On March 18, Prime Minister Justin Trudeau unveiled a stimulus package aimed at helping Canadian workers and businesses survive the severe economic downturn caused by the new coronavirus pandemic. The stimulus package – which includes $27-billion in emergency aid for workers and businesses and $55-billion in tax deferrals – will inject billions of dollars into businesses to help with their cash flow and to keep workers on the payroll, even if they have been sent home, while bolstering federal benefits and support programs for people who have lost their jobs.

“There are many families across this country who are looking at their sources of income drying up because of COVID-19,” Mr. Trudeau said. “Many workers do not qualify for EI. Therefore, we are putting in place exceptional measures that will flow money to them every two weeks.”

Highlights of the Emergency Aid Package

  • $10-billion Emergency Care Benefit – to provide $450/week for 15 weeks, for quarantined or sick workers, or for parents who must stay home to care for their children due to school closures
  • 5-billion Emergency Support Benefit – to provide funding to recently unemployed Canadians who do not qualify for EI
  • Small business owners will receive a temporary wage subsidy equal to 10% of salary paid to employees for 3 months
  • Taxpayers will not have to file their returns this year until June 1 and can defer any payments until after Aug. 31
  • Existing payments through the GST credit and Canada Child Benefit will be increased through May
  • Six-month moratorium on repayment of student loans
  • $157.5-million for homelessness programs
  • More than $300-million for Indigenous communities
  • Export Development Canada will provide support for Canadian companies hit by the COVID-19 crisis
  • Farm Credit Canada will receive additional funds to help farmers

The $82-billion package in federal support was hastily put together over the past few days in place of a federal budget that had been planned for March 30.

Alberta Premier Jason Kenney called the federal announcement a “very good first measure,” but he warned that the Canadian economy, and specifically his province’s oil-and-gas sector, will need considerably more help than what was announced on Wednesday. He said he’s confident the federal government has heard that message.

Finance Minister Bill Morneau said he is working with the airlines and oil and gas sector on specific measures to help them through the difficult times. The energy sector is reeling from crashing oil prices, with U.S. crude hitting 18-year lows at one point.

Previously, Ottawa pledged $1-billion in funding for health research and aid to the provinces, as well as $10-billion in new credits to backstop businesses. It also announced $300-billion in liquidity measures through the Office of the Superintendent of Financial Institutions and committed to buy up to $50-billion in mortgages to allow banks to continue to lend.

Business Groups Press Ottawa to Pay Wage Subsidies to Avoid Mass Layoffs

On March 19th, sources told the Globe and Mail that the federal government was developing additional lines of support for Canada’s small and medium businesses. The measures, which are expected to include additional credit facilities for cash-strapped businesses, would be in addition to the emergency stimulus package already announced – which fell short of some economists’ and business’s expectations.

Business groups are urging the federal government to follow other countries by covering a big share of employee wages to stave off massive layoffs as the COVID-19 pandemic worsens. “A wage-subsidy program is our best protection against large-scale unemployment,” said Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business.

“Without it I can’t see any way that Canada won’t add one million to the employment insurance numbers this coming week,” he said. About 500,000 applied for benefits last week. That’s the same proportion of job losses as in July, 1932, Canada’s worst month during the Great Depression.

The Canadian Federation of Independent Business and the United Steelworkers union in separate statements on March 24 say the Liberals’ proposed help to offset payroll costs doesn’t go far enough to save jobs.

The CFIB is calling on the government to increase the subsidy to 75% (up from the proposed 10%), capped monthly at $5,000 per worker, while the Steelworkers want it increased to 80% as is being done in the U.K.

Several countries have introduced measures to partially cover wages rather than sustain mass layoffs as they ask citizens to stay home. Denmark and Britain have taken the most dramatic steps to pay salaries for employers that commit to keep workers on.

The small business group says about one-third of its members are worried that they won’t survive more than a month under the current economic conditions. CFIB says most of its members have seen a sharp drop in sales, up to 75% in some cases, with the average hit around $136,000.

Source: Globe & Mail
Source: Globe & Mail
Source: Globe & Mail
Source: Financial Post