The epidemic benefits have been very generous with companies, and strict with workers: experts

Nujoud Al-Males, The Canadian Press

Published Saturday, August 6, 2022 at 11:21 AM EST

Economists said the benefits rolled out at the start of the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining income, but business support was excessive and shows the outsized impact of business groups on public policy.

For nearly two and a half years, the federal government has faced the unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. This shutdown has led to a series of pandemic relief benefits aimed at cushioning the blow to workers and businesses, the two most notable programs being the Canada Emergency Response Benefit and the Canada Emergency Wage Support.

Recent analysis from Statistics Canada based on census data shows that two-thirds of Canadian adults received pandemic benefits in 2020, with these benefits mitigating income losses and reducing inequality.

Previous analysis from the Federal Statistics Agency also found, as expected, that use of the wage support program was associated with a lower likelihood of closures and fewer employees.

While there was little time to spend on formulating benefits and fine-tuning the details in March 2020, economists are now assessing the successes and failures of these programs at a later date.

Any assessment needs to take into account the uncertainty people and governments were facing at the time and the urgent need to keep people healthy, says City University of New York economics professor Miles Korak, who has written analyzes of these programs.

However, Korac said that while CERB has been “terribly successful,” emergency wage support in Canada has been a “huge failure.”

“The Canadian Emergency Response Benefit got the money quickly in time to keep people at home, which is what we wanted to do to save lives,” he said.

On the other hand, Korak said that CEWS “came too late, were not well targeted and overindulged in (companies) insurance.”

CERB was quickly announced in March 2020 and $2,000 per month for Canadians who have lost income due to the pandemic shutdown. This was soon followed by CEWS, which subsidized corporate employee wages by 75 percent in hopes of encouraging companies to retain their employees.

Korac says that by the time the wage subsidy was introduced, many companies had already separated from their employees.

Another source of criticism of the wage subsidy program was that it subsidizes the wages of all workers in the affected firms, rather than just those whose jobs were at risk of being lost, making it particularly costly.

Jennifer Robson, associate professor of political administration at Carleton University, noted that the wage subsidy program is not working. Robson said businesses that would otherwise close for reasons unrelated to the pandemic have been kept afloat due to wage subsidies.

“This was not a business that would return to profitability,” Robson said.

Statistics Canada data shows that the number of business closings increased significantly in April 2020, but followed by a sharp decline, bringing the monthly closings down to a lower level than they were before the pandemic.

About 31,000 companies closed in August 2020, while nearly 40,000 companies closed in February 2020.

In hindsight, Korac said the wage support program should have been smaller in scope and targeted at larger companies with specialized needs where it would be important for companies to retain the same employees, such as the aviation sector.

The Canadian Federation of Independent Business said wage support is “crucial” for small business owners and noted in April of this year that only two out of five of its members reported returning to normal sales.

Adrian Fabshas, ​​press secretary to Finance Minister Chrystia Freeland, said in a statement that the government’s focus at the start of the pandemic was on protecting jobs and ensuring a strong economic recovery.

“Today we have regained 114 percent of the jobs we lost during the darkest months of the pandemic,” Fabshas said.

Contrary to what some economists have described as a very generous subsidy for businesses, some low-income Canadians have struggled with reclaiming social assistance benefits because they collected CERB. The Canada Revenue Agency is also hoping to recover benefits paid to more than 400,000 Canadians whose eligibility has been questioned.

In response, the 2000 Anti-Poverty Campaign Group called for CERB to be pardoned.

Korac said that while it is reasonable to ask those who fraudulently collected benefits to pay them back, companies should adhere to the same standards.

“My concern is the inconsistency in this response between individuals and companies,” Korac said.

The CFIB called for more loan forgiveness for small businesses that took out loans through the Canada Business Emergency Account. The federal government is already offering partial loan forgiveness if repayment is made by the end of 2023.

Robson said that when it comes to shaping public policy, business interest groups have well-resourced PR teams to advance their interests.

“There is no such thing for low-paid working individuals,” Robson said.

Korak noted that at the start of the pandemic, there was a focus on the role of frontline workers, but over time, this shifted to small businesses.

“I think the Small Business Lobby has been very effective in informing individual MPs and putting pressure on Cabinet and the government to respond in a way that many invisible and unheard moms and dads, workers and families have not had the same voice,” Korac said. .

The danger of the wage subsidy program, Korac said, is that it sets a precedent for excessively subsidizing companies and thus stifling innovation.

“We’re almost going towards basic income for small businesses rather than basic income for individuals,” he said.

This report was first published by The Canadian Press on August 6, 2022.

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