COMMENTARY

COVID-19’s effect on retail: Job losses and lower tax revenues

Man on phone wrting something down; family in background

Statistics Canada’s latest unemployment numbers clearly show how severe the set off by COVID-19 has become. The unemployment rate increased more in March 2020 than in any other month since that data first became available in 1976. More than 3 million Canadians have lost their jobs or had their work hours reduced due to COVID-19.

Retail sales have been particularly affected by shutdowns, travel restrictions, and physical distancing requirements. Unlike other parts of the economy, retail workers have limited opportunities to work from home. Across Canada, more than 1.3 million retail jobs have been affected by the pandemic. The latest Labour Force Survey shows the number of people working in wholesale and retail decreased by 208,000 in March. The April numbers may be even higher, since measures to limit the spread of the virus didn’t fully take effect until mid-March.

While the immediate effect of retail job losses is becoming clearer, the amount of money that governments make from taxes will also decrease. Goods and Services Tax (GST) revenue, which is closely connected to retail, made up nearly 12 per cent of all federal revenues in 2018–19. We estimate more than half of that came from retail sales.

The effect of GST revenue losses on provincial budgets will vary. In New Brunswick, Nova Scotia, and Ontario, retail-related taxes provide the highest percentages of provincial revenues in the country. (See Table 1.) For example, New Brunswick could lose up to one-tenth of its government revenues because of lower retail spending.

The Government of Canada has created several programs to limit the negative effects of the pandemic on the retail industry. These include the Canada Emergency Wage Subsidy, the Canada Emergency Business Account, the new Small and Medium-sized Enterprise Loan and Guarantee program, and allowing people to postpone all GST/HST payments until June. But we don’t know how much these programs will protect provincial budgets. It will become clearer in the coming months, but economists predict a double-digit decline in sales tax revenue for this fiscal year.

We also don’t know how much pent-up consumer demand there will be once restrictions are relaxed. That will depend on how much consumers are able to spend on things they put off buying during the pandemic and how secure they think their jobs are. Consumer confidence is now at a record low in Canada, so it will be a slow recovery. As a result, we don’t expect retail spending in Canada to return to its pre-COVID peak for at least 12 months. This long period of weakness will affect both retail employees and government finances.

Table 1

Employment and sales in high-risk retail sectors

Province/territory Retail employees Retail employee share (%) Retail sales ($ millions) Tax revenue ($ millions) Revenue share (%)
Canada 1,350,345 7.3 433,966 21,698 6.5
Alberta 172,320 7.6 61,694 0 0.0
British Columbia 177,445 7.3 61,030 4,272 7.5
Manitoba 46,005 7.0 15,331 1,226 7.3
New Brunswick 29,350 7.6 9,530 953 9.8
Newfoundland and Labrador 21,755 8.0 5,510 551 7.1
Northwest Territories 1,260 5.2 200 0 0.0
Nova Scotia 36,420 7.6 11,248 1,125 9.5
Nunavut 505 3.2 55 0 0.0
Ontario 508,300 7.3 162,429 12,994 8.5
Prince Edward Island 5,935 7.4 1,591 159 7.9
Quebec 306,305 7.2 88,961 8,874 8.1
Saskatchewan 43,420 7.4 14,683 881 6.1
Yukon 1,320 6.0 340 0 0.0

Note: Employment figures are for 2015 while retail sales and revenue estimates are for fiscal year 2018–2019.
Sources: The Conference Board of Canada; Statistics Canada; Canada Revenue Agency; provincial and territorial departments of finance.

COVID-19: Get all the insights

    Zafer Sonmez

Zafer Sonmez

Research Associate

 Lauren E. Nolan<

Lauren E. Nolan

Doctoral student at the Edward J. Bloustein School of Planning & Public Policy at Rutgers University

Media Contacts

For all requests, including reports and interviews, please contact: 

Michelle Rozon
media@conferenceboard.ca

Erin Brophy

media@conferenceboard.ca

Toll-Free
1-866-242-0075
(From 8 a.m. to 5 p.m. ET; after hours, please send an e-mail.)




Related research

Insights—COVID-19, Provincial Forecasts




Connect with us

        




Access our research

Access to the Conference Board’s reports is free of charge to professional journalists upon request.

Access our experts

Our experts are available to share research insights. Contact us.