Canada Cuts Projected Cost for Wage Subsidy Program

(Bloomberg) -- Canada cut the projected cost of its wage subsidy program while boosting the price tag for direct support to individuals, suggesting a slow return to work in the wake of Covid-19.

The federal government’s wage subsidy program, meant to be its flagship measure to buffer the economy from the pandemic, will cost C$45 billion ($33 billion), 38% less than a previous estimate, according to an update from the finance department. The cost of the Canada Emergency Response Benefit is seen swelling to C$60 billion from C$35 billion.

The CERB pays C$2,000 per month to workers who’ve lost their jobs or income due to the pandemic.

The shift indicates Canadians may remain unemployed for longer than the government anticipated. Canada shed 2 million jobs in April, the most on record.

When asked about the changes on Friday, Prime Minister Justin Trudeau said “it demonstrates how hard this pandemic hit our economy and how many people actually found themselves without a paycheck.”

He also said the CERB has been important to help millions of Canadians cover their rent and grocery expenses but the government will continue to encourage businesses to use the wage subsidy to rehire employees.

Back to Work

“As we move forward and as businesses start to reopen and need to get people back to work the Canada Emergency Wage Subsidy will become more and more important,” the prime minister told reporters in Ottawa.

Prime Minister Justin Trudeau has encouraged companies to rehire their laid-off employees using the wage subsidy, which covers as much as 75% of a worker’s pay with a maximum payment of C$847 a week.

Ottawa’s plan had been to reduce the amount of people receiving CERB while simultaneously increasing the number of companies using the wage subsidy. However, companies have been slow to take up the subsidy. Business leaders have criticized the government for being too slow to implement the program.

The cost of total direct measures to support the economy has increased to C$152.7 billion, according to the update. Costs are expected to continue to rise as the Finance Ministry has yet to calculate how much extending the two programs will cost, said the update. The government is currently conducting a four-week consultation with businesses and other stakeholders to understand how their programs are working and how to improve them.

Following are the largest direct support measures. For a full list, see here:

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