Cameron Swinton and Yat-Sing Cheng  ·  Apr 30

Potential Impacts of COVID-19: A Detailed Analysis

COVID-19: What we know as of April 26, 2020

SARS-CoV-2, the novel coronavirus that causes COVID-19, is a highly transmissible virus with significant variation in the severity of symptoms ranging from benign to severe. It impacts the respiratory system and, in advanced cases, the cardiovascular system, resulting in viral pneumonia and/or cardiac arrest. Data from Iceland suggests that more than half of those infected may show no symptoms and many others may present with only only mild symptoms, similar to a common cold. It is precisely because of these characteristics (variance in the severity of symptoms, high transmissibility etc.) that communities around the world are facing such danger. This also contributes to the economic and labour market risk that applies to Indigenous and rural communities in B.C. As of April 26, 2020, the rate of infection in the province is 420.62 cases per million people (0.04%). The mortality rate, including those who have recovered, is approximately 5.13%. This rate is likely lower, though, due to high numbers of asymptomatic cases and  limited testing. Of those who become infected, key risk factors for hospitalization, ICU admission, and death appear to be being over 50 years old and/or suffering at least one related chronic health condition. Males also seem to be disproportionately affected. The federal government has suggested current measures may last at least into July. These known risk factors, and the timing of government responses, are of significance to Indigenous and rural communities, impacting all aspects of their economies and labour markets. The course of the virus, the responses of all levels of government, and the continuing impacts of the pandemic are consistently changing. We will explore the key risks posed by the pandemic and current response measures to highlight key steps and initiatives Indigenous and rural communities may wish to consider when addressing this and future crises. 

Geography and Demographics 

The geography and demographics of B.C.’s Indigenous and rural communities are critical considerations when assessing the level of risk the novel coronavirus may pose to the region’s economy and labour markets. The population densities of these communities are relatively low compared to other urban and semi-urban communities in the province. The median age of the population in many Indigenous and rural communities in B.C. is lower relative to the provincial median. Males also tend to comprise a slight majority of the population in many communities as a result of these communities reliance on primary extractive industries. Therefore, they tend to have a slightly lower median age relative to female residents. Many rural and Indigenous communities are geographically isolated from the provincial epicentres of the current pandemic, which are centred around B.C.’s large urban and semi-urban areas and tend to be located along major roadways that act as transportation hubs. Many Indigenous and rural communities are also heavily reliant on commuting workforces. 


The low population density of Indigenous and rural communities, their demographic characteristics and their geographic isolation are protective factors that may limit the spread of the virus to and within these communities and reduce the severity of the its impact. This creates a labour force that is more resilient to current and potential future waves of infection, specifically regarding potential deaths and/or disability. However, the average household size in B.C.’s Indigenous community is larger relative to other populations due to the prevalence of multigenerational households, potentially negating the protective nature of lower relative population densities. Although isolated at the beginning of the pandemic, many Indigenous and rural communities experienced an increase in road traffic as a result of people attempting to relocate, which may have introduced the virus into communities with fragile healthcare infrastructure. The potential impact of the pandemic on these communities may be exacerbated by the difficulty, time, and cost required to transport critical goods, services and personnel to these isolated locations. Consequently, the Northwest Territories and many Indigenous communities have severely restricted non-essential cross border travel. Additionally, airlines, ferries, and bus networks have suspended or heavily curtailed their services to certain communities. All these measures have the potential to significantly impact the viability of Indigenous and rural communities as well as the businesses therein in terms of demand and labour capacity.

Indigenous and rural communities in B.C., and businesses therein, should consider the following steps and initiatives:  

  • Perform a risk analysis to holistically understand individual risk and the associated interconnectivity for the purposes of prioritizing both the risk and its corresponding mitigations (e.g., dealing with the pandemic during wildfire season); 

  • Assist and allocate resources to non-governmental organizations, such as chambers of commerce, in developing business continuity plans specifically focusing on small businesses and entrepreneurial ventures;  

  • Develop plans for continuity of government and community decision-making with a specific focus on how information technologies can be used for intergovernmental decision-making and continuity of democratic processes;  

  • Compile strategies for environmental management and natural disaster response with a focus on addressing restrictions in movement among communities and the interplay between pandemic response measures and the isolation of the community; and,

  • Develop forecasts and scenarios to create regional models that detail potential deaths, disability and healthcare resource utilization as a result of the pandemic.

