Home Finance Posthaste: CERB has been a lifeline for millions of Canadians — but...

Posthaste: CERB has been a lifeline for millions of Canadians — but it may be time to overhaul it

Good morning!

The Canada Emergency Response Benefit has been a lifeline for millions of workers, but the government now needs to modify the essential program, according to the C.D. Howe Institute.

As it recently extended the program by eight weeks, Ottawa has also proposed stricter measures for abusing the CERB such as imprisoning people. But that’s misguided, according to a working group organized by the think tank.

The group noted that when the $2,000-a-month CERB was first rolled out in March, there was no clarification on the consequences of misusing the system, other than requiring ineligible recipients to repay CERB benefits after verification. Retroactively imposing stricter penalties would be unjustified and unfair.

The C.D. Howe working group believes “imprisonment is excessive and that if considered necessary, should be considered only for new applications and serious abuse.”

Secondly, CERB fraud should be in line with what the Canada Revenue Agency applies for tax fraud.

Thirdly, severe penalties could have unintended consequences, “such as a chilling effect on the decision of an eligible worker to apply for the program for fear of making mistakes.”

Ottawa should also introduce a training program within the CERB so workers can be trained in new sectors and equip themselves with new and upgraded skills.

The Canada Training Benefit, announced last year, could be adapted to fit the current crisis, according to the group.

The Business Council of Canada has also called on the government to expand training programs for displaced workers in the harder-hit sectors, and “begin responsibly winding down” the CERB so “it does not function as a disincentive to work” by allowing an income-tested clawback so low-wage workers can keep some payments.

The letter also called for a review of Employment Insurance and an extension of the wage subsidy to the end of the year for sectors such as tourism and travel.

For its part, the government is doing everything possible to retool pandemic-related aid programs such as the CERB to help get workers and companies back on the job, by codifying the need to look or take work as part of the CERB application, according employment minister Carla Qualtrough.

The government is also looking at bolstering the safety net of Employment Insurance, the minister told a Senate Finance Committee on Monday, according to a report by The Canadian Press.

The minister said “policy discussions are ongoing about how to ensure the employment insurance system covers people as they transfer back to it from the CERB.”

“We are looking at how to ensure that as we transition people back to the employment insurance system that people are indeed covered,” Qualtrough told the committee.

“Employment insurance has been shown to be ineffective in terms of this kind of crisis and in terms of actually reflecting the way people work now.”

But it will need an all-hands-on-deck approach. Provincial governments also must step in with clearer guidelines that provide workers a clear pathway for returning to work. This is especially important for parents who need clearer  timelines on child care centres and school reopenings.

“The working group called for support from provincial governments to ease re-opening of the economy and supporting parents as they go back to work,” said the C.D. Howe working group. “Similarly, the extension of the CERB for initial applicants through to September gives Ottawa time to update its administrative architecture for Employment Insurance to ensure it can handle a surge in applicants at that time.”

The $60-billion CERB had already paid out $43.51 billion to 8.41 million people by June 4, before the Liberals promised to extend benefits to 24 weeks from 16. Included in the payments is $20.56 billion from the EI account to 3.96 million EI-eligible workers who exhausted benefits and couldn’t find work due to the pandemic.

The Fraser Institute also warns that EI is facing financial strain, as employee and employer contributions decline and payouts surge due to higher unemployment and greater generosity and accessibility of the system.

“The system will likely generate billions of dollars of losses, adding to Canada’s looming fiscal crisis though, at least in the initial phase, a large part of the deficit will be shifted to the Canada Emergency Relief Program,” said Fred McMahon, resident fellow at the Fraser Institute and author of a report published this morning. “And, even if an EI financial crisis is short term, unfairness, inefficiency, and perverse incentives in the system should motivate an overhaul.”

With files from The Canadian Press

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NEW IOS: Apple CEO Tim Cook delivers the keynote address during the 2020 Apple Worldwide Developers Conference (WWDC) at Steve Jobs Theater in Cupertino, California, U.S., June 22, 2020. WWDC, in its 31st year and held virtually for the first time, runs through June 26. Brooks Kraft/Apple Inc/Handout via REUTERS

The World Health Organization reported the largest single-day increase in COVID-19 cases around the world this week, as governments continue to struggle to contain the spread of the pandemic.

According to the organization’s figures, the Daily Mail reports, 183,020 COVID-19 infections were recorded on Sunday, June 21, surpassing the previous record of 181,000 on Thursday, June 18. Read the article here.

Warren Buffett, at this year’s Berkshire Hathaway Inc.’s AGM on May 2, said “I don’t know” 30 times during his discussion.

Here are four things investors (even Warren Buffett) just have to accept they know nothing about — and one new thing, writes Larry Sarbit.

Today’s Posthaste was written by  Yadullah Hussain (@Yad_Fpenergy), with files from The Canadian Press, Thomson Reuters and Bloomberg.

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