Federal wage subsidy has seen little demand
Emergency benefit much more popular
OTTAWA • The Trudeau government’s wage subsidy was supposed to be Ottawa’s flagship aid package to help Canadians and businesses get through the worst of the COVID-19 pandemic. But over two weeks after it launched, it’s attracted barely 13 per cent of the expected number of applicants.
“Clearly, fewer people are on Canada Emergency Wage Subsidy than the government expected when they set it up six weeks ago, whereas more are on the Canada Emergency Response Benefit than they expected,” stated Kevin Milligan, professor of economics at the University of British Columbia.
Announced nearly two months ago, the Canada Emergency Wage Subsidy (CEWS) covers 75 per cent of eligible employers’ payrolls — up to a weekly maximum of $847 per employee — for up to 12 weeks between March 15 and June 6.
Just over two weeks after the program’s launch, the numbers seem disappointing.
According to data released Tuesday evening by the Canada Revenue Agency, the government has received 132,481 applications, of which all but 9,000 have been processed and approved. CEWS has paid out a total of $3.36 million in subsidies to nearly 1.7 million employees.
That’s well under the expected 1 million applications that the government announced when the program was launched. Ottawa also budgeted $73 billion for the program.
Now, it’s increasingly unlikely that anywhere near that amount of applications will arrive or subsidies be doled out before the program hits its current expiration date.
On the other hand, the Canada Emergency Response Benefit (CERB), which pays out a monthly $2,000 for up to four months to those who lost their job because of the COVID-19 pandemic, has been way more popular than the government planned.
Instead of the expected four million recipients, nearly eight million Canadians applied for the benefit as of May 10.
“It’s pretty clear to me that the balance of those going to CERB instead of CEWS is different than the government expected. Quite a bit different, in fact. They’re not going to get close to that $73 billion budget, whereas they’re overspending on the CERB,” Milligan analyzed.
Of his own admission, that’s not what he expected, either.
“If you would have asked me in mid-april, I’d have told you I expected that more people would be on
CEWS than on CERB. But that turned out not to be the case,” he commented.
But why is CEWS, which ultimately can pay out well more to certain employees than CERB does, so unpopular to date? Both Milligan and Ken Boessenkool, a public-policy economist and founding partner at Kool Topp & Guy Public Affairs, argue that it came too late.
Whereas CERB was launched at the beginning of April and delivered money to applicants just days later, CEWS — a much more complex program — took six weeks before sending out cheques after it was announced at the end of March.
“The application process for this program came very, very late in the crisis. And
I think that had a material impact on people applying for it. I know of firms who shut their doors in the week before this program became available. When I talked to them and said that they can apply for this and get back money and asked why they were shutting down, they said that they couldn’t pay their bills,” Boessenkool explained.
He said it was too early to say if CEWS was a failure, and insisted he was “very cautious” about the data published by CRA considering how new the program is and how quickly the situation may change.
But ultimately, Boessenkool believes CERB was the better program to doll out aid to Canadians at the worst of the jobs crisis.
And though CEWS may have taken too much time to launch, both Milligan and Boessenkool believe the program will be a vital part of the reopening of Canada’s economy once the provinces are ready to so.
But that will depend partly on two things. First of all, CERB must be gradually phased out so as to allow businesses and Canadians to transfer to the wage subsidy if needed, says Boessenkool.
“I do believe this transition will be a bumpy and challenging one. CEWS is a much more complicated program,” he explained.
Second, CEWS must be extended past its current June due date until at least the fall, argues Milligan.
Prime Minister Justin Trudeau assured Monday that CEWS would be extended, but has yet to say until when.
“I think that as we get to this reopening phase, there will be a lot of businesses who will wonder if they should bother to reopen, if they’ll be able to do it, and if they should have two or three shifts, for example. That’s where the CEWS is going to be very helpful,” Milligan said.
“That’s the kind of thing that helps kick-start the economy. If you are hiring an extra shift, if you’re hiring that extra cook, those people are then making money and they’re out there spending, which then generates the economy being self sustaining again,” he added.
Finance Canada was not able to provide comments to this story by deadline on Wednesday.