National Post (National Edition)
Stimulus or just money for nothing?
The first rule of opposition politics is to draw contrasts with the government in the most extreme manner possible.
Pierre Poilievre is so wed to the game plan, he adhered to it even when he was a cabinet minister.
On Sunday, the Conservative finance critic accused the Liberals of engaging in “a gigantic experiment in freakonomics” — the study of incentives to figure out behaviour.
He said the government’s emergency benefits package is having the opposite impact to its intended effect — acting not as a stimulus to economic activity but as a “tranquilizer,” by punishing people for working. He offered the examples of students and minimum wage workers who have been “banned from working” by generous but inflexible benefits.
Poilievre may have embroidered here and embellished there, but he’s not wrong. A new report by a working group of some of Canada’s best economic thinkers at the C.D. Howe Institute revealed a similar if more soberly expressed disquiet with the way the government has responded to the crash in household income.
The working group, cochaired by Michael Horgan, a former deputy minister at the Department of Finance, and Kathleen Taylor, chair of RBC, concluded the Canada Emergency Response Benefit was necessary, since it offered a simple, quick response to the crisis.
But the group’s concerns were reflected in its recommendation that the program should be gradually wound down, rather than expanded to fill in remaining gaps. Niche populations currently not covered by CERB should be addressed by temporary provincial programs, it said.
The reason is that the launch of the Canada Emergency Wage Subsidy program on Monday creates the conditions for moral hazard — where parties protected from risk will act differently than they might otherwise have done if they were not protected.
Specifically, there is a worry that some workers might prefer to sit on their duffs for the next three months, pocketing $2,000 a month, rather than going back to work when called by their employers.
The working group report suggested there is already anecdotal evidence that some people on CERB have refused to go back to work when employment opportunities have arisen.
A similar disincentive to working exists for post-secondary students who stand to receive $1,250 a month between May and August on the assumption that there will be no jobs for them. As the parent of an 18-year-old, I would have preferred the government devoted all its resources to the Canada Student Service Grant, which promises up to $5,000 to support student education costs for those who take part in “national service activities.” Is it too cynical to suggest that the Canada Emergency Student Benefit will be fully subscribed and the Student Service Grant underutilized?
The C.D. Howe group’s position is that the government’s emergency response has issues that need to be addressed.
“The government needs to look at the time after this period of crisis,” said Parisa Mahboubi, senior policy analyst at C.D. Howe.
The working group professed itself surprised at the sheer number of applicants for the CERB: 6.73 million Canadians, or more than 35 per cent of the labour force.
One reason may be the relatively late implementation of the wage subsidy.
While it remained a work in progress, employers laid off workers, who then applied for CERB. The hope is that many of those workers will now migrate back to the wage subsidy.
Certainly that is the government’s assumption — it has allocated $35 billion to cover CERB but double that amount ($73 billion) to pay for the wage subsidy.
Yet there is no requirement for CERB recipients to be able and available to work or to seek employment, as there is under Employment Insurance.
More far-sighted workers will go back to their jobs if they have the chance. After all, they’ll still be earning long after the CERB runs out.
But there is no obligation to do so. And there should be.
As the C.D. Howe group suggests, the government could mandate that CERB recipients accept an offer to return to work, as long as the pay and conditions are not worse than they were preCOVID.
Workers receiving CERB have to reapply for the benefit every four weeks. Why not make it a condition that recipients have to attest they have not turned down a legal and safe job offer at a level commensurate with their pre-crisis earnings?
Justin Trudeau made the point in his daily press briefing Monday that no single program can reach everyone, “so we’re coming at this from every angle.”
No kidding. The direct relief measures are now estimated to cost $145 billion, and he’s not done yet.
The constant outflow of benefit federal dollars has done Trudeau’s popularity no harm — his approval ratings are the highest they’ve been in three years, according to a recent Angus Reid Institute poll.
But he is more comfortable being an almsgiver than a close-fisted treasurer.
“Yes we are aware of the challenges in terms of incentives and we are trying to ensure that the industries that need workers will be able to have them,” he said at his daily press briefing, without elaborating.
Even if it’s not yet clear to the prime minister, pressures are growing on the Liberal government to take action to ensure its generous safety net for workers does not become a summer hammock.
GOVERNMENT
NEEDS TO LOOK AT THE TIME AFTER THIS ... CRISIS.