Income Support and the Canada Emergency Response Benefit
- The Canada Emergency Response Benefit (CERB) provides temporary income support of $500 per week for those who have stopped working because of COVID-19 or who are not eligible for Employment Insurance or who have exhausted their benefits. It is currently available for up to 16 weeks.
- The $2,000 per month seems well-targeted for the essential spending needs of low-income, single-earner households. It is slightly more generous for those in Atlantic Canada where living costs are lower. If more than one person in a household receives the benefit, it should be more than sufficient for their temporary basic needs.
- For workers in highly affected industries, including tourism or other industries facing a slow recovery in demand and employment, the 16-week benefit period may be insufficient. Individuals earning less than $43,000 per year would receive less on employment insurance than the emergency benefit. Others may not qualify for employment insurance.
- In industries looking to bring workers back quickly, the current benefit structure creates financial disincentives for low-wage workers. This is particularly the case in retail trade and accommodation and food services – industries which suffered the largest reductions in employment due to COVID-19.
- Reducing the clawback in benefits as incomes rise is one way to help reduce the disincentive.
How much do people need?
APEC has estimated how much people need for essential purchases in this pandemic, based on average household spending in 2017. In a crisis situation, individuals facing an income loss can cut back on spending to focus on essential needs, even at lower income levels. APEC estimates a low-income household in Canada can manage temporarily on $2,000 per month, compared with normal average spending of $2,900 per month. Atlantic Canadians need slightly less due to lower shelter costs.
A low-income Atlantic household typically spends 45% of their income on food and shelter, compared to 39% for the average household. Transportation costs may be lower during the pandemic.
Will the CERB discourage people from returning to work?
- CERB recipients receive $2,000 per month and can earn an additional $1,000 per month before they lose their benefits.
- An individual whose earnings goes from $1,000 per month to earning $1,100 would see their monthly income drop from $3,000 to $1,100 as they would lose all their CERB.
- An individual in a low-wage industry may only want to work a few hours a week until their CERB runs out.
- Individuals in retail, accommodation and food services have little financial incentive to work unless they work 40 hours a week or earn more than median earnings for their industry.
- The disincentive is lower for individuals earning higher wages or working longer hours.