The role of the Canada Emergency Wage Subsidy program in assisting businesses through the pandemic

Released: 2022-02-23

According to a new study published today in Economic and Social Reports, on average, businesses that used the Canada Emergency Wage Subsidy (CEWS) program were less likely to close and had higher employment growth than businesses that did not use the program. The study, titled "The Canada emergency wage subsidy program and business survival and growth during the COVID-19 pandemic in Canada," finds that among businesses with employees, businesses that used the CEWS program had, on average, a 6.9 percentage point lower probability of being closed compared with businesses that did not use the program.

The COVID-19 pandemic had a major impact on businesses across Canada, with 9.9% of active employer businesses in February 2020 being closed (having no employees from October 2020 to March 2021). The federal government introduced a number of programs to help Canadian businesses, the largest of which was the CEWS program. Overall, 41.6% of active employer businesses in February 2020 used the CEWS at least once between March 2020 and September 2020. Estimating the relationship between the use of the CEWS program and business closures is important to understand the role that the program played in assisting businesses through the pandemic. Identifying the magnitude of the relationship is complex because CEWS was not the only program available to help businesses and those applying for CEWS were more likely to have benefitted. Therefore, today's release focuses mostly on the average magnitude of the relationship for all employer businesses. Future work will investigate the role of the CEWS in more depth.

For more information on the number of firms that used CEWS, amount of subsidy received and number of employees supported by industry, and detailed geography, you can consult the Canada Emergency Wage Subsidy Regional and Community-level Database.

Use of the Canada Emergency Wage Subsidy associated with lower probability of closure and smaller losses in employment

The study finds that, among employer businesses active in February 2020, using the CEWS between March and September 2020 was associated with a 6.9 percentage point lower probability of being closed from October 2020 to March 2021 compared with businesses that did not use the program. This result takes into account the pre-pandemic characteristics (e.g, indebtedness, profitability, liquidity, productivity, size, industry, and province) of the business and the use of other support programs.

On average, employer businesses that were active in February 2020 and that remained open after October 2020 experienced an 8.9% decline in the number of their employees between February 2020 and the average of the last three months in 2020. The study finds that the surviving businesses that used CEWS had a 5.0 percentage point higher cumulative employment growth rate over this period compared with businesses that did not use CEWS, taking into account the pre-pandemic characteristics of the business and the use of other support programs.

Associations stronger in the accommodation and food services and in the arts, entertainment and recreation industries

The associations between usage of the CEWS and survival and the usage of CEWS and cumulative employment growth were stronger for businesses with a higher risk of closure based on pre-pandemic characteristics and for businesses in the accommodation and food services and in the arts, entertainment and recreation industries. For example, among all employer businesses that were in the highest risk category based on pre-pandemic characteristics, CEWS usage was associated with a 12.1 percentage point lower probability of being closed. Furthermore, CEWS usage among businesses in the accommodation and food services and in the arts, entertainment and recreation industries was associated with an 18.5 to 19.2 percentage point lower probability of closure, depending on their risk of closure.

The relationship between Canada Emergency Wage Subsidy usage and the probability of closure was weaker among stronger firms

The relationship between CEWS usage and the probability of closure was weakest among businesses with higher productivity, higher profitability, lower indebtedness and greater liquidity before the pandemic. On average, the usage of CEWS among these stronger firms with the lowest risk of closure based on their pre-pandemic characteristics was associated with 2.4 percentage point lower probability of closure. In comparison, the probability was 6.9 percentage points lower for all firms, 7.5 percentage points lower for businesses that had a medium risk of closure, and 12.1 percentage points lower for businesses that had a higher risk of closure based on their pre-pandemic characteristics.

A key challenge in estimating the relationship between the use of the CEWS program and business closure and growth is that businesses that used the program are different from those that did not. Moreover, businesses 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. 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.

Chart 1 
Marginal effect of the Canada Emergency Wage Subsidy program usage on the probability of closure by risk of closure groups and industry

Products

The article "The Canada emergency wage subsidy program and business survival and growth during the COVID-19 pandemic in Canada" is now available in the February 2022 online issue of Economic and Social Reports, Vol. 2, no. 2 (36-28-0001).

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).