Economy can’t be restarted until COVID-19 assistance is sorted out

Bill Morneau is calling it the “safe restart.”

The finance minister says he has moved past the emergency response to the pandemic’s effect on the economy and is now fully engaged in how to switch from dousing the inferno with billions of dollars to sweeping up the ashes.

But in an interview about his strategy for next steps, Morneau wasn’t ready to call this stage “recovery,” and that’s a wise choice.

Before we can rebuild the economy, Morneau needs to redesign many of the key supports the federal government rolled out in the early frenzy of the crisis to make sure they don’t do more harm than good.

The virus is still with us, jobs are still precarious, unemployment is still rampant, and uncertainty is rife.

Morneau’s goal is to push people off the $500-a-week Canada Emergency Response Benefit, which has worked so quickly and so thoroughly to cushion the blow, and onto the government’s wage subsidy that covers 75 per cent of a struggling company’s payroll.

But such a switch will require a deep rethink of employment insurance and social assistance, plus how to get employers to play along, even if it’s not necessarily in their immediate financial interest.

All while keeping people safe from the virus.

“The challenge will be significant as we move into a safe restart, because there will be some people who will be in a much more difficult situation than they were before we had this crisis,” Morneau says.

Plan A is persuasion — encouraging employers to take back their workers and put them on the payroll, even if the economy is not in full swing. That way, workers have the security of a job to return to, and firms can ratchet up their work as health and safety allow.

In statements that would have seemed absurd just a few months ago, Prime Minister Justin Trudeau has taken to using his daily briefings to beg employers to bring back their workers and let the federal government foot the bill.

But the subsidy is not working exactly as hoped. To qualify, employers have to show a 30 per cent drop in revenues compared to a year ago. Then, the feds will pay 75 per cent of a salary up to a maximum of $847 a week, for up to 24 weeks.

Ottawa earmarked $73 billion for the program.

So far, just $8 billion has been spent — a lifeline for 284,038 companies, but not nearly what the federal government had in mind.

The emergency response benefit, on the other hand, has issued $41 billion in benefits to 8.25 million people so far, blowing past the government’s $35-billion estimate.

Why lay off workers instead of taking the wage subsidy? For some employers, it just doesn’t pay to keep the lights on, despite the federal offer — they don’t see a future.

For others, who laid off their staff before the wage subsidy was rolled out, it was just too late.

Now, Morneau is confronting another issue. As the economy slowly opens up, many companies would like to figure out how they can ramp up and make some money.

But if they make too much money, they risk losing their wage subsidies — even if they’re just making up for lost time due to the lockdown. So they may be tempted to simply stay closed until they can resume 100 per cent of their business.

“The wage subsidy should at least consider that challenge for them, not creating disincentives that would be inappropriate,” Morneau acknowledged.

“There’s a question obviously about the scale of the wage subsidy and whether that should be gradually changed, as opposed to changed all at one time.”

Even as he moves to redesign the wage subsidy, the finance minister and Employment Minister Carla Qualtrough are also puzzling through how to change the CERB so it doesn’t serve as an incentive to stay home from work if it’s safe, but also doesn’t get suddenly cut off for people who still need it, driving them into unsafe work or a state of destitution.

That means tying the CERB to employment insurance, Morneau says, but also to health and safety protections such as paid sick leave.

And since a significant proportion of those who qualify for the CERB aren’t eligible for employment insurance, it means taking a broader look at the whole range of income supports.

Otherwise, many people risk falling through the cracks, left to depend on social assistance (which is run by provinces) or take on unsafe work, labour leaders are warning the minister.

Plus, Morneau says, the adjustments need to be flexible enough to allow for different paces of restart in different provinces, and keep child care and transit requirements in mind.

Complicated doesn’t even begin to describe how all this will come together, so Morneau also has to build in room to manoeuvre. Mistakes will be made, and government officials need to be able to undo them.

Only once these supports are restructured for the “safe restart” can we even begin talking about a full and fair recovery. Those who are being consulted by Morneau figure he has about three weeks to sort it all out.

Heather Scoffield is a columnist with Torstar Syndication Services.

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