Millions of Canadians were waiting for the announcement – what would happen when the Canada Emergency Response Benefit (CERB) runs out?

The answer from the federal government came yesterday. To get us through to September, the CERB will be extended a bit longer – another four weeks. After that, about three-quarters of those in need of support will move to Employment Insurance. The federal government will be making it much easier to qualify for the benefits by requiring only 120 hours of insured earnings, compared to the previous minimum of 420, and will set a minimum benefit at $400 per week. I think low-wage workers hit hard in the pandemic will be happy.

Those ineligible for EI – which is mostly the self-employed, but also those who only recently entered the labour market – will be moved to the new Canada Recovery Benefit. This will offer a benefit of $400 per week while they are searching for work. While people become ineligible for the CERB if they earn more than $1,000 in the month they receive benefits, under the new benefit, having some extra earnings won’t mean people are cut off. Anyone earning less than $38,000 in 2020 won’t have their benefits reduced at all. If they end up earning more than $38,000, they’ll have to pay back some or all of the benefits at tax time. In particular, they’ll pay back 50 cents for every dollar of net income over $38,000.

Does this mean workers still affected by the COVID-19 shutdowns are well covered? I think it’s fair to say they generally are, but it will depend on individual circumstances. For those who haven’t found any work, the basic benefit is a bit lower – by $100 per week. But it looks like these workers will gain access to important training opportunities normally available to EI recipients. For anyone looking at a long road of unemployment ahead, it might be worth trying out a different path and taking advantage of such opportunities.

For those able to find some work, they will mostly be able to earn a lot more without losing their benefits. Allowing for earnings with a gradual clawback in benefits will make it more worthwhile to take any available work when it comes around. For the self-employed, it will also be easier to think about when and how benefits get clawed back. Unlike the average paid employee, they don’t get a paycheque that nicely lines up with a benefit period. They work, then they invoice, and at some point they get paid. Working this out over the 2020-21 calendar years will still pose some challenges, but this seems an improvement over the CERB.

The price tag for all this: A whopping $37 billion!

We should have a critical eye on every dollar spent during this pandemic. The new recovery benefits, the additional CERB, and some added costs to make EI manageable add up quickly. I expect to see our Parliamentary Budget Officer break that down for us.

But to judge this spending, we have to ask what would happen if we didn’t do this. We’d still have record numbers of people using our EI system, which would struggle to support them in a timely manner. We’d have record numbers moving to provincial social assistance programs, pushing a huge debt burden to provinces less able to take on that debt. But most importantly, we’d see many households taking on debt and being pushed into bankruptcy this year. That would push us into a demand-side recession, adding to the pandemic-driven shutdowns causing so many job losses. While $37 billion is a lot of money, it is my opinion that this is money well-spent.

 

Tammy Schirle is a Professor of Economics at Wilfrid Laurier University.

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