No government program during the COVID-19 pandemic was as consequential to Canadians as the Canada Emergency Response Benefit (CERB). Almost nine million citizens—half of the country’s pre-pandemic working population—received the $500-a-week benefit at some point between March 2020 and September 2020. In total, Ottawa sent out $74-billion in CERB payments, making it (by dollar value) one of the largest temporary federal programs in Canada’s history.
This unprecedented initiative was launched amid unprecedented crisis. In March 2020, with COVID-19 spreading quickly, Canada’s borders were closed, consumers began panic-buying and provinces announced lockdowns that immediately left millions of workers without an income. In normal times, unemployed Canadians apply for Employment Insurance (EI), which allows them to continue to pay their rent and feed their families. While imperfect, EI preserves livelihoods and prevents a deeper economic disaster.
By April 2020, 5.5 million Canadians had lost their jobs—one-third of all workers.
But EI wasn’t up to the challenge of so many Canadians, in so many different employment situations, losing their jobs at once. The CERB showed what an income support program truly focused on the needs of jobless Canadians could look like. Compared to EI, the CERB was more accessible, compassionate and straightforward. As we exit the pandemic, policymakers should overhaul the EI system—and look to the program that temporarily replaced it for inspiration.
The EI system has long been plague by systemic issues. Access to regular EI benefits—the financial support Canadians typically receive when they’ve been laid off—requires people to work from 420 to 700 hours each year, depending on the unemployment rate in their region. This requirement leaves out many part-time workers, the self-employed, and casual or multiple-job holders. Beneficiaries are also required to have paid premiums. Some low-income workers pay into the EI system but don’t generate enough insurable hours to become eligible for benefits.
Precarious work has been on the rise for years, but EI has no answer to it. According to Statistics Canada, about 1.7 million workers—8.2 per cent of the Canadian labour force—did some form of gig work in 2016, an increase from one million workers in 2005. The same report noted workers in the gig economy are more likely to be women and immigrants and to have lower incomes overall.
For low-income Canadians who can access EI, the program fails to provide anything close to a living wage (defined as the hourly wage a household requires to meet its basic needs). The amount of EI support one receives—known as the replacement rate—equals 55 per cent of average weekly earnings, up to a maximum (in 2021) of $595 per week, from 14 weeks to a maximum of 45 weeks, depending on the unemployment rate in the recipient’s region. A person who was earning $56,300 or more annually receives the maximum support. But a minimum-wage earner in Alberta who worked 40 hours each week would receive only $330. That amount falls below a living wage. EI was effectively made for jobless middle-income Canadians, not jobless low-income Canadians.
Even if they qualify, Canadians regularly wait a long time to get EI benefits. Prior to COVID-19, all EI applicants were subject to a waiting period of one week. After that week elapsed, applicants often waited another month or longer. According to data tabled in Parliament in April 2019, 16 per cent of all EI applications in 2018 took more than 28 days to process. Four weeks is the standard set by Ottawa for processing claims. But nearly half a million Canadians in 2018 had to wait longer than this.
Much of the wait has been due to Employment and Social Development Canada (ESDC) verifying claims. Our EI system has long prioritized fraud prevention over the quick delivery of essential support to jobless Canadians.
These issues bring us to March 2020, when COVID-19 hit Canada.
By April 2020, 5.5 million Canadians had lost their job or most of their working hours due to COVID-19 shutdowns. Over the course of just a few weeks, one-third of Canada’s workers were suddenly jobless and needed financial support. The sectors hit hardest were accommodation and food services, personal services (e.g., barbers and hair stylists), construction and culture/sports. The situation was worse still for workers paid at or near minimum wage: In the first month of the pandemic, half of these workers lost their job or most of their hours.
The crisis presented a unique challenge for the federal government: How do you get cheques to a large number of Canadians so quickly?
EI claims go up during normal economic recessions. But in those instances job losses typically occur over months, not days. The last time this many Canadians became unemployed in one fell swoop was the 1930s Great Depression. In the first week of the pandemic, mid-March 2020, the federal government received half a million EI applications. It had received 27,000 in the same week in 2019.
Benefits to these Canadians needed to be generous enough to preserve livelihoods and allow people to stay home during a public health emergency. An income replacement rate of 55 per cent wouldn’t be enough for Canadians to continue to pay for food and rent—especially for lower-income workers. Such a paltry amount would have incentivized people to seek whatever piecemeal work they could find, increasing their chances of catching or spreading the virus.
In early spring 2020, the flood of EI claims overwhelmed the federal government’s processing infrastructure, which includes computers dating back to the 1990s. Canadians waited hours to speak to call-centre agents.
The EI system was not up to the task.
