Statutory holidays aren’t free

Family Day is a costly election ploy by Premier Christy Clark

 

By Niels Veldhuis and Amela Karabegovic

As we approach what would have been the 100th birthday of Nobel Prize winning economist Milton Friedman, we are reminded of his common sense thinking. “There is no such thing as a free lunch.”

The same could be said of British Columbia Premier Christy Clark’s Family Day that will come into effect just a few months before British Columbians go to the polls in 2013. Someone will have to foot the bill, and unfortunately, it will be the people the holiday is supposed to help: ordinary B.C. families.

It is important to acknowledge British Columbians already enjoy nine statutory holidays a year. Only Saskatchewan has more with 10. At the other end of the scale, Nova Scotians receive five statutory holidays.

Add the minimum two-week vacation entitlement spelled out in B.C.’s Employment Standards Act and British Columbians enjoy at least 19 days off a year; most receive more. After five years, an employee is legally entitled to three weeks of vacation.

Furthermore, British Columbians are also entitled to five days of unpaid family leave to care for a worker’s immediate family.

Adding another statutory holiday is costly.

Businesses that close on Family Day lose a full production day, but their annual wage bill remains the same, since workers given the day off must be paid an average day’s pay. With lower revenues and no offsetting reduction in costs, owners, consumers, and employees end up footing the bill.

Consumers will pay if the costs are passed along in the form of higher prices. This, however, is increasingly unlikely, given competitive markets for most goods and services.

Employees bear the burden if the businesses invest less in machinery, equipment, and new technologies that make workers more productive or offer lower wage increases in the future.

Then there are business owners who will be burdened by the new statutory holiday in addition to the recession and slow-growing economy, the Harmonized Sales Tax/Provincial Sales Tax fiasco, and significantly higher minimum wages the Clark government recently imposed.

For small and medium businesses, the Canadian Federation of Independent Business (CFIB) estimates B.C. Family Day will cost $42 million.

Finally, let’s not forget average B.C. families who, as taxpayers, will fork over tens of millions of dollars to provide the extra paid day off for 359,000 provincial and municipal public sector workers (or 2.5times regular pay if they work on Family Day), who already receive significantly higher benefits than comparable workers in the private sector.

There are those who say the new statutory holiday will improve the economy since families will spend money on recreational activities and/or entertainment on their extra day off. To be sure, businesses that remain open on Family Day might see increased demand for their goods and services, but their wage costs will also increase because they are forced to pay workers 2.5 times their regular pay.

 

More importantly, increased spending by families on their day off might mean less spending at other times throughout the year. Family Day might change the timing and location of spending, but not the total amount families actually spend throughout the year.

The bottom line is statutory holidays aren’t free. Taxpayers, workers, and business end up footing the bill.

Niels Veldhuis and Amela Karabegovic are economists at the Fraser Institute.