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Pandemic benefits were too generous with businesses, stringent with workers: experts – CP24 Toronto's Breaking News

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Nojoud Al Mallees, The Canadian Press


Published Saturday, August 6, 2022 11:21AM EDT

Benefits rolled out at the onset of the COVID-19 pandemic allowed vulnerable Canadians to stay healthy while maintaining an income, but business supports were excessive and show the outsized influence of business groups on public policy, economists say.

Nearly two and a half years ago, the federal government faced an unprecedented task of shutting down the economy to slow the rapid spread of COVID-19. That shutdown led to a series of pandemic relief benefits aimed at softening the blow to workers and businesses, with the two most prominent programs being the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy.

Recent analysis from Statistics Canada based on census data shows two-thirds of Canadian adults received pandemic benefits in 2020, with these benefits cushioning income losses and reducing inequality.

Previous analysis from the federal statistics agency also found that, as was expected, usage of the wage subsidy program correlated with a lower probability of closure and fewer employee reductions.

While there was little time to spend on crafting the benefits and fine-tuning the details in March 2020, economists are now assessing the successes and failures of these programs in retrospect.

City of New York University economics professor Miles Corak, who has written analyses on these programs, says any evaluation needs to account for the uncertainty people and governments were facing at the time and the urgent need to keep people healthy.

That said, Corak said while the CERB was “terribly successful,” the Canada Emergency Wage Subsidy was a “huge failure.”

“The Canada Emergency Response Benefit got money out the door quickly in time to keep people at home, which is what we wanted to do to save lives,” he said.

On the other hand, Corak said the CEWS “came too late, it wasn’t well-targeted and dramatically over-insured (businesses).”

The CERB was quickly announced in March 2020 and $2,000 monthly to Canadians who lost income because of the pandemic shutdown. That was followed soon after by the CEWS, which subsidized businesses’ employee wages by 75 per cent in hopes of encouraging companies to hold on to their staff.

Corak says that by the time the wage subsidy was introduced, many businesses had already parted ways with their employees.

Another source of criticism for the wage subsidy program was that it subsidized wages for all workers at affected businesses, rather than simply those whose jobs were at risk of being lost, making it especially costly.

Jennifer Robson, an associate professor of political management at Carleton University, also pointed to the wage subsidy program as being unsuccessful. Robson said businesses that would have otherwise closed down for reasons unrelated to the pandemic remained artificially afloat because of the wage subsidy.

“These were not businesses that were going to return to profitability,” Robson said.

Statistics Canada data shows the number of business closures spiked dramatically in April 2020, but a sharp decline followed, bringing monthly closures to a lower level than pre-pandemic.

About 31,000 businesses closed in August 2020, while nearly 40,000 had closed in February 2020. 

In hindsight, Corak said the wage subsidy program should have been smaller in scope and targeted to larger businesses with specialized needs where it would be important for companies to hold on to the same employees, such as the airline sector.

The Canadian Federation of Independent Business has said the wage subsidy was “crucial” for small business owners and noted in April this year that only two of five of its members reported being back to normal sales.

Adrienne Vaupshas, the press secretary for Finance Minister Chrystia Freeland, said in a statement the focus of the government at the onset of the pandemic was to protect jobs and ensure a strong economic recovery.

“Today we have recovered 114 per cent of the jobs that were lost during the darkest months of the pandemic,” Vaupshas said.

In contrast to what some economists have characterized as excessively generous supports for businesses, some low-income Canadians have experienced clawbacks to social assistance benefits because they collected CERB. The Canada Revenue Agency is also hoping to recoup benefits paid out to over 400,000 Canadians whose eligibility was questioned.

In response, anti-poverty group Campaign 2000 has called for CERB amnesty.

Corak said while it’s reasonable to ask those who fraudulently collected benefits to pay them back, businesses should be held to the same standard.

“The concern I would have is the asymmetry in this response between individuals and businesses,” Corak said.

The CFIB has called for more loan forgiveness for small businesses who accessed loans through the Canada Emergency Business Account. The federal government is already offering partial loan forgiveness if repayments are made by the end of 2023.

Robson said when it comes to shaping public policy, business interest groups have well-resourced public relations teams to further their interests.

“There is nothing like that for individual low-wage workers,” said Robson.

