The Canadian Government’s pandemic transfers have been generous, but let’s not exaggerate

By Huw Lloyd-Ellis, Queen’s University

In the Globe and Mail’s Report on Business (December 2, 2020), Patrick Brethour suggests that the increase in Ottawa’s transfers to private-sector households during the pandemic so far amounted to $7 for every $1 of income lost.

To calculate this number, the article compares the change in government transfers to the change in primary household income between the first and third quarters of 2020. However, these values from Statistics Canada represent quarterly flows, not stocks, meaning that such an analysis misses the employment losses and transfers in the second quarter, when both values were at their highest levels.

The correct comparison is between the increase in transfers summed over each quarter and the losses in primary income summed over each quarter. If we take the values of transfers and income in the last quarter of 2019 as an estimate of what they would have been in each quarter of 2020 (a reasonable first-pass proxy given that the data is seasonally adjusted), then these net increases in each quarter are given in the table below.

This analysis shows that the total loss in household primary income was $38 billion and the total increase in government transfers was $97 billion over the first three quarters of 2020. This amounts to an increase in government transfers of about $2.5 for every $1 of household income lost. The actual value would be even less than this if we accounted for basic trends in income growth that would have occurred in the absence of a pandemic. It is not a little, but it also is not as extreme as the figures being reported.

Net increase over 2019 Q4 ($ millions)2020 Q12020 Q22020 Q32020 total so far
Primary Income-2,251-29,812-6,040-38,103
Government Transfers+5,212+60,296+31,162+96,670
Source: Statistics Canada. Table 36-10-0112-01 Current and capital accounts – Households, Canada, quarterly DOI: Values have been divided by 4 to convert to a proxy for quarterly rates but this does not affect the ratio.