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March 24, 2020

From: Rob Gillezeau, Gillian Petit and Lindsay Tedds

To: COVID response policymakers

Date: March 24, 2020

Re: Recommendations for Immediate Provincial Policy Responses to COVID-19 

With COVID-19 sweeping across the globe, conditions in Canada are, unfortunately, likely to get worse before they get better.

Given the scale of the wealth shock in stock markets alone – ignoring the unique economic impacts of the virus itself – we are entering a recession that will likely be one of the most severe in the last century both domestically and globally.

Because of the unique nature of the economic shock, it is creating massive disruptions for the labour force, particularly for those in the service sector and particularly for younger Canadians and for women. Further, it is exacerbating income hardships faced by many vulnerable populations, whose numbers are likely to grow in the coming months.

The federal government has now moved forward with a substantial suite of measures to sustain households and firms over the short run. With the federal measures now known, provincial governments should be looking to close gaps in the federal response package.

We recommend that provincial governments move forward rapidly with economic policy in two broad, but often overlapping areas, both related to creating financial bridging measures for individuals, nonprofits, and firms. In particular, we recommend that provincial governments should move forward on providing support that: 

  1. incentivizes labour force behaviour consistent with disease management (i.e., help flatten the curve); and,
  2. assists vulnerable populations and sustain their households as quickly as possible through pre-existing tools and programs. This is consistent with disease management and will help to smooth consumption and, to some degree, moderate declines in economic activity.  

This crisis will last many months and businesses and non-governmental organizations will also need support in helping sustain their businesses during this period of social distancing and self-isolation. Programs should be based on existing ones to ensure rapid implementation.

While traditional economic stimulus programs will also be needed to recover from the recession, such programs should be planned today, but not be rolled out, with the exception of direct income transfers, until after the virus is under control and social distancing and self-isolation measures are permanently lifted.

Provincial cooperation with federal partners is essential given the jurisdictional split.  Here are the top ten proposals that provinces should consider for their initial economic response to the virus while being clear that more is to come.

  1. Stimulus infrastructure spending is not currently the optimal response, but targeted funding for the construction of temporary health facilities (e.g., testing facilities) and space conversion (e.g., hotels and convention centres should hospitals be at capacity) are worthwhile measures to conduct immediately.
  2. Increased transfers to municipalities in exchange for policies related to property tax deferrals, utility deferrals and other relief programs along with increased revenue sharing arrangements with Indigenous communities where such arrangements or similar alternatives are in place for local relief programs. 
  3. Update Employment Standards Acts to include unpaid job leave for the duration of a national emergency such as the current pandemic, but also for future crises like an earthquake, forest fire, flooding, and related emergencies.
  4. Update Employment Standards Acts to guarantee two weeks of paid sick leave with an offsetting credit to any existing provincial payroll tax or provincial business taxes. 
  5. For businesses: Introduce a temporary credit to businesses taxes if firms maintain employment levels. For nonprofits: Introduce a temporary proportionate grant that maintains current employee levels.
  6. Mirror work by BDC/EDC for private-sector firms to provide short-term liquidity to nonprofits.
  7. Defer utility payments without fees in the event of job loss. Create a crisis fund to aid utility clients who cannot pay. Cease all utility disconnections. Cease all rental evictions and provide assistance to renters to help them pay rent either through rent bank programs or through rent assist programs like Rental Assist Program in B.C. or Rent Assist in Manitoba. Ensure program accessibility parameters are as broad as possible.
  8. Emergency crisis supports are often only available to social assistance recipients or under very narrow eligibility criteria. Relax these restrictions and increase maximum amounts.
  9. Top-up income assistance to 75 percent of Statscan’s market basket measure and reduce the benefit reduction rate. Remove all financial and assets tests to qualify for income assistance. Remove the requirement to actively search for work or attend work training programs while the social distancing and self-isolation constraints are in place.
  10. Top up provincially funded, tax delivered programs for low-income seniors such as the Seniors Supplement in B.C. and the Seniors Benefit in Alberta.

Rob Gillezeau is Assistant Professor of Economics at the University of Victoria, Gillian Petit is a doctoral student at the University of Calgary where Lindsay Tedds is Associate Professor and Scientific Director, Fiscal and Economic Policy.

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters. ​