To respond to the economic challenges of the COVID-19 crisis, I have proposed a crisis basic income that would proactively send a direct deposit or cheque to the 28.5 million Canadians who filed income taxes last year. There are 30.5 million Canadians over the age of 15 and 20 million Canadians were in the labour force (working or looking for work) in February. A Crisis Basic Income would cover the vast majority of Canadians who are working, is automatic rather than application-based, and payments can be added to income and taxed, or clawed back directly when Canadians file their taxes next year.
There are three reasons I prefer overshooting — rather than the undershooting which I believe characterizes the current federal approach:
1) Administration
While I pray they succeed, administration of the federal three pronged response will stretch our physically isolated public service to the breaking point. All three programs are application-based and will require some level of human oversight. One million EI applications were filed from March 16-22. The government is expecting four million CERB applications. There are over a million firms in Canada employing 17 million Canadians.
Dr. Jennifer Robson has raised flags about the cheques to everyone approach. But I believe that administering automatic payments in a single program to all 28.5 million tax filers will have fewer errors, gaps and lags than processing and verifying six million applications across three programs.
2) Indirect Wage Subsidy
The Crisis Basic Income can function as an indirect wage subsidy for firms. While business would have to temporarily renegotiate employee contracts, firms could reduce pay or hours by some or all of the $2,000 for each employee on payroll. I favour this decentralized approach to the centralized administration envisioned by the current plan.
3) Undershooting Gaps
This is the big one.
Ellis Auto Drome in Lethbridge has reduced its operations to two days a week. Their employees won’t qualify for EI or CERB – they are still working. And the wage subsidy would only cover two days of wages, not four. Neither program appears to fill the gap between two and five days of work.
Many freelancers jumping from gig to gig don’t set up a Canadian Controlled Commercial Corporation and can operate without a GST/HST number, both are required for the current wage subsidy. They wouldn’t qualify for a wage subsidy or the CERB if they keep working or working less.
Circle K stores in Canada are split between franchised and corporate stores. Detailed wage subsidy rules are not yet available, but the government has said it will be based on a drop in sales of at least 30 percent. Will this be calculated by store? By region? By company? We could face a situation where Kim’s boss at a franchised Circle K gets a subsidy while Chris’s boss at a corporate Circle K down the street does not.
Undershooting means trying to figure out who needs help now. Overshooting means figuring out who needs help later.
In normal times we would, and should, do the former.
In a COVID world we can, and should, do the latter.
This briefing note was prepared by Ken Boessenkool in response to his webinar delivered on April 3, 2020 with Jennifer Robson. You can watch that webinar below.
Ken Boessenkool
Partner, Kool Topp & Guy Public Affairs
Ken has worked for, or volunteered in a senior capacity for, Ray Speaker, Preston Manning, Jim Dinning, Stephen Harper, Christy Clark and Ric McIver. He has published numerous policy and academic papers on a range of key national issues, and is a frequent contributor to numerous online and print publications.
