Economy

As economy recovers, insolvencies will surely rise – Cape Breton Post

Published

4 years ago

March 2, 2021

How much debt have Canadians taken on to survive during COVID?

And with the end of the pandemic in sight — sort of — what will happen next?

According to Statistics Canada, things were not ideal even before COVID, with 30% of Canadians believing they were over-indebted in 2019. Then came the pandemic.

At the end of 2020, Douglas Hoyes of Hoyes, Michalos & Associates , a Licensed Insolvency Trustee, published an excellent summary of household debt and COVID-19 .

Insolvency filings went up at the beginning of the year, but 2020 finished with record lows, despite lockdowns and layoffs. Debt was deferred.

Going into the pandemic, Canada’s debt-to-income ratio was 180.4%. The average consumer owed almost $30,000 in non-mortgage debt.

Insolvencies were rising and had been since the end of 2018.

When COVID hit, the federal government held off financial chaos with CERB and wage subsidies, income supports that helped an estimated 50% of adult Canadians.

People deferred payments on everything from mortgages and credit cards to car loans and commercial rents.

With courts closed and debt collectors sidelined by COVID, everything was put on hold.

Insolvencies reached a 20-year low. (Alas, Statistics Canada notes that non-mortgage loans have increased steadily since May of 2020 and will soon be back to pre-pandemic levels.)

But deferrals are coming to an end, and government supports will not last forever. The economy is not predicted to be back in full swing until late this year or 2022; in the meantime, insolvencies will start to rise.

“Insolvencies will return as the economy recovers. It seems counter-intuitive to many, but if you don’t have an income or assets that can be seized by creditors, there is no need to file insolvency,” said Hoyes in his 2020 summary.

“Until economic growth is no longer driven primarily by consumer spending paid for with debt, until more Canadians can stop living paycheque to paycheque and using credit to survive, consumer insolvencies will inevitably return,” Hoyes added.

Asked to do a little crystal-ball gazing for the future, Hoyes said there are two schools of thought at the moment.

One is that with the vaccine and most people inoculated by Labour Day, we’ll quickly get back to normal. The pandemic will prove to have been a temporary blip.

“I do not subscribe to that theory,” said Hoyes.

“Yes, with the vaccine things will eventually get back to normal, but the world has fundamentally changed. Your favourite restaurant? It’s not reopening. Maybe not that nail salon or small fitness studio either. Others may replace them, but not to the same degree,” he said.

For some workers, then, change will be huge.

“For a 60-year-old chef, life is not going back to normal. That chef, if he used credit cards to survive the last year, might be one of my clients,” Hoyes said.

On the other hand, said Hoyes, if that chef retires, nobody can garnishee his wages because he won’t have any.

“People file for bankruptcy or do a proposal to get protection from their creditors. They do so because they’re afraid their wages will be garnisheed or they’ll be sued, or they’ll lose their house, ” Hoyes said.

With no wages and no house (i.e. nothing to lose) you likely wouldn’t file. And creditors have to take action within two years of when payments stopped.

“And the courts are still mostly closed and collection agents are still working from home. A lot of the big banks may decide, ‘What’s the point?’

“There will be fewer clients in my line of work,” Hoyes said.

As the economy recovers, Hoyes said it’ll be tough on people in their 50s and 60s who are not quite ready for retirement.

And tough on young people just finishing university, he said. A lot of experience will be lost in the way of hands-on learning and mentoring because of the way the world has changed.

People who’ve been deferring debt have more to think about and are potentially more at risk, said Hoyes.

Certainly, many Canadians, mostly middle income, will feel the debt impact of COVID-19 for years to come. Financially, “the guy in the middle will suffer most.That chef who used to earn $3000 a month is now getting 1800 on EI.”

And so his debts pile up.

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

2 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

6 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

7 days ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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