Who has suffered the most during the pandemic? It’s easy to see. Those in the service sector are often the lowest-paid workers in good times and the first to be laid off in bad: retail sales associates, restaurant servers and kitchen staff and others employed in small businesses.
Many of these workers normally live paycheque to paycheque and sometimes rely on food banks in order to feed their families even when they are working full-time.
The cleaners in hospitals and long-term care facilities are certainly essential workers, but they have suffered higher personal risks due to the pandemic. And many lower-income women without reliable child care have left the labour market altogether. It is these people and their children who have the greatest need for help.
Those in the top 20% of income earners have fared comparatively well. Their children didn’t suffer with schools being closed. Distance learning is not a problem for them since the vast majority have access to computers and high-speed internet. That is not true of children in the lowest 20% of households, so they suffered without access to on-line learning opportunities. In sum, it is the lower income group who are suffering the greatest hardships and they will continue to suffer until the economy is restored.
Government can provide help in two ways: a general broad-based tax cut or targeted expenditures. Each approach has its pros and cons, but any cost-effective assistance program will be targeted to aiding the disadvantaged and small business owners rather than the entire population.
The BC Liberal party has proposed eliminating the Provincial Sales Tax (PST) this year and reinstating a 3% tax the following year. The projected cost would involve about a $7 billion loss of revenue the first year and just under $4 billion the next.
The advantage of such a scheme is ease of implementation. The Minister of Finance just introduces a motion to eliminate the tax and shortly thereafter the tax is gone without any great increase in costs of administration. But the downside of such a policy is that, rather than being targeted on those experiencing the greatest burden arising from Covid-19, the benefits are spread across the entire population, including those in the top 20% of income earners. They, by and large, do not need such assistance.
Those buying high-priced cars or other luxury goods would rejoice, no doubt, but is this really the point?
Cutting the PST certainly will have appeal to voters, but should raise the question as to whether this is the best way to provide assistance to those who have carried the largest portion of the economic burden of the pandemic. These folks need funds to help in feeding their families, paying for rent or mortgages, and some form of childcare, so parents can work and earn income to meet their needs. Cutting the sales tax meets those needs only in an indirect and probably reduced fashion compared to targeted programs.
Providing the lowest-income 20% of households can be identified, direct support programs can be put in place to supplement earnings to cover essential needs for food and shelter. If indicated, monthly payments to cover the cost of daycare for children and provide transit passes to assure mobility can be added.
The civil service can certainly estimate the costs of providing such programs. I would be very surprised if they cost $7 billion in Year 1 or $4 billion in Year 2, assuming the economy returns slowly to a sustained level of economic growth.
Neither approach will guarantee that children in low-income households or living in remote communities have computer equipment and data connections that will give them access to distance learning. Solving that problem will take more time.
But providing help to those households who need it most should be priority No. 1.
David Bond is a retired bank economist living in Kelowna. His column appears Tuesdays.