Benefits introduced early in the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining an income, but business support has been excessive, showing the outsized influence of business groups on public policy, economists say.
Almost two and a half years ago, the federal government faced the unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. This closure led to a slew of pandemic assistance programs aimed at softening the blow to workers and businesses, the two most prominent programs being the Canada Emergency Response Benefit (CERB) and the Canada Emergency Wage Subsidy (CEWS).
A recent Statistics Canada analysis based on census data shows that two-thirds of Canadian adults received pandemic benefits in 2020, with those benefits cushioning income losses and reducing inequalities.
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Earlier analyzes by the Federal Statistical Office also showed that, as expected, the use of the wage subsidy program correlated with a lower probability of closure and fewer downsizing.
While in March 2020 little time could be spent elaborating on the benefits and fine-tuning the details, economists are now evaluating the successes and failures of these programs in retrospect.
City of New York University economics professor Miles Corak, who has authored analysis of these programs, says any assessment must consider the uncertainty people and governments were facing at the time and the urgent need to keep people healthy keep.
That said, Corak said while the CERB was “terribly successful,” Canada’s emergency wage subsidy was a “huge failure.”
“The Canada Emergency Response Benefit got money out the door quickly and in a timely manner to keep people home, which is what we wanted to do to save lives,” he said.
On the other hand, Corak said the CEWS “came late, was untargeted and dramatically over-insured (company)”.
Swiftly announced in March 2020, the CERB issued $2,000 a month for Canadians who have lost income due to the pandemic shutdown. CEWS followed shortly thereafter, subsidizing company employees’ wages by 75 percent in hopes of encouraging companies to retain their employees.
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Corak says that by the time the wage subsidy was introduced, many companies had already laid off their employees.
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Another criticism of the wage subsidy program was that it subsidized the wages of all workers in the affected plants and not just those whose jobs were at risk of being lost, making it particularly costly.
Jennifer Robson, associate professor of political management at Carleton University, also pointed out that the wage subsidy program was unsuccessful. Robson said businesses that would otherwise have shut down for reasons unrelated to the pandemic have been artificially staying afloat because of the wage subsidies.
“These weren’t companies that would return to profitability,” Robson said.
Data from Statistics Canada shows that the number of store closures increased dramatically in April 2020 but was followed by a sharp decline, bringing monthly closures to lower levels than before the pandemic.
About 31,000 businesses closed in August 2020, while almost 40,000 had closed in February 2020.
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In hindsight, Corak said the wage subsidy program should have been smaller in scope and aimed at larger companies with special needs where it would be important for companies to retain the same employees, such as: B. in the aviation sector.
The Canadian Federation of Independent Business has said the wage subsidy is “crucial” for small business owners, noting in April this year that only two in five of its members said they were returning to normal sales.
Adrienne Vaupshas, the press secretary for Treasury Secretary Chrystia Freeland, said in a statement the government’s focus at the start of the pandemic had been protecting jobs and ensuring a strong economic recovery.
“Today we have recovered 114 percent of the jobs lost in the darkest months of the pandemic,” Vaupshas said.
Contrary to what some economists have called overly generous support for businesses, some low-income Canadians have experienced welfare clawbacks for receiving CERB. The Canadian Revenue Agency also hopes to recover benefits paid to more than 400,000 Canadians whose eligibility has been contested.
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In response, the anti-poverty group Campaign 2000 has called for a CERB amnesty.
Corak said that while it is reasonable to demand repayment from those who fraudulently took benefits, companies should uphold the same standard.
“The concern I would have is the asymmetry in this response between individuals and companies,” Corak said.
The CFIB has called for more credit forgiveness for small businesses that accessed credit through the Canada Emergency Business Account. The federal government is already offering a partial loan waiver if repayments are made by the end of 2023.
Robson said when it comes to shaping public policy, business advocacy groups have well-resourced public relations teams to promote their interests.
“There’s no such thing for low-wage individual workers,” Robson said.
Corak noted that early in the pandemic, the focus was on the role of frontline workers, but over time that shifted to small businesses.
“I think the small business lobby has been very effective in informing individual MPs and pressuring the cabinet and government to respond in a way that many unseen and unheard mothers, fathers, workers and families just didn’t have the same voice,” Corak said .
The danger of the wage subsidy program, Corak said, is that it sets a precedent for over-subsidizing corporations, thereby stifling innovation.
“We’re almost moving toward a basic income for small businesses rather than a basic income for individuals,” he said.
© 2022 The Canadian Press
https://globalnews.ca/news/9041750/covid-relief-funds-generous-businesses-strict-workers/ COVID relief funds too generous to businesses, strict to workers, experts say – National