Where we go from here: Turning crisis into real opportunity

24 March 2021

As we mark the end of one year living with the COVID-19 pandemic, many of us are taking stock of our experience and laying plans for the coming year, happily anticipating a transition back to life as we once knew it.

The pandemic has changed us though, in many ways – for better and for worse. Some things have changed irrevocably. We have lost people we love, transformed the way we work, and upended how we shop. Other things have changed but may resume their former shape over time – such as women’s labour market participation, employment levels of low-wage workers, and (sadly) our carbon emissions and pollution.

Many people and organizations are usefully sorting through the changes they have made to see what they wish to keep, what they will leave behind, and what remains to be done to ensure an optimal recovery – in short, they are seeking ways to turn this crisis into an opportunity to come back better and stronger.

At Prosper Canada, the pandemic required us to work with partners to develop new virtual (by phone and internet) and hybrid service delivery models to enable community organizations to provide financial help to clients safely during the pandemic. Our initial focus was on tax-filing help to keep income benefits flowing to vulnerable Canadians. While virtual and semi-virtual tax-filing approaches can be more cumbersome and don’t work for everyone, they also open up exciting opportunities to leverage strong service capacity in some communities to extend services into surrounding rural, remote and Indigenous communities – a development we are pursuing in the year ahead.

The pandemic has also pushed us to make more effective use of technology in our own organization and to leverage it to better equip financial help providers and Canadians with quality financial information and help tools – like our Financial Relief Navigator and our forthcoming benefit screening tool. By centralizing curation and updating of quality financial information and creating user-centred, easy to navigate platforms and tools, we can make it easier and cheaper for community organizations, employers, financial services and public service providers to provide timely and effective financial help to individuals. Through purpose-built consumer facing digital tools and platforms, we can also enable more people who have the capability to help themselves.

These innovations enable financial help providers to extend services more cost-effectively and equip more organizations to provide ‘light touch’ support, freeing up specialized community services to help those with more complex needs. The pandemic has also forced us and our partners to all become faster, more nimble, real-time problem solvers – another positive change we will work to carry forward.

As we consider what else we might do to ensure a strong, equitable, and inclusive pandemic recovery, the forthcoming federal election offers an important opportunity to engage our political parties now on innovative ideas they can put in their election platform ‘window’. We would encourage every federal party to give urgent attention to how they can actively support those caught in the lower leg of Canada’s “K-Shaped recovery” so that they too can join in the burgeoning economic recovery and build their resilience against future financial shocks.

To this end, here are three suggestions with respect to low- and moderate-income Canadians and households:

1. Ensure every Canadian has access to the financial products, services and advice they need to build their financial health. Currently, people with low and moderate incomes are hard-pressed in Canada to access high-quality, unbiased financial information, education and advice when they need it. People with money can buy professional financial and tax advice but there is a structural gap in our marketplace when it comes to other Canadians. Non-profit credit counselling agencies may be able to help with debt, and there are other broader community financial help services available, but these tend to be tenuously funded and do not come close to meeting demand. Many low-income Canadians also face barriers to accessing mainstream financial services and products, due to institutional, personal and geographic barriers, and find it difficult to access affordable small dollar credit and other financial products suited to their needs. How can we fix this?

Invest $10 million annually in community financial help services to reduce poverty and help low/moderate income Canadians build their financial stability, security and resilience against future shocks. Pilot non-profit Financial Empowerment Champion organizations in 14 communities have helped 464,000+ individuals to build their financial capability and health in five years – connecting them to $794 million in additional income. On average, low-income participants saw their income increase by just under $6,000 per year at a cost of just over $50 per client served. A $10 million annual investment could extend these and related non-profit debt services to all regions of the country, helping 150,000+ struggling Canadians yearly to boost their incomes, reduce debt, build savings and join in Canada’s economic recovery.

