The Effects of CERB on Income Assistance
In response to the COVID-19 pandemic, the Canadian government offered an unprecedented financial assistance program known as the Canada Emergency Response Benefit. However, differing responses to the pandemic emerged within the pre-existing income assistance programs across the provinces and territories, with varying results.
What is CERB?
The Canada Emergency Response Benefit (CERB) was a temporary cash transfer program aimed at workers whose earnings were affected by the pandemic, starting March 15, 2020. CERB was a cash transfer of $2000 per month to workers whose earnings fell below $1000 a month due to the pandemic. As of October 4, 2020, the federal government received a total of 27.57 million applications, with 8.9 million unique applicants. Approximately $81.64 billion CERB benefits have been paid out to those living in Canada. CERB officially ended after they had received 28 weeks of benefits or on October 3, 2020, whichever came first.
At the end of CERB, one could continue receiving federal income assistance for a year through Employment Insurance (EI) or the Canada Recovery Benefit (CRB). The Canada Recovery Benefit is aimed at workers who are not eligible for EI and have stopped working or had their employment income reduced by at least 50% due to COVID-19. Welfare and disability benefits recipients were only eligible for CERB if they made $5000 in work income in the previous year and had either reduced or lost income due to COVID-19. CRB is a cash transfer of $500 a week for up to 26 weeks, paid biweekly. Because of COVID-19, eligibility for EI has temporarily expanded: A worker with 120 insured hours is qualified to receive EI, a minimum of $500 a week before taxes. Furthermore, a minimum unemployment rate of 13.1% now applies to all provinces and territories until September 2021, where normally a provincial unemployment rate would determine the number of weeks an individual can claim EI. This new unemployment rate allows for individuals to claim a minimum of 26 weeks of benefits up to 45 weeks. This means an individual will have more weeks of access to EI, a higher benefit rate, and easier access to EI.
What is income assistance and how does it work?
Provincial income assistance is often seen as the last option for those in need and is the last “safety net” in Canada. This is because it is only intended to be used by individuals who have exhausted all other means of financial support. Income assistance (IA) programs go by different names in different provinces and territories, including Social Assistance in Ontario, Employment and Income Assistance in Manitoba, and Income Support in Newfoundland and Labrador. Furthermore, each province and territory has different rules and eligibility requirements. For example, some provinces include households with an income top-up or partial benefit, while other provinces only provide full benefits but with a smaller eligibility range. Some provinces’ IA programs include First Nations people living on reserves, while others have a separate program for this demographic. In all programs across provinces and territories, maximum IA benefits are insufficient to help low-income households cross the income poverty line because of cuts in funding and the drive to incentivize returns to employment.
How does CERB interact with income assistance?
In April of 2020, a month after CERB was announced, the federal government encouraged provincial governments to let people keep all of their welfare and CERB cash transfers. This means clawback rates, the rate at which benefits given out must be returned, would be 0%. For example, Old Age Security has a 100% clawback if an individual earns more than $128,149, where an individual would have to pay back their entire pension, as a recovery tax, if their income exceeds that amount. The federal government specified that CERB monies must be repaid during tax season as a part of one’s income tax return.
How does this differ across provinces?
A lack of clear objectives and definitions has led to CERB being treated very differently across territorial and provincial income assistance programs. Due to the fast-tracked deployment of CERB, there was little technical guidance as to how CERB would interact with provincial programs Provincial governments disagree on whether to treat it like a replacement for employment income, EI, or as a tax benefit program. Depending on how CERB was interpreted, each province treated CERB differently for their income assistance programs.
Only British Columbia, Northwest Territories, and Yukon followed the government’s encouragement to not clawback CERB from recipients. In contrast, other provinces chose not to exempt CERB from earned income. In Saskatchewan, Nova Scotia, New Brunswick, Newfoundland, and PEI, those receiving IA and CERB could no longer receive IA benefits because their income with CERB now exceeded IA eligibility requirements. These provincial governments deducted one dollar of IA benefits for every dollar of CERB received, except for health benefits. Finally, other provinces have taken the middle route and partially clawed back IA benefits. In Ontario, Quebec, and Alberta, this ranged from a 50% to 75% clawback rate while retaining health benefits. This has been worrisome for IA clients, while policymakers have seen it as a good incentive to return to employment. Clawback rates have disproportionately affected low income people because, by chipping away at CERB, it disregards the possibility that COVID has affected their earning capacity or raised their costs the same way it affected people who aren't on IA. While clawback rates can be seen as negative for IA clients, provinces can “save” on IA money by relying on the federal CERB money and increase their own coffers. This led to some provinces, such as PEI and Nova Scotia, reinvesting the otherwise spent IA money into a different social assistance program.
The clawback of IA benefits to collect CERB does not necessarily result in a higher monthly income for an IA client if their loss in earnings and the loss of IA in clawbacks is more than the increase in income due to CERB. To highlight this situation, the differences between Alberta and British Columbia’s IA and CERB interaction shows how some IA clients can have a higher monthly income while some do not. For example, IA recipients in BC would have received CERB and the full IA benefit. Only those who earned more than $2000/month before the pandemic would have experienced a decline in monthly income when receiving CERB. However, in Alberta, IA benefits would have decreased to zero if IA recipients received CERB, resulting in a total monthly income of $2000. Furthermore, those on Alberta’s disability benefits with a total monthly income of $725 before the pandemic would have had a lower monthly total income of $2410 while collecting CERB than before COVID-19.
Implications of CERB and IA Interactions
CERB was meant to replace the lost employment income during the first wave of the COVID-19 pandemic and was distinct from other pre-existing financial assistance programs in Canada. The differing interpretations of CERB by provinces and territories underscores the importance of clarity of scope and purpose in the federal government’s policies to avoid differential treatment at the provincial level. As a part of the provincial and territorial jurisdictions, provinces and territories interpreted CERB differently with respect to their IA program to alleviate some of the government’s financial burden of funding social programs. Whether or not provinces and territories are deliberately taking advantage of CERB money or that there is a coordination problem between the federal, provincial, and territorial governments, there is still a lack of information what provinces, such as Saskatchewan with a 100% clawback rate, are doing with their IA savings. It is a fine balance, as the federal government has to take care not to interfere with provincial jurisdiction. However, the lack of clear definitions on a program can harm its targeted socio-demographic instead of helping them. The precautions taken by the federal government to not overstep its jurisdictions have their costs.
COVID-19 has disproportionately impacted low income earners, whose sources of income are more likely to be affected by lockdown measures. Low-income earners often lack the funds to survive increased costs of living during a pandemic, while many community support systems themselves are struggling to stay afloat. Public libraries, non-governmental organizations, and social service offices have closed or reduced their hours, cutting non-essential services like job training and limiting options for free internet access. With these restrictions, low-income households are forced to go without these services, which can negatively impact employability. Furthermore, those on disability benefits or welfare have the highest risk of contracting COVID-19 because of factors such as underlying medical conditions, weakened immune systems, interaction with multiple care providers, or living situations. Overall, IA programs were limited and inadequate during the pandemic, failing to remedy the significant impact of the pandemic on low-income earners. In the long term, IA programs need to be strengthened through less stringent clawback measures and better coordination with federal programs in order to help low-income households climb out of poverty instead of digging them into a deeper pit.