The Canada Revenue Agency building is seen in Ottawa, Monday, April 6, 2020. Economists say the deployment of COVID-19 relief benefits at the start of the pandemic allowed vulnerable Canadians to stay healthy while maintaining an income, but looking back, support for business were exaggerated and demonstrate the outsized influence of business interest groups on public policy. THE CANADIAN PRESS/Adrian Wyld Benefits rolled out at the start of the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining an income, but the business boosts were excessive and show the enormous influence business groups have on public policy, economists say. Nearly two and a half years ago, the federal government faced an unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. This shutdown led to a series of pandemic relief benefits aimed at softening the blow to workers and businesses, the two most important programs being the Canada Emergency Wage Subsidy and the Canada Emergency Wage Subsidy. Recent analysis from Statistics Canada based on census data shows that two-thirds of Canadian adults received pandemic benefits in 2020, with these benefits reducing income losses and reducing inequality. Earlier analysis by the Federal Bureau of Statistics also found that, as expected, use of the wage subsidy program was associated with a lower likelihood of closings and fewer layoffs. While there was little time to build the benefits and refine the details in March 2020, economists are now assessing the successes and failures of these programs in hindsight. New York University economics professor Miles Corak, who has written analyzes of these programs, says any assessment must take into account the uncertainty people and governments faced at the time and the urgent need to keep people healthy. . That said, Corak said that while the CERB has been “tremendously successful,” Canada’s emergency wage subsidy has been a “colossal failure.” “The Canada Emergency Response Benefit got money out the door quickly to keep people at home, which is what we wanted to do to save lives,” he said. On the other hand, Corak said CEWS “came too late, was poorly targeted and dramatically over-secured (businesses)”. The CERB was quickly announced in March 2020 and $2,000 per month to Canadians who lost income due to the pandemic shutdown. This followed on the heels of the CEWS, which subsidized the wages of business workers by 75 percent in the hope of encouraging companies to retain staff. Corak says that by the time the wage subsidy was introduced, many businesses had already parted ways with their employees. Another source of criticism of the wage subsidy program was that it subsidized the wages of all workers in the affected businesses and not just those whose jobs were at risk of being lost, making it particularly costly. Jennifer Robson, an associate professor of political management at Carleton University, also pointed out that the wage subsidy program has been unsuccessful. Robson said businesses that would otherwise have closed for reasons unrelated to the pandemic were artificially kept alive by the wage subsidy. “These were not businesses that were going to return to profitability,” Robson said. Statistics Canada data shows that the number of business closings rose dramatically in April 2020, but followed a sharp decline, bringing monthly closures to a lower level than before the pandemic. About 31,000 businesses closed in August 2020, while nearly 40,000 had closed in February 2020. In retrospect, Corak said the wage subsidy program should have been narrower in scope and aimed at larger businesses with specialized needs where it would be important for companies to retain the same employees, such as the airline sector. The Canadian Federation of Independent Business said the wage subsidy was “critical” for small business owners and noted in April of this year that only two out of five of its members reported a return to normal sales. Adrienne Vaupshas, Finance Minister Chrystia Freeland’s press secretary, said in a statement that the government’s focus at the start of the pandemic was protecting jobs and ensuring a strong economic recovery. “Today we have recovered 114 percent of the jobs lost in the darkest months of the pandemic,” Vaupsas said. In contrast to what some economists have characterized as overly generous support for businesses, some low-income Canadians have experienced clawbacks in their welfare benefits because they collected CERB. The Canada Revenue Agency also hopes to recover benefits paid to more than 400,000 Canadians whose eligibility was challenged. In response, the anti-poverty group Campaign 2000 requested an amnesty from the CERB. Corak said that while it is reasonable to ask those who have fraudulently collected benefits to pay them back, businesses should be held to the same standards. “The concern I would have is the asymmetry in that response between individuals and businesses,” Corak said. The CFIB requested more loan forgiveness for small businesses that had access to loans through the Canada Emergency Business Account. The federal government is already offering partial loan forgiveness if repayments are made by the end of 2023. Robson said that when it comes to shaping public policy, business interest groups have well-resourced public relations teams to promote their interests. “There is no such thing for individual low-wage earners,” Robson said. Corak noted that at the beginning of the pandemic, there was a focus on the role of frontline workers, but over time, that shifted to small businesses. “I think the small business lobby has been very effective in informing individual MPs and putting pressure on cabinet and government to respond in a way that many mothers, working fathers and families have not had the same voice,” Corak said. . The danger of the wage subsidy program, Corak said, is that it sets a precedent for oversubsidizing businesses and thereby stifling innovation. “We’re almost moving toward a basic income for small businesses instead of a basic income for individuals,” he said.
