Employer wage subsidy program lowered probability of businesses being closed
The Canada Emergency Wage Subsidy (CEWS) proved helpful in keeping employers in business during the early months of the COVID-19 pandemic.
Overall, 41.6 per cent of employers used the CEWS at least once between March 2020 and September 2020.
And using the CEWS was associated with a 6.9-percentage-point lower probability of being closed from October 2020 to March 2021 compared with those that did not use the program, according to a report from Statistics Canada.
Overall, employers that remained open after October 2020 experienced an 8.9-per-cent decline in the number of employees between February 2020 and the average of the last three months in 2020.
But those that used the CEWS had a five-percentage-point higher cumulative employment growth rate over this period.
Many Canadian employers took advantage of the CEWS program and found it effective, according to a survey released in August 2020. The program was still popular when the redesigned CEWS was announced, found another survey released in September 2020.
Variation by risk level
Among employers in the high-risk category, CEWS usage was associated with a 12.1-percentage-point lower probability of being closed. Also, in the accommodation and food services and in the arts, entertainment and recreation industries, CEWS usage was associated with an 18.5- to 19.2-percentage-point lower probability of closure, depending on their risk of closure.
Among those with the lowest risk of closure, CEWS usage was associated with 2.4-percentage-point lower probability of closure. Among those in medium risk, usage of the program is associated with 7.5-percentage-points lower probability of closure.
Overall, the probability was 6.9 percentage points lower for all firms.
The CEWS program ended in October 2021.
Statistical challenges
However, estimating these results is challenging because businesses that used the program are different from those that did not. Also, employers that expected to benefit the most were more likely to apply for support.
“The study does take steps to account for this issue, by controlling for pre-pandemic characteristics of businesses and the use of other support programs and re-estimating the relationship using a statistical technique to take the non-randomness of the usage of CEWS into account,” says Statistics Canada.
“The main conclusion that the use of CEWS is associated with a lower probability of closure and higher employment growth at the firm level is maintained.”