Cash and relief — fast
As the exponential growth in the number of Covid-19 cases starts to sink in, the exponential growth in the economic calamity is also becoming apparent. It is unprecedented in our lifetime. The potential destruction of individuals’ economic lives, security and well-being is staggering. As governments try to deal with the health emergency, they are also dealing with an economic shock unlike any they have ever felt.
Unlike any other economic downturn
The number of Canadians who applied for Employment Insurance was almost 930,000 last week, compared to 27,000 for the same week last year. And as staggering as those numbers are, they dramatically understate unemployment because over ⅓ of Canadians who were employed two weeks ago are contract workers or the self-employed. They aren’t represented in those numbers.
Millions of Canadians have less than a month of savings — and it is likely that hundreds of thousands of Canadians will not be able to pay their rent next month.
Thinking differently, quickly
Policies are being proposed that would have been inconceivable a month ago.
The most compelling policy ideas will be those that bridge us through the pandemic and stabilize the economic lives of Canadians immediately — to the greatest extent possible and with all the tools at our disposal. These have to be the immediate policy goals.
Medium-term and longer term economic stabilization and renewal efforts will come later. But the current crisis is serving to highlight the systemic vulnerabilities that have been highlighted for years. The sense of vulnerability that many of us are feeling today are experienced by gig workers and the self-employed every day due to policies that have not kept pace with the evolving labour market.
If you are still talking about “stimulus,” please stop. It isn’t the right framework and it misunderstands the problems we are facing. This type of crisis requires a new playbook.
A consensus is emerging that measures have to be large and fast and that we must find the quickest way of getting cash or relief (e.g. debt repayment pause, moratorium on evictions, etc.) into the hands of people who are at immediate risk of losing businesses or lodging, and into the hands of those who have suddenly lost their income.
There is also a consensus that we can afford a large effort. Even a $100 Billion — or 5 per cent of our national GDP — would take only about $1 Billion to service. The risk of doing too little and turning the immediate economic crisis into a longer term economic one is far larger than the risk of doing too much.
Delivering benefits — you can’t just flick a switch
The options governments can realistically deploy are also constrained by the systems that currently exist. Our Employment Insurance system covers only a fraction of workers, requires those workers to make proactive applications, and is already overloaded by demand. The Canada Child Benefit goes out to Canadian parents based on their income last year. We have no national data set that includes every Canadian.
Many good ideas will bump up against the reality of our current delivery mechanisms and data. Delivering something tomorrow, through government, that addresses 70% of a given problem will be more effective than rolling out something next month that deals with all of it. That’s especially true if not-for-profits can get their own funding to help fill the gaps for those populations they touch, where governments can’t.
We know that some of the programs are being rolled out slower than is ideal; we also know that everyone working on these things in Canada is working around the clock to roll them out as quickly as humanly possible.
The quickest instruments are the bluntest. Using the Canada Child Benefit and the GST rebate remain simple and useful vehicles to get money to people quickly, but many people who receive these benefits are facing catastrophic losses in income, while others are facing no loss in income at all. As tools get deployed, we will have to be really clear about which problems are being addressed and which people need different programs.
As governments experiment with many new approaches at once, some won’t work. Some money will leak away. Some people — even now — will find ways to run a scam. But waiting for perfect is not an option. And things are moving so quickly that ideas that get rolled out tomorrow may already be too little to address the issues that emerge next week.There will need to be differentiated responses for some sectors. Although small businesses in the tourism sector or the cultural sector face some of the same challenges as nail salons and pubs, there will be issues unique to each sector. We know Ministers and their departments are working now to craft responses to help.
Some groups are not receiving attention yet. In an online video meeting yesterday, Deena Ladd of the Workers’ Action Centre and Garima Talwar Kapoor of Maytree pointed to the many populations and groups — from migrant farmworkers to social assistance recipients — whose situations have yet to be addressed by the announcements to date.
The federal package
Federal, provincial, municipal and Indigenous governments are rolling out new initiatives every day. To understand what is going on, a good place to start is always the official source, and we encourage Canadians to check out the official documents being rolled out by their governments on a daily basis.
The federal effort, first announced on March 18, outlined initiatives to help stabilize the incomes of individuals and businesses. https://www.canada.ca/en/department-finance/economic-response-plan.html. The expansion of existing programs to the self-employed and those not covered by EI is particularly important. The extension of existing programs, like job sharing arrangements through EI, should have a material impact on the ability of businesses to retain some workers. And measures like eliminating the one week waiting period for EI will allow people to access cash immediately.
The Canada Mortgage and Housing Corporation is reacting in real time. Initiatives to make sure people don’t lose their homes — and parallel provincial efforts to ensure renters don’t lose theirs — will be particularly important. Stabilizing the housing situation for renters and owners is crucial to building an economic bridge through Covid-19. If people can’t pay their rent or mortgage and lose their home because of Covid-19, that would be a catastrophic policy failure with long-ranging consequences, some of which we saw in the United States when so many Americans lost their homes following the financial crisis of 2008.
