Insights & Analysis

November 24, 2020

The Canadian Emergency Wage Subsidy (CEWS): An Unexpected Lifeline for Employment in Alberta

The Canadian Emergency Wage Subsidy (CEWS) has been the federal government’s flagship program to retain and increase employment throughout the crisis. Though initial take-up was low, in part due to rigid criteria for eligibility, it has since grown to be one of the most crucial government supports in place.

Based on the latest data available, Alberta is currently the program’s largest beneficiary. We estimate that, as of the latest claims period (August 30 – September 26), the total value of support received via CEWS was equal to 64,000 Albertans’ full compensation for this month. This is a sizable number, representing about 3% of the workforce.

The heavy uptake of CEWS suggests that recommendations made by the Business Council of Alberta and others to expand and extend this now-essential program have played an important role in mitigating job losses across the country and particularly in Alberta. These changes include:

  • an extension beyond the initial September deadline, now through to June 2021
  • support for businesses with < 30% loss of revenues, a previously rigid cut-off criteria
  • additional support for the hardest-hit industries

Below, we dig into which provinces and industries are utilizing the program the most and where it is having the biggest estimated impact on employment.

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Which provinces are taking advantage? 

As one might expect, CEWS uptake is highest in Ontario. Owing to its large population, it accounts for the largest share of applications for CEWS and thus receives the most financial support. Specifically, Ontario accounted for 42% of CEWS applications in the most recent period, of August 30 – September 26, and 42% of CEWS dollars were received by Ontario.

However, after accounting for population size, Alberta stands out as receiving the largest share of support from CEWS. If all provinces were affected equally, Alberta would have received about 12% of CEWS support—equivalent to its share of national employment. However, as of the latest data available, Alberta is receiving 16% of total CEWS dollars. This means Alberta accounts for 31% more than its “expected share” of CEWS. The only other province receiving marginally more than expected is Ontario while take-up by businesses in other provinces has not been as high.

Why is Alberta receiving more CEWS support? There appear to be two factors driving this result: higher wage subsidies per worker and more applications.

Higher wage subsidies per worker in Alberta

Subsidy amounts from CEWS are based on both the employee’s typical wages and the extent of the business’s revenue loss. As an example, suppose two companies each apply for a wage subsidy for an employee earning $30,000 per year. One company had experienced a 70% loss in revenues while the other had losses of only 30%. The first company would qualify for a subsidy of $19,500 (roughly $1,625 per 4-week claims period) while the second would only receive $7,200 (roughly $600 per claims period).

In other words, subsidy amounts could be higher due to higher wages or greater business losses. Given the impact of not just COVID but also the oil price crash earlier in the year and declining business investment, it is entirely reasonable to assume that both are at play in Alberta. Indeed, most economic forecasts expect Alberta to be near the bottom of the pile in terms of provincial economic growth in 2020.

The average subsidy per employee is $1,314 per 4-week subsidy period in Alberta whereas the next-highest average is Ontario with $1,080. The higher average subsidy holds across most industries, with the exception of accommodation and food services; health care and social assistance; and information, culture, and recreation. All told, this higher payout per employee accounts for about three-quarters of the difference of why Alberta is receiving more than expected.

The remaining 25% of the gap between Alberta and other provinces is explained by the fact that program uptake is higher here than it is elsewhere. Since March, Alberta has persistently had the second-highest provincial unemployment rate, behind Newfoundland and Labrador, as it has struggled with an additional hit to its resource industries.

Which industries are most likely to take advantage?

As might be expected given the impact of COVID on public-facing businesses, accommodation and food services accounts for the largest share of employees supported by CEWS across all provinces, ranging anywhere from 19% in Ontario to 42% in PEI. The next-top industry varies by province; for many, manufacturing comes in next, but for Alberta construction has the second-most CEWS applications, accounting for 13% of the provincial total.

Another way to look at this is to focus on how the distribution of CEWS support in Alberta compares to BC, the province closest in size to our own.

Based upon an estimate of each industry’s share of employees receiving CEWS support1, uptake seems to be greater across almost all industries in Alberta compared with BC. A few industries stand out in this regard: accommodation and food services (41% versus 33%); business, building, and other support services (19% versus 11%); construction (13% versus 7%); and the natural resources industry (12% versus 0%). In fact, the only industry in which Alberta is relying upon CEWS noticeably less than BC is agriculture (3% versus 11%).

How much of a difference is it making on employment?

The impact of CEWS seems to be large. In total, Alberta businesses received at least some support for over 200,000 employees. However, because the subsidy is meant to cover only a portion of wages while employers cover the remaining amount, it is difficult to assess how meaningful the program has been in terms of jobs added or preserved; it is likely that some of these individuals would have been still have been employed even without the subsidy in place. We also know that some employers have been unable to “top up” the CEWS support, so the employee’s job is being completely supported by the program.

One way to capture the employment impact is to calculate how many full salaries the wage subsidy would cover. To do this, we can take the total value of the wage subsidy by industry divided by the industry’s average pay per employee (average hourly pay times average hours worked). Using this approach, the total dollars received via CEWS paid for the equivalent of 64,000 employees’ full wages.

This means that, in the absence of CEWS, Alberta might have had closer to 363,000 Albertans unemployed, instead of the 293,200 reported in September (assuming most of these applications represent individual employees and are not retroactive). This would equate to an unemployment rate of roughly 15% instead of the 11.7% reported in September.

The estimated impact on employment is especially noticeable in accommodation and food services (14,600 full wage equivalent) as well as construction (7,300 full wage equivalent) and wholesale and retail trade (7,700 full wage equivalent).

Though CEWS was initially presumed to be a flop, its expansion and extension have enabled it to become a backbone of employment support. As cases climb and, with it, uncertainty and greater restrictions, CEWS could be an essential safety net preventing greater unemployment in the winter months. The heavy uptake in Alberta in particular suggests that the CEWS will continue to be a lifeline in this province for many months, and we’ll be advocating for it to be continued for as long as necessary.

Footnote:  

1 CRA warns there could be multiple applications for the same individual if applications are done retroactively, so this should be used as an imperfect proxy of program use within the industry as opposed to an exact measure.  

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