Businesses that used the federal government's wage subsidy program were less likely to close during the first year of the pandemic, with those in accommodation, food, entertainment and the arts benefiting the most, a new study shows.
The study, , found the likelihood of closure for a business that used the Canada Emergency Wage Subsidy (CEWS) between March and September 2020 was 6.9 percentage points lower in the following six months, compared to businesses that did not use it.
Although businesses generally saw an 8.9 per cent decline in the number of their employees between February 2020 and the average of the last three months of that year, those that used the wage subsidy saw a five percentage point higher cumulative employment growth rate.
The federal government introduced the subsidy during the onset of the COVID-19 pandemic to help cover a portion of employee wages for businesses that saw a certain drop in revenue.
Between March and September 2020, 41.6 per cent of all employer businesses, active in February 2020, used the subsidy at least once, StatCan says.
Businesses in accommodation and food services, arts, entertainment and recreation .
The subsidy ended on Oct. 23, 2021 and has been replaced by two new programs.
"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," the report says.
"Moreover, businesses that expected to benefit the most were more likely to apply for support."
The report says the results account for pre-pandemic factors such as indebtedness, profitability, liquidity, productivity, size, industry and province, as well as the use of any other support programs.
Based on these factors, the report found businesses with a higher risk of closure and those in the accommodation and food services, arts, entertainment and recreation industries saw the strongest association between the use of the CEWS, survival and employment.
Businesses considered highest risk were 12.1 percentage points less likely to close, while the probability for those in accommodation and food, arts, entertainment and recreation was between 18.5 and 19.2 points lower depending on their risk.
The wage subsidy had a much smaller impact for businesses with higher productivity and profitability, lower debt and greater liquidity before the pandemic, with the probability of closure only 2.4 points less likely.
