Tuesday, 10 March 2020

Quarantine leave

I'm more of a sceptic about generalised bailouts during the coming downturn.

But there is a good case for support for quarantined workers.

In short, staying home when you're at risk of infecting others is a public good. If you're on unpaid leave because sick leave doesn't cover when you're not actually sick and you're out of annual leave, you'll have incentive to show up at work regardless of a stay-home notice. If your employer bears costs if you're out for a couple of weeks when you're probably fine, your employer will also have some incentive to ignore quarantine.

Singapore pays employers $100 per day per worker stuck home on quarantine, on proof that they're still paying their workers.

We could consider a variant of that here if we wanted to encourage stronger compliance with quarantine.

I go through some of that in this week's column at the Dom - published today but submitted last Thursday, so it doesn't include anything on the government's proposed support packages.
Singapore has maintained a tight lid on its outbreak. There, quarantine carries both a carrot and stick. Contacts of people with Covid-19 are placed under Quarantine Orders; workers returning from places with the virus are placed under precautionary Leaves of Absence; those recently returning from risky places with symptoms face a Stay-Home Notice.

Breach of these orders can result in hefty penalties, including firms' being barred from hiring foreign workers in future. Equally, businesses and self-employed persons are eligible for support: $100 per day per affected worker.

The combination of carrots and sticks has some nice effects.

Staying home when you pose a risk to others during a pandemic is a substantial public good. The benefits of an infected person staying home are shared by everyone else but the costs are borne by the worker and the employer.

Singapore's scheme providing compensation for this public good, combined with penalties, changes the calculus.

By helping firms continue to pay furloughed workers, it can mitigate some of the flow-on effects that otherwise result when reduced earnings lead to reductions in demand, leading to layoffs elsewhere.

The Government could consider similar programmes in New Zealand. We could follow Singapore, whose government has already worked through an awful lot of the policy fishhooks. Or, it could consider a government-funded annual leave programme only available during a declared pandemic for those under quarantine orders where work-from-home options are not possible.

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