Back to school concerns compounded by back to work woes
While parents worry about sending their kids back to school in September, millions will be without work and without government assistance. The Canada Emergency Response Benefit (CERB) runs out in September. It provided $500/week to pay the rent and buy groceries.
The future looks especially bleak for those previously employed in the service sector. They represent the largest sector -three out of every four jobs. With isolation measures in place, many jobs in the food and tourist accommodation sectors are lost for a long time.
Without CERB, a cloud of debt hangs over the unemployed. Canadians owe $1.77 for every dollar available to spend as of June, 2020.
The holders of that debt face a problem as well. Banks were happy to see Canadians in debt as long as the credit cards, loans, and mortgages were paid off with profitable interest. But what do banks do when Canadians can no longer pay debt?
Canada’s Big Six banks face growing loan losses as government programs wind down, and loan-deferral and interest rate relief programs come to a halt. Banks have already set aside $11 billion for losses but that may not be enough.
CERB has kept the wolf from the door so far. Personal insolvencies are below average and credit payments have remained stable.
The government of Canada faces a big problem as well. You only have to look back at the Dirty Thirties to see what happens when there are no jobs and no government support. Men left their desperate families on dustbowl farms and wandered the countryside on trains trying to find any work and money to send back home to starving families.
As of Tuesday, Prime Minister Trudeau has prorogued Parliament to deal with the crisis, a move that sets up a confidence vote this fall that could trigger a 2020 election.
Here’s the problem that the Trudeau government faces.
As of last March all EI recipients were rolled into the CERB program and received $500 a month. The feds will discontinue the CERB program at the end of this month and move recipients back to EI or an “EI-like” transitional benefit. Just what will an EI-like program look like?
There are major holes in the move back to EI as it now stands, according to calculations done by David Macdonald, senior economist with the Canadian Centre for Policy Alternatives.
At the start of August there were 4.7 million people receiving the CERB. Because EI has no minimum, 811,000 of those would receive less on EI than they did on CERB; instead of $500 a week, they would receive only $312 on average.
And under current EI rules, 2.1 million of those receiving CERB will not be eligible; they will get nothing at all. In B.C., that’s 324,000 who were previously receiving $500/week who will now get nothing.
The clock is ticking as CERB runs out. I look forward to the Throne Speech on September 23 and the federal plan in which “no one will be left behind,” as Trudeau promised.