Soumission

Submission to the Federal Labour Standards Review Commission

Summary

This submission is in support of bringing the Canada Labour Code's provisions on paid vacations into line with First World norms by raising minimum paid vacations from two weeks per year to four weeks.

Consequences of the status quo

Section 184 of the Canada Labour Code, covering about 10% of the national workforce, says that all employees are to receive a minimum of two weeks paid annual leave, rising to three weeks after six consecutive years with the same employer. Two weeks is also the statutory minimum in nine of the 10 provinces. Saskatchewan is the sole exception, with a three-week minimum. ¹

While these levels were comparable to what other modern nations provided for in their labour legislation up until the mid-'70s, changes since then have left Canada with one of the lowest levels of paid annual leave in the First World.

Among the consequences:

• Canada has a competitive disadvantage in attracting skilled immigrants compared to countries such as Australia. Australia roughly matches Canada in overall prosperity and quality of life, while offering a warmer climate and longer vacation entitlements. While Parliament can do little about Canada's climate, it can do something to ensure we offer prospective immigrants a competitive mix of economic and lifestyle opportunities.

  As one writer eloquently put it, "Trying to convince a skilled person to move from Germany (where he gets six weeks paid vacation a year) to Canada on the notion that we offer a better quality of life on only two weeks vacation a year, is a very difficult proposition to try and sell...[T]hat same immigrant is more likely to choose a country like Australia where minimum amount of annual vacation is four weeks." ²

• Canada's tourism industry is being denied opportunities to prosper. While Australians (who receive four weeks paid annual leave) spent an estimated A$50.1 billion (C$43.6 billion at June 2002 exchange rates) on domestic tourism in the year ending June 30, 2002, ³ Canadians spent an estimated C$35.3 billion during the 2002 calendar year. ⁴ Note that Canada's population is about 60% larger than Australia's.
  
  
• On a related note, longer annual leave entitlements would stimulate Canada's tourism industry as such an increase would have the greatest impact on young workers under the age of 35, who have the money, the interest and the lifestyle flexibility to travel, but the most restrictive vacation time provisions.
  
  
• The Canadian practice of starting off with a low annual leave entitlement and gaining additional weeks over 5-10 years with the same employer dampens labour mobility. Someone receiving four weeks paid annual leave from an employer may be dissuaded from seeking a career change if it will mean going back to just two weeks per year for the next several years. ⁵ Adopting a higher legal minimum would make it easier for people to make career changes, to the benefit of employers, employees and the economy.
  
  

A look at other nations

The two weeks annual leave minimum set out by the Canada Labour Code and the labour legislation of nine of the 10 provinces is very low by international standards. Among the nations of the First World, only the United States outdoes Canada in annual leave penury: there is no statutory minimum in the United States, and an estimated 13% of American employers do not provide any paid annual leave. ⁶

By comparison, here is how Canada compares to several other modern, prosperous nations:

• Australians have generally been entitled to a minimum of four weeks paid annual leave nationwide since 1974. In spite of being twice the Canadian minimum and greater than the statutory minimums in most of its largest trading partners, Australians enjoy a high quality of life due to strong economic growth and a high per-capita GDP.
  
  
• Britain introduced four weeks paid annual leave in the late 1990s. In spite of concerns that this would hurt British productivity and reduce living standards, GDP and output per hour worked continued to rise in during that period. ⁷
  
  
• Ireland amended its labour legislation in 1997 to provide for four weeks paid annual leave. ⁸ The country's economy easily absorbed this increase, with annual economic growth averaging 8 percent between 1995 and 2002.
  
  

See Appendices A and B for more information on paid annual leave in other modern nations.

Canada can afford longer annual leave entitlements

Thanks to the profound economic reforms of the 1980s and 1990s, Canada is now in a position where its economy can easily cope with an increase in paid annual leave to the same levels as Australia, Britain and Ireland.

• Canada has the third most competitive economy in the world, after the U.S. and Singapore. ⁹
  
  
• Among OECD members, Canada has the fifth highest per capita GDP. ¹⁰
  
  
• Canada's average annual GDP growth was 3.6% between 1993 and 2003, compared to an OECD average of 2.6%. ¹¹
  
  
• The OECD has also described Canada's economy as being on a sound footing for the future, noting that we have in place "a sound macroeconomic framework and structural policies that are mostly conducive to a well functioning economy" and that our economic performance has "remained robust overall". ¹²
  
  

Recommendations

• The Canada Labour Code should be amended to provide employees with four weeks paid annual leave.
• To offset employers' concerns about higher compliance costs and to eliminate the potential loss of vacation time as a barrier to labour mobility, the provision for longer vacation entitlements after six years' continuous employment with an employer should be eliminated.
  
  
• The Commission should bear in mind Canada's strong economic performance and the equally strong economic performance of nations such as Australia and Ireland if confronted with arguments that increased paid annual leave entitlements would be "unaffordable" or "damaging to the economy".
  
  

Appendix A: Annual leave around the world

Appendix B: Legislation regarding annual leave in other countries

Note: The above legislation is available on the Internet and can be retrieved through a keyword search.

Endnotes:

¹. Federal leadership in this area would provide an incentive for provincial governments to raise their minimums, as the provinces face a degree of "peer pressure" to stay in line with the two-week minimums in the Canada Labour Code and other provinces' legislation.

². Chris Rumbold, letter to the editor, The National Post, June 10, 2002, p. FP17

³. Tourism Futures International, Australasian Tourism Review: Public Version, 11 February 2003.

⁴. Statistics Canada, National Tourism Indicators: Quarterly Estimates, Second Quarter 2004 (13-009-XIB), Table 4.

⁵. Rumbold, op. cit.

⁶. Society for Human Resource Management survey, quoted on the Pennsylvania State University SMEAL College of Business web site (http://www.smeal.psu.edu/news/releases/aug03/vacation.html)

⁷. New Zealand Council of Trade Unions, Submission of the New Zealand Council of Trade Unions to the Transport and Industrial Relations Select Committee on the Holidays (Four Weeks Annual Leave) Amendment Bill, p. 3 (http://www.union.org.nz/policy/files/Holsweeks.pdf)

⁸. Government of Ireland, Organisation of Working Time Act 1997, s. 19 (http://www.irishstatutebook.ie/ZZA20Y1997.html)

⁹. International Institute for Management Development, The World Competitiveness Scoreboard 2004 (http://www01.imd.ch/documents/wcc/content/ranking.pdf)

¹⁰. Organisation for Economic Cooperation and Development, OECD in Figures, 2004 edition. Paris: OECD Publications, 2004, p. 79

¹¹. Ibid., p. 78

¹². OECD, Economic Survey: Canada 2004. http://www.oecd.org/document/24/0,2340,en_2649_34111_33838040_1_1_1_1,00.html

¹³. British employers can legally count Bank Holidays against the 20-day minimum, though only a minority do so. The Blair government has said it will close this loophole if re-elected in 2005.

¹⁴. The New Zealand parliament passed legislation in Dec. 2003 to raise the minimum to 20 business days, effective April 1, 2007.

¹⁵. There is no statutory minimum in the United States. 10 days per year is the most common practice.