Finance Minister Chrystia Freeland said last week she was consulting with Prime Minister Justin Trudeau, government policy experts and business leaders on whether to end pandemic programs.

Sean Kilpatrick / The Canadian Press

A Canadian economist who served as a social policy adviser to the federal government said Finance Minister Chrystia Freeland should ignore the opposite advice from the business lobby and end the federal wage subsidy.

With a total estimated cost of $ 111 billion, the Canada Emergency Wage Subsidy (CUSS) was the most important part of Ottawa’s $ 286 billion in direct support measures during the COVID-pandemic. 19. The grant provides money directly to companies whose revenues suffered during the pandemic, to cover part of their employees’ salaries.

The program has been adjusted and extended several times. The latest extension, approved just before the federal election campaign, postponed the grant expiration date to Oct. 23.

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“The Department of Finance should not extend the Canada Emergency Wage Subsidy. Its time is over, ”said Miles Corak, a professor in the economics department at the City University of New York, who this week published an article in which he argues that the SSUC was ill-conceived and should not be renewed.

Professor Corak specializes in the analysis of federal work support programs such as Employment Insurance (EI), and he spent time in 2017 as an Economist in Residence at the Federal Department of Employment and of Social Development.

The paper has been reviewed by other academics who have provided economic policy advice to the federal government in recent years, including Kevin Milligan of the University of British Columbia and Jennifer Robson of Carleton University.

Other pandemic support programs set to expire on October 23 include a rent subsidy program for businesses, as well as several programs that provide financial assistance directly to people unable to work for reasons related to COVID-19. .

Ms Freeland told reporters last week that she had consulted Prime Minister Justin Trudeau, government policy experts and business leaders on whether or not to end the programs.

The minister’s office said in a statement Monday that the government “will announce next steps soon.”

Canadian Labor Congress president Bea Bruske told The Globe and Mail she spoke with Freeland on Monday about the expiring programs. Ms Bruske said that while the wage subsidy can be helpful, the CLC’s priority is an extension of direct supports to individuals.

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“I am cautiously optimistic,” Bruske said, adding that the minister had not made it clear whether any of the programs would be extended.

Opposition MPs have argued that the issue of extensions is of such importance that Parliament should sit as soon as possible, but Trudeau announced last week that the first meeting of the House of Commons since the September elections would not take place until November. 22.

Professor Corak’s article says calls from corporate lobby groups for an extension of the SSUC are flawed and that the existing EI program can handle the remaining labor difficulties in the Canadian economy.

In an interview on Monday, Professor Corak said there was a stronger argument for the wage subsidy at the start of the pandemic, as the EI system was largely overwhelmed and the government was under pressure. to find an alternative. But he has now said that the EI program has been improved, and now that employment levels have rebounded and the shortcomings of SSUC policy are known, the federal Liberals should resist pressure to announce a another extension.

“The biggest failure of the program was its inability to target funds where they were needed most,” he said. “Many, many companies received a lot of money that was not needed. He supported the businesses that were not going to close and he stopped many businesses that would have closed anyway. “

Professor Corak’s article builds on previous criticisms of the SSUC by other economists, including Michael Smart of the University of Toronto, who estimated that every person-month of employment supported by the SSUC has cost the government $ 25,000.

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“Income support of this magnitude paid directly to affected workers would likely not be seen as politically acceptable by informed citizens, and it is therefore difficult to imagine that the program would pass a reasonable cost-benefit analysis,” says Professor Corak. in his article. He also says that the influence of the small business lobby “may have shaped a less than optimal response.”

Alla Drigola Birk, director of parliamentary affairs at the Canadian Chamber of Commerce, said while the design of the wage subsidy may have been too broad at first, the situation was unprecedented and the government needed to act quickly.

“The decline is still 20 to 20,” Ms. Drigola Birk said. “The objective of these policies was to prevent a catastrophic collapse of our economy.”

She said extending the program only to hard-hit sectors that are still affected by public health restrictions, such as restaurants and hotels, would be good for the economy and respect the government’s fiduciary responsibility.

The SSUC has evolved over time. It was originally designed to provide a subsidy of up to 75 percent of the first $ 58,700 earned by an employee. The percentage of the benefit was proportional to the degree of loss of income by a business. The subsidy ceiling has since been reduced to 20 percent.

Dan Kelly, president of the Canadian Federation of Independent Business, said that while the first version of the program was too generous, it became less of a problem in the summer of 2020 when grants were put on a sliding scale.

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“This ended all giant subsidies for companies with temporary losses and ensured that all subsidies were proportional to the loss of income,” he said.

He said the program was initially compromised by a delay of several weeks in implementation, which meant many companies were laying off workers before the grant was announced.

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