* This text, originally in French, is current as of
August 24, 2020. The author would like to thank the Research Chair in
Taxation and Public Finance of the Université de Sherbrooke for the
financial support that helped make this study possible. The author would
also like to thank Tommy Gagné-Dubé, Louis Lévesque, and Suzie St-Cerny
for reviewing the text and making comments and suggestions. Any
misinterpretations are his own.
In response to the pandemic, the federal government announced the
introduction of a benefit that will forever be part of Canadian public
policy history: the Canada emergency response benefit (CERB). This
analysis seeks to draw some lessons from the CERB experience.
But before proceeding with any analysis, evaluation, or criticism, it is
worth underscoring the colossal work done by the public servants who
had to develop new public policies in the midst of a crisis. Let us also
recognize that the CERB constituted emergency assistance, as its name
suggests. Its purpose was to provide economic support to the millions of
Canadians left unemployed by the COVID-19 crisis. Its initial goal was
to prevent financial distress for as many people as possible—a noble
goal that was generally achieved.
Writing an article on the CERB while it was constantly evolving was a
challenge in itself: after the initial draft, the text had to be revised
several times, to keep up with the government's changes, until the
final announcement scheduling an end to the CERB on September 27, 2020.
Origin and Parameters
From the outset of the pandemic, concerns were expressed about whether
the employment insurance (EI) computer and administrative systems could
deliver benefits quickly to so many newly unemployed people. The federal
government quickly began looking for alternatives. On March 18, it
announced the creation of the emergency care benefit and the emergency
support benefit, two measures that were to be delivered by the CRA to
Barely a week later, the federal government cancelled these measures and
introduced the CERB, available through either the CRA or Service
Canada, depending on the applicant's situation. Initially, the CERB
offered a taxable amount of $500 per week for up to 16 weeks to workers
who had more than $5,000 in earned income in the previous year and who
stopped working for COVID-19-related reasons. Clearly, the pressure to
deliver assistance quickly meant keeping eligibility criteria very
simple and using the CRA as a delivery agency for those who did not
qualify for EI. In creating the CERB, Canada differed from most OECD
countries, which instead opted to expand their existing EI programs.
The CERB Instead of EI
The CERB was established retroactively to March 15. This meant that
applications for anyone who lost their job on or after March 15 were
processed under CERB criteria, even if they were eligible for EI. Again,
this choice was probably made to avoid clogging up the EI computer and
administrative systems. Exit the initial goal of providing parameters
comparable to EI. The simplicity of providing a flat $500 weekly amount
eliminated the proportionality between the income lost and the benefits
received for recipients otherwise eligible for EI: those with higher
incomes were limited to $500 per week when they could have received up
to $573 per week if they had lost their jobs before March 15;
conversely, lower wage earners would have received less in EI.
For some, such as full-time students working part-time, the eligibility
criteria for the CERB appeared to be easier to meet than those for EI.
Of course, young workers (25 and under) were in more precarious sectors,
but they are overrepresented among CERB beneficiaries.
Also note that for CERB benefits, unlike EI regular benefits, there were
no criteria related to being ready to work and looking for a job. In a
lockdown context, the requirement to be looking for work made no sense,
but once the economy reopened, this EI criterion remained absent from
After the implementation of the CERB, political pressure led to a series
of expansions. Initially, an individual was required to have no work
income in order to receive the CERB. In order not to penalize certain
beneficiaries, such as a self-employed person responding to emergencies
or a person who had lost a main job but still had a secondary job, the
criterion was broadened by allowing beneficiaries up to $1,000 per month
in earnings while they were receiving the CERB. This provision
illustrates once again a major difference between the CERB rules and the
mechanism that applies to EI recipients earning employment income.
Under the CERB, the benefit was lost entirely as soon as the
beneficiary's monthly working income exceeded $1,000. Under EI, the
phaseout is roughly 50 cents per dollar of earned income.
The owners of small and medium-sized enterprises who had chosen to pay
themselves in the form of dividends rather than salaries also had their
concerns addressed. Initially, they were not eligible for the CERB if
they did not have earned income. A change was made to allow dividends to
be included in income to meet the $5,000 earnings requirement. Next,
beneficiaries who had exhausted their regular EI benefits and who could
not find employment during COVID-19 also became eligible for the CERB.
