The Broadbent Blog


Federal COVID-19 aid needs speed, and space to grow

On March 18, the federal government announced an aid package to help workers and businesses affected by the COVID-19 pandemic. The package includes $27 billion in wage supports and enhanced benefits, and $55 billion in deferred income tax payments. It is supposed to ensure that workers and small businesses have the financial support they need to follow public health advice and stay home.

 

  • Read about what’s in the package in this backgrounder

To be effective, the funds must flow quickly into the bank accounts of as many people as possible. The sooner affected workers can make the financial decision to stay home from work, the more effective public health measures will be in slowing the spread of COVID-19. 

 

Is it big enough? 

The part of the package that flows directly to households is a reasonable size (1.2 per cent of Canada’s Gross Domestic Product, or GDP). It is a good first step but will need to be supplemented in the coming weeks, and we look at how below. Several other countries have put together much larger packages for workers, ranging from two to six per cent of their GDP. The good news is the federal government has said this is an initial package, and they are willing to do more. Many are calling on the calling for governments at all levels to go bigger and faster, taking bold measures that will support us all through this crisis. The union I work for, CUPE, is calling for the federal government to pull out all the stops.

 

Is it fast enough? 

Most of the benefits going directly to workers won’t flow before April 1, when many workers will face rent or other monthly expenses. For some workers making the decision to self-isolate or stay home without sick pay, this is not soon enough.  

The Finance Minister has said the Emergency Care Benefit and the Emergency Support Benefit should be available in two to three weeks, which means early April. Parliament has been recalled to pass legislation with a reduced number of MPs. All opposition parties say they will cooperate to fast track these measures. Finally, the one-time lump sum through the GST credit and Canada Child Benefit (CCB) is expected to arrive in May.  

The federal government had already announced priority processing for sick leaves related to COVID-19. EI sick leave processing can take over a month in normal times. We don’t know how quickly Service Canada will be able to approve leaves and get benefits to workers under the current circumstances. There will be a significant increase in layoffs that will likely overwhelm the current capacity of Service Canada to process claims quickly.  

The one-week waiting period has also been waived for COVID-19 related sick leaves, which means that workers will be eligible for benefits from the first day of their sick leave. The waiting period has not yet been waived for other benefits, meaning workers will have no income replacement for the first week of their unemployment unless the federal government waives the waiting period for all EI claims.

 

Can we do better? 

Economists are nearly unanimous in their assessment: there is no practical limit on what the federal government can spend to get us through the next few months. The old rules don’t apply. Now is not the time for tinkering around the edges of our current policy instruments, it is the time for bold action that rises to meet the scale of the human crisis in front of us. If the federal government cannot or will not get money out to workers faster, then we need provinces to step in and fill in the financial and public service gaps.  

 

Where are the gaps? 

This package aims to ensure workers can follow public health advice and still be able to put food on the table and cover rent. But there’s more to do.  

  • Low income people and First Nation, Inuit and Métis communities: The announcement makes some first steps to support people experiencing homelessness or gender-based violence, to reduce costs for pensioners, and to meet the critical needs of all urban and rural Indigenous communities. It’s clear more is needed, and we will push for that in the weeks ahead.  
  • Renters: While the federal government has worked with lenders to ensure a six-month payment deferral for mortgages, there are no specific supports for renters. None of the federal wage supplements available to workers will be in place before rent is due April 1. There should be an immediate and indefinite ban on evictions and an immediate rent freeze in all jurisdictions.
  • Child care for essential workers: While the package includes support for those who need to stay home and care for children, it didn’t deliver any support for parents who are essential workers and must be on the job when schools and child care centres are closed. The federal government should work with the provinces to fund this critical emergency care. Child Care Canada is monitoring provincial action and updating their website as new measures are announced.
  • Employers who want to keep workers on payroll: The 10 per cent wage supplement and the Work Sharing announcement are good measures that may help businesses that experience moderate losses due to the slowdown. Work Sharing allows employers to reduce the number of hours of work per employee instead of laying workers off, and workers get a wage top-up from EI. It works well when there is a temporary slowdown. But neither of these programs are enough for many employers that have closed completely or have seen dramatic drops in revenue. Targeted announcements for these sectors should make sure that help for business is tied to protections for workers.  
  • Community service organizations: The package doesn’t look at reducing poverty or supporting organizations that deliver critical services in our communities, such as food banks. We will need to continue to press all levels of government to provide additional resources. Many community organizations were already operating at capacity before the pandemic and are likely seeing increased demand. 
  • Fix EI: Employment Insurance was already failing too many workers, and will be insufficient even for many who qualify. It’s too soon to know how many workers will be laid off in the next few weeks, but over 500,000 workers applied for EI the week of March 16. We could potentially see the unemployment rate double in April. Unions have been united in calling for lower entrance requirements, longer sick leave benefits, a minimum benefit level, and higher replacement rates that make EI more accessible to precarious and low wage workers. This would be an appropriate time for the federal government to listen to workers and repair this critical lifeline. 