Corak noted that at the start of the pandemic, there was a focus on the role of front-line workers, but with time, this shifted to small businesses.

“I think the small business lobby was very effective in informing individual MPs and putting pressure on cabinet and the government to respond in a way that many unseen and unheard mothers, fathers workers and families just didn’t have that same voice,” Corak said.

The danger of the wage subsidy program, Corak said, is that it sets a precedent for providing excessive subsidies to businesses and thereby stifling innovation.

“We’re almost moving towards a basic income for small business rather than a basic income for individuals,” he said.

This report by The Canadian Press was first published Aug. 6, 2022.

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US bear market deepens: What that means for you – Al Jazeera English

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United States stocks slumped further this week as investors navigated a barrage of bad news.

Central banks around the world have been scrambling to fight soaring high inflation by increasing the cost of borrowing without hurting long-term growth prospects. Adding to the uncertainty and fear are rising tensions between the West and Russia following Moscow’s invasion of Ukraine.

In the US, the S&P 500 – a proxy for the health of retirement and college savings accounts – this week fell to its lowest level in almost two years and was set for a monthly decline of nearly 8 percent.

The tech-heavy Nasdaq 100 has dropped nearly 33 percent so far in 2022, the Dow Jones Industrial Average lost more than 20 percent while the world’s best-known cryptocurrency, Bitcoin, shed nearly 60 percent of its value. Home prices are also dropping as interest rates soar, making loans for potential buyers more expensive.

The Federal Reserve, the country’s central bank, is tasked with fighting the highest inflation in decades and has been doing that by raising interest rates. But can it increase the cost of capital to reduce demand and moderate prices without plunging the economy into a deep recession?

“It’s really a no-win situation at this point. Largely because of the number of shocks policymakers have had to deal with,” Cristian deRitis, leading economist at Moody’s, a research firm based in New York, explained to Al Jazeera.

How much further down can stocks go? What is a bear market exactly? And is there a light at the end of the tunnel?

Here’s the short answer.

I keep hearing that the US is in a bear market. What is that exactly?

A bear market occurs when a broad market index dips more than 20 percent from recent highs.

Why is the US currently in a bear market?

“Persisting concerns over inflation and the Fed’s ability to tame prices without a hard landing,” is how Peter Essele, head of portfolio management at Commonwealth Financial Network, a Massachusetts-based firm, explained it.

What’s the reason behind the high inflation and why are prices out of control?

Kenneth McLaughlin, professor of economics at Hunter College in New York, told Al Jazeera that one of the reasons is the federal government “injecting $5 trillion into the economy including through stimulus checks during the pandemic with kind of good intentions but with no plans to pay for it.”

In other words?

Think back to early 2020 when businesses shuttered and economies came to a standstill to curb the spread of the coronavirus. Millions of Americans found themselves under lockdown with nowhere to go and spend the fresh-off-the-press stimulus checks. That caused equity prices, be it stocks, Bitcoin and home prices across the US, to skyrocket. It also caused a surge in demand for goods and that, as we see now, has led to the highest rise in the cost of living seen in decades.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S
The war in Ukraine and growing tensions between the West and Russia are expected to continue to spook investors and roil markets [File: Brendan McDermid/Reuters]

How does this cause the stock market to go down?

As the Fed raises rates, which is essentially increasing the cost of borrowing in order to bring down the price of goods and services, people start to fear a slowdown in the economy. This pushes down the price of stocks and other investments.

Are the current economic conditions really just the consequence of what happened in the last 2 years?

The last two years have been unprecedented in many aspects. But what we are seeing today can also be attributed to the extremely low interest rates of the last decade when, following the financial crisis of 2007-2008, the government made it cheaper for Americans to borrow, Essele told Al Jazeera.

Didn’t the markets just have a rally?

Stocks did experience a rally in August. Things were looking up when petrol prices, which had soared in earlier months, dropped sharply. Investors held on to the hope that perhaps the Fed would ease on the interest rate hikes if the inflation numbers for August showed that consumer prices had cooled. But despite cheaper petrol, food and other essential goods, prices remained high – surging 8.3 percent in August compared with a year earlier.

Where are we now?

“Inflation is becoming more structural and investors are now concerned about stagflation,” Essele explained to Al Jazeera, suggesting that price hikes may be here to stay for the long haul. Stagflation is a mashup of the words “inflation” and “stagnation” and refers to a situation when inflation is high even as the rate of economic growth slows down.

