The billion-dollar cost of Ontario parents having to stay home during a school closure
I thought it might be interesting to estimate the cost of parents having to stay home if some schools in Ontario are closed starting next week.
The TL;DR version: It’s likely to cost Ontario’s economy over a $1 billion a month.
This is a very rough back-of-the-envelope type calculation. It doesn’t take into account any type of dynamic effects (e.g. a parts plant that produces fewer parts because workers stay home not only affects the output of that plant, it also impacts the output of the assembly plant that uses those parts). So take all of this with a couple pounds of salt.
The math here is beyond basic and relies on only two components:
Lost output from a worker staying home * # of workers staying home
Lost output of a worker staying home
In 2018, the value of the output of the average Ontario worker was $57.30 in 2012 dollars (according to this Statistics Canada table), which is $64.36 in today’s dollars (according to the Bank of Canada’s calculator). Over a 7.5 hour work day, that’s $482.70 in output for the average worker that would be lost if they are not at work. We’ll round to $480 to keep things simple.
The type of worker that may be forced to stay home may be different than average (either in terms of productivity or average hours worked), so the real figure could be a bit above or below this. But as stated before, it’s just an estimate.
# of workers who would stay home
This is much more difficult to estimate. There are roughly 2 million students in elementary and secondary schools, according to the Ontario Ministry of Education. Of course, this does not mean that there will be 2 million parents staying away from work because:
- Many schools are not closing
- Many families have multiple children in school
- Many families will be able to find alternative arrangements to look after their children.
As a very rough estimate, we’ll assume that the number of parents staying home is 5% of the total number of children in the system. That’s 100,000 parents. I would love to have a better estimate; if you could provide one please do! But for now, this works.
$480 x 100,000 = $48 million in GDP per day
That’s over $1 billion in lost productivity per month. Of course, this is based on some rough estimates of parameter values, but it gives us an indication of how economically damaging a closure could be.
