Pandemic lessons

From the June 2021 print edition

By the time I’m submitting this column, about half of the North American population will have been vaccinated against COVID-19. What this means is that the majority, and likely the vast majority, of citizens are now safe.

How do I arrive at this conclusion? It’s estimated that anywhere from 15 to 30 per cent of the infected are asymptomatic. They’ve been “naturally” immunized, so whether they know it or not, they have nothing to fear from this virus. Life should be returning to normal and hopefully sooner rather than later.

That said, there will be a new normal. It seems to me that much about how a modern economy operates has been revealed. Let me rephrase that: This pandemic has helped us understand how a modern economy should function. I’m not sure that we broadly understand this process and the public policy implications, particularly as it relates to tax policy. And that will be the ultimate focus of this column.

Home comforts
This pandemic has taught us that many white-collar workers can perform their duties out of their homes. Yesterday, I was speaking to a young man who works as an investment representative for a discount brokerage. He told me that throughout the past year, he has been working out of his apartment. However, he expects that he will be required to return to the office soon. My suspicion is that he is probably right, yet our government should be taking concrete action
to discourage this. Working out of our homes is the single greatest productivity boost that North America has enjoyed since the advent of the personal computer.

I’d like to use the experience of that young man as metaphor. He previously spent 90 minutes each working day, driving to and from work. Time is money and then on top of that there is the hard cost of paying for gasoline, let alone wear and tear on public infrastructure. He was required to dress in a certain manner which meant that he regularly had to spend money for dry cleaning.

He habitually bought coffee and lunch and now he eats at home, saving a great deal of money.

The bottom line is this pandemic has provided him with an enormous boost to his real income. Let’s call it a pay raise in the neighbourhood of 10 per cent. What is this pay raise based on? Using fewer inputs to achieve the same output.
Working from home rather than in redundant office space
is fabulous for the economy.

Thus, the question should be, how to encourage this practice? Let’s go back to this young man. Because he’s classified as an employee, he can’t write off home expenses. He could if he were regarded as self-employed. Couldn’t we allow employees to write off a fraction of home expenses (say, mortgage payments and common fees or rent) just as I am able to because I bill my work through a corporation?

Lesson learned
However, the most important economic lesson we’ve learned is that in a modern economy, so much of the work being done can be understood as anything from superfluous to frivolous. I walk down the streets of Toronto and see empty stores that were previously full of women getting their nails done and I ask myself
if anyone is really worse off because this service is no longer available? Now, I’m guessing that the store owners and employees would like to ask me if anyone (except me) would be worse off if Supply Professional magazine chose to show a picture of a cute puppy instead of my thoughts on the Canadian economy?

That actually buttresses, rather than refutes, my argument. Will there be a re-thinking of work and the responsibility to fend for yourself? It is already true in Canada that if you don’t want to work, you don’t have to. Life won’t be great, but you won’t starve, you won’t have to sleep outside, and you will be taken care of by the healthcare system no matter the decisions you have made. Is it possible that more of us will “opt out” of working and turn to the political process to take care of our needs and wants?

I see two long-term economic implications of this pandemic. There has been an unintended and fortuitous productivity boom.

Yet as fewer people create more of the value, it is inevitable that there will be a growing wealth gap. I’m thinking that the best public policy solution is an income tax system where you don’t pay anything until you’re past the poverty line and then a flat tax from that point forward. However, that doesn’t address the need for meaning that work provides so many of us. But that can wait until the next column, that is, if one appears instead of a picture of a baby Collie.

Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.