Business groups are welcoming the federal government’s move to send monthly payments to workers who aren’t being paid by employers but haven’t been laid off. But they are warning that legal complexities could limit the program’s usefulness, and they argue that greater wage subsidies at the levels introduced in other countries – and paid to employers – are still needed.
Prime Minister Justin Trudeau said Wednesday, as he has for several days, that the government is considering suggestions for a significant increase in Canada’s 10-per-cent wage subsidy. For now, it is far lower than amounts being paid in Britain, Denmark and, most recently, Ireland.
With layoffs soaring to record levels and companies’ cash reserves shrinking, time is running short for the government to take action, said Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business. “Every day, there’s another wave of business closures.”
On Wednesday, Ottawa announced changes to emergency benefits, with the self-employed and workers who aren’t receiving wages but are still employed eligible to receive payments of $2,000 a month for the next four months.
That flat amount will benefit workers with lower wages, because it is not based on a percentage of lost income, as are Employment Insurance benefits. But for employees with annual pay above $44,000, the benefit will be smaller than Employment Insurance payouts, which top out at $572 a week.
Employers face murky legal terrain in attempting to stop paying employees without terminating their positions. Only Saskatchewan has passed legislation giving legal clarity to the question, Mr. Kelly said, adding that he is urging other provinces to follow suit quickly.
But the new program does not do enough to assist companies struggling to stay afloat, argues Trevin Stratton, chief economist for the Canadian Chamber of Commerce. The chief concern of many companies is cash flow, he said. “In many ways, it’s a liquidity issue.”
Employees with higher pay will also be significantly worse off receiving the emergency benefit than they would with a wage subsidy program similar to those being launched in Europe, Mr. Stratton said. There, the subsidy rates are much higher – Denmark’s rate is 75 per cent – and tied to median individual income.
Mr. Stratton suggested that a Canadian program could subsidize 75 per cent of wages to around the $65,000 mark, with employers topping up beyond that.
On Tuesday, Ireland announced its wage subsidy program, which will refund employers up to 70 per cent of wages during the pandemic, up to a maximum of €410 a week, the equivalent of $634. Companies must show at least a 25-per-cent drop in revenue, and are expected to make “best efforts” to fully maintain workers’ wages, although there is no outright requirement to do so.
In a statement, Canadian Manufacturers and Exporters said it backs Ottawa’s actions so far to help business, but more supports, specifically higher direct wage subsidies, are “desperately” needed. The association said that direct subsidies would reduce pressure on the EI system, and would make it easier for companies to resume operations.
Mr. Stratton echoed that view, saying that the pace of economic recovery will be slowed if large numbers of companies have to scramble to rehire workers. Delays could undermine hopes of a quick – often referred to as a V-shaped – rebound.
Instead, he said, widespread unemployment could impair aggregate demand and result in a sluggish economic recovery. “There’s going to be economic ramifications," he said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.