Major Capital Projects 

Currently, major projects in B.C., like Coastal GasLink and the LNG Canada project, have cut their workforce by between 50% and 65% at major sites, suspended what they consider non-essential operations, and paused consultations with major stakeholders for the duration of the government-mandated pandemic response measures. Construction and critical energy infrastructure, and some other services remain operational due to them being classified as essential services. Certain projects slated for Indigenous and rural communities depend on other projects being approved and/or require interprovincial and inter-territorial transportation. Many potential subcontractors situated in Indigenous and rural communities have already experienced significant declines in existing and new business as a result of the pandemic, despite many of them being classified as essential services.


There will likely be significant delays to prospective industrial and major capital projects among Indigenous and rural communities as a result of the pandemic limiting their operations as well the current and probable future recessionary environment. In the event governments ease some of the pandemic response measures, major project proponents may consider limiting their operations to current levels to protect the health and safety of their workforce, and/or comply with disparities in provincial response measures This could further delay major projects. There is a possibility that as a result of the economic and financial pressures put on some of the project proponents, major projects could be scaled back or cancelled, particularly in the case of smaller capital projects. The economic and financial reasons for cutting back or canceling such projects could be the result of a lack of solvency or liquidity within the major project proponents, thereby threatening their viability. The project proponents may also significantly change their corporate strategy and cancel projects post-pandemic. This could be the result of shifts in domestic and local demand trends as well as constricted and volatile capital markets. Given the relatively long timeframes of such projects this is unlikely, yet the impact of a prolonged global recession prompted by the pandemic could result in the aforementioned scenarios. A risk that many Indigenous and rural communities can exploit is that major project proponents are increasing their efforts to only use local workers and subcontractors during the pandemic in order to limit the spread of the virus. However, the viability of potential local subcontractors for such projects is a significant concern and many may disappear during the pandemic and force project proponents to use non-local subcontractors.

Indigenous and rural communities in B.C., and the businesses therein, should consider the following steps and initiatives:  

  • Design remote engagement and consultation strategies for major project proponents and communities that take advantage of advances in information technologies to provide a richer data-driven decision-making environment; and,

  • Develop real option valuations and strategies that specifically focus on major project delays and/or cancellations. 


Impact on Specific Industries and Types of Businesses 

There are several specific industry and business types that will be disproportionately impacted by the pandemic. Currently, only essential services are permitted to continue operating and they are allowed as long as they comply with a series of newly introduced health and safety protocols. These measures reduce the capacity of the businesses still operating to the absolute minimum. . Non-essential businesses are currently mandated to close. Hospitality, food services, recreation, and entertainment services have been hit disproportionately hard by the pandemic, albeit some have successfully implemented strategies such as eateries allowing take-out and delivery options, or many businesses transitioning some of their services online. These businesses have been disproportionately impacted because of typically thin profit margins as well as a lack of many alternative forms of operating that comply with current anti-pandemic measures. Most events with major economic implications for Indigenous and rural communities have been cancelled. It remains unclear whether certain classes of small businesses are eligible for specific types of federal and provincial emergency funding.

Essential service providers will likely be relatively robust post-pandemic and continue to see low layoff and termination rates as well as the potential for new hiring. The tourism industry may be impacted to a greater degree than other non-essential businesses as a result of persistent travel restrictions between provinces, territories and countries for non-essential workers and/or goods and services. Furthermore, they may suffer a long-term demand shock due to shifting customer preferences. These risks should also be considered in the context of local festivals and community events. Consultants, sole proprietors, partnerships and small non-essential businesses with a few employees may be disproportionately impacted by the pandemic. There are several reasons for this. Firstly, the financial capacity of such businesses is more likely to be insufficient, particularly regarding large global black swan events like a global pandemic. Furthermore, these types of businesses are more directly vulnerable to the pandemic itself insofar as suffering the death or prolonged illness of key employees as a result of COVID-19. 