However, not all groups in society who did not meet the criteria had the
privilege of having their concerns addressed. For example, people who
had recently started a job after leaving social assistance remained
ineligible for the CERB if they had not yet earned $5,000, even if they
actually lost a job because of COVID-19.
After the CERB
On August 20, 2020, the government of Canada unveiled how the CERB would
end. After a final four-week extension to September 27, with the
maximum enrolment period expanded to 28 weeks and all other parameters
unchanged, a transition will be made from the CERB to the "simplified
EI" (SEI) system or to one of the three new benefits: the Canada
recovery benefit (CRB), the Canada recovery sickness benefit, and the
Canada recovery caregiving benefit.
The SEI Program
To assist in transitioning the majority of CERB recipients to EI, the
federal government announced that an SEI program would apply as of
September 27, 2020. The government has significantly reduced the number
of hours of work required to qualify for SEI by introducing a one-year
credit of insurable hours that varies according to the type of benefit.
This means that claimants have to work only 120 hours to qualify for
Although the proportionality of benefits to lost income is restored in
SEI, a base level of $400 per week has been established for claimants of
regular SEI benefits. For the rest, the usual EI criteria will be used
to determine eligibility. These SEI benefits are available for at least
26 weeks, but if claimants qualify for more, they will get more. As with
the CERB or EI, SEI benefits are taxable.
Three New Benefits
As part of transitioning CERB recipients to other programs, the
government is creating three new taxable benefits for people who do not
qualify for SEI:
- The CRB provides a single payment of $400 per week for up to 26
weeks to workers who do not qualify for SEI—primarily self-employed
people. To obtain the CRB, workers must certify that they meet the
criteria, are looking for a job, and will accept a job when it is
reasonable to do so. Applicants will be required to repay some or all of
the benefit if their annual net income (excluding the CRB) is greater
than $38,000. In these last three elements, the CRB differs from the
- The Canada recovery sickness benefit concerns workers, whether
salaried or self-employed, who are unable to work because they are sick
or have had to self-isolate because of COVID-19. They are eligible for a
benefit of $500 per week for up to two weeks.
- The Canada recovery caregiving benefit of $500 per week for up to 26
weeks is targeted at households where at least one member is unable to
work because of a need to care for a relative (a child under 12 years of
age or a family member with a disability).
Incentive To Work
In addition to supporting households financially during the pandemic,
the government needs to consider the effect of the CERB on the incentive
to work. The simplicity of the parameters adopted meant that some
households received more from the CERB than the work income they had
lost. This situation may have led some workers to prefer the CERB over
wages. On the one hand, some have argued that low wages are the real
problem behind the disincentive to work, but, on the other hand, the
disincentive effect of the CERB on workers receiving it appeared to be
Not surprisingly, it was calculated that it was more profitable to
receive the CERB than to work for minimum wage, in both Quebec and
Ontario. For example, a single person who continued working for minimum
wage and who was therefore not entitled to the CERB would have less
disposable income in 2020 in Quebec and Ontario than if the individual
had been laid off and received the CERB.
To counter the "CERB effect," the Quebec government created the
incentive program to retain essential workers (IPREW). In simple terms,
this program provided a taxable benefit of $100 per week to low-income
earners working in essential services. To be eligible, gross wages had
to be $550 or less per week and annual employment income had to be
between $5,000 and $28,600 before the benefit. This benefit was paid
retroactively to March 15, for a maximum of 16 weeks (and, unlike the
CERB, it was not extended). The IPREW turned the financial disadvantage
of working into a slight advantage for its recipients.
Although the federal government seemed to be aware of the "incentive to
work" issue and announced that it would make efforts to ensure that it
was offering the CERB while encouraging employment in all circumstances
nothing was done in this regard. An opportunity to correct the
situation was clearly missed when, on June 16, the extension of the CERB
from 16 to 24 weeks' duration was announced.
The CERB's Cost and Interactions
Initially, the CERB was expected to cost $24 billion. By August 16,
nearly 8.6 million individual claimants had received $70 billion. It is
now projected that the cost of the CERB—available for up to 28
weeks—will be $88 billion.
