Ottawa readies CERB exit plan
Draft legislation tightens eligibility terms
Even this most prodigal of governments knows it can’t keep spending $3.6 billion a week on the Canada Emergency Response Benefit.
CERB was indispensable when it was introduced — providing income for people who had been deprived of their livelihoods by COVID.
But as the economy reopens, Ottawa is looking at an exit strategy from a program that has cost $43.5 billion in the past 12 weeks, supporting 8.4 million workers.
The first signs of that game plan are evident in legislation the government is currently negotiating with the opposition parties.
According to a draft bill seen by National Post, C17 tightens the eligibility conditions around CERB, and makes it a criminal offence to knowingly claim money under false pretences.
Workers will no longer be eligible for income support payments if they fail to return to work “when it is reasonable to do so”, or if their employer makes a request for their return. Applicants who have declined a “reasonable” job offer will also be deemed ineligible.
Each period of eligibility will be shortened to two weeks from four, and the amount a worker can earn without clawback, will be reduced to $500 from $1,000.
The changes, as far as they go, are sensible. There is still no requirement to look for work.
But the message is clear anyone who can work, and is able to find a job, should do so.
Nearly one third of the workforce earns minimum wage levels — under $15 an hour — which is less than CERB offers.
The hope was that many people would return to work by transitioning to the Canada Emergency Wage Subsidy program, where Ottawa picks up the tab for 75 per cent of wages, up to $847 per employee per week.
That has not happened so far. CERB has proven a safe place to ride out the storm for many workers.
But the emergency benefit is set to run out on July 6 for those who started claiming it on March 15.
The problem is that many workers claiming CERB may find that their jobs are no longer there for them, once the lockdown is lifted.
It puts the government on the horns of a dilemma.
The C.D. Howe Institute issued a paper from one of its COVID working groups on Monday that suggested the Trudeau government has two options: either expand Employment Insurance to include ineligible CERB recipients; or, continue CERB with modifications to make the transition to work more desirable.
The way to do this, the group suggested, is to increase the flexibility of CERB using lessons learned from the EI program that set parameters on claw-back rates and earnings exemptions. The Working While on Claim program suggests the higher the exemption for allowable earnings, the more incentive there is to accept part-time work. The issue may be that CERB is administered by the Canada Revenue Agency, which does not keep real-time data on individual monthly earnings.
However, the alternative — using the EI account — could create its own problems. If the account moves into deficit, it would trigger premium increases (unless the government consciously decided to freeze premiums). EI premium increases would act like a tax increase on low and middle earners and act as a disincentive to employers to hire more workers.
Ottawa has to juggle competing priorities — it must transition as many workers as possible off CERB to reduce income replacement payments and allow labour markets to readjust to the new reality.
At the same time, the need for support will not disappear by midsummer.
There was encouraging news last week with job numbers that suggested the recession might be over already — 290,000 jobs were added in May, and the number who worked less than half their regular hours fell by a similar number.
But the unemployment rate at 13.7 per cent is the highest in four decades.
It is likely that whole sectors have been decimated — accommodation, travel, tourism, food services — and some jobs may not come back. More resources will have to be devoted to training workers in those industries for new work.
Liberals concede the government is likely to transition to an enhanced EI or an extended CERB, as the C.D. Howe group suggested.
The current legislation does not specify the nature of the program going forward — changes can be enacted by Cabinet without recourse to Parliament in any case. “We can’t get too far ahead of our skis,” said one official.
But the hope is that by tightening the eligibility criteria on CERB, it might encourage some people to migrate to the wage subsidy program.
There is a sense that we’re all in the clean up stage after a tornado has torn through town. While there’s always the prospect of a downed power line, the immediate danger has passed. The government’s emergency benefit has provided income replacement for millions of people but it can’t do so indefinitely.
Ottawa’s new legislation is recognition of that fact.