At first, the government proposed two benefits to complement the EI system: the Emergency Care Benefit and Emergency Support Benefit. But given the urgency of the situation, it became clear that a new relief program had to be designed from scratch, and fast. The result was the $2,000-a-month Canada Emergency Response Benefit. Even if temporary, the program represented the first major change in income security for the jobless since the major cuts to EI, formerly known as Unemployment Insurance, of the 1990s.
The CERB upended conventions that define EI. Instead of replacing 55 per cent of weekly earnings, it paid a flat rate of $500 a week, which for most Canadians was higher than what EI’s formula would have produced. To receive the CERB, individuals needed to have lost work due to COVID-19 and to have earned at least $5,000 in 2019 or the previous 12 months, an eligibility threshold much lower than required for EI. Tweaks to the program soon after its launch allowed Canadians to claim the CERB if they’d made $1,000 or less a month.
A significant change from previous benefit programs was that the CERB was attestation-based. Instead of ESDC agents verifying an applicant before sending them benefits, the government relied on claimants to attest to their eligibility. Verification was conducted after benefits went out, months later and closer to 2021’s tax filing time. This meant that jobless Canadians received cheques within two days instead of EI’s pre-pandemic average of three to four weeks.
The formula relied on beneficiaries to do the right thing. It also left open the risk of ineligible recipients and fraud. But that was the policy tradeoff: You could have fast cheques with minor potential for fraud (CERB), or you could have slow cheques with plenty of verification and little fraud (EI). You couldn’t have both. The right decision was to get support to Canadians as quickly as possible.
Approximately 6.7 million Canadians applied for the CERB in its first month. Of all workers who earned at least $5,000 in 2019, 35 per cent received at least one CERB payment. Some people required the support only once; others, locked in uncertainty as restrictions eased, then tightened, received the benefit for as long as it took to get their jobs back.
Who were these CERB recipients? Women were slightly more likely than men to apply for and receive the benefit, reflecting the fact they were more likely to lose work from lockdowns. Two-thirds of workers employed in accommodation and food services in 2019 received CERB payments in 2020, the highest rate among all sectors. More than half of workers aged 15–24 received the CERB.
In Alberta, adults aged 25–44 were more likely than similarly aged Canadians to have received CERB support. Albertans younger than 25 were less likely to have received support than young Canadians in general. Female Albertans, however, were more likely to have received CERB than Canadian women in general.
Indigenous and racialized workers across the country, who were particularly overrepresented in hard-hit sectors, were also more likely to receive the CERB. About two-fifths of racialized people received the benefit (compared to only one-third of non-racialized people).
A significant number of recipients worked in the gig economy, such as artists and delivery people, or were part-time or contract workers.
The CERB more than offset lost income for the poorest 10 per cent of Canada’s families—for them, in fact, the benefit represented a net increase in income. Some observers have argued that the program was too generous in providing less-fortunate Canadians with a bit of financial breathing room. Still, some 422,000 CERB recipients remained below the poverty line in 2020—208,000 of them because they owe taxes on the benefit. We nevertheless shouldn’t be surprised if forthcoming data show the country’s poverty rate actually decreased in 2020.
People who had to leave work due to an illness or to care for family also qualified for the CERB. The program’s eligibility was universal across regions, sectors and different COVID-related reasons for lost work. The simple criteria made it easy for people to understand.
But even with CERB’s lower threshold, some people who needed support were nonetheless left out. About 604,000 Canadians were jobless before COVID-19 and, despite having no real prospect of getting a job, couldn’t claim EI or CERB during the pandemic.
The CERB was not without hiccups. At the start of the program about $500-million worth of double payments were accidentally sent to CERB recipients who had applied through both the CRA and ESDC. A week after the program launched, the federal government introduced a control to prevent such an error from repeating. The CRA subsequently asked Canadians who’d received double payments to return them.
A significant number of self-employed workers applied, thinking they were eligible. Some applicants were told by CRA call-centre agents that gross income—rather than net income—would be used to determine the $5,000 cutoff. Information on the CRA website initially didn’t specifically state net income was to be used. Only after some 440,000 CERB recipients were sent letters in November 2020, asking them to confirm their eligibility, did many discover they weren’t in fact eligible. But by then many of them had spent the money.
The CRA eventually admitted its messaging had been “unclear” and the lack of “consistent clarity led some self-employed individuals to mistakenly apply to the CERB.” Ottawa soon exempted those who had applied in good faith from repayment. The agency estimates 30,000 such recipients qualified, representing 0.3 per cent of all CERB claimants.
CERB was also criticized for its generosity, including by business owners who argued the financial support was too high and created a disincentive for employees to return to their jobs after workplaces reopened. A recent study in the US, however, showed no relationship between the replacement rate of pandemic jobless benefits and the length of time unemployment benefits were drawn. In other words, providing the jobless with adequate benefits doesn’t necessarily keep them from taking another job. Other factors, such as health concerns or a lack of childcare, are the most important drivers of a person’s decision to return to work.
