Every crisis, it is said, also provides us with an opportunity. Government responses to the economic and social emergency caused by COVID-19 must deal with the immediate impacts on vulnerable workers and communities, but also move us towards our longer term goals.
The pandemic has already hit many vulnerable workers hard and with hundreds of thousands already applying for EI, unemployment is set to rise very sharply. The federal government has responded with an appropriate first step by announcing major spending packages.
Recognizing that access to Employment Insurance benefits is highly problematic for many low paid employees and non- existent in the case of self-employed and gig economy workers, the federal government proposes two new temporary programs. These are the Emergency Care Benefit and the Emergency Support Benefit, intended to get cheques to impacted workers through the Canada Revenue Agency (CRA). It’s important to acknowledge that these emergency benefits, as well as EI, cover a little more than half of earnings up to $450 and $573 per week, respectively. It will hardly be enough to pay for basic essentials of housing, utilities and food in many parts of the country. Imagine a minimum wage worker in Ontario accessing this program and seeing their income drop from about $550 a week to around $300. Improvements are clearly needed. That’s why the Broadbent Institute and others have called for benefits equal to at least 80% of earnings.
Regardless of the amount, it’s imperative that these cheques be distributed as quickly as possible. But the government has already stated this won’t happen before April 1, rent day for many. Top-ups to the Canada Child Benefit and the GST rebate for low-income individuals won’t come until May. These lag times and low levels of support could mean that many Canadians quickly end up in the dire straits these programs are meant to prevent. We’d like to see the federal government give workers the benefit of the doubt and get payments underway while verifying the claims.
Provinces have a big role to play too. Quebec, to its credit, moved quickly to provide an immediate income supplement. Ontario has put a moratorium on evictions tied to unpaid rent and a few provinces have now instituted job protection measures for any employee missing work due to sickness, self-isolation, quarantine or family care. Others are deferring utility bills. These are all helpful one-offs, but they need to evolve quickly into robust provincial packages that supplement income, provide paid sick leave and job protection, keep roofs over peoples’ heads and assist the most vulnerable in our communities.
The reality is the pandemic is bringing to light the gaping holes in our income security system that existed before COVID-19. The steady rise in insecure and low paid work, fueled in large part by a growing gig economy, leaves far too many individuals and families one pay cheque away from disaster. Some of the changes made now to help stem the economic fallout of the pandemic, such as paid sick days and unemployment income support for gig and contract workers, should become permanent features post COVID-19. Delivering these new emergency benefit programs through current CRA accounts sets an administrative precedent for how we could continue these programs in the future.
When it comes to support for businesses, the most pressing issue is to minimize the growing wave of layoffs and coming surge in bankruptcies caused by a collapse in revenue at companies which may already have high levels of debt. Lower interest rates and relaxed bank reserve requirements will help struggling companies in the short term, as will the federal government’s expansion of loans to smaller and medium sized companies through the BDC (Business Development Bank of Canada) and EDC (Export Development Canada), our state owned banks.
The danger here is that we will end up bailing out the owners of corporate assets rather than helping workers, something we saw in the last financial crisis. Yes, we need to help employers to save jobs, but not without conditions.
In 2009, the federal and Ontario government spent $10.8 billion of taxpayer money bailing out General Motors to save jobs. A decade later, General Motors closed down the Oshawa assembly plant. Learning from this experience, the government should consider taking up long-term equity positions in return for injections of public capital into large and normally profitable corporations.
Business support could also come in the form of more serious short-term wage subsidies for businesses that commit to keeping their staff on the payroll. The 10% subsidy recently announced by the federal government will unfortunately do little to stop lay-offs in many sectors facing significant downturns right now. Other countries, such as Denmark, Sweden and New Zealand, are taking a more aggressive approach and subsidizing wages by half or more for businesses that don’t proceed with lay-offs. In doing so, they are smartly tying support for employers and employees together, making both more resilient during the crisis and therefore more capable of rebounding once it has passed.
There’s no denying we need a serious transition plan for workers in devastated sectors, but it should focus on major public investments in a Green New Deal rather than on bailouts to companies that won’t survive a long period of low oil and gas prices and serious global action to deal with climate change.
The federal and provincial governments deserves to be congratulated for actions to date. But we need a major national debate on the recovery package as it unfolds to ensure that it meets our shared goals for our economy and our society.
We should be careful about planning for the future we want rather than just shoring up the economy of today.
Andrew Jackson is a senior policy adviser and Katrina Miller is program director at the Broadbent Institute.