Ottawa turns focus to wage subsidy program

As businesses reopen, Liberals target recovery, unemployment numbers

The federal government is eyeing changes to its benefits programs as economic restrictions lift, businesses slowly reopen and people get back to work, the Star has learned.

Prime Minister Justin Trudeau has already signalled one element of that change — an extension to the wage subsidy program that’s meant to encourage employers to keep staff on the payroll or hire them back.

Within the Prime Minister’s Office and the finance department, officials are looking at how to balance the extension of the Canada Emergency Wage Subsidy (CEWS) with the Canada Emergency Response Benefit (CERB), which was introduced early in the crisis to provide financial support when people were told to stay home, as well as the existing Employment Insurance program.

“Obviously, as the economy restarts, gradually, CEWS will have to carry more and there’ll also be less need for CERB,” one official told the Star.

“A lot depends on how the restart goes and because the primary functions of the programs remain — support people who can’t work, and support people to keep working,” said the official, who was not authorized to speak publicly.

Trudeau has spoken about the need for government to “support people with what they need when they need it.”

“We’re going to stay open and flexible to adjusting the programs we’ve put forward, to stretching them out, to condensing them, to combining them,” he said earlier this week.

The specifics of the changes have yet to be worked out, but they centre on the government’s goal of seeing the wage subsidy take on greater importance during the slow recovery phase of the pandemic.

The government introduced its wage subsidy hoping it would keep workers on the payroll, but it arrived after many affected businesses had already laid off staff and required several tweaks.

For now, the emergency benefit — which pays $500 a week for 16 weeks — remains the main financial support. By Sunday, 7.8 million Canadians had applied, and it had paid out $30.5 billion. In comparison, the government has approved 123,642 applications for its wage subsidy, providing $3.4 billion in support to 1.7 million workers.

The government is hoping to use its wage subsidy program to nurture the recovery and address the sobering unemployment numbers that saw two million jobs lost in April. Trudeau announced last week that the wage subsidy would be extended beyond June to “help kick-start our economic reopening and boost jobs.”

Complicating that challenge is the reality that the recovery will be uneven, across both the country and sectors of the economy, with the threat that outbreaks could cause another round of shutdowns.

“It’s hugely more daunting,” Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives. “How do you account for differences in people’s overall financial security as this goes along? What are the jobs that aren’t going to come back?”

In the absence of an improved Employment Insurance system, Block said the emergency benefit will be needed for “crucial” support through what promises to be a lurching recovery.

“If you think the GDP decline is bad now, try taking away the CERB and see what happens to overall economic activity,” she said.

As businesses reopen, Block said workers should remain eligible for the benefit even if they refuse to work in a situation they feel is unsafe. “We don’t want to force people into unsafe work situations,” she said.

Block said the government should also be open to further financial supports, such as rent supplements or further boosts to the GST credit and Canada child benefit, which it has already done in the crisis.

“The longer this shutdown lasts, the greater the economic impact on people who are in a precarious situation,” she said.

Pedro Antunes, chief economist at the Conference Board of Canada, said that the support programs have largely blunted the economic impact for many of those hit by the upheaval.

“Certainly I think a lot of the programs have been quite generous,” Antunes said in an interview.

“Now the question is, how do we back away from these a little bit? Hopefully we’ll be able to do that as we start to see a little better employment numbers.”

The challenge now is to transition away from support that allowed workers to stay home, and toward encouraging employers to get staff back on the job, Antunes said.

“There was little incentive for employers to hire back workers when they were closed,” he said.