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2 Million Canadians Are Worse off Because CERB Ended

A close up image of Canadian $20 Dollar bills

The end of September 2020 marked a crucial month since it marked the transition from the move away from lockdown to living in a world with COVID-19. Canada has been preparing for the move toward an economy with the ongoing pandemic.

The Canada Emergency Response Benefit (CERB) ended, and the government transitioned to the Canada Recovery Benefit (CRB) and the new and improved Employment Insurance (EI) program. However, the transition does not seem to be going as well as everybody wanted it to.

Post CERB era

The CERB saw $2,000 payments in four-week periods for more than 8.5 million Canadians during March 15 and September 26. Many Canadians relied on CERB to pay for essential expenses like food and utility bills as they had lost their jobs amid the lockdown. CERB helped more than 4 million Canadians successfully ride the wave as they returned to work.

However, the Canadians who still can’t find jobs no longer have the CERB to help them. The government introduced an improved EI and the new CRB program to help. The CERB alternatives do not appear to be as generous as the CERB was for Canadians.

The result is more than two million Canadians may be worse off transitioning from the CERB to alternative programs. By September 16, there were around 3.7 million Canadians eligible for CERB. However, there were 4.3 million CERB recipients in the first week of CERB and four million in August, leaving 300,000 CERB recipients who might not fare well in the transition.

Examining the numbers

Among four million CERB recipients, 2.1 million were eligible for the transition to the new EI as CERB ended on September 27. The alternative programs do not offer the same amount of benefits to qualifying Canadians. The qualification criteria for alternative programs like CRB and the new EI, as well as programs like the Canada Recovery Caregiving Benefit (CRCB), and the Canada Recovery Sickness Benefit (CRSB), do not allow many Canadians to receive government benefits.

Across all the CERB recipients, the alternative programs will see the affected Canadians receive an average of $377 per week in the post-CERB era. The amount is significantly lower than what they were receiving through CERB. Many of these include people who will receive nothing after CERB because they don’t qualify for other programs.

Confusion-fuelled sell-off

The confusion created by the uncertainty of transitioning to post-CERB life saw many investors cash in on their profits from investments to cover their expenses. Many Canadians put their money into high-growth stocks that were performing well as the pandemic struck. Shopify Inc. (TSX:SHOP)(NYSE:SHOP) was one such stock that soared to unbelievable valuations.

Shopify suddenly fell in September as the end of CERB came close. The Canada Revenue Agency (CRA) delayed CERB payments as it needed to take proper measures to verify the eligibility of Canadians before disbursing the payments. Shopify declined 23.09% between September 1 and September 17 amid the confusion as investors sought to cash in on their profits.

The sudden sell-off led Shopify into oversold territory. At writing, Shopify is up 12.86% from September 17, and it is still trading for a 13.20% discount from its September 1 valuation. I think Shopify could be an ideal investment for investors who want to cash in on the company’s discounted price.

Foolish takeaway

As the economy moves to the post-CERB era, there could be further volatility as the COVID-19 situation develops. It would be a good idea to consider looking at high-quality stocks like Shopify to see if they move into oversold territory and purchase shares at a discount.

The post 2 Million Canadians Are Worse off Because CERB Ended appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

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