After more than three months on temporary layoff, Jake, a waiter at a restaurant in southern Ontario has just gone back to his job. But his return to work presents a dilemma that’s likely familiar to many recipients of the Canada Emergency Response Benefit (CERB).
That’s because recipients of the CERB, which provides $2,000 a month to Canadians who’ve lost their income due to COVID-19, can only earn up to $1,000 in a four-week period before losing their benefits.
“If they accepted even one more dollar’s worth of work, they lose the $2,000 CERB benefit and are left with $1,001 to support themselves and their family,” economist Tammy Schirle noted in a report for the C.D. Howe Institute in May.
That’s why Jake, who’s been receiving the CERB since being laid off in mid-March, says he’s conflicted about what to do next.
In July of last year, he says he made around $2,400 — a few hundred dollars more than what he’s been getting through CERB. This summer, though, it’s hard to predict what a month’s worth of wages and tips will amount to, he adds.
While the restaurant he works at has been busy, it’s currently operating at less than a third of capacity due to public health-related restrictions, Jake says. He worries he could end up earning considerably less than the $2,000 a month he’s been receiving through CERB.
And while CERB recipients are required to go back work when able, Jake says he has ample latitude to decide how many shifts to take on.
Normally, he says, he’d pick up as much work as possible — but under the current circumstances, he’s not sure that would be in his best interest.
On the one hand, he says, he’s reluctant to stay on government benefits.
On the other, he adds, “I don’t want to shoot myself in the foot.”
Uncertainty an incentive to stay on CERB
The uncertainty workers like Jake face around their hours and income is a key issue with CERB as a growing number of Canadians gradually return to their jobs, says Schirle, a professor at Wilfrid Laurier University.
The CERB, she says, was “an excellent first response to the crisis.” But, she adds, Ottawa’s emergency income support program “was not designed to facilitate any return to work.”
That’s especially true for workers with lower incomes and flexible hours like Jake. They face a choice between the certainty of being able to have at least $2,000 a month in income by staying on CERB and the risk of being significantly worse off financially if their earnings cross the $1,000-a-month threshold, Schirle says.
“You can certainly sympathize with why an individual would go with a certain outcome,” she adds.
While CERB was initially set to run for 16 weeks, with the eligibility period starting retroactively on March 15, Ottawa has now extended it for a maximum of 24 weeks, with the program available until Oct. 3.
Canadians who stay on CERB are encouraged to seek employment and consult the Job Bank, the country’s national employment service.
But Schirle says she and many other policy experts were hoping for stronger incentives to return to work.
One option would be to tweak CERB so that benefits would be scaled back by 50 cents for every dollar earned above $1,000, Schirle wrote in her C.D. Howe report.
“Workers would continue getting at least some CERB support while earning up to $5,000 per month,” she noted.
The clawback would be similar to that faced by those receiving Employment Insurance, which is reduced by 50 cents for every dollar earned up to 90 per cent of insurable earnings.
And while bringing CERB in line with EI isn’t necessarily the optimal policy design, there’s evidence that those parameters encourage people to take up even part-time employment while continuing to provide some degree of income support, Schirle says.
Slow return to work
As of May 31, 1.2 million Canadians who at one point received CERB were off the benefit, as provincial and territorial economies across the country began to reopen, according to the Department of Finance.
Still, the federal government has revised the overall cost of CERB from an initial estimate of $35 billion to a whopping $80 billion, a figure that reflects both the extension of the program by another eight weeks and take-up, according to information on the finance department’s website.
At the same time, Ottawa has cut the projected cost of its federal wage subsidy, which covers 75 per cent of an employee’s wages for eligible employers.
The program, meant to help businesses retain their workforce and quickly ramp up activity as the economy recovers, is estimated to cost just $45 billion — down from a previous estimate of $73 billion — for its first 12-week period.
Ottawa has extended the wage subsidy to Aug. 29, 2020.
The federal government doesn’t track the number of CERB recipients who have transitioned to the CEWS, a Department of Finance official told Global News via email.
However, the department’s revised estimates for both programs suggest many Canadians aren’t going back to work as quickly as anticipated.
While a gradual benefits clawback would likely provide stronger incentives for CERB recipients to go back to work, a more sophisticated program design also presents some serious implementation challenges, Schirle says.
One of the reasons why the rollout of CERB through the Canada Revenue Agency went so smoothly was the “incredibly simple” design of the application form, Schirle notes.
All applicants need to get the benefit through CRA is their social insurance number, their contact information and to declare that they are eligible for CERB (a self-assessment the CRA has now started to probe in many cases).
But Ottawa has also been administering CERB through the existing infrastructure of the EI program. Anyone who would normally qualify for traditional unemployment benefits must apply for CERB through Service Canada and submit bi-weekly employment reports.
That more complicated process may have contributed to a number of implementation hiccups for that part of the CERB program, with some Canadians experiencing significant payment delays.
And the 46-year-old computer system that supports EI is ill-suited to accommodate big policy changes quickly, as one government official said.
Ottawa faces a tough choice, Schirle says.
On the one hand, building a smarter, more complex CERB from the ground up would require designing “a much bigger system very quickly,” Schirle says. On the other, channelling a more sophisticated CERB through the antiquated I.T. systems of the EI program presents its own technical and administrative headaches, she adds.
Still, Schirle holds out hope Canada will come up a better system by the end of August, ideally, one that includes programs that help displaced workers retrain and find jobs in different industries.
In the meantime, Jake, the waiter, says he’ll wait to see how much he earns in the first few days back on the job before deciding whether to submit another CERB application.