The federal government’s newly announced COVID-19 economic relief measures are a good start to aiding people and businesses whose livelihoods have been disrupted by the ongoing public health crisis. It was crucial for the federal government to act fast and provide reassurance to Canadians that help is on the way and more is coming, with this package being just the first phase. However, unprecedented as the package was, it is clear that with a crisis of this magnitude much more will be needed in the coming days and weeks, both provincially and federally. In what follows, I flag key areas where federal support needs to go further and where our provincial government can step in to provide immediate direct emergency assistance for impacted workers and lower income British Columbians that need help.
The federal package announced a number of new temporary measures that will provide much-needed support to British Columbians who have been hit hard by the economic turmoil that is resulting from the pandemic. However, the size of the package of direct aid to people and small businesses was just over 1% of Canada’s GDP ($27 billion), much smaller than what’s needed and what other countries have put on the table. The much-touted total package value of $82 billion is misleading because it includes $55 billion in owed taxes that are being deferred for 6 months, much of which are owed by large, profitable corporations and likely won’t provide the kind of injection of cash/liquidity that most struggling businesses would need to stave off bankruptcy.
The key direct aid measures in the federal package include:
- A new Emergency Care Benefit essentially extends EI sickness benefits to workers who don’t otherwise qualify—but only if they need sickness benefits due to COVID-19, not other illness—and provides support to people who can’t work because they’re caring for a family member quarantined or sick with COVID-19 (again, not other illness), as well as to parents who are unable to work because they need to care for children stuck at home due to school and child-care closures. This recognition of the importance of family care is welcome and long-overdue; it should become a permanent feature of our EI system. The application for this benefit will be available in April. At the time of writing, there were no details yet as to exactly how much people will receive and for how long, all we know is that it will pay “up to $900 bi-weekly for up to 15 weeks.” As previously announced, the regular 1-week waiting period for benefits is waived for EI sickness and care benefit claims due to COVID-19, however, so far it still applies to any other EI claims.
- An Emergency Support Benefit for unemployed workers not eligible for EI, including gig economy workers and many part-time workers. Details on how exactly this would work are yet to be announced. This is much needed because current EI eligibility requirements are too restrictive and leave too many workers unprotected, especially lower-paid and precarious workers. A whopping 61% of British Columbians who were unemployed didn’t receive EI in 2018 (last year for which the data is available). About 135,000 British Columbians were unemployed in February before the COVID-19 crisis and the number will likely grow rapidly in the coming weeks.
- Financial support for lower-income families through one-time increases in the GST credit (up to $300 per adult and $150 per child) and the Canada Child Benefit ($300 per child). Using the tax system to deliver support makes it easy to target to the families that need it most but the amounts are small and payments are expected to come sometime in May, which seems like ages away in the currently rapidly changing environment with rent and bills due long before then.
- Moratorium on Canada Student Loan payments for 6 months.
- New wage subsidy for small employers (will likely include small businesses and non-profits). The subsidy is supposed to encourage businesses to keep their employees over the next 3 months but is valued at only 10% of payroll up to a maximum of $1,375 per worker and while it would certainly be welcome by small employers scrambling to adapt to staff working from home or extra health measures, it’s highly doubtful that at this low rate it would prevent many layoffs as many workplaces experience enormous disruptions to regular revenues.
- Additional funding for homeless shelters and for women and children fleeing violence. This money should flow fast and would likely need to be substantially increased to meet the needs of these highly vulnerable groups.
- Indigenous Community Support Fund, though the announced $305 million would need to be significantly boosted.
- Tax deferral for individuals and corporations, which will largely benefit the better-off and more profitable companies (that owe more). Taxes owing for the 2019 tax year won’t have to be paid until September and that’s estimated to postpone (not eliminate!) payments of $55 billion that could theoretically be put to use currently. While deferring is obviously a good idea at a time when businesses are scrambling to adjust and support their staff during the pandemic, I’m not convinced that the bulk of the funds will be injected into the economy to support workers and reduce layoffs and it’s likely most of them would go to large, profitable corporations that owe more in taxes.
- Some support to allow financial institutions to defer or otherwise reduce mortgage payments for homeowners who are struggling on a case-by-case basis. While promising, these measures are entirely discretionary and the government has no mechanisms to ensure that all mortgage holders who need support will be accommodated. Alarmingly, no similar programs or significant supports have been extended to renters—an oversight that needs to be promptly remedied. BC Housing recently announced a stop on all evictions for social housing residents, and the province should work on extending it to all renters. Nobody should be losing their home in the midst of a pandemic.
- Improved access to credit for small and medium-sized businesses through a larger envelope for the existing Business Credit Availability Program (BCAP). This will likely help some businesses with temporary cash-flow challenges but likely won’t prevent staff layoffs in the event of closures or significant revenue disruption.
1. Faster rollout of the financial relief measures for those who need themUsing the tax system to extend benefits to lower-income families through increases in the income-tested GST credit and the Canada Child Benefit is a good idea because it eliminates the need of setting up a special application process and catches the vast majority of Canadians who file taxes. However, Canada needs to find a way to get benefits to flow faster than 6 weeks from now.
