Wean­ing mil­lions off aid a chal­lenge

Calgary Herald - - NEWS - KAIT BOLONGARO

Justin Trudeau is be­gin­ning to wean mil­lions of peo­ple off gov­ern­ment sup­port in what will be one of the trick­i­est eco­nomic pol­icy ma­noeu­vres in Canada’s re­cent his­tory.

Three months af­ter COVID-19 threw the econ­omy into sus­pended an­i­ma­tion, the prime min­is­ter is plan­ning to wind down an aid pro­gram that of­fers $2,000 a month to work­ers who lost their jobs or had their hours cut be­cause of the pan­demic.

The pro­gram worked — al­most too well. About 8.4 mil­lion Cana­di­ans, more than 40 per cent of the labour force, re­ceived at least one pay­ment from the Canada Emer­gency Re­sponse Ben­e­fit at one point. Just 1.2 mil­lion have stopped re­ceiv­ing it. Re­mov­ing CERB will be a del­i­cate bal­anc­ing act. Push­ing peo­ple off too quickly could come at a po­lit­i­cal cost and ham­per the re­cov­ery. Mov­ing too slowly could be just as risky. Trudeau’s ob­jec­tive is to get peo­ple off the pro­gram and onto pay­rolls as fast as pos­si­ble as the econ­omy re­opens — and quell crit­i­cism it’s be­ing abused and could be pro­vid­ing a dis­in­cen­tive for work­ers to re­turn to their jobs.

In a sur­vey of thou­sands of com­pa­nies last month, 17 per cent said they had yet to fully re­open be­cause of staffing is­sues. Of those, about half said they were hav­ing trou­ble re­call­ing staff or get­ting them to work the hours needed. Health con­cerns and the at­trac­tive­ness of the CERB were cited as they key rea­sons, ac­cord­ing to the sur­vey by the Cana­dian Fed­er­a­tion of In­de­pen­dent Busi­ness.

The math is es­pe­cially chal­leng­ing for com­pa­nies in low-pay­ing in­dus­tries. In most of Canada, a worker mak­ing the provin­cial min­i­mum wage for 40 hours a week will earn a lit­tle more than $2,000 in a month.

“We may see the phe­nom­e­non of both labour short­ages in some in­stances and record high un­em­ploy­ment,” Per­rin Beatty, pres­i­dent of the Cana­dian Cham­ber of Com­merce, said in a tele­phone in­ter­view.

CFIB is­sued a state­ment last week en­cour­ag­ing the gov­ern­ment to “shift gears” by mak­ing it eas­ier for com­pa­nies to qual­ify for wage sub­si­dies — and more dif­fi­cult for work­ers to refuse em­ploy­ment while on in­come sup­port.

While econ­o­mists and pol­icy-mak­ers have ap­plauded the Trudeau gov­ern­ment’s quick re­lease of cash into the econ­omy,

We may see the phe­nom­e­non of both labour short­ages ... and record high un­em­ploy­ment.

that hasn’t stopped Canada’s job­less rate from sky­rock­et­ing to among the high­est in the de­vel­oped world.

Un­em­ploy­ment is now at 13.7 per cent — a post-war record.

In Ger­many, the gov­ern­ment is us­ing a wage top-up that lets em­ploy­ers re­duce hours while cov­er­ing the re­main­der of work­ers’ pay­cheques. Un­em­ploy­ment there is just 6.3 per cent.

Busi­nesses in Canada say layoffs were made worse by the slow im­ple­men­ta­tion of a COVID-19 wage sub­sidy, which didn’t be­gin de­liv­er­ing cash un­til early May. By then, many busi­nesses had al­ready suf­fered nearly two months of lit­tle or no de­mand.

Up­take for the wage sub­sidy has been lower than hoped. About $10.5 bil­lion has been dis­trib­uted — one quar­ter of what’s been de­liv­ered un­der CERB.

The new worry is that gen­er­ous aid to in­di­vid­u­als could in­hibit busi­ness from re­turn­ing to ca­pac­ity. Com­bined with le­git­i­mate health con­cerns among work­ers, some em­ploy­ers are strug­gling to ramp op­er­a­tions back up be­cause of labour short­ages.

One of those is Al­pha Meat Pack­ers, which had to shut down tem­po­rar­ily be­cause some work­ers con­tracted COVID-19. Since re­open­ing at the end of last month, the meat packer has only been able to run at about 80 per cent ca­pac­ity, ac­cord­ing to Terry Toun­tas, di­rec­tor of op­er­a­tions at the Mon­treal-based com­pany.

“We have strug­gled get­ting our em­ploy­ees back on the pro­duc­tion lines,” Toun­tas said.

“Some cite health con­cerns while oth­ers claim to have re­ceived com­pen­sa­tion for a month’s salary from the CERB and chose to not come to work.”

One prob­lem for Trudeau is that pol­i­tics are ham­per­ing the his abil­ity to cur­tail the pro­gram. The gov­ern­ment was un­able to pass leg­is­la­tion that would have dis­qual­i­fied peo­ple who fail to re­turn to work un­der “rea­son­able” con­di­tions, while im­pos­ing fines for ap­pli­cants who pro­vided mis­lead­ing in­for­ma­tion. In­stead, the gov­ern­ment is now sim­ply ask­ing re­cip­i­ents to at­test they are look­ing for work.

Trudeau has pledged not to abruptly end the CERB al­to­gether, an­nounc­ing this week it will be ex­tended un­til the end of Au­gust for peo­ple still in need.

At the same time, the gov­ern­ment says it is ex­pand­ing el­i­gi­bil­ity for wage sub­si­dies, al­low­ing more com­pa­nies and or­ga­ni­za­tions to qual­ify.

A new for­mula is likely com­ing at the end of this month, ac­cord­ing to a per­son fa­mil­iar with the plans.

The pivot re­quires a bit of a leap of faith from a gov­ern­ment that has been more com­fort­able help­ing in­di­vid­u­als than sup­port­ing cor­po­rate Canada.

The ini­tial idea be­hind CERB was to get money to cit­i­zens as quickly as pos­si­ble, whether they had lost their jobs or not — a les­son of­fi­cials had learned from the 2008-09 re­ces­sion, when a fo­cus on con­struc­tion spend­ing de­layed the re­cov­ery.

It has worked to put cash in Cana­di­ans’ pock­ets and cush­ion the shock of COVID-19. The prob­lem now is get­ting busi­nesses to buy into the re­cov­ery.

“Cre­at­ing in­cen­tive for em­ploy­ers to bring peo­ple back will be im­por­tant,” Fi­nance Min­is­ter Bill Morneau told BNN Tues­day, sug­gest­ing changes to the wage sub­sidy plan are nearly fi­nal­ized.

ADRIAN WYLD/THE CANA­DIAN PRESS

Prime Min­is­ter Justin Trudeau is fac­ing a del­i­cate bal­anc­ing act in tran­si­tion­ing peo­ple from the COVID-19 aid pro­gram back to jobs, says Kait Bolongaro.

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