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March 19, 2020 0 Comments

Ottawa’s COVID-19 bailout package is a good start but experts say more is needed

OTTAWA—The federal government’s $27 billion aid package to individuals and companies battered by COVID-19 is a good start but refinements are needed to ensure help for all those caught in the turmoil and unemployment sweeping the economy, experts say.

Changes to employment insurance — largely absent in Wednesday’s announcement — top the wish list of unions and advocates who say systemic problems will shut out many who need help. Small businesses want a wage subsidy program made more generous. Seniors and students are hoping the government doesn’t leave them out.

And there’s a call on Ottawa to communicate clearly how Canadians can access the income support programs.

This as economists struggled to find ways to describe the economic damage wreaked by the virus, which has forced the unprecedented shutdown of businesses.

Indeed, just hours after Finance Minister Bill Morneau unveiled the government’s aid package Wednesday, automakers announced they were halting production for a week. That industry employs 40,000 assembly workers in Ontario, plus another 75,000 at auto parts manufacturers, according to Unifor, which represents many of the employees.

“It’s bad. Like, real bad,” Unifor President Jerry Dias told the Star. “I’d be very surprised if they are up and running in a week.”

Paused assembly plants are just the latest industry hit as airlines slash flight schedules, bars, gyms and theatres all go dark and the economic life of the nation slows. Ottawa’s package this week was aimed at getting money to affected individuals and keeping credit available for businesses. It’s not a perfect plan but economists say it was critical the federal government get a fiscal strategy out the door.

“This is a good start, What we were looking for was the government to move fast and go big,” said Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives.

She praised the government for using existing mechanisms, such as enhanced payments through the Goods and Services tax credit and the Canada Child Benefit, as a quick way to get money out the door.

The centre had urged the government to make changes to the employment insurance program – reducing the number of working hours to qualify, setting a minimum payment and raising the maximum payout — to make it easier to access and more generous.

The government did waive the one-week waiting period for individuals in quarantine seeking EI sickness benefits. And it waived the requirement for a medical certificate. But it stopped short of broadening access to EI for those who are underemployed, all long-standing problems that predate the current crisis, Block said.

“All of those features of the existing EI program that should have been addressed weren’t,” she said in an interview.

Instead, the government has created two emergency funds to assist those who don’t qualify for employment insurance, one aimed at unemployed workers and the other to assist those stuck at home due to illness, self-isolation or looking after children.

Now the onus is on the government to tell Canadians more about these benefits, she said. “What they are eligible for, how to apply for them and having adequate numbers of public servants to answer those questions I think is going to be the next crucial step,” Block said.

Dias called the package “balanced” and praised the government for acknowledging that it is only a first step in addressing the economic fallout. “There was a recognition that once we get through this, we’re going to have to spend,” he said.

Like Block, he said the government should have done more on the EI front, such as waiving the one-week waiting period to collect payments for unemployment rather than sickness. He said the qualifying hours needed to get EI should be eliminated.

“There’s a lot of vulnerable workers out there, hospitality industry, tourism and retail sectors,” he said. “The key piece in this and what we advocated for was how do you get people money that don’t qualify.”

“Overall, it was very good but did it have some omissions? The answer is yes,” he said.

Prime Minister Justin Trudeau said the government would be working with public servants to get the funding programs up and running quickly.

“The help for Canadians will be flowing in the coming weeks. We recognize that this is a difficult time both in terms of getting these new programs in place quickly enough to help Canadians,” he told reporters Thursday.

Yet some businesses are hitting a wall trying to access the $10 billion in new credit made available last week through the Business Development Bank of Canada and the Export Development Canada, the NDP said Thursday.

Two NDP MPs are appealing to Deputy Prime Minister Chrystia Freeland to change the eligibility after learning that businesses are prohibited from applying if liquor makes up more than 50 per cent of their sales. With the hospitality industry hit hard by the government-ordered shutdowns, this restriction would appear to shut out many of the businesses that need help.

“The current restrictions punish these business owners in the food and beverage sector who surpass the alcohol sales threshold,” MPs Jenny Kwan and Gord Johns wrote in their Thursday letter. “This policy needs to change to allow access to this essential funding.”

The six-month, interest-free moratorium on payments to the Canada Student Loan Program was applauded by the Canadian Alliance of Student Associations. “Extending it to six months I think shows a lot of foresight into how long this pandemic could last,” association chair Adam Brown said in an interview.

With the economy in turmoil, students are concerned about summer job prospects and with it, needed income for tuition and living expenses. That could become more pressing if retail closures are prolonged. “As the situation evolves over the summer we’ll probably be in a better situation to assess what the needs of students will be going into September,” Brown said.

Seniors are worried by the sharp downturn in the stock market that has hit their savings. The government has reduced the mandatory withdrawal for registered retirement income funds. But Trudeau suggested Thursday that more help may be on the way, acknowledging the “anxiety” caused by the turmoil.

“We recognize that the market disruptions are massive and many Canadians have seen their retirement savings and pensions reduced significantly. We will be taking measures to ease the impact of that,” he said.

The Canadian Federation of Independent Business praised some of the measures but said the promise of a wage subsidy to encourage small employers to keep employees on staff was too small — promising just 10 per cent of an employee’s wage — to be effective. The organization is already encouraging the government to make it more generous, pointing to jurisdictions like Denmark that subsidize wages up to 75 per cent to avert layoffs.

Craig Alexander, chief economist at Deloitte Canada, said the government’s focus has to be getting money to individuals and ensuring credit is available for businesses which are going to “burn through cash resources very quickly.”

But just as importantly, he said it was essential that measures got rolled out quickly — even if more is required down the road — to assure rattled individuals and businesses.

“In the current environment, fear is our biggest enemy. Fear and anxiety on the part of workers and businesses is going to make this much worse,” Alexander said in an interview. “The government’s actions reduce the environment of fear. This is also why you don’t want to wait.”

He noted, for example, that the government has yet to detail targeted help to sectors of the economy especially hard hit — such as the airline industry — though assistance has been promised. “I don’t think that was an omission. I think it’s taking longer to design,” he said.

He said a large contraction in the economy is unavoidable in the second quarter but said economists foresee a potential rebound later in the year, though they are divided whether it comes in the third or fourth quarter. Of course, that hinges on containing the virus.

“Without containment, this will drag on longer and longer. By paying the cost of the economic pain today, we actually set ourselves up for the virus burning itself up and getting to the other side,” Alexander said.

“What we need to stress to people is that this will pass. And when it passes, we are going to have an enormous rebound in economic activity,” he said.

Bruce Campion-Smith is an Ottawa-based reporter covering national politics. Follow him on Twitter: @yowflier

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