A huge share of the workforce has claimed the CERB - The Orca
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A huge share of the workforce has claimed the CERB

Ken (2)
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If employment continues to recover, hopefully the need for a generous federal government payment to an unusually large slice of the workforce will diminish.

The Canada Emergency Response Benefit (CERB) is the federal government’s flagship support program for individuals. Almost anyone who lost a job or had hours cut because of the COVID lockdown of many businesses and the shuttering of international travel is eligible for the program. This casts a very wide net, which is reflected in the program’s substantial uptake.

Given the vast job losses that followed the shutdown, there was clearly a need for the program. Because it was important to manage the unprecedented volume of applications, the process necessarily has been simple. Applicants only need confirm that some income was earned recently or in 2019, and a full 4-week payment of $2,000 is then made available, irrespective of income.

The CERB does not automatically renew. A person must apply for each 4-week period a claim is made. The first period started March 15. The program recently was extended and now runs until September 26. When it concludes, the government expects an expanded Employment Insurance (EI) program will provide support for people who have not been able to return to work.

The federal government has provided limited information on the number of CERB applicants by province, gender and age through August 16. Over the five and a half four-week periods reported so far, a total of 8.6 million Canadians have applied for the CERB. The government has delivered $70 billion in CERB payments to these applicants. Based on these nation-wide totals, the typical claimant has collected $8,120, an amount equivalent to payments covering a little over 4 periods.

Locally, some 1.15 million British Columbians have applied for and received the CERB. Based on the Canada-wide average payment, B.C. residents claimed an estimated $8.2 billion in CERB benefits through mid-August.

The number of CERB claimants dramatically exceeds the job losses reported since the onset of the COVID-19 shock. At the low point back in April, 400,000 jobs were lost in B.C. (Most of the affected workers were temporarily furloughed rather than permanently laid off.)

With a partial recovery in recent months, by the end of August employment was “only” down by 150,000 relative to February. Yet the number of unique CERB applicants in B.C. is nearly three times the number of jobs lost at the height of the shutdown. Perhaps more alarming is the fact that 1.15 million CERB claimants represents nearly half of (45%) of B.C.’s entire pre-COVID workforce.

Why does the number of unique recipients far exceed the number of job losses?

The main reason is because people are permitted to earn up to $1,000 during each four-week period they receive the CERB. Younger age cohorts, where part-time employment is more common and median wage rates tend to be lower, are heavy claimants. As shown in the accompanying figure, the number of unique claims for B.C. workers under the age of 25 amounts to a staggering 61% of this cohort’s employment.

 

The median part-time wage rate in the broad service sector – where more than three-quarters of employed British Columbians work – is around $300 a week. Prior to the pandemic there were nearly 600,000 part-time workers in the province. This figure fell by 200,000 when COVID arrived, but there was still a very large pool of workers (around 400,000) whose pre-pandemic earnings would qualify them for CERB. With the widespread scaling back of hours beginning in March, this pool expanded significantly.

The complications that have accompanied virus containment strategies further skew the incentives to claim the CERB. For many parents, day-care options have been limited and normal summertime activities have been greatly curtailed. Often, parents have had no option but to work less and claim the CERB.

In some instances, the legitimacy of the claim may be stretched, but people were and are facing an uncertain future. And with the program used so extensively, the temptation to submit a claim is very strong when one sees friends and colleagues with $2,000 deposited into their bank accounts shortly after answering a few simple questions online.

The combination of widespread and immediate need, the very low bar for eligibility, and the relative generosity of the program resulted in an enormous uptake for the CERB program. If employment continues to recover, hopefully the need for a generous federal government payment to an unusually large slice of the workforce will diminish. But when the program winds up in a few weeks’ time, the Business Council believes that total employment in the province will still be down by 100,000 – 120,000 compared to February.

Even with an expanded EI program, the hurdles for EI coverage will be much higher than with the CERB. Depending in part on future business closures and exits in the fall and the pace of job recovery, we expect that many households will face financial challenges in the months ahead.

Ken Peacock is chief economist of the Business Council of British Columbia.

SWIM ON:

  • In April, Ken Peacock and Jock Finlayson laid out two plausible scenarios for a COVID-19 recession: one bad; one very bad.
  • Jody Vance: If the CERB is keeping otherwise eager, willing, and able people from going back to work, it should be tweaked, not dumped or held sacrosanct.
  • There’s no one-size-fits-all solution for BC, a province that includes places as different as downtown Vancouver and Fort Nelson. Dene Moore says BC’s pandemic response must reflect this basic fact.
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