Economy

How to help workers and the economy during the COVID-19 crisis

Published

5 years ago

March 13, 2020

It’s crystal clear we have to act fast to “flatten the curve,” the public health experts’ term used to describe the importance of reducing the pace of infection with COVID-19 to avoid overwhelming health systems. It’s also becoming clear that flattening the curve of the health crisis will reduce the associated economic crisis. What “act fast” steps can we take?

Governments have shut down schools, organizations have cancelled big gatherings, travel is being sharply cut back. Now the toughest, most critical step is to prevent contagion through the workplace. This disruptive phase of flattening the curve will cost businesses and workers alike. Telework will be the new normal for those who can stay home for a bit.

But millions of workers in stores, restaurants and Uber/taxi drivers don’t have that luxury, nor do people providing care for the young, the sick and the elderly. We have to make sure every sick worker can afford to stay at home. The federal government has already acted quickly to improve sickness benefits in Employment Insurance. This is a good but far-too-modest start.

Millions of low-income workers in Canada can’t afford to lose any hours of work. Among modest-income self-employed workers, almost no-one will be able to claim EI benefits. More than 1 in 10 of Canada’s 19 million workers are independent contractors without paid help. Among Canada’s 16 million employees, 12 per cent have temporary jobs, a share that rises to almost 1 in 3 for workers under 25. While they don’t get as ill, young workers needing to replace lost hours are more likely to spread COVID-19. Millions of people also provide low-wage work in child, elder and health care fields, making them prime carriers of contagion.

The federal government can do five things, unilaterally and immediately, so Canadians can reduce work-related contagion as quickly as possible, wherever they live and whatever kind of work they do.

1. Improve EI: One in 10 workers making less than $15 per hour pays into Employment Insurance but won’t have enough hours to qualify for sickness benefits. The act permits the government to lower that hourly threshold qualification temporarily. Increasing the income replacement rate from 55 per cent of insurable earnings to 80 per cent for lower-waged earners (like we had in the 1940s) would also reduce people’s desperation to pick up extra hours of paid work. To support those not currently EI eligible, the federal government could fund a temporary unemployment assistance program, as sketched by an April 2019 Public Policy Forum report. A flat weekly benefit to those who don’t have enough work or a forgivable “jobseekers loans” with repayment tied to income reported to the tax system would revitalize the feds support for the hard-to-serve unemployed, a role it played by funding extended regional jobless benefits until 1991.

2. Expand Paid Sick Leave: The tax system could aid small and medium employers with cash flow to provide or expand paid days of leave for the rest of 2020. Subject to a reasonable maximum, the additional payroll costs associated with new paid leave days could be made deductible from 2020 corporate income taxes.

3. Limit deepening debt: A single cheque via GST credits, Guaranteed Income Supplement or Canada Worker’s Benefit may not be enough to live on for two weeks, but would ease the financial stress of upfront out-of-pocket costs triggered by self-isolation. One-time supplemental payments of these income-tested federal credits could help households least likely to have emergency savings or access to affordable credit.

4. Secure housing: The Canada Mortgage and Housing Corporation could immediately provide a pool of capital to existing or new rent banks across the country so that those who can’t make the rent because of falling incomes or illness don’t lose their housing too. The federal government could also broker a deal with banks and major lenders to extend the mortgage default period and/or defer mortgage payments over the next six months, as Italy has done.

5. Prepare our social infrastructure for post-crash demand: People turning to key community services like food banks and child care after this period may find non-profit services have been hobbled by the triple whammy of losing fees for service and donation revenues even as demand rises. These agencies can’t weather the storm like small businesses because they are less able to access lines of credit. Capital for low-interest lending could be handed to the Business Development Bank of Canada, or funded through the Social Innovation Social Finance sector.

As the public health and economic crises become more clearly intertwined, all federal parties should collaborate not just to suspend Parliament, but to support a package that works for all Canadians, especially those who need it most.

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

Published

2 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

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

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

Published

2 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

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

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Economy

S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

Published

3 days ago

September 13, 2024

Anne Joseph

TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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