What the CERB did do was make some workers less desperate during the pandemic than they would have been under the old EI system. The higher and more predictable payments of $500 a week also meant workers didn’t need to grab just any job, no matter how badly suited to them, simply to survive.
Some business owners blamed CERB for temporarily creating a worker shortage. Workers, on the other hand, tend to blame a business’s inability to hire on low wages and poor working conditions. Jobs in restaurants, retail and hospitality tend to be defined by difficult hours and low pay. One result of CERB may well be some efforts at reconciliation of these differences between workers and employers—perhaps wage bumps and improved conditions as the pandemic recedes.
The CERM ended in September 2020, but it influenced the “enhanced EI” system and recovery benefits that the program would transition into. The EI system Canada offered starting that month preserved a relatively low eligibility threshold. Instead of $5,000 of income, regular EI benefits effectively required 120 insurable hours of work over the previous year (the threshold is technically 420 hours, but the government offered a 300-hour temporary credit).
The Trudeau government originally announced that regular EI benefits would have a floor of $400 a week, with a weekly maximum of $573 ($595 in 2021). After pressure from the opposition NDP, the floor was increased to $500, in line with the CERB. Instead of having regional eligibility requirements, the EI threshold was uniform nationwide. ESDC also took advantage of the CERB period to make changes to EI’s processing system so it can handle a large number of claims quickly.
Ottawa also created three temporary recovery benefits: the Canada Recovery Benefit (CRB), for workers ineligible for EI, such as the self-employed; the Canada Recovery Sickness Benefit (CRSB); and the Canada Recovery Caregiving Benefit (CRCB). All provided $500 a week in support.
CERB showed what government can do if it wants to. Its legacy is the dramatic expansion of the realm of what’s possible in public policy.
If a person earned over $38,000 including both CRB and employment income, they had to start paying back their CRB. One major change from the CERB, however, was that these programs required more rigorous verification prior to payments being made. Some CRB recipients faced verification delays, which were flagged by the taxpayers’ ombudsperson in April 2021. But most EI and recovery benefit claims were processed quickly, thanks to improvements made over CERB’s seven-month period.
More than two million Canadians have applied for the CRB. More than 3.8 million have accessed EI since September 2020. The transition from CERB went well.
A sore spot was the CRSB, which only provided $500 a week for up to four weeks and had atrociously low take-up rates. The benefit become a political lightning rod as several provinces, including Ontario and BC, refused to implement paid sick days, instead pointing to the CRSB, which was hardly a substitute. The CRSB provided income support only if the applicant was sick and away from work for more than half of their scheduled work hours in a week. That didn’t help workers who stayed home and only missed a day or two of work. The CRA, which administers the CRSB, can’t make payments on a day-to-day basis. In spring 2021, Ontario and BC put forward their own paid sick-leave programs, albeit minimal in coverage.
On October 23, 2021, CERB’s replacements—the CRB, CRSB and CRCB—ceased to be offered, and new EI claims reverted to the old EI rules. The self-employed were once again without income support. Unemployed workers receive 55 per cent of previous earnings instead of $500 a week, and the duration of benefits is now less than 50 weeks.
One of my questions for judging pandemic-era policy responses is: Did we learn anything from the crisis? When it came to support for unemployed Canadians, the pandemic showed us that the old EI system was slow; it didn’t cover insecurely employed workers; it didn’t cover self-employed or gig workers; and, for lower-income workers, it didn’t provide much actual benefit. At this point, we’ve learned two of these lessons—which isn’t half bad.
One major piece of the CERB that survives is universal and lower entrance requirements: these will be set at 420 hours, a big improvement over the 900+ hours required in the pre-pandemic EI system, though not as good as the 120 hours needed during the pandemic. This means part-time and insecurely employed workers who pay EI premiums will be much more likely to gain benefits when they become unemployed. This change isn’t permanent; it’s an extension into 2024. But the longer a change sticks around, the more likely it is to become permanent.
ESDC has also sped up its intake system for newly unemployed Canadians, which is positive. But it hasn’t managed to match the impressive two business days that it took for CERB payments to be sent out.
The federal Liberal Party’s 2021 election platform contained a promise to implement a new EI benefit for the self-employed. It would mirror regular EI in length and benefit level and would begin in January 2023. Plenty of details must be worked out, not least of which is how the self-employed will contribute.
Broadly speaking, the CERB and its descendant programs were an evolutionary line that leapt into life in spring 2020, and critical genetic material has made its way back into the EI system. Time will tell whether that line continues or ends up extinct in future iterations.
In the longer term, however, I hope the program illustrated just what a government can do when it wants to. In a matter of weeks, a massive new benefit was created and rolled out, completely replacing EI and substantially improving on it in key ways. CERB’s lasting legacy is the dramatic expansion of the realm of what’s possible in public policy.
David Macdonald is a senior economist with the Canadian Centre for Policy Alternatives.
