Federal cash will prevent mass layoffs — but businesses say six weeks is too long to wait,

Great concept, rendered useless by delay, may force up EI applications, advocate says

Both economic and industry experts agree: The federal government’s wage subsidy should prevent mass layoffs across Canada.

But business organizations were left in shock Wednesday at the announcement by the federal finance minister that funds for the subsidy — meant to help those laid off due to the COVID-19 pandemic — may not start flowing for another six weeks.

“It renders a great concept useless for so many of those most in need of it,” said Rocco Rossi, president and CEO of the Ontario Chamber of Commerce.

The long wait for getting access to the subsidy will also likely mean more people having to apply for EI in the meantime, the exact scenario a wage subsidy is designed to avoid, Rossi pointed out.

“The cash crunch is right now,” said Corinne Pohlmann, senior vice-president of national affairs at the Canadian Federation of Independent Business.

The subsidy, first announced by Prime Minister Justin Trudeau last Friday, is one of the government’s most important policies aimed at helping Canadians facing financial difficulties and out of work due to the COVID-19 pandemic.

It’s designed for businesses, regardless of size and including charities, sole proprietorships and partnerships, to keep employees on the payroll, as well as to rehire employees who may have already been laid off and are collecting EI.

If the employer gets the subsidy, they can rehire their laid off workers and put them back on the payroll. Those workers will then no longer receive EI. “I think it’s certainly a strong measure that will help a lot of companies keep

their workers on staff,” said Sal Guatieri, senior economist and director at BMO Capital Markets.

The subsidy will see the federal government cover 75 per cent of the first $58,700 of a person’s wages, which works out to $847 a week. Finance Minister Bill Morneau said Wednesday that a portal will be set up on the Canada Revenue Agency website, allowing businesses to apply within the next three to six weeks.

The subsidy is expected to cost the government $71 billion, Morneau said.

Companies will need to be able to demonstrate a 30 per cent loss of revenue compared with this time last year, Morneau said, though details are still being worked out on how a seasonal business or a relatively new business can be deemed eligible. Rossi at the chamber of commerce said the 30 per cent figure is a “blunt instrument” and said government will need to be open to different criteria so that more businesses can be considered eligible for the subsidy.

“Get ready to rehire people,” Morneau said at Wednesday’s press conference, strongly encouraging businesses to also cover the remaining 25 per cent of an employee’s salary.

Mark Manger, associate professor of political economy at the Munk School at the University of Toronto, said a wage subsidy may be new to Canada, but it’s copying successful programs that have existed in several European countries for decades.

Karl Littler, vice-president of public affairs at the Retail Council of Canada, said the wage subsidy “is going to make a huge difference.”

“It will be a very significant reduction in the number of layoffs and furloughs,” he said. “I think that people are going to make every attempt possible to keep their people on.”

Morneau urged businesses to try to bridge the gap and continue to pay their employees until they get the subsidy, but business groups say that will be impossible for many businesses which have already been shut down for nearly three weeks.

Laid-off workers would also be entitled to apply for the Canada Emergency Response Benefit, which provides $2,000 a month to people laid off due to COVID-19, until the subsidy kicks in.

That plan is expected to cost the government $24 billion.

The wage subsidy and emergency response benefit are part of the federal government’s multibillion-dollar economic package in response to the COVID-19 pandemic.

Another measure includes government-backed $40,000 interest-free loans to small businesses, to be paid back by the end of 2022 with the first $10,000 forgivable if certain conditions are met. Banks were expected to start issuing those loans next week.