Most business leaders support federal wage subsidy

25 September 2020 3 min. read
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Most Canadian business leaders (76%) think the revamped Canada Emergency Wage Subsidy (CEWS) is a good investment to keep Canadians working, according to a recent client survey from KPMG Canada. The Big Four firm in August polled nearly 300 business leaders across a range of industries.

Three quarters of business leaders surveyed by KPMG said they rely on funds from the wage subsidy to keep their employees on the payroll, while more than half said reduced employee wages have helped them deal with other costs incurred by Covid-19. Nearly a quarter of leaders said the wage subsidy has helped them rehire previously laid off workers.

"Our clients have told us that the federal wage subsidy program is helping them not only to retain their employees, but also to cope with pandemic-related costs and rehire workers who have been laid off," says Lucy Iacovelli, Canadian managing partner of KPMG's national tax practice. "While there has been an upturn in the economy, many Canadian business leaders are still uncertain about what the coming months will bring, and welcome continuing support during this fragile recovery period."

The country appears to be heading toward a second wave, with 1,248 new cases on Wednesday. Ontario on Tuesday recorded its highest number of cases since early May. Whether or not public officials have the fortitude to act quickly and re-enact the restrictions necessary to flatten the virus curve, it’s apparent that Covid-19 isn’t going away on its own. And that means depressed consumer confidence, job losses, hobbled economic output, and devastated industries (e.g. travel and hospitality) until there is a widely distributed vaccine.
Most business leaders support federal wage subsidyGovernment intervention is, of course, necessary to keep the economy afloat as the country experiences a health crisis not seen since the Spanish Flu. The CEWS and the Canada Emergency Response Benefit (CERB) – which ends tomorrow – have been important avenues for injecting funds into the Canadian economy. CERB is being transitioned to an expanded EI program with wider benefits and eligibility.

The CEWS, meanwhile, was revamped in July to broaden access – making the amount of wage subsidy vary depending on revenue decline, and allowing for a maximum combined subsidy of 85% for eligible employers. In the Throne Speech earlier this week, the government announced its intention to extend the CEWS into summer 2021. 

Opinion is split on which companies should be able to access the CEWS. Nearly half (48%) of respondents said the subsidy should only be available to businesses or sectors significantly impacted by the economic downturn.

“It's clear from the results that business leaders have different perspectives on whether the program should be used to help all companies that have been impacted or just focus on those hardest hit by the pandemic," added Iacovelli.

There is, unfortunately, no such thing as free money. Government debt needs to be repaid, and the spending made today will be reckoned with down the line – whether that means higher income taxes, higher corporate tax rates, reduced spending on social programs, or a little bit of everything. It’s fun to spend, but it’s less fun to deal with the future ramifications. One can’t approach the economic downturn like a Depression-era, penny-pinching R.B. Bennett, but adjustments to the flow of the stimulus spout have actual meaning and value. Targeting stimulus spending to where it can have the most positive economic impact remains a critical endeavour.

Overall, the survey respondents rated the redesigned CEWS favourably, with 44% giving it a positive rating, 24% rating it as average, and 17% holding a negative view of the program.