Economists say benefits introduced at the start of the COVID-19 pandemic have allowed disadvantaged Canadians to ensure their health while maintaining their incomes. But excessive support for businesses shows the enormous influence of business groups on public policy.
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About two and a half years ago, the federal government faced an unprecedented task of locking down the economy to slow the rapid spread of COVID-19. The shutdown has brought with it a series of pandemic benefits designed to mitigate the blow to workers and businesses. Two of the most prominent programs are the Canadian Emergency Relief (CERB) and the Canadian Emergency Wage Subsidy (CEWS).
A recent analysis by Statistics Canada based on census data showed that two-thirds of Canadian adults received pandemic benefits in 2020 that mitigated income loss and reduced income inequality.
Previous analyses by the Federal Bureau of Statistics also found that, as expected, the use of wage subsidy schemes was associated with lower probabilities of closures and fewer employee layoffs.
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While there was little time spent in March 2020 on formulating benefits and fine-tuning details, economists are now reviewing the successes or failures of these welfare programs.
Michaels Corak, an economics professor at New York University who analyzed the projects, said any assessment would need to take into account the uncertainty people and governments faced at the time, as well as the urgent need to keep people healthy.
Still, Corak said that while CERB was "very successful," Canada's Emergency Wage Subsidy (CEWS) was a "huge failure."
"Canada launched the Emergency Benefit (CERB) and paid it out in a timely manner to keep people at home, which is what we're doing to save lives," he said. But, on the other hand, "CEWS came too late, and it wasn't well targeted." ”
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CERB quickly announced in March 2020 that it would pay $2,000 A month to Canadians who lost their income due to a pandemic shutdown. It is followed by CEWS, which subsidizes the salaries of corporate employees by 75%, hoping to encourage companies to retain employees.
However, by the time wage subsidies were introduced, employees of many businesses had already left.
Another disadvantage of the wage subsidy scheme is that it subsidizes the wages of all workers in affected enterprises, not just those at risk of unemployment, which makes the cost particularly high.
Jennifer Robson, an associate professor of political management at Carleton University, also noted that the wage subsidy program was not a success. Robson said that because of wage subsidies, businesses that were not closed by the pandemic are still operating artificially. "These businesses are not going to be profitable again."
Statistics Canada data shows that the number of business closures increased sharply in April 2020, but then fell sharply, leaving the number of monthly closures below pre-pandemic levels. Among them, about 31,000 companies closed in August 2020, compared with nearly 40,000 companies in February 2020.
In hindsight, Corak said the wage subsidy scheme should be smaller in scope and targeted at larger businesses with special needs that must retain the same employees, such as the airline industry.
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The Canadian Federation of Independent Businesses said wage subsidies were "vital" for small business owners, noting in April that only two of its five members had reported a return to normal sales.
Contrary to what some economists describe as overly generous support for businesses, some low-income Canadians have also led to a reduction in other social assistance benefits as a result of receiving CERBs. The Canada Revenue Agency also wants to recoup the benefits paid to more than 400,000 people because their eligibility has been called into question.
Corak said that while it's reasonable to ask people who fraudulently receive benefits to repay the money, businesses should adhere to the same standards.
"At the beginning of the pandemic, people were focused on the role of frontline workers, but over time, the attention shifted to small businesses." The danger of the wage subsidy program, Corak noted, is that it sets a precedent for over-subsidizing businesses to stifle innovation.
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