Similarly, EI applications need to be expedited, which will be a huge challenge given the unprecedented volume of applications that are likely to land in the coming weeks. Under normal circumstances, the average application processing time for an EI claim was 19 days, and many had to wait longer. This won’t be sufficient in a time of crisis. The new Emergency Support Benefit needs to be processed and paid out quickly once the applications become available in April.
2. Further improvements to EI benefits and paid sick leave for workersThe crisis has exposed gaping holes in the EI system that need to be permanently fixed. While the federal package has addressed some of them, unfortunately, a number of other measures are needed, including:
- Waive the waiting period for all types of EI benefits for the duration of the crisis, not just for sickness benefits.
- Increase the current replacement rate of 55% of insured wages to at least 75%. 55% of wages is lower than many people’s rent or mortgage payments, nevermind other bills (which explains why so few people can afford to use their full parental benefits). What’s worse, it essentially amounts to poverty incomes for lower-wage workers and those who work part-time.
- Introduce a minimum weekly EI benefit floor to prevent workers from being plunged into poverty when receiving EI. Currently, an EI supplement is only available for low-income families with children but not for other workers.
- Extend the maximum duration of EI benefits so that nobody runs out of EI benefits while the crisis is ongoing.
- Ensure that COVID-19-related EI benefits don’t affect eligibility for other EI benefits after the crisis is over, including parental or regular benefits.
- Reduce the working hours required to qualify for EI to 360 hours and make the threshold the same for all jurisdictions, so more workers can benefit from the EI system they have paid into, instead of having to apply for the Emergency Support Benefit.
3. Additional support for lower-income people, especially those who are not in the labour market and won’t benefit from the EI-related measuresBC already has over 500,000 people living in poverty (according to the newly-rebased Market Basket Measure) and more will likely join their ranks during the crisis. They all will need extra support at a time of crisis. Many of them are working and eligible for some EI or the new Emergency Support Benefit but others aren’t. Here’s what they need:
- Immediate, generous increases to welfare and disability rates, which remain thousands of dollars below the poverty line. Remove all work search and training requirements for the duration of the public health crisis when people ought to be generally staying home even if not self-isolating. Consider relaxing eligibility requirements for the duration of the crisis so more British Columbians can get the supports they need at this time.
- Larger boost to the GST credit than what has been announced.
- A boost to the Guaranteed Income Supplement (GIS) for low-income seniors. Seniors are at increased risk of complications from COVID-19 and likely more restricted than younger adults in their ability to go out to procure necessities or maintain basic social connection. Lower-income seniors would be particularly hard hit and many can’t afford the extra costs of commercial grocery delivery services without additional support.
- Additional provincial support for lower income people. In BC, the easiest way to deliver provincial funds in the hands of those who need them most is using the existing income-tested benefits. The MSP Tax Force had recommended rolling them all into one Dogwood Benefit, however, now is probably not the time to make that change and it seems wiser to use the most generous of the credits available, the Climate Action Tax Credit and boost that to deliver relief quickly. The BC Child Opportunity Benefit would have been a great complementary tool in light of the extra costs parents face in light of the large-scale school and childcare closures, but unfortunately it will only come into effect in October. If these funds cannot be deployed fast enough, an initial emergency relief cheque cut to all households could be considered in the interim. The amount could be taxable, so families who don’t need it can give some or all of it back with their 2020 tax return. Putting money in people’s hands is crucial at a time of crisis and it seems much more humane to provide support to some people who might not need it in order to ensure nobody who needs it is left behind.
4. Additional support for services for the most vulnerable in our communityThis includes additional funds to support those who are homeless to cope with the pandemic and for the non-profit organizations that provide critical services during the pandemic, such as shelter, food, health and mental health supports. Given fears that domestic and sexual violence is likely to increase during mandated self-isolation and social distancing, much more support will be needed both federally and provincially for survivors and service agencies that support them than what has been announced.
5. More generous wage subsidies for hard-hit small businesses and non-profits that commit to not laying off staffTax deferrals or tax holidays are not going to be effective in preventing mass layoffs (in addition to being very costly) because they are broadly based and don’t require employers to continue paying staff. Countries like New Zealand and Denmark are offering much more generous wage-subsidy measures, and their examples should be seriously considered.
Now that we have the initial federal aid package, the BC government needs to step in swiftly with a provincial program of immediate relief for those who need it the most, and continue to push the federal government to address remaining EI gaps and further boost federal income supports.
We are just at the beginning of what will continue to be a rapidly evolving crisis. New ideas and measures will need to be considered and adopted continuously, but it is essential to get immediate relief measures flowing into communities across the province quickly. For further ideas on what the provincial government can do by way of initial emergency measures, see the companion piece by my colleagues Shannon Daub and Alex Hemingway.
Iglika Ivanova is a Senior Economist and the Public Interest Researcher at the CCPA’s BC Office. This blog also appears on Policynote.