EI ‘not the right program for this kind of crisis,’ analysts say, as economy braces for more layoffs

The record half-a-million Canadians who filed for employment insurance last week is likely just the first in a series of blows to the labour market by COVID-19, with analysts predicting many more layoffs to come.

“The longer this goes on, the more danger it does to the labour market,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives.

The layoffs announced last week by the federal government already represent 2.5 per cent of Canada’s entire labour force. Based on those numbers alone, the unemployment rate — which was at 5.6 per cent — will, at a minimum, increase by more than half, to 8.6 per cent.

There are no definitive statistics on the total number of layoffs at this point, with the number of EI claims currently the only measure.

Hospitality, restaurant and food services, tourism, retail and airlines have been hardest hit. Air Canada announced layoffs of more than 5,100 flight attendants, while Air Transat laid off more than 2,000. Hotel occupancy across the country has reportedly dropped to 10 per cent. Bars and restaurants are running on skeleton crews to fulfil takeout orders, if they haven’t closed entirely.

According to Statistics Canada’s most recent labour force survey, 5,992,500 people are employed in the following four sectors, which have been the hardest hit by COVID-19: wholesale and retail trade; information, culture and recreation; accommodation and food services; and transportation and warehousing. Together they employ nearly one-third of Canada’s labour force.

Not all aspects of these sectors have been affected, but some segments have been forced to close entirely. It’s possible the 500,000 jobless claims filed last week could just be a fraction of the total claims by the end of the month, according to Rafael Gomez, a University of Toronto professor and director of the Centre for Industrial Relations and Human Resources.

Gomez said that 50-per-cent job losses in the four hardest-hit sectors — or 2,961,250 unemployed people — seems like a “conservative estimate” if the current physical distancing protocols continue.

“The 500,000 EI applications in just one week of the crisis speaks to the reality and urgency of the situation,” he said.

Gomez said that although the number of layoffs are “massive,” in most cases they aren’t likely to be permanent.

“The assumption is that once this gets under control and we stabilize the public health system, that demand will pick up again,” he said. “So these people, what they need is some injection of income right now so the wheels of the economy don’t grind to a halt.”

One exception, Gomez said, is the oil industry in Alberta, which was already dealing with tanking oil prices, reduced demand and questions about the industry’s long-term viability.

“That’s where this could have a more permanent, harmful legacy,” Gomez said. “Those aren’t just (temporary) layoffs. They might be permanent.”

For other industries, Gomez said the demand might not be the same as before. “Will people be as willing to go on cruise ships? I doubt it, right? There will be some changes in behaviour, which will reallocate where people are spending money currently to other sources.”

So once the dust settles, jobs might move, Gomez said. “But people are going to buy stuff after this is over, so what we need are stabilizers, what are called income stabilizers, in very quick order.”

The federal government tried to do just that last week when it announced its $ 82-billion economic stimulus package, which included aid delivered through EI and for those workers who aren’t eligible for EI.

Gomez suggested that rather than using EI the government should have provided direct deposits to people through the Canada Revenue Agency by setting an income cut-off and paying anyone who fell below it. “Get the money into their hands,” he said.

EI was meant to deal with problems in certain industries, “not the whole system crashing at once,” Gomez said. “It’s not the right program for this kind of crisis. Half a million in just a week? What’s going to happen in a month as more provinces have shut down operations and more of these sectors start laying off people?”

Get the latest in your inbox

Never miss the latest news from the Star, including up-to-date coronavirus coverage, with our free email newsletters

Sign Up Now

Macdonald said whether or not laid-off workers will be able to return to their jobs once the crisis is over depends on how long it lasts. The longer this goes on, the less likely that becomes.

“A lot of those employees might not come back because maybe they found other work,” he said, adding that we won’t know the “real scope” of job losses until early May.

“It’s really only then that we’ll get a full picture of what’s happened in the past seven days.”

TORONTO STAR