In the face of unprecedented layoffs from the COVID-19 lockdowns, the federal government is quickly shoring up Canada’s income-support network. The new Canada Emergency Response Benefit will provide $2,000 monthly (now non-taxable) to those losing work because of the pandemic; other income supplements (like expanded GST and child-tax benefits) will also help.
Of course, it’s not enough to support workers after they’ve lost their jobs. It’s also vital to prevent layoffs in the first place. Like the doctors say, an ounce of prevention is worth a pound of cure. So government is also moving to prevent a tsunami of layoffs that would overwhelm our support systems, and plunge the economy into depression.
Many businesses have seen revenue evaporate virtually overnight: especially in consumer-facing sectors like retail, hospitality, and personal services. Firms in other industries will soon experience spillover losses: logistics and wholesaling, manufacturing, business services, and more. With no customers and no revenue, few have the financial resources to keep workers on staff.
If each business simply disemploys its own workers, however, they collectively make the problem much worse: further shocking consumer confidence and deepening the collapse in spending power. Worse yet, a competent and experienced workforce is the backbone of any business. Desperate companies which toss aside that critical asset, scattering employees into the winds of the coming storm, will lose the capacity to restart production once the health emergency is over.
To prevent this worst-case scenario, government is moving to help companies cross the economic chasm now in front of us. Businesses need cash flow, subsidies, and legal protections to survive the coming months. Then they will need an enormous reconstruction plan — like the Marshall Plan that rebuilt Western Europe after the Second World War — to kick-start production, once this new war against COVID-19 has been won.
Here are the major elements of a strategy to support businesses and prevent mass layoffs. The government is already implementing several of these measures, but more will be needed before this crisis is finished:
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These measures are unprecedented — and expensive. But money is no barrier: the federal government (in partnership with the Bank of Canada) has unlimited capacity to provide funds to help businesses survive the coming weeks. And once the pandemic has run its course, we can invoke creative strategies to manage the accumulated debt: including deferring, refinancing (at near-zero interest rates), and converting debt to other assets (including money).
We’ve never faced an economic emergency like this one. Both workers and the businesses they work for need every dollar of support government can provide. The normal rule book of capitalism has been thrown aside. It’s time for government to jump right in, and guarantee the survival of the industries and firms that will be essential to our prosperity — once we can go back to work.