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It appears that the 75 percent federal wage subsidy program may be adjusted to make it easier for businesses to qualify. The original announcement was that companies experiencing a 30 percent drop in revenues on a year-over-year basis could qualify. However, the Globe & Mail has reported to have a draft bill that would expand the program to allow organizations to use January and February as the reference point for the decline in revenues. In my mind, this makes some sense given that In my mind, this makes sense given that some firms experienced a sharp drop in revenues in the early stages of the pandemic and resulting global downturn.
As an economist, I am getting a bit nervous about the possibility that nationalism and protectionism will rear its ugly head in the post pandemic world. There is little doubt that supply chains will be reformed in the wake of the crisis. Indeed, US protectionism in past years already had some companies looking to adjust some of their international linkages. The pandemic and the disruption to trade also revealed Canada’s supply chain vulnerability. So some changes are natural.
However, in the wake of the threat that critical medical supplies might not flow across borders, there is now a growing appreciation that countries might want to adjust supply chains for key products. For example, the CEO of RBC said, “Our governments, leading enterprises and academic institutions need to determine how to best develop and protect more resilient Canadian supply chains.” Meanwhile, the Quebec government said on Monday that it has begun working on plans to increase the province’s self-sufficiency in health care and food sectors, to make sure it has enough locally made medical equipment, medication and other supplies needed to weather a future crisis.
Let me be clear, I agree that Canada may want to ensure access to critical products and services. This is completely understandable. However, we need to ensure that such sentiment does not expand more broadly to a larger range of products and industries, thereby becoming a movement toward dismantling global supply chains and leading to de-globalization.
The world economy, its companies and its people have benefited hugely from global supply chains that increased efficiency, productivity and lowered prices. There has been an issue that globalization has led to higher inequality, but this should not be addressed through de-globalization. It will be important to monitor this risk, as protectionism and nationalism would damage Canada’s economic recovery. Indeed, protectionism was a key part of the Great Depression.
Meanwhile on the job front, 3.18 million Canadians have applied for employment insurance and the Canada emergency response benefit since March 16. At least 795,000 Canadians filed for benefits on Monday alone, the launch day for the Canada Emergency Response Benefit. Statistics Canada will release the Labour Force Survey on Thursday, and the headlines will look terrible. The survey was conducted between March 15 and March 21. This won’t show the full impact of the job losses, but I would not be surprised if the report has a headline drop of something like 600,000 net new positions.
Other key updates include: Alberta increasing the maximum time for a temporary layoff from 60 days to 120 days to ensure temporarily laid-off employees stay attached to their jobs longer. This change is retroactive for any temporary layoffs related to COVID-19 that occurred on or after March 17. The Ontario government is also deferring $15 million in property taxes for people and businesses in parts of Northern Ontario located outside of municipal boundaries.
Craig Alexander is the first Chief Economist at Deloitte Canada. He has over twenty years of experience in the private sector as a senior executive and leading economist in applied economics and forecasting. He performed macroeconomic research, regional and sector analysis, and fiscal market forecasting and modelling. Craig is a passionate public speaker and holds a graduate degree in Economics from the University of Toronto.