Question 2

Many provinces in Canada allow welfare recipients to earn a small amount of labour market earnings, say X, before the tax-back of welfare benefits begins.

a) Assuming a 100% clawback rate for labour market earnings above this threshold X illustrate such a welfare program in an income-leisure choice diagram.

b) Last March 2020, the federal government introduced CERB (Canada Emergency Response Benefits) in response to public health restrictions imposing a countrywide lockdown and the shutdown of all face-to-face services. Describe the parameter of the program and how it worked (what was the amount of the benefits? was it a proportion of past earnings? was there a clawback if a person received some labour market earnings? if so how was it defined?).

c) Based on the information provided n b), illustrate graphically the CERB program in an income leisure choice diagram.