Telecoms take $240M from wage subsidy
Layoffs, dividends draw criticism from outsiders seeing flaws in program
Canada’s big three telecom companies have collectively received more than $240 million from the federal government’s wage subsidy program while continuing to pay out billions of dollars in dividends to shareholders.
According to the most recent filings in provincial lobbyist registries, Bell has received $122.9 million, Rogers $82.3 million and Telus $38.6 million in support payments as part of the Canada Emergency Wage Subsidy (CEWS).
Since the beginning of the pandemic, the three companies have continued to pay out regular dividends to shareholders; Bell and Telus have announced increases to their annual payouts. Both Bell and Rogers have also laid off workers at their hard-hit media divisions.
Other large businesses have also paid out dividends while receiving CEWS support, including numerous companies in the oilpatch, auto-parts maker Linamar and furniture retailer Leon’s. (Torstar, the parent company of The Hamilton Spectator, is among the recipients of the federal wage subsidy.)
Economists say the relief payments to large, profitable companies with ample access to credit illustrate problems in the way CEWS is designed, in these cases leading to benefits for shareholders but not necessarily targeted support for workers whose jobs are at risk. One Liberal MP is calling on the government to claw back payments from companies that have paid dividends.
“CEWS is sold as a wage subsidy, but it’s really a business expense subsidy,” said Amin Mawani, associate professor of taxation at the Schulich School of Business at York University.
Mawani has argued that Canada should consider a model where the government pays subsidies only in respect of employees who miss hours of work because of the pandemic.
Under the current rules of the Canadian program, businesses with any level of revenue decline are eligible for at least some level of subsidy with respect to all their Canadian employees.
He said it is understandable that businesses would continue to pay dividends, which he described as a “cost of doing business” akin to paying interest to the bank on loans, but he questioned the need to hike payouts this year. “I don’t think shareholders were necessarily expecting an increase during the pandemic.”
Bell cut more than 200 jobs at its media division in recent weeks, a move that followed a restructuring of management jobs in January. Rogers also laid off workers in its sports and media business in November.
Michael Smart, a professor of economics at the University of Toronto and co-director of Finances of the Nation, a virtual think tank on public policy, said those moves “tell me that CEWS is not saving jobs.”
“If businesses can get a subsidy from the government, of course they’re going to apply for it, but the subsidy is not going to be effective in saving jobs. Other business decisions are going to drive hiring and layoff decisions,” he said.
While it makes sense to help small businesses struggling to get credit, Smart said, Bell, Rogers and Telus “have ample access to borrow in their own right to get through this situation.”
On Friday, Nate ErskineSmith, Liberal MP for Beaches—East York in Toronto, filed a private member’s motion calling on the government to compel companies that received CEWS money to return any equivalent amounts that they paid in dividends or through share buybacks.
The telecoms all said the wage support payments they got helped keep workers employed in the face of unprecedented disruption caused by COVID-19, which included retail store closures that affected all three companies as well as advertising declines and loss of revenue related to sports broadcasts that hit the media operations at Bell and Rogers.
“Bell implemented a range of measures in 2020 to keep team members employed, including job reassignments to customer service and other roles, but job losses in media and retail would have been unavoidable in 2020 without CEWS support,” said Bell spokesperson Marc Choma, adding the company has not “applied for or received CEWS funding since last November.”
Telus spokesperson Erin Dermer said, “The subsidy helped to avoid layoffs as retail stores were closed and home installations and repairs were cancelled.”
“The wage subsidy program, designed to help businesses of all sizes, across all sectors, helped us provide critical support to team members whose work was impacted,” said Rogers spokesperson Andrew Garas.
The companies have not reported the total CEWS support they have received in their disclosures to investors, but have to disclose government support as part of certain lobbying records.