Once the two flagship programs (the CERB and the Canada emergency wage
subsidy [CEWS]) were implemented, the federal government expressed its
desire to transfer CERB recipients to the CEWS and EI. These programs
remain almost co-dependent: without one, there would be more
beneficiaries under the others.
More broadly, disbursements related to the federal constitutional
responsibility for EI are rising sharply. Although EI benefits amounted
to $20.1 billion in 2019-20, the combination of EI, SEI, the CERB, the
CEWS, and the three recovery benefits will cost more than 10 times that
amount in 2020-21.
A Prelude to a GMI?
Some say that the CERB has acted as, among other things, a pilot project
on the appropriateness of a guaranteed minimum income (GMI). The CERB
has rekindled discussion of a GMI, but this renewed consideration must
take into account a number of factors, including the fact that the two
benefits differ widely in their respective eligibility criteria. That
said, the parliamentary budget officer has estimated the cost of
introducing a maximum monthly GMI benefit for Canadians aged 18 to 64 of
$1,527 for singles and $2,160 for couples. In a scenario where the GMI
is reduced by 50 cents for every dollar earned, 9.6 million Canadians
would have received it at an estimated gross cost of $45.8 billion over
six months (a period comparable to the CERB's 24 or 28 weeks). According
to these benchmarks, the GMI benefit, compared with the CERB, would
have been offered at lower cost and to more individuals, but with lower
monthly amounts being provided. Apart from the monthly value of the GMI,
however, the main difference is its progressive reduction, which
appears to be more neutral than the CERB in terms of providing a
financial incentive to work.
Learning from the CERB Experience
The CERB is a large-scale public policy experiment. The government must
learn from this experiment to ensure that it does better next time, even
if only for a second wave of the virus. In the future, what will be the
best way to provide financial support to households? The following,
without being exhaustive, offers some food for thought:
- With many applications expected and with rapid assistance clearly
desired, the federal government turned, in part, to the CRA to manage
the CERB. From this perspective, the CRA "delivered the goods." As many
had been pointing out since the spring, it was up to the government to
make the necessary adjustments (which it finally did after several
months) to transition beneficiaries from the CERB to SEI and the three
new economic recovery benefits.
- From a macroeconomic point of view, the rapid creation of the CERB
met the need for income replacement well, but it had unintended effects
on the incentive to work. For example, the CERB included eligibility
criteria that allowed certain groups with no significant shortfall, such
as young people living with their parents or part-time workers, to
qualify and even to receive more than their lost employment income. The
design of a financial support policy must ensure that working provides
greater financial gain in all circumstances. Yet the government, despite
its statements in this regard, never adjusted the CERB to reduce its
negative effects on the incentive to work. It is the transfer of
beneficiaries to SEI that addresses this irritant.
- Although the EI system's weakness—that is, its not allowing for more
flexibility or for the expansion of the existing program—forced the
creation of the CERB, the government, once the crisis was over, worked
on transitioning its beneficiaries to the CEWS and EI. The CERB has
proved to be more popular than the CEWS; we must try to understand why.
In addition, the EI system needs to be redesigned so that its
eligibility criteria can evolve in response to economic and labour
market conditions, enabling it, where necessary, to take the place of
the CERB. This point seems to have been heard, since SEI and the three
new recovery benefits were created during the drafting of this article.
- Although the government had to act quickly in the face of the
crisis—which it did—it is imperative that there be audits and
accountability to ensure that the money went where it was supposed to
- It is essential that a detailed assessment of the CERB's impacts,
especially its cost and work incentive issues, be undertaken to inform
future decisions, particularly with respect to proposals to establish a
- Another phenomenon arising from the CERB's simple parameters is
that, unlike many federal government benefits, the benefit provides no
family income criteria or mechanisms for its repayment by high-income
earners when they file their income tax returns. The income-tested
repayment of the benefit could apply only with SEI and the CRB.
- Finally, the economic recovery may be slow. It seems crucial that in
the case of persistent unemployment, the government develop training
support for claimants. The societal effects of such an approach could
only be positive.
Although the CERB played its part in the emergency, it was time, after
two extensions, for this major public policy to be adjusted to minimize
its potentially negative impacts. This adjustment was all the more
important, given the high risk that a new wave of the pandemic will
require ongoing income support programs.