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The new economic stimulus benefit well seen

FRANCOPRESSE – The federal government announces the extension of the Canada Emergency Benefit until the end of September. A modified EI program will come into effect on September 27, and three types of Canadian Economic Stimulus Benefits (CEPP) will be introduced for workers who do not qualify for EI. Economists are receiving the changes favorably… for now.

Bruno Cournoyer Paquin – Francopresse

The Minister of Employment, Workforce Development and Disability Inclusion, Carla Qualtrough, accompanied by the Minister of Finance, Chrystia Freeland, made the announcement on August 20 at a conference of hurry.

Minister Qualtrough adds that these new measures should be adopted at the start of the new parliamentary session, on September 23. However, she specifies that changes to the employment insurance program can be made through regulatory changes.

Read also: Are the hours counted for the Canadian Emergency Benefit

Read also: The Canada Emergency Benefit does not make employers happy

A few billion more to ensure the transition

According to senior officials from Employment and Social Development Canada (ESDC), the new measures announced will be in effect for a period of one year. The cost of the PCU extension is estimated at $ 8 billion. The costs of PCRÉs are currently estimated at $ 22 billion. To these amounts must be added $ 7 billion for the proposed changes to employment insurance.

The Canadian emergency benefit (PCU) was established by the federal government in May 2020 to replace the earnings of workers who lost their jobs as a result of the crisis created by COVID-19. The PCU pays $ 2,000 per month to eligible workers whose monthly employment income does not exceed $ 1,000.

Currently, approximately 4 million Canadians benefit from ECPs, while 8.5 million people have used it since the onset of the crisis.

With the relative recovery in employment during the months of June and July, the PCU had been the subject of much criticism. Employers and chambers of commerce criticized him in particular for preventing a return to work and therefore slowing down the economic recovery. A review shared by the Bloc Québécois and the Conservative Party. The new measures announced are therefore intended to promote the return to work.

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Changes to Employment Insurance

As of September 27, the employment insurance (EI) eligibility threshold will be changed in the form of a credit for hours worked. Thus, employees who have worked 120 hours in the past 52 weeks will be able to access EI benefits. These are set at a minimum weekly threshold of $ 400. The maximum benefit amount remains $ 573. Benefits will be paid for a maximum of 45 weeks.

In the past, the EI eligibility criteria were based on labor market conditions in the claimant’s region. The program required a minimum of 420 hours worked and set weekly benefits at 55% of employment earnings.

For Colin Guldimann, these changes to employment insurance raise questions about the structure of the long-term program. Credit: Courtesy

Colin Guldimann, an economist at the Royal Bank of Canada, thinks that “the critical element here is the increase in minimum employment insurance benefits. [à 400 dollars par semaine]. “

“The 55% weekly income replacement rate would not have been enough for many workers who lost their jobs, especially because a significant number of them were at the bottom of the income scale. So a lot of Canadians who work in low-paying jobs, like retail and restaurant business, have lost their jobs, ”adds Colin Guldimann.

The economist also observes that the normal employment insurance program offered a much shorter period of benefits for people who had worked less. By establishing eligibility for benefits from 26 to 45 weeks, the new measures recognize that people have been unable to work because of the crisis.

As in the case of the regular program, the new measures require the applicant to be looking for work and allow the applicant to accumulate employment income with that of benefits. For every dollar earned on the job, however, EI benefits are reduced by 50 cents.

For Colin Guldimann, these changes to employment insurance raise questions about the structure of the long-term program. There will have to be a public debate on the employment insurance program: should we continue to limit eligibility to those who have paid benefits? Is the 55% income replacement rate sufficient?

Introduction of new income support measures

However, according to Minister Qualtrough, since EI does not cover self-employed workers and freelancers, which has left millions of people without supports.

As a result, the ECP is being replaced by the Canadian Economic Stimulus Benefit (CEPP) for workers who are not eligible for Employment Insurance, and cannot return to work due to COVID. The PCRÉ offers these workers $ 400 per week for a maximum of 26 weeks.

Colin Guldimann observes that this 26 week period is inspired by the employment insurance program. The government no doubt believes that there will have been an economic recovery and a recovery in employment by then, but it really depends on the situation of the pandemic, he adds.

As in the case of the new employment insurance measures, PCRÉ applicants will have to be looking for work. They will also be able to combine the benefit with work income. They will, however, have to reimburse 50 cents for each dollar earned in excess of $ 38,000 in net annual income when filing their tax return.

This benefit clawback rate is a better work incentive than that of the PCU, which clawed back all work income above $ 1,000 per month, underlines Colin Guldimann. “If someone can only work part-time, you don’t want to get all of their benefits back, because then they might not want to go back to work,” he says. And maintaining the link between employers and employees is a critical asset for economic recovery.

0821 Francopresse Changements PCU MAJ Jean Michel Cousineau
Jean-Michel Cousineau, economist, full professor, School of Industrial Relations, University of Montreal. Credit: Courtesy

Economist Jean-Michel Cousineau, full professor in the industrial relations department at the University of Montreal, recalls that the recovery will be asymmetric. “There are certain sectors that will not come back: accommodation, catering, certain sectors of commerce, aeronautics, public transport,” he says.

For Professor Cousineau, the support measures must maintain a balance: “We must protect people who are in distress, but at the same time we must not freeze them in a sector where there is nothing to do.” The recovery will take place more quickly in some sectors than others, so “flexibility between sectors and professions” should be facilitated.

He also noted that Minister Qualtrough briefly mentioned the importance of training at a press conference. However, he adds, there is a problem of jurisdiction, since training falls under the jurisdiction of the provinces.

Two other types of economic stimulus benefits are added to the PCRÉ: the Canadian Sickness Benefit for Economic Recovery (Sickness PCRÉ) and the Canadian Economic Recovery Benefit for Family Caregivers (PCRÉ Family Caregivers).

Sickness PCRÉ offers $ 500 per week for two weeks to workers who are affected by COVID-19 and need to self-isolate. A person will only be able to claim it once, and the eligibility criteria will be the same as for ECPs.

The family caregiver PCRÉ aims to support people who must take time off work to take care of a child under the age of twelve or a dependent because daycare centers or schools are closed due to COVID- 19. The benefit provides these workers with $ 500 per week, for a maximum period of 26 weeks. People who want to keep their children at home if schools are open are not eligible.