$80B CERB program may hamper recovery by being a disincentive to work, provinces warn

OTTAWA — Provincial leaders are warning that the Liberal government’s key COVID-19 financial support program could hamper economic recovery by providing a disincentive to work.

Officials in three provincial offices told the National Post that finance ministers and economic development ministers in more than six provinces have raised concerns during private calls in recent weeks about the current structure of the Canada Emergency Response Benefit (CERB).

Those concerns largely match with public statements made by various premiers, who have warned that the private sector has struggled to rehire some workers due to the hard eligibility cut-offs under the program. Others worried that Ottawa might extend CERB beyond its current August deadline.

Discussions about CERB come as Prime Minister Justin Trudeau seeks to tweak his government’s two main financial aid programs, part of an effort to transition people back into the workforce.

The Liberals last week announced changes to the Canada Emergency Wage Subsidy (CEWS), a major step in the economic reopening that was broadly supported by industry groups. The changes to CEWS effectively widened access to the wage subsidy and tied the size of subsidy payments directly to a company’s revenue losses.

Many observers are calling for a similar adjustment to the CERB program, which provides $2,000 per month to the unemployed. Workers who make more than $1,000 per month are currently cut off from the program entirely, which has caused some part-time and lower-wage workers to decline work, according to business owners.

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A recent survey by the Canadian Federation of Independent Business, which represents 110,000 small and medium-sized businesses, found that 27 per cent of respondents had encountered workers who “refused to return to work when recalled.” Of those who refused to return, 62 per cent cited a preference to stay on the CERB program, according to the July 16 survey.

Respondents also cited physical health concerns (47 per cent) and worries over childcare obligations (27 per cent).

The lobby group found a “significant challenge for employers in rehiring or finding the workers they need to safely reopen their businesses,” according to a summary of the survey.

Ottawa has spent $60 billion on the CERB as of July 12, providing financial aid to more than eight million Canadians. CERB and CEWS together are expected to cost $160 billion, by far the largest sum of COVID-19 direct spending measures unveiled by the Trudeau government since March. It is expected to post a 2021 deficit of $343 billion.

Observers are widely in agreement that the CERB program was required as a temporary holdover after the economy was locked down earlier this year. But some now say it has surpassed its initial intention and increasingly needs to be phased into a “scaling” structure.

In a research note last week, BMO economists said a prolonged CERB was a “key risk” to Canada’s economic recovery. The C.D. Howe Institute, a think-take, had been arguing as early as April that Ottawa would have to begin planning ahead on the program, and consider ways to gradually wind down or otherwise adjust it. Conservative finance critic Pierre Poilievre has claimed CERB is having a “tranquillizer” effect on workers.

Among provincial leaders, Manitoba Premier Brian Pallister has been among the most outspoken critics of the CERB in its current form, and has been lobbying for adjustments.

“I think it’s common sense and long overdue that we remove these impediments to people going back and taking another shift,” he said in a press conference last week.

Manitoba in June introduced its $2,000-per-month Manitoba Response Benefit (MRB) as an alternative to CERB. It is designed to provide funds to eligible residents regardless of their work income, which could in turn spur a return to work, the government has said.

Speaking to reporters earlier this week, New Brunswick Premier Blaine Higgs called the CERB “a temporary stopgap measure that has made it difficult” to lure some workers back into the workforce, particularly in the meat packing industry. He said people will have to “look out beyond this year” and he encouraged them to take a longer-term approach to their work prospects.

Alberta Premier Jason Kenney has also raised concerns over the CERB program in its current form, telling Global News in an interview earlier this month that it threatened to keep workers at home as the pandemic restrictions stretch into their fifth month.

“In the last couple of weeks, I keep hearing from employers in every sector — manufacturing, construction, hotels, tourism, restaurants and the service industry, the hospitality industry — telling me that they’re having a hard time recruiting workers as the economy is reopening,” he said.