Canada’s economy has been placed in an induced coma since it was infected with the novel coronavirus. Arousal from the coma must be done carefully to avoid a devastating setback.
Keeping the comatose economy on life support has been expensive. We’ve blown the wad on the first wave of the pandemic to the tune of one-quarter trillion dollars. We can’t afford an expensive relapse.
Canada’s debt, manageable now, could lead to consequences worse than that of the Dirty Thirties if the recovery is not done right.
Royal Bank of Canada CEO Dave McKay puts it this way: “We can’t screw this up because we don’t have enough fiscal firepower. We can’t fail the re-entry. We don’t have enough money for a massive step back.”
Bringing the economy back to life is as much an art as a science; a little wakefulness here, a few stimulations there. Hurry up and wait to see what happens. The patient’s urge to run must be tempered with the pitfalls that lie ahead.
Deep thinkers are at work. We need to listen to the advice of health professionals, who understand the mortal dangers of this virus, and to economists who appreciate the long-term social and economic costs of tanking the economy.
Unemployment already exceeds anything in the past century, except the Great Depression. The sheer number of people affected is staggering. A projected 8.5 million Canadians will receive $2,000 monthly from the Canada Emergency Response Benefit (CERB). That’s nearly 40 per cent of Canada’s work force.
Unlike Employment Insurance, the CERB does not require recipients to look for work. It doesn’t require them to accept a job offer. Recipients can only earn up to $1,000 a month, anything more and the CERB is lost.
The disincentives to find work are part of the induced coma. Rest and relaxation is the prescription. Workers must stay home to avoid contagion. To encourage workers to help wake up the economy, they should be allowed to keep a larger portion of the benefit as they return to work with a gradual clawback as earnings rise.
This would be a step towards a basic annual income for all Canadians –an idea supported by both the right and left ends of the political spectrum. Sheila Regehr, chair of the Basic Income Canada Network, is urging just such a change. The group issued a policy paper in January that proposed a $22,000 annual benefit for a single adult. Under that proposal, benefits would be reduced by 40 cents for each dollar of earnings and would be eliminated entirely after a person’s income rose above $55,000.
Child care is another knotty problem. Parent returning to work need affordable child care, but they need to assured that they are not sending their children into harm’s way. Any uncertainty about public-health risks at daycares and schools will prove to be a significant disincentive for many Canadians to return to work.
The next decade may well be known as the Dark Twenties. The economy that awakes from the induced slumber might not recognize its former self.