The Trudeau government’s forthcoming cut to the Canada Recovery Benefit (CRB) comes even as it acknowledges many who rely on the CRB are unlikely to return to pre-COVID work conditions and pay for years.
And, that isn’t entirely an oversight.
The coming cut
In July 2021 the federal government is set to cut the CRB to $300 per week from $500 per week. The whole program is slated to end in September.
This change was announced in the 2021 budget. But, in that same budget, the government acknowledged:
Long unemployment spells mean that many vulnerable workers risk withdrawing from the workforce or seeing their skills erode, with lasting impacts on their lifelong earnings, and on the wider labour market, that could take years to reverse.
Business investment is, as Bloomberg describes it, “well below pre-crisis levels.” Unemployment remains high at 8.2 percent. Statistics Canada notes over 312,000 people have been unable to find work for more than a year. And, just last week, Equifax noted uneven credit spending and missed payments likely forecasts an “uneven K-shaped recovery,” where a minority will see their incomes and prospects recover, while the rest will remain worse off.
However, leaving those in financial difficulty behind for a lower-wage future isn’t a bug in the CRB system—it’s a feature of a program designed and redesigned to crack down on recipients and maximize “incentive to work.” The CRB was, to this end, designed within the ‘workfare’ tradition that’s marked every social program in Canada since at least the mid-1990s.
Dismantling the welfare state
Canada’s income support programs largely fall under provincial jurisdiction. But, prior to the 1990s, the federal government gave the provinces significant support under the rubric of the Canada Assistance Plan (CAP). Bound up in the CAP were standards for provincial delivery. Those standards (while allowing for some means testing) ensured recipients qualified for income support programs on the basis of “need,” without requiring them to seek work to make ends meet.
Leading into the 1995 budget, however, then Employment Minister Lloyd Axworthy suggested the government slash social assistance transfers to save money. In late 1994, a leaked federal discussion paper suggested adding work requirements to the system as a key way to kick people off. Minister Axworthy claimed, at the time, as justification: “There was a lot of abuse and waste in the system.”
This wasn’t just an effort to cut costs. The Liberal government was also keen to slash and redesign income support to maximize “labour market flexibility”—in others words, to push unemployed workers to accept any work at any wage. The federal government explicitly proposed, to this end, a “redesign of income support programs so as to reduce disincentives for individuals to seek work.”
Ultimately, the Chrétien Liberal government dismantled the CAP, slashed federal transfers and removed that “need” standard. And, the result was much the same. Across Canada, “workfare schemes” and more stringent requirements proliferated.
A 2005 government research paper found that after 1995:
Virtually all provinces, with varying degrees of intensity, instituted changes aimed at reducing SA dependency. Eligibility rules were tightened (especially for new entrants), benefit levels were cut, ‘snitch’ lines were introduced, and other rule and procedural changes were adopted.
The Employment Insurance system was hollowed out similarly. On the basis of very low unemployment and eight-week eligibility, the program was deemed “nearly universal” in 1971. Owing to decades of clawbacks, structural shifts and new “entrance requirements” eligibility fell to 37 percent by the 1990s—and it continued to decline through to 2020.
Canada’s welfare state was left threadbare. For years after, Canada remained one of the least redistributive countries in the OECD.
When disaster struck
Owing to eligibility-tightening and structural shifts, many who needed support at the start of the pandemic in March 2020 were not covered by EI and the existing income support regime. To avert massive social dislocation, the Trudeau government introduced the $500 per-week Canada Emergency Response Benefit (CERB) as an explicit stop gap.
CERB initially provided $500 per week of support for up to 16 weeks to those who lost their income source due to COVID-19 and who didn’t meet EI requirements. The government budgeted $24 billion for the program but it soon surpassed $74 billion as COVID-19 wiped out over 30 years of Canada’s “job gains.”
$74 billion is paltry compared to the more than $700 billion shored up for Canada’s capitalists through various subsidy schemes. Yet immediately, a chorus of right-wing journalists and business owners demanded the Trudeau government claw back its support for unemployed workers.
The Toronto Sun complained CERB was “overly generous.” The Globe and Mail worried it didn’t provide minimum wage workers with enough “incentive” to return to work. One Financial Post columnist suggested employers classify CERB recipients who refused recall notices as having “resigned” to disqualify them from future emergency support.
Many pro-business think tanks argued similarly. The C.D. Howe Institute, for example, complained of CERB:
Unlike the EI program, there was no requirement to remain available to work and be actively looking for a job and the amount of benefit was relatively generous for low-income earners and was not linked to pre-pandemic income.
Canada’s business owners also intervened to demand cuts.
Linamar CEO Linda Hasenfratz, Teck Resources CEO Donald Lindsay and Loblaw Companies Ltd. CEO Galen Weston authored a joint op-ed as members of the Business Council of Canada titled “We have flattened the curve, now what?” It said:
CERB is extremely expensive, and companies across industries are finding it difficult to restart if employees lack incentives to return… Adjusting CERB and other programs to be more targeted and provide greater incentives to work is crucial.
