COVID: Some grants have been too generous, say economists | Coronavirus


COVID: some  subsidies have been too generous, say economists | Coronavirus

< p class="sc-v64krj-0 knjbxw">The Canada Emergency Response Benefit (CERB) was a success, but the Emergency Wage Subsidy (CEWS) was a failure, economists say.

< p class="e-p">Economists are mixed on financial aid for businesses during the pandemic.

While they believe that the programs for individuals have kept the most vulnerable out of the water, they believe that the assistance to companies has been too generous.< /p>

The Canada Emergency Response Benefit (CERB) has been a big success, according to New York University economics professor Miles Corak, but the Canada Emergency Wage Subsidy (CEWS) was a huge failure.

Mr. Corak agrees that the uncertainties faced by people and governments during this period must be taken into account in order to properly evaluate programs.

The Canada Health Benefit emergency made it possible to send money in time to allow people to stay in their homes, which the authorities wanted in order to save lives. On the other hand, the CEWS came too late, the program covered too many businesses and they were overprotected.

The CERB was instituted as early as March 2020. This program allowed eligible Canadians to receive $2,000 per month. Created a little later, the CEWS allowed companies to obtain a subsidy corresponding to 75% of the eligible remuneration paid to an employee.

Mr. Corak says that by the time the CEWS was implemented, a large number of companies had already laid off their employees.

Businesses that would normally have closed for reasons other than the pandemic have been artificially kept afloat by the wage subsidy program, believes Jennifer Robson, associate professor of political management at Carleton University.

These are not companies that could hope for a return to profitability, she argues.

Statistics Canada data shows a large number of closures in April 2020, but they have been steadily declining in the months that have followed, even reaching an even lower level than before the pandemic.

As a result, around 31,000 businesses closed in August 2020, compared to almost 40,000 in February of the same year.

According to Mr. Corak, the CEWS should have been narrowed down and aimed at the largest companies that had specific needs, those that had to keep their employees at all costs, such as airlines.

This is a view that the Canadian Federation of Independent Business, for which the CEWS has been crucial to small and medium-sized businesses, would not express. In April 2022, FECI reported that only two out of five of its members claimed to have returned to normal income.

Adrienne Vaupshas, ​​a spokeswoman for Finance Minister Chrystia Freeland, recalls that the government's objective was to protect jobs and ensure a strong economic recovery for the country.

Today, we have recovered 114% of the jobs lost during the darkest months of the pandemic, she points out.

Recent analyzes from Statistics Canada – based on census data – indicates that two-thirds of Canadian adults received benefits in 2020. These helped to offset income losses and reduce inequalities.

According to the federal agency, the use of the Canada Emergency Wage Subsidy is associated with a lower probability of closure and less pronounced job losses.

< p class="e-p">The CEWS has set a dangerous precedent, says Miles Corak, who points out that by subsidizing children too generously companies, you can put a brake on innovation.

We are more focused on a basic income for small businesses than on a basic income for individuals.


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