TD Economics: Government rolls up COVID-19 income measures

By Brian DePratto
Senior Economist      

Prime Minister Justin Trudeau held a press conference this morning to introduce a new COVID-19 response measure: the Canada Emergency Response Benefit (CERB). 

Introduced via legislation yesterday, the CERB replaces two measures introduced a week ago (see commentary) – the Emergency Care Benefit and the Emergency Support Benefit. The CERB is focused on income replacement and so doesn't require an applicant to have lost their job, but rather lost income for at least 14 days as a result of the pandemic. The CERB will deliver up to $2,000 per month, and up to 16 weeks of support will be available. At the maximum, the CERB will cover income lost between March 15 and October 3 of this year. 

The Prime Minister indicated that he hopes the application system will be ready for April 6, with payments expected to come 10 days thereafter.

Importantly, it appears that the CERB will be administered outside of the Employment Insurance (EI) system. The Department of Finance press release noted that "the EI system was not designed to process the unprecedented high volume of applications received in the past week." This should hopefully simplify the application process 

Finance Minister Bill Morneau also spoke this morning. He noted that under the new approach, the government anticipates that direct economic supports announced to date will total $52-billion, double the $27-billion figure previously communicated.

Key Implications

Simplicity is good, and broadening income supports to include those who have lost hours but are still formally employed is a welcome adjustment. Today's doubling of support measures should make it easier for all impacted workers to gain some support and so strengthens the bridge back to post-pandemic normality. 

And quite the gap it is – as discussed in our updated forecast, the Canadian economy is in the midst of a shock with no modern precedent. The pandemic response generates an economic hit that no business could have planned for, and so requires an economic response. Given both the Prime Minister and Finance Minister's language over the past few weeks, we expect more measures will be forthcoming.   

The key area that still needs focus are small and medium sized businesses. Today's measures, as well as supports offered via Business Development Bank of Canada and Export Development Canada should help ease the burden of assigning zero-hour schedules and similar techniques, but as noted by the Canadian Federation of Independent Business, the pain that small and medium sized firms are feeling is intense – we hope that additional measures to ensure that furloughed workers' firms still exist after the pandemic control measures are lifted will be forthcoming.