Two new experiments are worth applauding. The Emergency Support benefit will provide up to $5-billion in support to workers who are not eligible for EI. A new 10% wage subsidy for businesses is an unprecedented new broad-based support. Both will likely need to be bigger, and implemented with great speed. (more on that below)
Policy community responses
Luckily, the Canadian public policy community is diverse and creative. In this first post, we will highlight some of the best work that has been done (Apologies if we missed you! Get in touch by e-mail or Twitter!), with a particular focus on those ideas designed to stabilize the economic lives of Canadians, businesses and not-for-profits and bridge them through the next few months.
Sending cash and relief fast
Tammy Schirle has lots of useful policy analysis and important tips for Canadians — like making sure the CRA has your accurate address and banking information to ensure you get the benefits you need.
Kevin Milligan has been doing a great job analyzing these proposals in real time on Twitter, outlining their rationale, and addressing plausible criticisms (here and here). His perspective is that the government was right to lean towards the use of existing mechanisms, even when they are imperfect, which he outlines in this CD Howe Institute memo.. There is concern that some of the initiatives will take too long to roll out — but realistically, there is no conceivable way that the government through the Canada Revenue Agency could roll out a program like emergency income support any faster than is being proposed.
Sean Mullin and Karim Bardeesy, in their Toronto Star op-ed of last week, make a call for a three-part framework to guide thinking on economic policy — first, send money to stabilize the situation; then, traditional stimulus; finally, work to adapt to a new economy that can thrive
Ken Boessenkool proposed an immediate Crisis Basic Income in Maclean’s to deal with the biggest economic challenge we face: the sudden loss of working income. As a way to stabilize incomes quickly, an immediate cash benefit could be very effective. It would not be as expensive as the immediate price tag, because some of these funds could be taxed back or clawed back through the tax system, if an individual’s income stabilized.
Jim Stanford does his quick analysis at Progressive Economics on the initial federal efforts . Stanford argues it is crucial that the federal government make stronger commitments that people and businesses will not be left destitute — and that this needed to be backed by strong actions. It goes without saying that this must be a policy goal and Jim states it forcefully, arguing that we need a moratorium on bankruptcies, foreclosures and evictions.
Business, not-for-profits, and other public services
There is rightly lots of interest in increasing the wage subsidy to employers beyond the 10% offered by the government so far, consistent with what other countries have offered. Many are concerned that there is not enough yet to stabilize small and medium sized businesses.
In Policy Options, Erin Millar, Teara Fraser, and Suzanne Siemens outline the challenges they are facing and document how easier access to more debt and small wage subsidies are not going to be sufficient to bridge businesses through the next several months.
Jon Shell pleads to not forget the kinds of small and medium-sized retail businesses that populate our streets and welcome customers face-to-face. He proposes specific measures to save business owners and their families from financial ruin. They are all intended to reduce and postpone expenses, including suspending commercial rent payments up to $10,000, suspending water and electricity bills, delaying collection of property taxes or remitting of sales taxes, and getting credit companies to delay payments and waive interest on corporate cards up to $25,000.
The implications for the charitable sector and not-for-profit organizations have not attracted as much attention, but the implications for thousands of community organizations that rely on donations are every bit as dire as the implications on small businesses that rely on foot traffic. These organizations provide vital services to Canadians and touch almost every aspect of life in our communities.
Rahul Chandran makes a simple plea in Maclean’s that every foundation with an endowment double the value of every current grant to a non-profit, and do so without any restrictions. Immediately. He points out that foundations know and support these organizations — and that they now need more money to support the people they serve
Brian Dijkema and Sean Speer argue in this CARDUS report that the federal government should match charitable contributions on a one-to-one basis. We would add that many of the income support policy proposals currently being considered to help SMEs are equally applicable to not-for-profits.
One policy area that risks neglect as policymakers attend to the health and economic aspects of COVID-19 is public education. Sam Andrey (also Director of Policy and Research at the Ryerson Leadership Lab) has some actionable prescriptions in The Toronto Star on how to re-direct resources, and attend to students and families on the wrong side of the digital divide.
We’ll conclude our round-up with some higher-level arguments around what a proper response to COVID-19 looks like, for governments and institutions.
Karim Bardeesy calls on leaders to make sacrifices, retool their institutions, and help their people to be their best selves on the Ryerson Leadership Lab website and in Corporate Knights / Future of Good.
Hearing from the community
We hope to source many more contributions from the policy community, and link to existing work, through this PolicyResponse.ca project. Get in touch by e-mail at email@example.com or reach out to us on Twitter at @PolicyResponse. You can also subscribe to our mailing list.
— Matthew Mendelsohn, Sean Mullin and Karim Bardeesy