Businesses risk 'double whammy' with COVID-19 benefits ending, economist says
TORONTO -- Canadian businesses risk a “double whammy” of potential labour shortages and a fall in consumer spending due to COVID-19 benefits ending Saturday, an economist says.
On Thursday, Prime Minister Justin Trudeau and Deputy Prime Minister and Minister of Finance Chrystia Freeland announced that, on Sunday Oct. 24, the Canada Recovery Benefit will be replaced with the Canada Worker Lockdown Benefit.
The new Worker Lockdown Benefit, available until May 7, 2022 and retroactive to Oct. 24, will give $300 weekly to those whose workplaces are closed due to government-imposed lockdowns.
The Canada Emergency Wage and Rent Subsidies will also be replaced by the Hardest Hit Business Recovery Program, available until May 7, 2022, which will provide similar wage and rent supports but only for businesses that can prove they experienced a 50 per cent revenue loss over the first 12 months of the pandemic.
The new Hospitality and Tourism Recovery Program applies to such businesses as hotels, bars, travel agencies and festivals, and requires applicants to show an average monthly revenue loss of at least 40 per cent for the first 13 qualifying periods of the Canada Emergency Wage Subsidy and a revenue loss of the same amount in the current month.
Freeland reminded Canadians during the announcement Thursday, that the measures and benefits were always meant to be a “temporary.” The changes in benefits come with a price tag of $7.4 billion.
“We’re moving from the very broad-based support that was appropriate at the height of our lockdown to more targeted measures that will provide help where it is needed while prudently managing government finances,” she said.
More than 200,000 business owners have leaned on the Canada Emergency Rent Subsidy and more than 450,000 have received benefits from the Wage Subsidy. More than two million Canadians have applied for the Canada Recovery Benefit and, as of Oct. 10, the government had paid out $27 billion to them.
Senior economist for Capital Economics Stephen Brown said on CTV’s Your Morning Friday that Canadians and businesses losing the benefits could feel the effects on two fronts.
“When we talk about how this is going to affect the economy, there’s really two parts to it – for these people [who were on CRB] they’re going to see their income drop back down, and it’s a lot of people - 800,000 were receiving the CRB last month - and on top of that, people who were receiving employment insurance will also likely see that come to an end,” Brown said. “So from September to November, more than a million people are likely to lose access to these benefits and that’s a significant hit to household income.”
Brown said that ending the current benefits he described as maybe “too generous for long term,” and replacing them with benefits under more stringent requirements “could help relieve some of these shortages that we’re finding.”
“A lot of restaurants in particular are struggling to hire at the moment and that could be because that these benefits are changing the incentives for people to come back to work,” he said. “If that’s the case then we could see some of these labour shortages ease.”
Brown said economists analyzing how the end of certain benefits could effect the economy have to look at many variables.
“It’s what’s called a ‘downside risk,’ and one of the things that is difficult for economists to gauge is exactly the role these programs have had in supporting the economy,” Brown explained, adding that Canada has had a stronger recovery than most were expecting because of consumer spending.
“But we just don’t know the gauge of this decision, if we take away these benefits now, is that going to cause a sharp fall in spending at restaurants and retailers? At the same time are some of these businesses are seeing their benefits falls back,” he said. “So we do risk a bit of a ‘double whammy’ for these businesses over the Christmas period, particularly if we were to see a new wave of the coronavirus. Because even though we have these schemes to help them, they don’t offset all of the risks.”
Bea Bruske, President of the Canadian Labour Congress told CTV News Channel that the government should continue the benefits and pandemic supports.
“Our take really is the individuals working in those businesses also need their supports to continue,” Bruske said Friday. “The Canada Recovery Benefit that currently benefits more than 821,000 workers in Canada will come to end tomorrow, and that means that those workers are going to be left without the financial supports that they need in order to pay their bills, pay their rent and buy their groceries.”
With Ontario mulling lifting capacity limits and presenting its step-by-step plan for easing out of its COVID-19 framework Friday, Bruske said while some may think it will help businesses get back on their feet and pick up revenue – it presents new challenges and concerns for workers.
“If capacity limits are lifted, will employers be enforcing distancing? Are we going to make sure that masking is enforced?” she said. “If you’re an individual going into a forward-facing, public sector type of workforce where you’re dealing with customers coming in… workers have a decision to make whether or not they’re going to be feeling comfortable going to work in those kinds of jobs, based on what’s happening, based on what the numbers are looking like, how their employers are responding to these issues.”
CEO and President of Restaurants Canada Todd Barclay said on CTV News Channel Friday that the discontinuation of the previous benefits and the implementation of more targeted, stringent ones will affect Canadian businesses.
“It will affect us, quite drastically in fact,” he said. “Effectively what’s happened here, is many restaurants across the country, based on the announcement yesterday, have been handed a death sentence.”
Barclay said seven out of 10 restaurants in Canada to date are using the subsidies to “stay alive” and that 50 per cent of them will no longer be able to take advantage of them based on the new criteria.
“Many restaurants are operating at 20, 30, 39 per cent reductions in revenue,” Barclay continued. “And because of the thresholds, they will no longer be able to receive any type of subsidy. That’s why I’m saying these new programs are a death sentence for tens of thousands of restaurants across the country and hundreds of thousands of employees.”
Barclay said it was encouraging for the new benefits to be in place through the winter into the spring, but he said his industry will be trying to work with the federal government to lower the thresholds so that more restaurants can take advantage of them.
“Give us a chance to survive,” Barclay said.
Bruske also said that people may hesitate coming back to work for safety reasons, but also because of the lack of full-time and well-paid positions.
“We know that while some of the jobs may be returning, the full hours of work certainly aren’t,” she said. “So when employers are only able to offer only part-time or very fluctuating hours of work that also means that the workers have to make a decision over whether or not they can take that job or hold out for something more permanent or more consistent in terms of their paycheque.”
Bruske said that the Canadian Labour Congress is concerned the loss of benefits will also mean job losses, and that they are hoping the government will prioritize the plight of workers when Parliament resumes.
“We are hoping that when government finally reconvenes at the end of November that things like employment insurance changes are going to be front and centre of the priority list, making sure we have funding for skills training is going to be front and centre,” she said. “And that we get childcare organized so that workers can get childcare in place so they can get back to work.”
With files from CTVNews.ca’s Sarah Turnbull