On Boosting Jobs and Incomes

by Terrance Hunsley

I.M.F. Predicts Deeper Global Downturn Even as Economies Reopen (June 24)

WHO says pandemic will be around for “foreseeable future.”

No one is saying this is going to bounce back to normal. Canada is likely to go through a recovery that will be protracted, uneven and difficult. Many businesses will reopen with a different business model and fewer employees.  Many will struggle with social distancing that reduces their volume of business. A second wave shutdown could be the nail in the coffin for others. Planned future automation will be advanced. We could see waves of layoffs as companies and industries (like collective transportation, tourism, entertainment, etc.) struggle with reduced business. 

Governments at all levels will face revenue shortfalls. And yet government needs to play a larger role in the economy, like it or not. There will be a need for continuing stimulus, for protecting people who lose their income, and for getting the economy going and people into jobs. The federal government and Bank of Canada can increase the money supply, but not indefinitely. Economic and political limits will quickly come into play. There will be huge pressures to reduce spending wherever possible. 

But we need to get and keep people working.

For the stimulus that will be needed, we should consider whether we subsidize existing businesses, even if they are on their way to downsizing or extinction, or if we subsidize workers.  There are valid arguments to be made on both sides. Here I will address the  possibility of subsidizing workers.

The Canada Workers Benefit could be a vehicle for a portable wage subsidy, especially for the lower paying jobs.  It could allow workers to shop for jobs that have a future or that provide flexibility to combine training or other activities. Employers who make the case for reduced wages for a specified period could be permitted to have their wages subsidized through the CWB.  The scale of the subsidy would be reduced over time with the expectation that wages will rise to replace it. If they don’t, then the worker will need to look for another employer. The floor income for the worker could be set somewhere near the CERB benefit, or perhaps something like 3/4 of the median full time wage in the economic region. Above the floor, the subsidy can be adjusted and even customized to the individual situation if needed.

The Longer Term

I think the best final destination for income security and wage policy is a national basic income. Several models could work, including the one sponsored by the Basic Income Canada Network. Personally, I prefer a taxable universal transfer, which could eliminate disincentives to work, since it would not be reduced, and be received without being oppressed by bureaucratic oversight.  It will require higher taxes on the income and wealth of high income and wealthy people and businesses. That may take some political courage but it is doable.  

However the road to it runs through mucky constitutional issues and beggar thy neighbour federal-provincial fiscal competition. So we might best start with a program that is currently federal and can be adjusted quickly and continuously if needed.  The administrative system for the CWB is in place.  As the economy recovers and industry sectors begin to thrive, subsidies can be decreased, but the guaranteed income floor can remain. 

Then, federal-provincial agreements could combine the CWB with social assistance and disability benefits to form the Basic Income.

In a future article, we will look at flexible work,  and the policies that support them

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