Indigenous and rural communities in B.C., and the businesses therein, should consider the following steps and initiatives:  

  • Assist and allocate resources to non-governmental organizations, such as chambers of commerce, in developing business continuity plans specifically focusing on small businesses and entrepreneurial ventures;

  • Social and human capital continuity strategies and the possibilities associated with remote working arrangements, the current unemployment situation and the recessionary period that likely will follow this pandemic;

  • Create strategies and frameworks detailing how governments, non-profits and other institutional actors can take advantage of under-utilized human capital;

  • Quantifying trade-offs for communities and provide real option valuation and externality accounting as communities develop reopening strategies on a regional basis; and,

  • Identifying how communities can implement local risk financing arrangement involving contingent capital arrangements and index-based risk financing.

Emergency Funding and Wages 

There are several emergency funding and stimulus programs at both the federal and provincial level that will impact funds available to individuals and businesses during the pandemic and consequently provide an economic cushion for key economic factors like post-pandemic aggregate demand The two most significant programs implemented by the federal government are the Canada Emergency Response Benefit and the Canadian Emergency Wage Subsidy.

The Canada Emergency Response Benefit is a stimulus benefit targeted at individuals who are no longer receiving employment income, income from contracted work or self-employment and parents who were previously receiving EI or parental benefits. Whether they are EI-eligible or not, the benefit is $2000 per month for up to sixteen weeks. The benefit is taxable, and it will be payable in the next tax year. However, although EI-eligible individuals may apply, those already receiving EI cannot receive this benefit simultaneously and will receive their EI benefits until the end of their EI period. Thereafter they may apply for the benefit. Those eligible for EI from March 15th onwards will be automatically processed to receive the benefit and if unemployed following the benefit’s expiration may apply for regular EI benefits. The federal government appears to have taken the approach of distributing the benefit without fully vetting the eligibility criteria and will likely conduct appropriate screening later. The provincial equivalent of this benefit is B.C.’s Emergency Benefit for Workers. This is a one-time, tax-free, $1000 payment to individuals whose ability to work has been impacted by the pandemic. Recipients of EI and the Canada Emergency Response Benefit are eligible. Provincial benefits do not impact receipt of the federal benefit. Applications will open May 1, 2020, and potential recipients must have been a B.C. resident since March 15, 2020, have been approved for the Canada Emergency Response Benefit and have filed or agree to file a 2019 B.C. income tax return.

The Canadian Emergency Wage Subsidy is a 75% wage subsidy targeting businesses that have been impacted by the pandemic. It is slated for twelve weeks and is retroactive as of March 15th. The legislation passed the House of Commons on April 11th and received Royal Assent on April 13th. Businesses, regardless of the number of employees, partnerships, non-profits and charities, are all eligible for the wage subsidy. Public bodies such as municipal governments, crown corporations and public universities are not eligible. Entities eligible for this wage subsidy must have experienced a reduction in gross revenue of 15% in March and 30% in April and May. Revenue should be calculated based on prior accounting practices and accounting practices will not be permitted to change during the period of enrollment. Eligible revenue for most businesses will be determined as revenue generated from arm’s length sources. For non-profits, charities and other similar organizations they must exclude revenue from non-arm’s length sources and may choose to include revenue from government sources. Eligibility rolls over period to period and the baseline revenue benchmark will be an average of gross revenue in January and February of 2020. The benefit provided to each employee will be based on the average weekly renumeration of the employee for the period between January 1and March 15 inclusive. The program is slated to have an end date of June 6, 2020. The subsidy amount for a given employee is 75% of weekly employment renumeration, up to a maximum of $847 per week. The eligible renumeration includes salary, wages and taxable benefits. Severance pay, stock options and other similar forms of renumeration are not included in the benefit. A special rule applies to employees who do not deal at arm's length with the employer. The subsidy amount for such employees is limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020. The subsidy is only available in respect of non-arm's length employees employed prior to March 15, 2020. The 10% wage subsidy included in the COVID-19 Emergency Response Act, passed on March 25, 2020, will reduce the amount available to employers under this benefit. Eligible businesses will also be able to obtain a 100% refund for employer-paid contributions to Employment Insurance and the Canada Pension Plan.

