Liberals announce changes to $80B wage subsidy program in effort to improve accessibility

OTTAWA — Finance Minister Bill Morneau announced changes to the federal government’s key wage subsidy program on Friday, introducing a more flexible payout system that had long been recommended by industry groups.

The tweaks to the Canada Emergency Wage Subsidy (CEWS) remove a major threshold that business representatives said had excluded many firms from applying for the program.

Companies were previously compelled to prove that their revenues had fallen at least 30 per cent over the last year in order to apply for the CEWS, designed to cover 75 per cent of wage costs in an effort to keep people employed. Changes announced on Friday remove that stipulation, and will instead introduce a scaling mechanism in which subsidies are more directly commensurate with revenue losses.

Successfully adjusting the CEWS program, now expected to cost $82 billion, represents one of the larger challenges facing Prime Minister Justin Trudeau this summer as government seeks to wean Canadians off of support programs and usher them back into the workforce.

Industry groups had been calling for months for changes to the wage subsidy, which has seen a much lower-than-expected uptake. So far, Ottawa has so far spent just $18 billion out of the initial $73 billion that it had set aside for the program.

That has in turn caused millions of people to instead funnel into the Canada Emergency Response Benefit (CERB), which provides $2,000 per month to the unemployed. Ottawa is now seeking to move those same people back into the CEWS program as provincial governments gradually reopen their economies, and as companies begin rehiring.

The new scaling design is likely to satisfy lobby groups, who had complained that the wage subsidy program broadly failed to appeal to companies. Many firms whose revenues had grown sharply ahead of the COVID-19 pandemic, for example, were excluded from the CEWS. Other firms who had recently underwent a merger or acquisition often didn’t meet the program criteria.

The new alterations to CEWS effectively open up the program to any company whose revenues have dipped even a single percentage point below pre-virus levels.

The Canadian Federation of Independent Business, in a June 10 letter to Morneau, said eligibility for the CEWS could be broadened by “introducing a sliding scale, where firms would be able to qualify for a smaller wage subsidy with smaller revenue losses.”

Trudeau earlier this week extended the wage subsidy until the end of the year, while CERB has been extended into October.

The stakes of the CEWS adjustments are high. In his fiscal update on last week, Morneau announced that Canada is likely to run a $343 billion deficit in 2021, or roughly 16 per cent of GDP. The eye-watering number is largely a result of CEWS and CERB, whose combined price tag is now $160 billion.