According to Statistics Canada, the official unemployment rate has jumped to 7.8 per cent as more than one million Canadians lost their jobs in March due to the COVID-19 pandemic.
“The employment decline in March was larger than in any of the three significant recessions experienced since 1980,” Statistics Canada reported.
An additional 2.1 million people worked fewer than half their normal hours or not at all between March 15 and 21. Although these figures are troubling, they are also unsurprising. In the midst of a public health emergency, keeping people out of workplaces has been a necessary part of the social distancing strategy intended to stop the spread of COVID-19.
Yet the difficulty governments across Canada have had in meeting the needs of workers impacted by the coronavirus crisis has exposed the holes in our social safety net and the inadequacy of existing labour laws.
It’s important to recognize the official jobless numbers are underestimating the severity of the crisis for many working people.
For starters, even before this current crisis, official unemployment has grown increasingly difficult to measure due to the spread of precarious forms of employment.
COVID-19 could heighten economic insecurity
Despite the Bank of Canada’s positive report on job growth over the past five years, many workers remain involuntarily part-time or working fewer hours than they would like. Others are misclassified as self-employed or independent contractors. Still others are engaged in forms of paid work which elude clear categorization.
As the federal government indicated, more than five million Canadians have applied for emergency benefits since March 15, which suggests an unemployment figure of closer to 25 per cent. The full consequences of the current crisis for economically insecure workers are almost certainly not captured in the official count.
For instance, Canadian households are highly indebted. As of September 2019, average household debt to income stood at 175.9 per cent. This means for every dollar of disposable income, Canadians owe about $1.76 in debt — a total that includes mortgages and credit cards debts.
A study released last summer by the Canadian Centre for Policy Alternatives demonstrates the growing gulf between wages and average rental costs in cities across the country. Perhaps most troubling, polls from a year ago found that 46 per cent of respondents were $200 or less away from financial insolvency at month’s end, and 31 per cent don’t earn enough to cover bills and debt payments.
At present, public health concerns dictate that many people remain away from work. But cuts and reforms to Canada’s Employment Insurance program undermine this objective.
The erosion of Employment Insurance
At its strongest in the 1970s when it covered over two-thirds of workers who experienced unemployment, EI has been drastically overhauled over the past decades. Fewer than half of unemployed workers now receive benefits. Onerous eligibility criteria and a low wage replacement rate of only 55 per cent up to a maximum of insurable earnings make the program both a shell of its former self and a laggard compared to more generous unemployment insurance programs in Europe.
In response to the inadequacy of EI, the federal government introduced the Canadian Emergency Response Benefit (CERB). The CERB’s $500 weekly benefit will help some workers who do not qualify for EI, such as the self-employed and other freelance workers.
However, its impact is also limited by eligibility criteria that dictate workers must be without labour income or have not voluntarily quit their job because of COVID-19. This leaves out workers on reduced hours or whose bosses refuse to lay them off, as well as those who wish to leave unsafe working conditions.
Putting workers at risk
In Ontario, Premier Doug Ford repealed many of the previous government’s reforms to the Employment Standards Act (ESA), including eliminating the right to paid sick days.
The Conservative government has amended the ESA during the pandemic to allow emergency leave related to COVID-19. But because this leave is unpaid, the ability of low-wage workers to take it is limited.
The reforms made to unemployment benefits and employment standards over the past decades were designed to reduce regulations that protect workers on the faulty assumption that this would improve efficiency and enhance economic growth. The mistakes of this approach are all too apparent during a public health crisis when workers need financial support in order to stay away from work.
Wage subsidies and a lack of worker power
The Canadian government has further tried to solve the problem of getting money into people’s hands while they are away from work through a wage subsidy program.
The Canada Emergency Wage Subsidy is aimed to encourage employers to retain or recall employees by providing 75 per cent of an employee’s pre-crisis wage, up to $847 per week for up to 12 weeks. In order to receive the subsidy, employers must demonstrate a 15 per cent drop in revenue for March 2020 and a 30 per cent drop for the following months.
The government has also introduced a process for refunding employer-paid contributions to EI and the Canada and Québec pension plans.
The total cost of the wage subsidy could be as much as $80 billion over three months, more than the federal government’s total transfers to provinces for health care, social assistance and equalization payments for the whole year.
Wage subsidies a gift for employers?
The Canadian Centre for Policy Alternatives projects that many employers will receive more through the program than they lose in revenue. As such, the wage subsidy has become controversial because it could turn into a substantial gift to employers and potentially be repaid through cuts to social services in the future.
There are additional concerns that nothing is in place to ensure employers pay the remaining 25 per cent of workers’ wages, or that large employers aren’t able to take undue advantage of the program.
However, some in the labour movement support a wage subsidy program as a way to keep people in their jobs and reduce the long-term employment disruptions caused by the COVID-19 crisis.
In this vein, countries like Denmark have instituted more worker-friendly versions of a wage subsidy. The difference is that Denmark has much greater union coverage and a collective bargaining system where unions and employer associations largely negotiate contracts at the industry level. More co-ordinated labour relations systems like this give unions much greater power to shape policy.
In Canada, where private sector union density is just 16 per cent and contracts are mostly work-site based, workers lack comparable institutional power. In this sense, more co-ordinated economies with robust labour regulations are better able to manage the employment and social consequences of the pandemic.
The COVID-19 crisis should encourage us to look seriously at ways to transform our system of labour law and social protection in order to empower working people.
Adam D.K. King does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.