As Canada
begins to make significant inroads in driving down the daily new cases of
COVID-19 and the number of recoveries rises further, the path forward is
two-fold. First, we need to make
sure that we continue to monitor the infection rate and take steps to ensure
that there is not a re-ignition of the pandemic and a second wave. Second, after three months of lockdown and reduced economic activity, we need to get the economy moving again – albeit
carefully, with new rules and procedures for reopening to comply with the first
step above. Nevertheless, the challenge
is daunting given a national unemployment rate that has soared to over 13 percent
with 3 million unemployed and nearly as many underemployed with fewer hours of
work.
We cannot
afford a second wave given the economic damage that has already been done to
the economy. Many businesses may indeed
never reopen and of those that remain, if they do not reopen this summer, there
will be even more attrition going into the fall. Part of the issue is the fall in demand but
part of the issue is also the ability to find workers to start doing things
again given the incentive effects that rapidly designed assistance packages
appear to have created. There is
anecdotal evidence and public commentary that the CERB is paying many people to
stay at home and that some people getting the CERB may not be entitled
to it. Naturally, the numbers alone raise eyebrows
given that up to 6 million Canadians are either unemployed or working fewer
hours but over 8
million are apparently receiving CERB benefits. The stories range from PEI
to Ontario
and have prompted proposals of a
crackdown.
This makes
today’s announcement about the
two-month extension to the CERB particularly concerning. While the government tried to place
conditions on receiving the extension – such as "actively looking" for work though how that could even be monitored is a good question –
these apparently did not pass so we are stuck with two more months of a program that may cause some disincentive effects when it comes to
re-starting the economy this summer. Now
it stands to reason that support like the CERB was needed to deal with the
onset of the pandemic and making sure that people did stay home during the lockdown. However, the numbers suggest that many more
are collecting the CERB than the employment impact numbers suggest have been
impacted.
For the upwards of two million Canadians collecting the CERB that
appears in excess of the sum of those unemployed or with reduced employment, the last three months
have seen the start of an early summer. With today's extension of 8 weeks,
Canada has now embarked on providing a relatively generous long summer to
several million people rivaling all that time off of school for the kids. There may indeed
be some very nice social benefits to all of this as people have more time to
enjoy their families and do the things they have always wanted but ultimately
the CERB is costing about $17 billon a month which means by early September it
will have cost nearly $90 billion. And,
if more businesses shut down during the summer because they cannot restart due
to labour shortages, then there will be even fewer businesses open to hire
people come September and we end up with a self-reinforcing circle and a call to extend the CERB yet again.
Without a vaccine or effective treatment to COVID-19, there may indeed be many arguing its not safe to ask people to go back and that the CERB be extended. At the same time, given the traffic I have seen in Thunder Bay this last week, I imagine the fear of COVID-19 may apply to returning to work, but little else. If the CERB
is to be re-extended, then perhaps a declining benefit designed to
ease people off the support and back into the labour market makes sense. If the first three
months are $2000 per month, perhaps the extension should come in at perhaps $1500
if only to set a precedent when the inevitable calls come in August to extend
the benefit yet again. Canada’s support to those hit by COVID-19 has been considerate and appropriate
but it needs to have a long-term purpose. It needs to help facilitate a transition back
to economic re-engagement and not become a permanent fixture given the haste with which it was cobbled together. If this is the start of a basic income program, it needs to be better designed. On the other hand, maybe this all just a lead up to calling a fall federal election.
