It's all about the restart
There are essentially two responses for workers during the coronavirus crisis.
- Boost/expand unemployment benefits so people can survive
- Subsidize wages so people can continue to collect paycheques
On the surface, they look the same; they're about helping people manage through the crisis. But governments are coming around to the idea that Option #2 is much better and they're right.
Canada is one of the few countries that's doing both. First they launched improved unemployment aid but this week shifted to a plan to pay 75% of wages up to $56,800 for companies who have lost 30% of their revenue. It's a massively expensive program at $72B for 2-3 months but it's better value.
Why? It's all about the restart. It's fundamentally harder to get people back to work when you have to take them off the unemployment rolls. People get lost in the shuffle, it's an HR headache, some move on, some are forgotten about.
If you can keep the onboard and doing some work then you give people something to do, and you keep them attached. Even if they're doing only 10% of the previous work, it's something and it makes people feel much more secure and hopeful than a few months of unemployment cheques. For companies, they can scale the amount of real work that employees are doing as revenues increase and the economy returns to normal.
I think it's urgent that more countries shift to this model or the crisis will drag.
In terms of the FX market, I think we're months away from rewarding countries and currencies who manage the crisis well but this is something to keep in mind. That said, for a country like Canada it doesn't matter how well the crisis is managed because it's an export-oriented economy.
For others currencies though, it could have major implications down the road.
