Economic rescue model is putting workers first
Canada is using a new model of managing an economic crisis caused by COVID-19, one that could see the economy emerge from the crisis stronger than it was when the novel coronavirus first struck.
The new model aims to keep workers on the payroll, ready to kick the economy back into high gear once the crisis has passed.
It is an unprecedented worker-first model, a backdoor business bailout that rescues workers first, and by doing so rescues their employers.
The rescue model also has the markings of an industrial strategy.
It pumps billions of dollars into a long-underfunded health-care system, one of our biggest economic sectors.
And it enlists scores of Canadian companies, from startups to multibillion-dollar enterprises, in a joint venture to achieve greater Canadian capabilities in advanced health research and sophisticated manufacturing of COVID-19-related supplies.
The new model is without precedent in size and scope, with a price tag at the federal level alone of $202 billion.
Think “economic crisis,” and the remedy that comes to mind is bailouts of troubled companies, industrial sectors and governments.
But in this economic rescue model, workers are the first priority.
A staggering $95 billion of Ottawa’s rescue package will be spent on wage subsidies to everyday Canadian workers.
That sum, close to half of all federal spending on the COVID-19 crisis, eclipses the total stimulus spending of $54 billion by Ottawa and the provinces during the Great Recession.
And the wage subsidy is just one of several new measures to protect the incomes of everyday people and of households.
It’s a model that smacks of the nanny state that businesspeople decry. Yet business has enthusiastically embraced it.
The Canadian Federation of Independent Business (CFIB), the small-business lobby, describes the wage subsidies as the business community’s best hope for a swift return to full health once the emergency phase of the coronavirus has passed.
The new model is not entirely a Canadian invention. On wage subsidies, for instance, it draws on best practices in other countries fighting COVID-19, including Britain, Denmark and the Netherlands.
Parliament will soon be recalled to give legislative approval to the wage subsidy program. Approval is expected with bipartisan support.
Later this month, direct federal payments will start going out to Canadian employers that have suffered a COVID-19related loss of revenue of at least 30 per cent. The payroll subsidy equals 75 per cent of an employee’s first $58,700 in salary, or a maximum of $847 per week.
To qualify, employers must make best efforts to pay the remaining 25 per cent, Prime Minister Justin Trudeau said this week. And the PM has called on employers to rehire laid-off workers so they may be included in the wage subsidy program.
A separate new federal program provides replacement income to part-time and selfemployed workers in the new so-called “gig” economy, to whom assistance cannot be channelled through an employer.
Together, these incomesupport programs amount to the biggest attack on income inequality in history.
To some, this model will give the impression of government deficits stretching out forever.
Actually, this model prevents a massive drop in national income not seen since the Great Depression. It puts a floor under the decline in consumer spending. And it reduces government outlays on Employment Insurance.
It also curbs the health costs associated with severe economic downturns, which are times of increased rates of family disintegration, domestic violence and substance abuse. In China and Northern Italy, hard hit by the COVID-19 pandemic, divorce rates have spiked in recent weeks.
Workers afflicted by those conditions put added pressure on the health-care system. And they are weakened in their ability to give their all when they return to work.
As well, many furloughed workers don’t respond to recall notices, having drifted to other vocations, opted for retirement or relocated far from their former employer.
Canada was suffering from skills shortages before COVID-19 struck. The new rescue model of keeping workers on the payroll guards against a more acute skills shortage once economic recovery takes hold.
As noted above, there is an industrial-strategy element to the new economic rescue model.
Ottawa is looking to companies based in Canada for crisisrelated supplies. That should be a permanent boost to Canada’s manufacturing and R&D prowess.
Imports are a limited option. Apart from China, a significant supplier to Canada of COVID-19-related supplies, most countries are struggling to meet their own requirements.
“We need a sustainable, stable supply of these (crisis-related) products,” Trudeau said this week. “And that means making them at home.”
Ottawa is financing Canadian research into COVID-19 treatments, equipment and vaccines. And the feds and the provinces, notably Ontario, are investing in advanced Canadian manufacturing capability to quickly ramp up production of everything from N95 masks and medical gowns to portable DNA testing machines and ventilators.
Canada won’t achieve selfsufficiency in health-care supplies from this crisis. But the feds seem to have that as an unstated goal, and the country certainly will get closer to meeting it in this process.
There are still some gaps in the industrial strategy. At a time when the nation’s students are reliant on homebased internet learning, broadband access is intermittent or non-existent in many parts of the country, including Eastern Ontario and most Indigenous communities.
Canada has so far resisted the
U.S. and European practice of ordering companies to provide essential supplies. It has instead called for volunteers, of whom we fortunately have an abundance in the Canadian business community.
But internet service providers (ISPs) might be an exception, requiring governments to order them to provided unlimited internet access during a national emergency.
At times, the new model of emergency economic response looks like policy-making on the fly.
For instance, in the space of just nine days last month, a proposed federal wage subsidy of 10 per cent for small-business employees became a 75 per cent subsidy for employees of all enterprises, regardless of size and including non-profits.
And at all times, the model has the look of a master plan, given its wide ambit and remarkable co-ordination among all levels of government.
But it isn’t a master plan, and it isn’t written down anywhere. Nor is this new model centrally directed., instead drawing on the expertise of public health officials and medical practitioners across the federation.
The model consists of new measures announced each day by local, provincial and federal governments, and smart private-sector initiatives like “hero pay” increases in compensation for at-risk workers.
Though it is a marvel, the model doesn’t even have a name. Perhaps, as long as we’re in lockdown, hostage to Netflix, Gem and Crave, we could give it one.
In the meantime, keep helping to stop the spread. And be well.