Photo: Renaud Philippe The Duty
The negative effect of aid programs on the incentives to work will become a problem more and more as we continue déconfinement of the economy, writes tax expert and professor Luc Godbout.
Governments deserve “a good grade” for their emergency assistance programmes during the pandemic, according to the expert Luc Godbout, but should be tightened for the next wave.
At the beginning of the pandemic, the research Chair in taxation and public finance from the University of Sherbrooke is told that she should prepare a list of the measures governments would put in place to assist workers and businesses to get through the crisis, and keep it updated. “We did not think it would work also taking. There are weeks where changes are made every two days, ” said one of its main researchers, professor Luc Godbout, maintenance, telephone Duty on Friday.
If a first report had to be prepared for this barrage of expansions of existing programs, and to invention of programs using ad-hoc, it would be rather positive, he says. “Overall, I would give it a good rating. The decisions were taken quickly. It has managed to stay to listen to the reality and people. It was facing distress and acted. “
The additions and the continual adjustments have not shocked either. “We adjusted according to the evolution of the situation at the same time that we left the time to the spirits to take the measure of the magnitude of the crisis. I doubt they would have agreed that the government deploy all of the current measures from the outset. “
Issue of equity
But these measures are far from perfect. Luc Godbout is seen, for example, an equity issue in the fact that, under the Provision of the canadian emergency (PKU), a professional who loses his job after having contributed to employment insurance all his life has the same right to financial assistance ($500 per week) that a student who has lost a part-time job. And what about the fact that this same student to be able to chain, at the end of the limit of 4 months from the PCU, two additional months of benefits under, this time, to the Benefit of canadian emergency for students (PCUE) ? And all this without being asked, in return, an effort to find re-employment.
The negative effect of assistance programmes on the incentive to work was largely theoretical as long as the canadian economy was “on break,” admits the expert, but it will become a problem more and more as we continue déconfinement of the economy.
“It has been a little the only ones in the world not to choose to extend the conditions of the employment insurance, but rather to create something completely new next. At the same time, it is not necessary to exaggerate the severity of the problem. All these problems are expected to be of short duration. “
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With the return to normal, the government should tighten gradually the terms and conditions of their programs, believes Luc Godbout. “If we can extend every two days during the crisis, I imagine that people would understand that we can do, little by little, the opposite now. “
In the, unfortunately likely, the second wave of pandemic COVID-19, governments should re-open the valves of their emergency assistance, but taking into better account, this time, the real needs of their providers and in a manner that does not encourage dependency.
In this regard, the researcher does not conceal his preference for another program put in place by the federal government, that of the wage Subsidy emergency of Canada (SSUC) paid to companies to help pay for their employees in technical unemployment. “This program does not have the disadvantages of PKU, but it is expensive” ; more than $ 75 billion this year alone, to be more precise, according to the parliamentary budget officer.
The latter was predicted already last month, a deficit of 252 billion this year to the federal government. “We should be closer to $ 300 billion today,” says Luc Godbout. Canada will remain, however, relatively less indebted than other countries, and it is the role of governments to untie their purse strings in such circumstances. This does not mean that they should not seek to use this money in the most efficient way possible, not least because they will also then need for their economic recovery plans.
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