Ken Boessenkool is a public-policy economist with a long history in Canadian politics.
The biggest economic policy challenge we face during COVID-19 is addressing the massive and widespread loss of work prompted by government-mandated physical distancing. That’s not to minimize other such challenges, but the loss of work is vast and unprecedented.
To its credit, the federal government’s three-pronged response has not been tepid. First, the existing Employment Insurance (EI) program catches a portion of those who lose their jobs. Second, a new Canadian Emergency Response Benefit (CERB) that works through our tax system is intended take care of the 45 per cent of Canadians who who lose their jobs and don’t qualify for EI. Third, the government will institute a 75-per-cent wage subsidy to be paid to small- and medium-sized businesses to encourage those firms to retain their employees.
But there are three major reasons why proactively sending a direct deposit or cheque to the 28.5 million Canadians who filed income taxes last year – a Crisis Basic Income, as I have proposed in these pages and elsewhere – remains a more effective and efficient plan.
The first is administrative. While I pray they succeed – and I continue to cheer on our civil service, as well as our health professionals – administration of the three-pronged response will stretch our physically isolated public service to the breaking point. All three programs are application-based and will require some level of human oversight. Nearly 1 million EI applications were filed between Mar. 16 and Mar. 22. The government has said that it is expecting 4 million CERB applications. There are more than a million businesses with fewer than 100 employees in Canada.
Jennifer Robson, an associate professor of political management in the faculty of public affairs at Carleton University, has raised flags about the cheques-to-everyone approach, including errors in the Canada Revenue data set because people move or change their personal situation; lags in sending cheques; and gaps for those who don’t file. But I believe an automatic Crisis Basic Income will lead to fewer errors, lags and gaps than processing and verifying 6 million applications across three programs – two of them new.
Second, the Crisis Basic Income can function as an indirect wage subsidy for firms. Automatic payments represent a decentralized approach – firms could reduce pay or hours by some or all of the $2,000 for each employee on payroll – versus the top-down centralized administration envisioned by the current wage subsidy.
Third is the big one: undershooting gaps. There are 30.5 million Canadians over the age of 15, and 20.0 million Canadians in the labour force (working or looking for work) in February. A Crisis Basic Income a) would cover the vast majority of Canadians who are working, b) is automatic rather than application-based, and, c), payments can be added to income and taxed, or clawed back directly when Canadians file their taxes next year. In short, the broad Crisis Basic Income approach overshoots today and reconciles later, while the three-pronged plan creates potential gaps for those who don’t neatly fit any of the proposed programs neatly.
Our local auto-repair shop has reduced operations to two days a week. Their employees are working, so won’t qualify for EI or CERB. And the wage subsidy would only cover two days of wages, not five. Neither program appears to fill the gap between two and five days of work. A Crisis Basic Income would.
Or look at self-employed freelancers, many of whom haven’t set up a Canadian Controlled Commercial Corporation and operate without a GST/HST number, both of which measures are required for the current wage subsidy. They won’t qualify for a wage subsidy or the CERB if they keep working or if they work less. But they would get a Crisis Basic Income cheque.
Or consider a retailer split between franchised and corporate stores. Detailed wage subsidy rules are not yet available, but the government has said the subsidy will be based on a drop in sales of at least 30 per cent. Will this be calculated by store? By region? By company? We could end up with Kim’s boss at a franchised store getting a wage subsidy, while Chris’s boss at a corporate store down the street does not. They would both get Crisis Basic Income.
We simply do not know how deep and wide the current economic dislocation will be. We cannot forecast with accuracy which particular groups of Canadians will face an immediate economic loss – we only know it will be large. Canada therefore needs a policy that overshoots by design – a policy that is as universal as possible.
Undershooting means trying to figure out who needs help now. Overshooting means figuring out who needs help later.
In normal times we would, and should, do the former. But in a COVID-19 world, we can, and should, do the latter.
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