CERB as proxy for UBI

The Canada Emergency Response Benefit (CERB) was a temporary financial relief program introduced during the COVID-19 pandemic to provide income support for individuals who lost work due to government-mandated closures. While CERB shared some characteristics with Universal Basic Income (UBI)—such as direct, unconditional cash transfers—it was fundamentally different in both design and purpose. Unlike UBI, which provides ongoing, unconditional financial support to all citizens regardless of employment status, CERB was a targeted, emergency response measure with eligibility criteria, time limitations, and a defined purpose of income replacement rather than economic restructuring. CERB required recipients to have had prior employment income ($5,000 in the previous year), was available only during a defined crisis period, and ended as the economy reopened.

Critics of CERB claim that it discouraged work, but empirical data suggests that its primary effect was economic stabilization, preventing a collapse in consumer spending while enabling Canadians to focus on health and safety. This analysis evaluates CERB’s economic impact using data to assess whether it incentivized joblessness or functioned as a necessary safeguard during an unprecedented crisis.

Economic Stabilization

CERB was instrumental in maintaining consumer spending during the pandemic-induced economic downturn. Without such support, many Canadians would have faced severe financial hardship, leading to decreased spending and further economic decline. According to Statistics Canada, workers who received CERB lost an average of $8,100 in employment income, which was largely offset by $7,600 of financial assistance from the program, effectively replacing 95% of lost income (Statistics Canada, 2024).

Employment Dynamics

The pandemic led to significant job losses due to mandatory closures and health concerns. CERB provided temporary support to those unable to work. Research indicates that there was a lack of evidence of any short-term work-disincentive effect from CERB (McMaster University, 2022).

Program Design and Impact

CERB was designed as a temporary measure, providing $500 per week for up to 16 weeks to eligible workers (Canadian Tax Foundation, 2020).

While some raised concerns about potential work disincentives, analyses suggest that CERB did not significantly discourage work. A study found that 40% of CERB recipients pursued training or education opportunities during the benefit period, indicating proactive engagement in skill development (Canadian Centre for Policy Alternatives, 2023).

Addressing Concerns

While some critiques highlight potential disincentives, it's important to consider the broader context. The Fraser Institute noted that the Canada Recovery Benefit (CRB), which followed CERB, had clawback provisions that could create work disincentives for certain income levels (Fraser Institute, 2020). 

However, these concerns are more pertinent to CRB than to CERB itself.

Conclusion

CERB was a necessary intervention to support Canadians during an unprecedented crisis. Evidence suggests it effectively replaced lost income and did not create significant work disincentives. The program's design aimed to provide immediate relief, contributing to economic stability and allowing individuals to focus on health and safety during the pandemic.

References

Canadian Centre for Policy Alternatives. (2023). CERB: More than just an income program. Retrieved from https://www.policyalternatives.ca/news-research/cerb-more-than-just-an-income-program/

Canadian Tax Foundation. (2020). CERB: From Emergency to Recovery. Retrieved from https://www.ctf.ca/EN/EN/Newsletters/Perspectives/2020/3/200308.aspx

Fraser Institute. (2020). Trudeau government creating harmful work disincentives for many Canadians. Retrieved from https://www.fraserinstitute.org/commentary/trudeau-government-creating-harmful-work-disincentives-many-canadians

McMaster University. (2022). A Framework for Evaluating Canada's COVID-19 Income Support Programs. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9400823/

Statistics Canada. (2024). The role of the Canada Emergency Response Benefit. Retrieved from https://www150.statcan.gc.ca/n1/daily-quotidien/240523/dq240523d-eng.htm