COVID benefits too generous with Canadian businesses: Experts Pipa News

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OTTAWA – Benefits introduced at the start of the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining income, but business supports were excessive and show outside influence of business groups on public policy, economists say .

About two and a half years ago, the federal government was faced with the unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. That shutdown led to a series of pandemic relief benefits aimed at easing the blow to workers and businesses, with the two most prominent programs being the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy.

A recent analysis by Statistics Canada, based on census data, shows that two-thirds of Canadian adults will benefit from the pandemic in 2020, with these benefits expected to offset income loss and reduce inequality.

A previous analysis by the Federal Statistics Agency also found that, as expected, use of the wage subsidy program is correlated with a lower likelihood of discontinuation and fewer employee deductions.

While March 2020 had little time to spend on formulating benefits and fixing details, economists are now retrospectively evaluating the successes and failures of these programs.

New York University economics professor Miles Korak, who wrote the analysis on these programs, said there was uncertainty at the time for any assessment and governments were faced with an urgent need to keep people healthy.

That said, Korak said, while CERB was “very successful”, the Canada Emergency Wage Subsidy was a “huge failure”.

“The Canada Emergency Response Benefit quickly ran out money in time to keep people at home, which is what we wanted to do to save lives,” he said.

On the other hand, Korak said that CEWS “came too late, it was not well targeted and dramatically over-insured (the business).”

The CERB was announced in March 2020 and provided $2,000 monthly to Canadians who lost income due to the pandemic shutdown. Shortly thereafter, CEWS subsidized the wages of employees of businesses by 75 percent, hoping to encourage companies to retain their employees.

Korak says that by the time wage subsidies were introduced, many businesses were furloughed from their employees.

Another source of criticism for the wage subsidy program was that it subsidized wages for all workers in the affected occupations, not just those who were at risk of losing their jobs, making it particularly expensive.

Jennifer Robson, an associate professor of political management at Carleton University, also pointed to the wage subsidy program as a failure. Robson said businesses that would otherwise have closed for reasons unrelated to the pandemic remained artificially inflated because of wage subsidies.

“These were not businesses that were going to return to profitability,” Robson said.

Data from Statistics Canada shows that the number of business closures increased dramatically in April 2020, but followed a sharp decline, bringing monthly closings to lower than pre-pandemic levels.

Around 31,000 businesses closed in August 2020, while around 40,000 were closed in February 2020.

Finally, Korak said the wage subsidy program should be smaller in scope and targeted at large businesses with special needs, where it will be important for companies to hold on to similar employees, such as the airline sector.

The Canadian Federation of Independent Business has said wage subsidies for small business owners were “significant” and noted in April this year that only two of its five members reported returning to normal sales.

Adrienne Waupshas, ​​press secretary to Finance Minister Chrystia Freeland, said in a statement that the government’s focus at the start of the pandemic was to protect jobs and ensure a strong economic recovery.

“Today we have regained 114 percent of the jobs that were lost during the darkest months of the pandemic,” Vaupshas said.

Contrary to what some economists have characterized as overly generous support for businesses, some low-income Canadians have experienced fallbacks to Social Assistance benefits since they collected CERB. The Canada Revenue Agency is also hoping to recover benefits paid to more than 400,000 Canadians whose eligibility was questioned.

In response, the anti-poverty group Campaign 2000 has called for CERB Amnesty.

Korak said that while it is reasonable to ask people who have fraudulently collected profits to pay them back, businesses should be held to the same standard.

“What would worry me is the asymmetry in this response between individuals and businesses,” Korak said.

The CFIB has called for more loan forgiveness for small businesses receiving loans through the Canada Emergency Business Account. The federal government is already offering partial loan forgiveness if payments are made by the end of 2023.

Robson said that when it comes to shaping public policy, business interest groups have public relations teams to advance their interests.

“There’s nothing like it for low-wage individual workers,” Robson said.

Korak said that at the beginning of the pandemic, the focus was on the role of front-line workers, but over time, it shifted to smaller businesses.

“I think the small business lobby was very effective in informing individual lawmakers and pressuring cabinet and government to respond in a way that many overlooked and unheard mothers, father activists and families did not have the same voice, Korak said. ,

Korak said the danger of the wage subsidy program is that it sets a precedent for providing businesses with excessive subsidies and thereby spurring innovation.

“We are moving towards basic income for small business rather than basic income for individuals,” he said.

This report by The Canadian Press was first published on August 6, 2022.

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