Canada’s economic measures miss opportunities for change, say progressive economists

The pandemic has shown the need to decommodify key sectors like housing
Photo: Ted McGrath
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An “acronym soup of emergency benefits” — as economist David Macdonald puts it — has rolled out in Canada over the past two months. For many, it’s been tough to keep track of all the economic measures implemented since Canada’s response to the COVID-19 crisis began in mid-March.

The measures adopted up to now are “unlike any other relief that we’ve seen in past economic crises,” says Armine Yalnizyan, an economist who is currently the Atkinson Fellow on the Future of Workers. Past relief measures focused on getting people back to work, she says, while these ones are meant to allow workers to stay home.

Large sections of the economy that are considered non-essential have been deliberately shut down to prevent the spread of the virus.

“The traditional idea, which is that we’ll go out and build some bridges to deal with a recession, those principles don’t apply in this case,” says Macdonald, a senior economist at the Canadian Centre for Policy Alternatives.

Progressive economists agree that the crisis has created opportunities for transformation — if only governments would respond to them.

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‘Stuck in the neoliberal, capitalist ideology’

The shutdown has affected broad swathes of society, but not equally.

At least “37 per cent of the potential labour force has been idled, in terms of lost jobs and lost hours,” as of early May, says Yalnizyan.

“The other thing is the gendered nature of all this — so much of what was shut down, starting with education and schools, but also non-essential, non-local travel, non-essential retail, restaurants … all of that is driven by low-paid work that is primarily done by women.”

“These are the people who are going to have the hardest time getting back in, but they’re also the people whose income is critical to already low household income,” she says. With such a major contraction, “the only actor left is the government to prop up the non-essential economy.”

Economic measures taken thus far have been meant to preserve the status quo, not transform it.

To do so, the federal government has made a series of cash injections — notably through measures such as the Canadian Emergency Relief Benefit (CERB), the Canadian Emergency Wage Subsidy (CEWS), and now, the Canadian Emergency Student Benefit (CESB). The CERB provides $2,000 a month for four months to workers who have lost income, the CESB offers students and recent graduates $1,250 a month, and the CEWS pays 75 per cent of employee salaries for companies that have lost revenue, in an attempt to prevent layoffs.

These programs represent “an approach to try to win time,” says Guillaume Hébert, a researcher at the Institut de recherche et d’information socioéconomiques (IRIS), a Quebec-based progressive think tank. “They’re attempting to maintain liquidity, to make sure the economy doesn’t paralyze.”

If “it’s one thing that liberal governments are pretty good at, it’s these technocratic measures,” says Michal Rozworski, an economist and co-author of The People’s Republic of Wal-Mart. “They’re making sure that things can continue as much as possible.”

And that’s a problem. Economic measures taken thus far have been meant to preserve the status quo, not transform it.

“We missed an occasion” to think beyond what existed before the crisis, Hébert says, “because we have governments at every level who are stuck in the neoliberal, capitalist ideology.”

‘An issue of equity’: The CERB and CESB

Income supports have allowed a lot of people to fall through the cracks, and “that’s been one of the major weaknesses,” Rozworski says.

Even with around 40 per cent of all people who were employed in February now receiving CERB, there are still around 1.4 million jobless Canadians who aren’t receiving this income support, according to Macdonald. This includes, he says, around 550,000 workers who were unemployed before March 15 (the beginning of CERB eligibility) but don’t have access to standard Employment Insurance (EI), 400,000 workers who are on EI but receiving less than $2,000 a month, and around 400,000 people who don’t qualify for the CERB because they didn’t make $5,000 in 2019 or the past year.

Closing those gaps should be an immediate priority, he says.

The federal government should also use the CERB as a model for reforming EI, he says, describing the current system as overly restrictive.

A new EI system could have “a floor on what you could be paid, which was not the case with the old EI system,” he says. “You would have a system that better covers self-employed and gig workers” and aims to provide funds quickly, as CERB does, in contrast to the current long waiting periods.

Among the most important outcomes of the CERB, Hébert says, is that it “allows us to pose the basic questions about what supports we provide people.”

“CERB absolutely helped a lot of people, and hopefully helps people think towards the idea of something like a universal basic income,” he says, while noting that IRIS does not have a position for or against basic income.

Rather than the lavish handout that the right-wing commentariat in Canada claims it is, the CERB provides “roughly what you would make working full time at minimum wage in most provinces,” says Macdonald. “That’s what students would presumably be making, if not more, if they were taking a summer job.”

Students, though, if they’re ineligible for the CERB because they weren’t working before March 15, will instead receive the newly established CESB — which pays $750 less per month.

“It’s not clear that students have lower requirements for income than people who had a job on March 15,” Macdonald says. “So there’s certainly an issue of equity there.”