There are several important considerations regarding the Canada Emergency Response Benefit. Depending on the whether any extensions or amendments are introduced, this benefit could significantly depress median incomes for the second and third quarters of this year, specifically in industries considered non-essential and in essential industries that have scaled back their operations. This is due to the combination of the benefit as well as any EI receipts. The second key consideration is the federal government’s delayed eligibility screening. By delaying eligibility screening, those who receive the benefit who took advantage of moral hazard or did not know they were ineligible will have to remit the benefit at undetermined time under a claw back scheme. This is very similar to the taxable nature of the benefit insofar as a tax deferral on the benefit may result in a significant individual tax burden that will strain an individual’s finances, particularly in the case a prolonged recession, which is a distinct possibility post-pandemic. The impacts of the provincial benefit will be like the federal benefit, albeit not as impactful on the broader macroeconomic context.

There are several key risk considerations to consider regarding the Canadian Emergency Wage Subsidy. The first risk is that such a wage subsidy will likely not apply to firms that have highly variable workforces or make extensive use of contractors. The reason for this is that these workers are not classified as employees and are often used on a project-by-project basis. Consequently, a large portion of the Canadian workforce may be excluded from benefiting from this wage subsidy. There is a provision included in the legislation encouraging firms, if possible, to continue to pay employees 100% of their renumeration. However, there are no mechanisms built into the program to prevent firms from engaging in cost-cutting or restructuring by diverting funds to retained earnings or capital acquisitions. Furthermore, the wage subsidy does not account for seasonal businesses insofar as its benchmarks for revenue and employee compensation are from January and February. An additional consideration regarding the benchmark and the roll-over cut-offs is their impact on new businesses, high-growth businesses and businesses with highly volatile revenue. Consequently, a business may qualify for the subsidy one month, but not in the next and qualify again in the subsequent period. The level of cost volatility this creates may threaten the viability of the business and the livelihoods of its employees. Furthermore, the lead-time for the federal government to fully implement this program may exceed a month. Consequently, businesses in precarious liquidity positions may disappear as a result.

Indigenous and rural communities in B.C., and the businesses therein, should consider the following steps and initiatives:  

  • Assisting communities in taking advantage of federal, provincial, and international programs and initiatives as well as initiatives administered by non-profits, charities and academic institutions that have the specific purpose of pandemic relief and/or research; and,

  • Assisting in designing cost and risk allocation frameworks for the period during the pandemic and immediately thereafter. 

Other Economic Factors 

There are several other critical economic and financial risk factors that must be considered regarding these two major benefits programs and the current overall macroeconomic context. Firstly, is that programs designed to ensure Canadian individuals and residents have enough funds to fulfill their basic needs during the pandemic. These programs have been combined with tax deferrals grants from provincial utilities and deferred interest payments from banks. Another important factor to consider is that many critical money market interest rates have fallen below 0.25% and other interest rates tend to follow these rates. The prime rate and conventional 5-year mortgage rate have fallen to 2.45% and 5.04%, respectively. Bond yields and the CPI have also fallen significantly over all terms and measurements. Although many Canadian banks have provided customers the option of deferring interest and mortgage payments, many have been criticized for still charging interest on the interest.

It is possible that the Canada Emergency Response Benefit, the Canada Emergency Wage Subsidy and other programs may remain for period post-pandemic, given that such programs have been used in other locations and at different times throughout history to spur economic growth in a recessionary period. A likely consequence in the medium- to long-term may be an inflationary environment. This could occur post-pandemic as money supply outpaces demand. The extent inflationary pressure will be the result of reduced supply of goods due to the pandemic, which will result in natural price increases and the degree to which lending at both the interbank level and to conventional borrowers. The pace at which economic activity resumes and aggregate demand grows will determine the timing of the inflationary pressure. Many municipalities should consider future possible capital investments post-pandemic given the relatively low cost of financing. Credit factors that are important for individuals and institutions are credit scores, credit ratings and the ability of borrowers to pay. For governments this may require reassessing and changing the degree to which they rely on different sources of tax revenue. Deferring payments harms credit histories of any entity and may reduce possible future borrowing potential and create opportunity costs in a post-pandemic period of low interest rates.

Indigenous and rural communities in B.C., and the businesses therein, should consider the following steps and initiatives:  

  • Assist and allocate resources to non-governmental organizations, such as chambers of commerce, in developing business continuity plans specifically focusing on credit management; and,

  • Develop forecasts, scenarios and real option valuations for capital projects with a specific focus on capital structure. 


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