Pay out emergency benefits or subsidize wages?

Opinion piece by Francesco Amodio ’10 (Economics) on Canada’s response to COVID-19 crisis

BLAIR GABLE / REUTERS

In a piece published on March 31 in the Montreal Gazette, Francesco Amodio ’10 (Economics) looks at measures taken by the Canadian government in response to the coronavirus pandemic.

Here’s an excerpt:

The measures taken by the Canadian government are in line with those taken in other countries, where governments are adopting either one or the combination of the following two approaches. In the first one, the government lets firms lay off workers, then pays out employment insurance benefits or other kind of income support transfers. The second approach focuses instead on “saving jobs,” with the government subsidizing wages in order to avoid layoffs.

Each approach has its pros and cons. In the short run, the size of wage subsidies and number of potential layoffs will determine which one is costlier. Perhaps more importantly, the two approaches differ in their medium- to long-run impacts.

Francesco Amodio ’10 is a graduate of the Barcelona GSE Master’s Program in Economics and the GPEFM PhD Program (UPF and Barcelona GSE). He is currently Assistant Professor of Economics at McGill University in Montreal, Canada. Follow him on Twitter or visit his website

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