Business groups are urging the federal government to follow other countries by covering a big share of employee wages to stave off massive layoffs as the COVID-19 pandemic worsens.
“A wage-subsidy program is our best protection against large-scale unemployment,” said Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business.
“Without it I can’t see any way that Canada won’t add one million to the employment insurance numbers this coming week,” he said. About 500,000 applied for benefits last week. That’s the same proportion of job losses as in July, 1932, Canada’s worst month during the Great Depression.
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Goldy Hyder, president and CEO of the Business Council of Canada, agreed the country needs to reframe “the way we’re thinking about stimulus [into] a job preservation program."
He said business groups “are saying, ‘I want to do everything I can to keep my employees. The best model is, pay me to pay them,’ ” amid the widespread economic shutdown.
Several countries have introduced measures to partially cover wages rather than sustain mass layoffs as they ask citizens to stay home. Denmark and Britain have taken the most dramatic steps to pay salaries for employers that commit to keep workers on.
Denmark will cover 75 per cent of salaried workers’ pay, capped at the equivalent of $4,700 a month while Britain will cover 80 per cent, up to about $4,200. Several countries have made job protection a condition of support, including Sweden and New Zealand.
It’s part of an effort that has been likened to “freezing the economy” in place, with governments offering workers and employers the tools to offset the toll on their livelihoods from idling economy activity while they manage the pandemic’s peak.
“We need the government to take bold and decisive action and freeze our economy like the U.K. and Denmark have done," said Benjamin Bergen, executive director with the Council of Canadian Innovators, a lobby group for domestic technology companies that has urged Ottawa to backstop cheap bank loans to keep small and medium-sized enterprises afloat.
"The government needs to create wage subsidies that allow Canadian businesses to keep people on payroll so they are ready to fuel the economic recovery when the pandemic is over.”
On Sunday, Prime Minister Justin Trudeau, responding to questions about “freeze the economy” measures elsewhere, said, “We have not ruled out anything.”
He added that the $82-billion in federal assistance and tax deferrals announced so far were just a start. “We are continuing to talk about next steps, looking at best practices from around the world and what other countries ... are doing to ensure that our economy remains solid, if at a standstill, so that it can pick up again” when the crisis ends.
He cautioned “there is no one measure that is going to be sufficient. ... Yes, it’s obvious that companies that are able to keep people on the payroll longer will find it easier and not have to rehire later. ... These are the things that we are absolutely looking at."
As part of its economic response plan, Ottawa has said it will spend up to $10-billion on an emergency care benefit for sick or quarantined workers or those caring for loved ones who are sick with COVID-19, the disease caused by the novel coronavirus.
It announced a GST credit, emergency support benefits for those not eligible for employment insurance and $3.8-billion to cover up to 10 per cent of salaries for eligible small businesses, up to $1,375 for each employee over three months.
Ottawa promised $55-billion in tax deferrals for individuals and businesses while federal bank regulators boosted credit availability. Mr. Trudeau said Sunday that the House of Commons will be recalled on Tuesday to pass emergency legislation and put the plan in motion.
Mr. Kelly at CFIB said he was “optimistic” the government is considering a larger wage subsidy, “but for this to work, it needs to happen now, not after most employers trigger their layoff decisions."
He said his organization would ask its 110,000 members to push their MPs to lobby for it. Mr. Hyder at BCC said the wage subsidy shouldn’t cover everyone, but only those whose ability to work had been stopped by the pandemic.
For now, Neil Selfe, founding principal with Toronto boutique investment banking firm Infor Financial Group, said the only way he or many of his corporate clients facing plunging revenue could provide government aid to employees would be to lay them off so they can apply for EI.
The government “should be encouraging employment, not layoffs," he said. “I am gravely concerned we will see accelerating mass layoffs across all business categories beginning next week.”
Dave Samuel, managing partner with Birch Hill Equity Partners, a Toronto private equity firm whose 15 portfolio companies employ 40,000 people, said: “There needs to be something that is a blunter and clearer instrument that says to everyone, ‘stay in place,’ " for the time being, until the country can put in place an effective containment strategy such as South Korea’s.
“The carnage of millions of people being laid off and having to rebuild that will be multiple times more expensive than freezing the system and getting people back in place [later]. This is pull-the-fire-alarm time from a societal point of view.”
Shane Todd, a partner with Fasken Martineau DuMoulin LLP, which operates Canada’s largest national labour and employment law group, said many of his small- and medium-sized business clients have continued to pay workers after their businesses shut down this month.
But they can’t keep that up indefinitely and are desperate for more details from government, he said Sunday. “They’re making decisions day by day, based on how much money they have in the bank. And they’re hoping for more concrete relief measures."
How other countries are subsidizing employee wages during the crisis
Several countries are offering wage subsidies to employers affected by the novel coronavirus crisis, in some cases offering significant financial support contingent on businesses making every effort not to lay workers off.
Britain has said it will provide government grants to cover 80 per cent of furloughed workers’ salaries, up to a cap of the equivalent of about $4,200 a month. The country said it will place no limits on the amount of funding available, but said employees must be “kept on payroll, rather than being laid off.” Employers can top up the amount their workers receive.
The Danish government will pay 75 per cent of workers’ salaries (up to a cap of about $4,700 a month) in cases where employers say they have to either lay off at least 50 employees or 30 per cent of their work force. For hourly workers, Denmark says it will cover 90 per cent of their earnings, up to about $5,350 a month. Employees must take five days of vacation or time off work first and employers must cover the balance of what the government doesn’t fund. The plan, which will last for three months, is expected to cost the Danish government about $535-million.
The country is offering a flat-rate subsidy paid in one 12-week lump sum to help businesses avoid layoffs. It will pay about $480 a week for employees working more than 20 hours a week and about $285 for those working fewer than 20 hours. The maximum subsidy per business is about $120,000. To qualify, businesses must have experienced at least a 30-per-cent decline in actual or predicted revenue, must make best efforts to retain workers, and must pay them a minimum of 80 per cent of their normal income for the subsidized period.
The Swedish government has proposed a “short-term layoff” policy under which employees will receive up to 90 per cent of their regular wage while working reduced hours. The state will cover 75 per cent of the costs. “The aim is for affected companies to be able to retain their staff and rapidly gear up again when the situation improves,” the government said.
The United States
Two Democratic lawmakers have proposed a pair of bills to prevent layoffs that would allow employees to collect some unemployment insurance benefits to make up for lost wages. Those measures could face opposition in the Republican-controlled Senate, which is considering a separate economic stimulus bill released last week that includes direct cash payments for many Americans.
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