The fallout from the coronavirus pandemic has created an economic crisis — one that experts are increasingly concerned could push more people into poverty.
Many organizations have warned about the disproportionate impact of the virus, but the United Nations took it one step further Friday, cautioning that the “worst impacts of the crisis on poverty are still to come.”
It’s something Canadian experts are worried about, too.
“There’s no doubt that the huge decline in employment is going to push people under the poverty line,” said David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives.
“The real question is — how much can government programs push back?”
Poverty already rife in Canada
In the years prior to COVID-19, many Canadians were still falling below the poverty line.
Statistics Canada data shows the “poverty gap” increasing incrementally between 2015 and 2018.
While fewer people in Canada are living on low incomes, recent recalculated figures suggest those still in poverty have not seen improvements.
“Then, obviously, the pandemic caused a historic drop in employment,” Macdonald said.
In April, as the coronavirus tore through the economy, Canada shed nearly two million jobs. That was on top of an employment drop of more than one million in March. By May, the unemployment rate rose to 13.7 per cent, topping a previous high of 13.1 per cent set in December 1982.
Without the Canada Emergency Response Benefit (CERB), Canadians would have been in a “far worse position,” Macdonald said.
But, he said, official numbers on poverty for this year won’t be available until 2022, so “it’s not entirely clear yet if it’s (CERB) has kept poverty rates stable.”
The Employment Insurance (EI) program wouldn’t have covered the number of Canadians who suddenly found themselves in dire need of assistance, he said, nor would it have helped self-employed or gig workers. That’s where CERB filled in.
“It was a critical support,” he said. “But it’s expiring.”
Transition from CERB
The last eligibility period for Canadians to receive the $2,000-a-month benefit ends on Sept. 26. At that point, the federal government has promised a “seamless” transition to the EI program.
Whether it will, in fact, be seamless, is what worries Macdonald. According to his analysis, of an estimated 4.7 million Canadians who were receiving CERB as of the beginning of August, only 1.4 million would qualify for EI under the normal rules.
Canada has said it would make tweaks to expand its eligibility, but “some people could still receive a lot less because of their circumstances,” said Macdonald.
“It’s a huge risk. There’s a lot at stake here,” he said.
“If it goes well, it could mean continued support for people. If it goes poorly, whether that be because their files aren’t transferred correctly or they just receive a lot less because of their circumstances, that could leave some people rounding out 2020 with big declines in income.”
Food insecurity lingers
The transition is something Food Banks Canada (FBC) is concerned about, as well. Food security, among a number of other income issues, are interwoven with poverty.
Pre-pandemic in Canada, 4.4 million Canadians were residing in food-insecure households due to financial constraints, including 1.2 million children.
When lockdowns took hold and jobs got lost, FBC saw a spike in foodbank use. Many of those seeking help had never used food banks before, said Kirstin Beardsley, FBC’s chief network services officer.
The arrival of CERB changed things “significantly,” she said, keeping numbers “down to a comparable year-over-year” after the initial spike.
“But folks have now gone through their CERB allotment. We have things like eviction notices back in force. People who were able to defer payments may now need to pay bills,” Beardsley said.
“People were able to keep their heads above water with the CERB. As that ends, we’re concerned there will be a moment where folks just can’t make it all work.”
Beardsley acknowledged that the switchover from CERB to EI is necessary, but given the changing eligibility for supports and the wide scope of circumstances Canadians are facing, she worries people will rely on their savings or dip further into credit card debt.
“People will do a lot before they enter the food bank,” she said.
“We know a lot of people live paycheque to paycheque or have a limited amount of savings. While you’re working, even a little, you can make it all add up, but as soon as your income is lost, it doesn’t.”
What’s next?
The COVID-19 situation in Canada, like everywhere in the world, is ever-changing, as Macdonald pointed out.
While the economy has rebounded to some degree, he said, there are a number of variables that could better or worsen financial situations for Canadians over the next few months. One is the inevitable change in season.
Restaurants and the hospitality industry were severely impacted during the pandemic. When policymakers gave the all-clear to reopen in varying capacities, many reopened with reduced seating and put the emphasis on outdoor patios.
Macdonald fears that as it becomes too cold to sit outside, and indoor seating remains locked, staffing in these industries could fluctuate as well.
“Employment levels are still not back to where they were, but they’re potentially a lot higher than they will be in November and December,” he said.
Another variable is the availability of school and child care, he said.
As schools have reopened across Canada, outbreaks of the virus have followed. If schools were forced to shutter again, “we may see a lot more pressure on this front,” he said.
“Once kids go home, people will have to stop working. And it is overwhelmingly women who have either quit their jobs or taken hours off their jobs to take care of children. That exact same thing could happen this fall.”
It’s why economic recovery plans must take “everything into account,” and “not leave people behind,” said Beardsley.
“We don’t want people to fall into a cycle of poverty because it’s very challenging to get out of.”
— with files from the Canadian Press and Global News’ Erica Alini
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