‘You shouldn’t be doling out money to wealthy shareholders’: The CEWS

Less has been documented about the effects of the CEWS, the wage-subsidy program for organizations that have seen a drop in revenue. The program is in effect, Macdonald says, “but it’s unclear so far what the take-up rate is going to be on that.”

The CEWS, which was initially proposed by the NDP, has been the subject of critique for its preservation of existing labour market inequalities. Journalist and union organizer Nora Loreto points out, in a column for RankAndFile.ca, that in a labour market where women are paid $0.86 for every dollar a man makes, the CEWS serves to bake existing inequalities into relief measures. Such inequalities worsen when considering the prevalence of women in the part-time workforce, and are even starker for Indigenous women.

For Rozworski, the idea of a wage subsidy is not inherently bad. “It does maintain employment relationships,” he says. “It’s much easier to go back to a job where you’ve just been furloughed than it is if you’ve been fired — and it’s much easier to restart the economy and think about the future when you keep so many of these relationships going.”

But the program missed an opportunity to crack down on corporate tax evaders.

Prime Minister Justin Trudeau announced he would bar companies convicted of tax evasion from accessing support. The number of otherwise eligible companies that would be excluded by this rule, however, is zero, according to research by NDP finance critic Peter Julian.

Trudeau has thus far refused to bar companies registered in tax havens from public support. And even if he did, some companies would slip through. “For a lot of companies, the main company isn’t registered in a tax haven, but it operates through a complex set of subsidiaries,” Rozworski says.

The biggest problem, in his view, is that the CEWS comes with very few strings attached.

“If the government has your business on life support, you shouldn’t be doling out money to wealthy shareholders. No buybacks of stocks, no payouts of dividends. There should be some proof that you’re actually using this for payroll, as opposed to for credit, or meeting rent.”

‘A real perfect storm’: Housing and the market

One of the most significant holes in the measures announced up to now relates to the question of housing, particularly for renters.

“Rent is the largest expense for many households,” Rozworski says, “especially lower-income, working-class households.” And while homeowners have been provided mortgage deferrals on a voluntary basis by the big banks, renters have been left out in the cold.

“Cancelling rent, for sure that would be a gain, a way to better consider the needs of renters, who have lower means than owners in general”

While every province has enacted some form of temporary eviction ban during the public health crisis, Macdonald says this does not address the real needs of the situation. “The eviction ban doesn’t change the fact that people owe rent, so when the eviction ban is lifted, there will be plenty of people who will be four months behind on their rent and they’ll be immediately evicted.”

“There’s a real perfect storm that’s brewing there for the coming months,” he says, particularly given the growth of real estate investment trusts — vehicles for Bay Street to invest financial capital in the real estate market — in recent years.

“For them, this will be a huge boom, these evictions. They want turnover in their buildings, to get old tenants out who have been there a long time and potentially have rent-controlled apartments,” he adds. “And once they boot them out, they can jack up the rent. So for real estate investment trusts, this is the best thing since sliced bread, that people can’t pay their rent.”

This “perfect storm” has led to calls for provinces to outright cancel rent and mortgage payments for the duration of the crisis, in order to lift a cost burden and prevent a wave of evictions.

Rozworski, who supports the idea, says that such a program would better serve residents of hot housing markets like Toronto and Vancouver, where CERB payouts may barely be enough to cover rent.

“A thing like rent cancellation would give people significantly more breathing room,” he says. “The need for those kinds of measures becomes greater the longer this goes on.”

“Cancelling rent, for sure that would be a gain, a way to better consider the needs of renters, who have lower means than owners in general,” Hébert says.“Having said that, the simple cancelling of rent in the medium and long term isn’t itself a solution. We would need to put forward a vision of decommodified housing.”

“Why not imagine, as much as we can, the exit of housing from the market?”

The need for more transformative goals

Taken together, the relief measures up to now represent attempts to stabilize society in a moment of crisis, and preserve the economy as it existed before, Hébert says. The goal is to be ready, to the extent possible, to relaunch as the public health crisis subsides.

Yalnizyan identifies two strategies that could be adopted when planning relief measures: putting cash in people’s pockets or increasing services. The first option allows for money to continue circulating and for people to meet their financial obligations as they existed before the crisis. The second option is about reducing those obligations and making sure people can meet their needs.

So far, Canada has opted for cash injections, which make sense as an initial step, Rozworski says, because “it’s easier to give people money than food.”

But money relies on the market as a distribution mechanism — a mechanism that has failed, he adds.

“The market produces things and will keep producing things if they’re profitable, but won’t produce things that are necessary but not profitable, or even not profitable enough,” he says. “That’s the basics of what this crisis has exposed.”

Ultimately the pandemic points to the imperative to decommodify sectors that involve key human needs, such as housing.

“The space of debate up to now,” Hébert says, “has absolutely not been there even though the crisis has certainly opened up a lot of those problems.”

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