2. Help financially struggling households deal with consumer debt. Half of low-income Canadians carry no debt, but the other half are overburdened by debt, paying 31 per cent of their income to service debt that amounts to an average 278 per cent of their income. The single largest debt most of these individuals carry is not a mortgage. It’s student debt – $22,000 on average and more than higher income households. CERB debt, potentially owed by roughly 440,000+ mainly low and moderate-income Canadians, has significantly added to this already crushing financial burden. Low-income Canadians are also the least able to afford, but the most reliant on alternative, high-cost, high-risk forms of credit with predatory rates and practices that can trap them into spiraling debt.

Forgive Canada Emergency Response Benefit (CERB) debt owed by those with incomes under $25,000. These individuals do not have sufficient funds to both meet basic needs and repay thousands of dollars to the federal government. Pursuing repayment will only lead to acute and widespread suffering, more pressure on overburdened shelter, health and social services, and increased economic disparity – not less.

Graduate and cap CERB repayment for all other individuals earning $25,000-$50,000. CERB repayment should be proportional to people’s means to avoid overburdening already struggling households with excessive debt. For every $5,000 income increment above $25,000, individuals would be asked to repay only up to an additional $1,000 in CERB debt with the maximum debt capped at $5,000 for those earning $50,000. This would be repayable over a five-year period with no interest or penalties to make repayment manageable.

Give individuals with incomes of $50,001-$80,000 a five-year interest free period to repay CERB debt to make payments manageable and avoid compounding widespread household financial pressures arising from the pandemic.

Expand forgiveness for federal student debt – particularly for individuals on provincial social/disability assistance and/or living below the official poverty line. This would alleviate financial stress, enable them to better meet basic needs, and enhance their financial stability – a critical prerequisite for employment readiness and participation for those seeking employment.

Work with provinces/territories to review the impact of alternative high-cost credit services and identify effective regulatory approaches to curtail predatory and high-risk lending. High- cost credit and lending practices that lead to consumers paying for consumer goods multiple times over and trap many in spiraling debt traps are corrosive to financial health and help to drive excessive household debt that is undermining Canada’s macro-economic health. The Financial Consumer Agency of Canada can play an important role in researching the scope of this problem and effective solutions and, by sharing insights with provincial regulators, catalyze regulatory action to curtail predatory practices – as it did with payday lending.

3. Establish a comprehensive and robust national monitoring and research program that will enable us to better identify and address drivers of poor household financial health. By more actively monitoring household financial performance, how this differs across diverse groups and geographies, and exploring the underlying drivers of poor financial health and effective solutions, we can better define the challenges Canadians are facing and mobilize stakeholders from all sectors in coordinated action to advance solutions. Currently, policy makers lack adequate data and analysis to drive effective solutions – a situation that undermines efforts to build a stronger, more equitable and inclusive economy and improved quality of life for all Canadians.

Establish annual monitoring, analysis and public reporting by Statistics Canada and other relevant federal agencies on the following aspects of household financial health, including analysis of disparities by gender, ethnocultural background, income, and geography:

Amount and composition of individual and household debt (mortgages, home equity lines of credit (HELOCS), other lines of credit, education loans, auto loans, credit cards, installment loans, payday loans)
Amount and composition of individual and household savings and assets (liquid savings, investments, real estate assets, TFSAs, RRSPs, RESPs, RDSPs, PRPPs)
Net worth of individuals and households
Personal insolvencies, consumer proposals and bankruptcies.

Establish a National Longitudinal Survey on Household Finance to enable more in-depth exploration and understanding of Canadians’ financial challenges and their drivers to inform effective solutions. This should be designed to shine a light on the diverse experiences and challenges of different groups of Canadians – by gender, age, ethnicity, income and geography.

These are just a few suggestions for concrete ways in which we can truly “build Canada back better” and transform COVID-19 from an unprecedented challenge into a once in a lifetime opportunity to tackle longstanding structural inequities and to come out of this wiser, and better off – goals every Canadian can surely unite behind regardless of political stripe.