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Justin Trudeau’s $107B Coronavirus Plan Doesn’t Do Enough to Prevent Layoffs

Despite the federal stimulus money and support, an unprecedented number of Canadians have lost their jobs. The federal government can do more according to economists.

by Anne Gaviola
Mar 25 2020, 7:20pm

Photo by Sean Kilpatrick via the Canadian Press

Justin Trudeau’s $107 billion stimulus package is a done deal. But the plan, which increased from $82 billion last week, could still do more to prevent layoffs and get money quickly into the hands of the people who are in real financial trouble right now.

The package includes a newly streamlined $52 billion emergency plan which makes available $2,000 in monthly support for workers who need income because of COVID-19. This benefit is for anyone who is out of work, taking time off because they're sick, taking care of someone who is sick, or taking care of kids home from school.

But getting that money into people’s bank accounts won’t happen until mid-April, according to the federal government. And that’s assuming that everything goes smoothly.

The reality is that many Canadians can’t wait. A rapid escalation of COVID-19 related restrictions on travel, social distancing, and shutdowns of everything except for non-essential services in Ontario and Quebec, have brought the airline, service, and events industries to a standstill. We’ve never seen layoffs of this magnitude before. Last week, nearly one million people in Canada filed for Employment Insurance (EI)—which is about 5 percent of all the workers in the country.

According to a new Angus Reid poll, 44 percent of Canadians say someone in their household has either lost their job or had their hours cut back because of the coronavirus outbreak. Sixty-six percent of workers whose hours or pay have been reduced say their employer isn’t covering that reduced pay. One in five households are expecting to lose work soon. And most rents are due April 1.

One way the Trudeau government could do more to prevent layoffs is in the form of wage subsidies. Currently, it offers a 10 percent temporary wage subsidy for small businesses. “This will encourage employers to keep staff on payroll during these uncertain times,” Trudeau said. The payout is capped at $1,375 per worker and $25,000 per employer. But that 10 percent subsidy is remarkably low compared to what some European countries are offering.

The Swedish government will subsidize workers’ salaries so they still receive 90 percent of their pay while they work reduced hours. Denmark’s federal government is subsidizing 75 percent of salaries for firms that promise not to lay off staff. The U.K.’s planned subsidy is 80 percent of salaries.

When asked by reporters Wednesday why Canada’s subsidy is so low compared to these countries, Trudeau did not immediately commit to increasing it. Wednesday afternoon Finance Minister Bill Morneau said that the newly-announced $2,000 a month support is “a wage subsidy that’s going directly to employees” and offers coverage similar to what’s offered in certain European countries.

Morneau also said that new economic measures will be unveiled later this week. Until then, the government would continue to offer the 10 percent wage subsidy.

According to David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, a 10 percent wage subsidy doesn’t do much.

“It might be useful in some specific cases, as might the EI work-sharing program, but so far those programs have had essentially no impact on the mass layoffs we're seeing. Also with businesses being completely closed, paying 90 percent of workers' salaries instead of 100 percent with no business coming isn't going to be an incentive to keep workers on payroll,” he said.

The NDP want that wage subsidy to be 80 percent and the Conservatives are calling to “significantly increase” it. The Business Council of Canada said Ottawa’s wage subsidy should offer workers something that is at least equivalent to what they would get through EI, otherwise, it’s better financially for them to be laid off.

Trudeau has said that this is the first phase of emergency money, and there is more to come, so this isn’t everything that’s going to be available.

Paul Kershaw, the founder of Generation Squeeze, a non-profit that advocates for young adults says that even with emergency support, people who live in Toronto, Vancouver, and other high-cost cities will still have a hard time making ends meet because monthly housing costs can easily burn through all or most of that $2,000.

“Despite this large, and still likely to grow, government financial response, young workers will struggle to cope amid COVID disruptions because they were already squeezed so much by the economic system in advance of the pandemic, because the economy had tolerated housing costs for renters and young owners to rise so far beyond local earnings, especially in our bigger cities,” Kershaw said.

The need for speed is a major factor for people who don’t have much, or any, financial cushion. Trudeau’s plan includes emergency money for workers in the form of boosts to GST and Child Canada Benefits (CCB), but those won’t likely be delivered for weeks, or even months.

“These are not normal times and what we need now isn't perfect policies, it’s fast policies,” said Macdonald. “Many of these policies are good ones but I am concerned about speed. The boosts to the GST and CCB credits are the right mechanisms, but May is far too late, they should happen tomorrow and keep happening monthly until the crisis is over.”

Armine Yalnizyan is an economist and policy expert as the Atkinson Fellow On The Future Of Workers. She says that unlike other recessions, where “stimulus” was needed to spur the economy, at this point in time, what the federal government is rolling out is an aid package to tide people over because the coronavirus pandemic is forcing economic activity to slow down.

“Unlike every previous economic downturn, we are not trying to stimulate economic behaviour,” Yalnizyan said. “Quite the contrary: we are trying to stop all non-essential economic transactions, asking people to stay home so we can limit contagion, disease, and death.”

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