Canadian Emergency Wage Siphoning

The CEWS began taking applications at the end of April 2020. To qualify for the scheme, framed as a lifeline to small businesses, eligible companies had to prove they had suffered a drop in revenue of at least 15 percent in March 2020 and 30 percent over the following months in order to receive a 75 percent wage top up.

A cross-party consensus on the need for a wage subsidy — which embraced the social-democratic New Democratic Party (NDP) and labor leaders — made it possible to push through the CEWS legislation quickly. The NDP, in an ill-considered move, actually pressed to loosen the original restrictions further and “adopt more flexible criteria.”

The government soon extended the original period of twelve weeks of coverage through the summer. The rules changed further in July, giving subsidy access to employers with any amount of revenue decline. The application advises applicants that the “employer is under no obligation to prove that the decline in revenue is related to the COVID-19 crisis.” Critics were quick to predict that it would result in a “windfall” in cash for already-profitable companies.

In December, the Financial Post published a list of names that confirmed those predictions: at least sixty-eight publicly-traded companies had received the subsidy and yet paid out massive amounts in dividends.

Because the government keeps the total list of CEWS recipients secret, the true amount of public money paid out to shareholders remains a mystery. However, journalists have managed to uncover the books of companies like Bell, Rogers, and Telus. Their discoveries show how those firms did exactly what the legislation permitted and made out like bandits in the process.

As Nora Loreto points out:

Rogers made a net income of $1.7 billion in 2020 and still got the CEWS. Why? Because their income was only 1.7 billion, not $2.1 billion as it was in 2019.

Liberal Dithering

Following the wave of criticism, Bell appeared before the Standing Committee on Industry, Science and Technology in January. Liberal MP Nathaniel Erskine-Smith asked the company about its decision to take wage subsidy cash despite its profitability.

Bell argued that it needed investment capital to fund its projects, and therefore needed the subsidy to entice shareholders. Just last week — on the heels of the company’s annual mental health campaign, #BellLetsTalk — Bell’s media division cut hundreds of jobs. More layoffs are expected soon.

“I take it,” Erskine-Smith told the company’s representative, that “you would not have reformed the CEWS so that a profitable company like yours with $5 billion in available cash wouldn’t continue to receive millions of dollars in taxpayer funds? You like it just the way it is.”

Erskine-Smith has been vocal in his anger about the misuse of wage subsidy cash by companies. But his frustrations haven’t translated into any meaningful changes to CEWS — a creation of his own party — coming off instead as a performance of powerlessness.

Nor does the government have any intention of clawing the money back. It has leaned entirely on condemnation from the likes of Erksine-Smith and occasional pronouncements that are long on rhetoric but short on substance. In December, Finance Minister Chrystia Freeland told the House of Commons finance committee:

I want to emphasize … for any companies that may be listening, that the wage subsidy must be used to pay workers. That is very, very clear and we expect companies to comply with that.

It’s worth remembering that wage subsidies are not a new policy. If the government had wanted to, it could easily have passed legislation to stop public money from being handed out as dividends. But it didn’t. And it still hasn’t.

Bellfare Laughing vs. Welfare Bashing

The toothless response to the abuse of CEWS contrasts sharply with the way that provincial governments have managed the Canada Emergency Response Benefit (CERB). CERB was a streamlined, $2,000-per-month unemployment program that began in March 2020 and lasted until the end of the summer.

The federal government prioritized getting money to applicants over verifying their eligibility, noting that it would “clean up after the fact.” The plan was to have cash returned if recipients were not eligible — which was not always clear, due to ambiguous government messaging and changing criteria.

Controls on misuse of the program were, in the government’s words, always premised on finding those who deliberately tried to “defraud” the system, not those who made “honest mistakes.” How they plan to distinguish between the two remains to be seen.

In any case, the “clean up” has begun. The Canada Revenue Agency (CRA) is repurposing an already extant complaint line to allow for CERB and CEWS snitching, and recently sent out around 410,000 letters to Canadians questioning their eligibility and stating that they may need to pay their CERB money back.

Op-eds and commentary in the country’s newspapers have reinforced the welfare-bashing campaign, ringing the alarm on “CERB frauds” and supposed benefit-induced laziness. The Conservative Party helped, too.

The doling out of the CEWS was sufficiently open-handed to raise eyebrows, even in the business community, and yet our rulers have expended much more energy attacking the supposed “fraud” of CERB recipients — that is, of working people.

Of course, in the eyes of the government and the business press, there’s nothing egregiously fraudulent about corporations ransacking billions from public coffers and giving it to their friends. The difference between CEWS and CERB recipients is that the former are “job creators” and “innovators.” They drink Cristal, live in Rosedale, and went to the same private schools as those who work in Parliament.

The Bell Tolls for the Bell Heeled

The CEWS debate has forced open a conversation among Canadian elites about the nature of Canadian capitalism as they wrestle with the country’s state sanctioned oligopolies. Even the investor class has begun to recognize the shortcomings that result from the concentrated power of the telecoms giants.

The pandemic has also shed light on a similar cartel model that is at play in the grocery sector, where companies introduced — then suspended — “hero pay” provisions in lockstep with one another.

To dismantle the nation’s telecoms cartel, the Canadian government needs to recognize telecommunications as the public good it is and nationalize the industry. Internet and telecommunications access should be rooted in values of access and fairness. Such a change in orientation would allow us to end price gouging, underperformance, and the hemorrhaging of capital to shareholders.

In the meantime, the unknown billions in public money siphoned into Bay Street through CEWS ought to be redistributed to the poor for the remainder of the COVID-19 crisis. Anything less would be shameful in a place like Canada, where, for all the country’s wealth, one in seven people have struggled to put food on the table throughout the pandemic.