So what does the future hold? And how long will this bear market last?

Expect above-average price pressures. The war in Ukraine and growing tensions between the West and Russia add to the uncertainty and will continue to spook investors and roil markets.

“But we are likely in three-quarters of the way through the bear market,” Essele predicted.

I don’t own any stocks, why should I care about a bear market?

While stock investors are the ones most directly affected by a US bear market, there are spillover effects to the rest of the economy primarily due to the “wealth effect”. That is, as households see the value of their retirement and stock portfolios decline, they will pull back on their spending.

“Given how dependent the US economy is on consumer spending, this impact can be significant and widespread,” Moody’s deRitis told Al Jazeera. “Discretionary sectors such as travel, leisure, and hospitality may feel the most immediate effect but other industries such as housing and retail trade will experience reduced demand as households grow cautious.”

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Ontario Securities Commission files allegations of fraud in multimillion-dollar crypto offering – CP24

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TORONTO – The Ontario Securities Commission says it has filed allegations against Troy Richard James Hogg related to a crypto token offering that raised US$51 million.

The statement of allegations says that between May 2017 and June 2019, Hogg, an Ontario resident, promoted and sold a crypto asset named Dignity token, previously called Unity Ingot, to investors around the world.

The regulator alleges that Hogg and his companies – Cryptobontix Inc., Arbitrade Exchange Inc. and Arbitrade Ltd. – defrauded investors with false and misleading statements in promotional materials, including that gold bullion supported the value of the tokens.

The OSC alleges that Hogg and his companies further defrauded investors by spending a significant amount of invested funds on things unrelated to crypto security tokens, including buying real estate and making payments to companies controlled by Hogg.

The regulator also alleges that Hogg did not file a prospectus for the token or obtain the necessary registration with the OSC to engage in trading activities.

The OSC says it was assisted in its investigation by the U.S. Securities and Exchange Commission, which ran a parallel investigation and has levelled charges against Hogg and several U.S. residents.

This report by The Canadian Press was first published Sept. 30, 2022.

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Lululemon settles lawsuit with Peloton over allegations of ‘copycat’ clothing

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Two of North America’s biggest names in fitness have settled a lawsuit over allegations of “copycat” sports bras and workout tights.

Vancouver-based “athleisure” brand Lululemon has agreed to terms with American exercise bike company Peloton after negotiating a “mutually agreeable settlement” in the patent dispute, according to a notice of voluntary dismissal filed in a California district court on Friday.

The terms of that agreement have not been made public.

Lululemon filed suit in November, claiming Peloton’s Strappy Bra, Cadent Laser Dot Legging, Cadent Laser Dot Bra, High Neck Bra, Cadent Peak Bra and One Luxe tights were all rip-offs of its own products.

“Unlike innovators such as Lululemon, Peloton did not spend the time, effort and expense to create an original product line,” the Lululemon claim read.

“Instead, Peloton imitated several of Lululemon’s innovative designs and sold knock-offs of Lululemon’s products, claiming them as its own.”

Court documents show that the dispute dates back to a 2016 co-branding deal that allowed Peloton to put its logo alongside Lululemon’s on certain Lululemon products that were sold through Peloton stores.

In its own court filings, Peloton claimed the arrangement was “burdensome and time-intensive,” leading the company to end the partnership and develop “its own private label brand of fitness apparel.”

This image is included in a lawsuit filed by Lululemon against Peloton. Lululemon claimed the average customer would not be able to tell their products apart. (U.S. District Court)

Lululemon, in turn, claimed that Peloton had simply imitated some of its garments. The yoga wear firm sent Peloton a cease-and-desist letter on Nov. 11, 2021, asking the company to “immediately stop selling its copycat product.”

According to the Lululemon lawsuit, Peloton said it needed until Nov. 24 to respond to the accusations in the letter.

Instead, Peloton filed its own lawsuit in the Southern District of New York, alleging that Lululemon was making “baseless threats” and asking a judge to pre-emptively declare that Peloton had done nothing wrong.

News of the settlement in California comes just one day after a judge in New York dismissed Peloton’s lawsuit, ruling it “an improper anticipatory declaratory judgment action,” filed with the intention of beating Lululemon to the courthouse.

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