COVID-19: Canada’s Emergency Benefit & Wage Subsidy – Gaps & Concerns.

COVID-19 is a public health and economic crisis. Governments are urgently responding to avoid an economic depression and social instability.

The government of Canada has announced a number of programs, including the Canada Emergency Response Benefit (CERB) and to wage subsidies of up to 75% of employee wages.  The two programs alone are in the tens of billions of dollars.

(Photo from the Atlantic magazine)

The CERB was announced last week and it is a direct benefit of $2000 per month to help with loss of income due to the COVID-19 crisis and it is an improvement on the two EI related benefits announced earlier. However, CERB does nothing for many Canadians, such as students and graduates about to enter the job market, those unemployed for a longtime, anyone who earned less than $5000. This gap in support especially leaves out the homeless, marginalized and most vulnerable segments of our society. This omission is a moral and policy failure.

These are just some of the people who won’t qualify for the benefit.

If you’re self-employed and your income is significantly reduced, but you’ve managed to make a partial income, you appear to be ineligible. For example, if you normally make $2500, but now making $250, you likely do not qualify. You also won’t qualify if you voluntarily stopped working.

Canada has more than 500,000 post-secondary students graduating in the next couple of months, many of them would not have made $5000. They are entering the workforce for the first time and left without this income support – and, there are no jobs.

The Federal Wage Subsidy, like the CERB is well-intentioned, but not without significant concerns. It is one of the most expensive federal programs ever.

It is estimated that the subsidy of 75% for companies with a 30% revenue decline would cost $6.3 billion a week, and over $80 billion over three months (CD Howe Institute). This is more than all the major federal transfer programs for an entire fiscal year – not three months – to the provinces and territories for social assistance, health, equalization and so forth.

Much is unclear about this program. It should go to those companies that need it most: small and medium sized businesses and non-profits. Large corporations, many of which are profitable and had earnings in the hundreds of million or billions of dollars could also receive large subsidies. They don’t need it. What if employers do not pay the remaining 25% to their workers? What if banks, rental companies defer payments from customers and renters and require payment later? Do they still qualify? What if companies pay out huge bonuses to executives or do share buy-backs? What if industries which were already in decline such as oil companies or due to poor business decisions, that has little to do with COVID-19 – can they still step in and use the subsidy? What about numbered or anonymous companies? 

There should be concern about waste, misuse and corruption. For large companies and employers, it could be examined on a case-by-case, where necessary.

There’s no question that the federal government has a crucial responsibility to help Canadians get through this crisis. The CERB will be an essential help for many families. As for the wage subsidy, implemented properly it can be a beneficial program. It is imperative that the program not be misdirected and that it goes to those businesses that really need it, because we’re all paying for it.

The federal government is means-testing programs for individuals – the most vulnerable and poorest Canadians will not get the CERB – all the more reason to scrutinize the wage subsidy and ask if it is being used for proper policy objectives and if it’s the best use of public emergency money.

Many Canadians have been advocating for social programs such as universal pharmacare, childcare, affordable or tuition free post-secondary education, dental and eye-care – for decades.

A Universal Basic Income payable to all would cost less, be easier to administer than the complexity of various different programs coming from the Federal government, and have significant benefits. The UBI could then be taxed back based on progressive taxation next year. But, that is a topic for another day and post.

The Liberal government has, however embarked down a different pathway and the need for financial assistance is immediate. There are many gaps and valid questions that arise about the CERB and Wage Subsidy programs. It is our role as Canadians to ask those hard questions, demand transparency and responsible use of public funds.

About Bill Sundhu

Canadian lawyer, Former Judge, Member of Kellogg College of University of Oxford (Masters Degree in International Human Rights Law 2010).
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