

Before deciding whether we should start to reopen the economy, we need to understand what it is that we are trying to accomplish through the shutdown. If the shutdown is intended to slow the spread of COVID-19 and prevent our health care system from being overwhelmed, then we have room to start slowly loosening shutdown restrictions today. If, however, our objective is to minimize the number of Canadians that become infected or die from the disease, which seems to be the objective of public health officials today, then the shutdown may need to continue indefinitely.   Read More »

Dear Florida, Can NY borrow some ventilators? The U.S. needs better coordination of medical equipment across states

By Christopher Cotton and Neil Renwick

Christopher Cotton, Ph.D., is a Professor of Economics at Queen’s University where he holds the Jarislowsky-Deutsch Chair of Economic & Financial Policy and is the Director of the John Deutsch Institute for the Study of Economic Policy. Neil Renwick M.D., Ph.D, is a Clinician Scientist and Head of the Laboratory of Translational RNA Biology at Queen’s University and an Associate Attending Physician at The Rockefeller University Hospital in New York City. 

Last week, NY Governor Andrew Cuomo issued a plea to the rest of the country: “Help New York. We’re the ones hit right now… We need relief. We need relief for nurses working 12-hour shifts. We need relief for doctors. Help us now and we will return the favor.”

This request is based on the fact that states like New York, New Jersey, and Michigan are being hit hardest by the COVID-19 pandemic now, and are likely to see their apex in the next week or two, while other states are unlikely to reach their peak until later this spring. Today, as New York faces a shortage of health care workers, there are other places in the U.S. with excess medical capacity, where doctors and nurses not yet being pushed beyond their breaking point.

We claim such an argument not only applies to doctors and nurses but also applies to life-saving ventilators as well.Read More »

We Hit the Brakes. So, What Now?

By Thorsten Koeppl

Thor Koeppl is a Professor of Economics and RBC Fellow at Queen’s University. He also serves as a Scholar and member of the National Council and Monetary Policy Council at the CD Howe Institute. 

Imagine you are driving your car on an alpine road.  You see some rocks starting to fall, a rockslide!  What do you do? Slam on the brakes.  Stop.  You take a deep breath and, after a sigh of relief that you kind of dodged it, you think: So, what’s next? How do I get past that rock slide?

This is where we are at in Canada in our response to the current CoVid-19 pandemic.  We brought the economy pretty much to a full stop.  It is fair to say that this reaction will likely save Canadians being fully engulfed in the rock slide.  We yet do not know how big the benefit will be in terms of lives saved or how large the costs will be on the economic side, but we did the right thing.  Act on the side of caution and hit the brakes.

Soon, hopefully, there comes the time to catch a breath and look forward to see how we can navigate the medium-run fall out from the pandemic.  And this is where economists and the way they tend to think can help us a lot.  After all, economists are “social engineers” that deal with problems where individual behaviour needs to be steered in the right direction to achieve better outcomes for society.Read More »

Citizenship: Signaling Tool from Immigrants to Employers

By Isabella Mira, Queen’s Law & Economics

Canada is a country built by immigrants. It is known for its multiculturalist approach to welcoming these newcomers and uses a points system to select immigrants. This method of screening has received much praise from economists and policy-makers alike for its ability to identify applicants that will answer the varying demands of the labor market. As an immigrant myself, this initial description is both reassuring and inspiring.

Yet a component often forgotten is that attracting and screening immigrants is only half the battle. Once they arrive, it is just as important to ensure immigrants’ skills and assets are properly integrated into the labour market and the Canadian economy.  Reports on Canada’s immigration policy reflects this gap in analysis by offering both positive and negative accounts of immigrant success in Canada. Statistics and articles such as OECD report a positive picture by stating that employment of foreign-born Canadian citizens has increased since 2008, and in 2012 Canada had the third highest employment rate for immigrants among the OECD member countries (Canada, 2014). In sharp contrast, articles by Ley and Smith (2008) discuss extensive immigrant poverty in gateway cities, Bloemraad (2006) speaks to non-economic factors such as possession of cultural knowledge as barriers to immigrant success, and Derwing et al. (2000) present the now-familiar issue of foreign credential recognition. These conflicting accounts invite questions as to the true success of Canada’s immigration policy.

In my M.A. essay, I propose an approach to reconcile these different accounts of immigrant labour market integration. I posit that the decision to ascend to citizenship acts as a signaling tool for employers.Read More »

Why is the Canadian dollar a commodity currency?

By Gregor Smith, Queen’s University

The Canadian dollar (CAD) often is described as a ‘commodity currency’ or even as a ‘petrocurrency’.   The correlation between commodity prices and the value of the CAD features in daily commentary but you can see it in data at any frequency.

The figure below shows monthly data for the CAD/USD exchange rate along with the Bank of Canada’s commodity price index (reported in real USD) over the past thirty years.  Clearly, these two things tend to move together.Read More »

What can we Learn from Historical Economic and Financial Crises?

These notes form a short extract from the forthcoming monograph by John Crean and Frank Milne, The Anatomy of Systemic Risk, (2017a); and a shorter working paper, The Foundations of Systemic Risk (2017b).

By Frank Milne, Queen’s University

There are many historical financial crises that resemble the recent crisis of 2007-9. Crean and Milne provide a summary of various banking crises, discuss their similarities, provide a theory integrating their observations and examine the implications for Risk Management systems and financial regulation.

Here we will restrict our discussion to two major banking crises that should be of interest for Canadians. There are clear parallels with current Canadian banking and regulatory risks. We will draw some conclusions that are supported by the Crean-Milne framework.

The first example is the Australian Banking Crisis of the 1890s, and the second example is the Texas Banking Crisis of 1980-89.Read More »

Do longer license suspensions decrease impaired driving?

By Dayna Bartlett, Queen’s Economics M.A. student

In 2015, according to Statistics Canada, there were 72,039 police reported impaired driving incidents and 122 of those leading to death. Further, MADD Canada reports that on average, four people are killed daily by alcohol-related or drug-related traffic collisions. It is, therefore, no surprise that the concern regarding impaired driving is a subject that has continued to bring a range of heartaches and considerable debate. As it has been and remains one of the leading causes of death in Canada, there has been a great deal of research conducted, policies proposed, and laws implemented in the attempt to reduce the fatal collisions arising from impaired driving.

Under the Criminal Code of Canada, an individual is considered impaired and is subject to criminal charges if they drive while having consumed an amount of alcohol in which their blood alcohol concentration (BAC) level exceeds the legal limit of 80 milligrams per 100 milliliters of blood. In addition to the per se legal limit set by the Criminal Code of Canada, different provinces have also implemented warn ranges, in which penalties and sanctions may be applied even if an individual is driving below the 0.08 legal limit. One of the more recent laws that has been adopted by most Canadian provinces aimed to deter drunk driving are longer license suspensions that offenders face if found driving with BAC levels between 0.05 and 0.08.  Specifically, license suspensions have recently increased for first-time offenders past the initial 24-hour period to a minimum of 3 days, and even longer in certain jurisdictions.Read More »