The Business Council of Alberta argued likewise in a May 2020 report, with many workers earning more on the below-minimum wage emergency program than at work: “The previously appropriate ‘no-one-should-be-left-behind’ model does not work when we are looking to move forward.” As a solution, the Council suggested cutting benefits as job vacancies rose.
Some of the discussion around whether the benefit package was a work “disincentive” referenced CERB’s high clawback rate. As with CERB, recipients were able to earn only up to $1,000 per month in work income before they were cut off. But the conclusion was nearly-unanimous: Workers need to be compelled back to work.
Past Liberal advisors agreed that CERB benefits should be reduced.
Lynch and Dupont noted as CERB was “slightly more generous than full-time employment at the minimum wage,” that “Many Canadians personally have no strong economic incentive to return to work.” Rather than raise wages, Lynch and Dupont concluded from this: “Realistically, the level of benefits has to be reduced.”
The government signalled its agreement.
When asked by opposition Tory and Bloc MPs what the government was doing to ensure precarious workers were not too comfortable on $500 a week, Deputy Assistant Finance Minister Suzy McDonald assured opposition MPs: “We’re looking into that situation. As far as the CERB is concerned, we’re hearing about what’s working and what isn’t working so well. We’re always reviewing the programs in order to improve them.”
Cutting CERB to CRB: ‘Incentive to work’
By September 2020, the Trudeau government was hinting at an end to CERB, even while ramping up the wage subsidy for employers.
A federal report justifying the decision reads as follows:
Aligning the extension of the CEWS treatment for furloughed employees with the extension of the CERB from August 30 to September 26, 2020, will continue to meet the Government of Canada’s priority that Canadians can access the support they need through the COVID-19 crisis. It will also contribute to preserving the employee-employer relationship in situations where employers were ordered to shut down their business or are facing decreased demand, while maintaining the incentive to work.
In late 2020, the government scrapped the CERB. In its place, it changed the floor on EI benefits to $400 per week and reduced the hours needed to qualify to 120. The Liberal government further split CERB three ways into a $1,000 two-week benefit for those self-isolating, a $550 weekly benefit for parents who miss work to care for dependents and the Canada Recovery Benefit—a $450 weekly benefit for everyone else.
The CRB requires workers to reapply every two weeks. And, it requires them to seek out “reasonable work” to continue to qualify.
Leading up to the CRB’s introduction, Minister Carla Qualtrough told the House of Commons:
We have put a lot of effort into ensuring that there are no disincentives to work. These new benefits really work like employment insurance: People must be looking for work, be available for work, accept a reasonable job offer and be present in the country. They really need to be actively looking for work.
In response to pressure, mainly from Conservative MPs, Liberal MP Wayne Easter likewise sought praise for introducing these work requirements.
“The government has shown us throughout this that it was willing to listen to members,” Easter said. “The member opposite said that with CERB there needs to be employment incentives, and there are.”
CRB was extended, more recently, as key provinces entered a third wave of COVID-19 infections to $500 per week. However, the work requirements remain intact.
CRB’s work requirements at a glance
As the federal government prepares to cut CRB, applicants are still required to reapply every two weeks and demonstrate their willingness to accept work, including, potentially, at lower wages.
Currently, the website for the program notes those re-applying must attest to the fact that they sought work and did not “refuse reasonable work” while they received the benefit.
If you refuse reasonable work, you will automatically lose five periods (10 weeks) of the CRB eligibility periods. You must also wait five periods (10 weeks) before you can re-apply. If you refuse work again, you will face the penalty again.
The Canada Revenue Agency declined to comment on how many workers have been penalized for refusing “reasonable work” to date.
But members of the government have noted applicants’ willingness to seek work is to be monitored “as with” EI, which requires applicants document their “job search activities.” Minister Qualtrough told BNN some of the reason behind cutting CERB in favour of the new system of transitional benefits was to allow for the “rigour of the EI system,” so “the chance for fraud and abuse goes down” as “EI is really strict in how it monitors people.”
An FAQ document somewhat elucidates what the federal government means by “reasonable work.” Crucially, it offers no explicit protection against work at lower pay, so long as it is “similar:”
Accepting part-time work may be reasonable if it is with your previous employer at the same or similar pay, with the possibility to work more hours in the future.”
Further to this end, it notes, “The Canada Recovery Benefit is also available to individuals who have had at least a 50 percent reduction in income due to COVID-19. That means even if you accept a job with a lower salary you may still be eligible for the Benefit.”
That is, however, only until the benefit is withdrawn.
As Minister Qualtrough told CBC earlier this year, when asked how the government would know when to “wind the benefits down:”
Between economic and public health there’s really no light of day.
Mitchell Thompson is a writer, editor and occasional radio producer based in Toronto.