 

Finally, there was nothing in the announcement about a stimulus package. In the coming weeks, we expect to see a stimulus package and infrastructure plan to help create good jobs for workers, and help communities rebuild once the public health crisis has passed. The crisis has revealed many pre-existing gaps in our current public infrastructure, both physical and social, that we will need to address. 

 

What don’t we know right now? 

A lot. We don’t know how long the current public health advice will be in place, so we don’t know how long schools, libraries, recreation facilities, child care centres, or affected businesses will be closed. We don’t know how many people will be unemployed and in need of financial support in the coming weeks and months. 

We are also waiting for more details on the income support that the federal government has announced. The government hasn’t confirmed how these benefits will be calculated. If they are truly equivalent to EI, they will leave low-income, precarious workers without enough to cover the basics.  Some loans are being deferred, but unevenly,  we need a blanket no-interest deferral on all loan payments given the unprecedented level of liquidity being provided to the banking sector in Canada. We don’t know what other targeted measures might be coming to help workers in airlines and other deeply affected industries, but we need a focus on workers and public ownership over corporate bailouts that never trickle down. 

We do know that the federal government and the provinces seem to be working together effectively, and governments are being fast and creative in their responses. Many provincial governments have taken quick action to update legislation to ensure workers have job-protected leave, and some, such as Quebec, have put in place emergency payments and guaranteed child care support for emergency workers. Businesses who can manufacture vital protective equipment and ventilators are stepping up to the plate. 

 

Lessons for a better world 

When the pandemic has passed, we will have learned that another world is possible. One where we come together to take care of each other, where we realize that cleaners and child care workers are the backbone of a well-functioning community, where resources are mobilized to serve the common good, and where no-one is left behind. We cannot risk forgetting this lesson.  

Many of us know the current system is broken and prioritizes profit over people and their well-being. The pandemic is making those cracks clear. The response to the pandemic has shown that the government has the capacity to act in the public interest on a massive scale – job-protected paid sick leave for all workers was not on any government’s agenda before last week. We will need to carry that urgency to build a better society with us into the recovery to ensure that we do not return to “normal.”

 


What’s in the wage support and benefit enhancement package? 

 

First, we should examine what is covered. The wage support package has four main components.  

The Emergency Care Benefit will help workers who have to self-isolate or go into quarantine, workers who have to care for someone who is sick with COVID-19, and workers who have to stay home to care for children because their schools or child care centres are closed. Workers will be able to apply for this benefit through their online Canada Revenue Agency (CRA) account by early April. You won’t need a doctor’s note or other administrative documents, just a simple confirmation that you meet the requirements. This makes the process much faster and simpler. Anyone receiving the benefit will be asked to re-confirm every two weeks that they still meet the requirements. The benefit will be available for a maximum of 15 weeks.  

The Emergency Support Benefit is for workers facing unemployment who don’t qualify for Employment Insurance (EI), including self-employed workers. This benefit will also be administered through the CRA and be comparable to EI benefits. There is less information about how this benefit will work and what will be required to be eligible. The longer it takes to get clear information out about this program, the less effective it will be in helping self-employed workers to make the decision to follow public health advice and self-isolate. The more administratively complicated this program is, the longer it will take for benefits to flow to workers, meaning they may be hard pressed to avoid risky opportunities to make ends met. 

There is also a Temporary Business Wage Subsidy that will be available to not-for-profits, charities, and small businesses. The wage subsidy will cover 10 per cent of wages paid for the next three months, up to a maximum of $1,375 per employee and $25,000 per employer. Employers can benefit immediately by keeping a portion of the personal income tax that they have withheld from paychecks and that they would normally submit to the CRA. 

Finally, there will be one-time increases in the GST credit and the Canada Child Benefit (CCB) payments that will be delivered in May. The increase to the GST credit be equal to your annual entitlement, effectively doubling your GST credit for the 2019-20 benefit year. The CCB payment will be a one-time increase of up to $300 per child.   It’s not clear why this portion of the benefit won’t roll out until May, this should be the fastest way for the federal government to deliver money to high need individuals. 

The $55 billion tax deferral is temporary, until after August 31, 2020. It’s useful to think of this measure as an interest-free loan, allowing businesses to use that money to pay some of their bills while they see slowing demand for many of their goods and services. Jim Stanford argues that it’s misleading to say this measure is worth $55 billion, since it’s just a loan, and it’s better to think of it as costing government the interest on this loan, which is closer to $550 million.