OTTAWA—The federal government has promised to pay the wages of hundreds of thousands of Canadian workers in an extraordinary move to help nurse the economy through the COVID-19 crisis.

Prime Minister Justin Trudeau announced Monday that Ottawa’s promised wage subsidy program — originally meant as a modest measure to help small businesses — will now apply to all firms, big and small, that have suffered a sharp revenue loss because of the impact of the virus.

It’s a dramatic expansion of the program and comes as the ranks of Canada’s unemployed swell by the day and the prospect of a prolonged economic shutdown well into April to contain the virus.

“This is about making sure that people are still getting paid whether they work for a business that employs 10 people or a 1,000 people,” Trudeau said during his daily briefing.

The government unveiled new criteria Monday to determine which firms will be eligible. Any business that has seen a drop of 30 per cent or more in revenue will be able to get a wage subsidy of 75 per cent to help keep workers on the payroll, Trudeau said. It will also apply to non-profit organizations and charities.

The program will cover 75 per cent up to a salary of $58,700, paying up to $847 a week and will be backdated to March 15.

In light of the program’s new, more generous terms, the prime minister urged employers to rehire employees who have already been laid off because of the widespread closures across the economy and where possible, to top up wages to cover the remaining 25 per cent.

He also warned employers not the “game” the program and said there would be consequences for those who do.

“This unprecedented situation calls for unprecedented action and it calls for good faith and trust between everyone involved,” he said.

“If there is abuse, there will be severe consequences for anyone who takes advantage of the system and therefore takes advantage of Canadians,” Trudeau said.

When first unveiled earlier this month, Ottawa promised to pay just 10 per cent of a workers’ wage and only small- to medium-sized firms were eligible, sparking criticism from business groups that it was too low to alleviate job losses.

On Friday, the government raised the subsidy to 75 per cent and Monday’s move opened it to more companies.

“It’s a substantial wage subsidy and it looks like it’s broadly applied and those were the most important criteria,” said Dan Kelly, president and CEO of Canadian Federation of Independent Business, which had pushed for changes.

“If governments can cover the wage bill for a period of time or a large chunk of it … then the business itself has a fighting chance,” Kelly said.

He said businesses are keen to see the detailed criteria. And he cautioned that some firms forced to close up shop completely won’t have the financial resources to cover wages while waiting for Ottawa to reimburse them.

“Even with the promise of 75 per cent down the road, if you have no money from which to pay it, it’s not going to offer you much help,” he said.

Still, Kelly said he was encouraged that the government seems to be using an “honour system” and not requiring detailed paperwork upfront to access the subsidy. “Getting this sped up fast is super, super critical,” he said.

Even under the best-case scenario, he warned that the economic disruption caused by COVID-19 will see thousands of businesses go under.

Trudeau was unable to say what the cost of the program might be. Finance Minister Bill Morneau would have additional details on Tuesday, he said.

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When first announced, the cost of the wage subsidy program was estimated at $3.8 billion. Now it could be 10 times that amount.

“These costs keep climbing but I can assure people that our focus right now is on making sure that Canadians keep their jobs even if they’re not working at them right now,” Trudeau said.

The prime minister made the announcement on a day when his government was originally scheduled to be delivering its budget. In a speech just over three weeks ago, Morneau boasted that the country’s debt-to-GDP ratio was expected to continue trending downward.

Now the government is spending on the fly with a promise to work out the costs later.

In a Friday briefing note, Scotiabank economist Rebekah Young estimated the cumulative price tag on deficit spending could top $140 billion or almost seven per cent of GDP with debt levels approaching 40 per cent of GDP.

The wage subsidy program alone could cost at least $42 billion over three months, perhaps higher given Monday’s changes, she said in an interview. “We’re looking at tens of billions,” said Young, director of fiscal and provincial economics at the bank.

She cautioned that it may also be hard for the government to suddenly withdraw its wage supports until the economy shows true signs of a rebound. “Even if the virus is over in three months — which I think few scientists think will happen — it’s really difficult to pull stimulus suddenly,” Young said.

But the price tag of not acting would certainly be higher in terms of its cost on the individuals, businesses and the overall economy.

“There’s that potential of just totally devastating the economy,” Young said.

She noted that household and corporate debt levels have swelled since the 2008 financial crisis, making them all less able to weather a financial upset, raising the spectre of financial ruin if the government did not provide a lifeline.

“You could have a lot of households going bankrupt and a lot of businesses going insolvent,” she said.

The promised funding isn’t about stimulus. It’s about helping Canadians survive, she said. “This is more about…bridge financing to make sure no one gets evicted, that they can pay the rent and they can pay their essentials,” Young said.

Former Parliamentary Budget Officer Kevin Page called the emergency subsidy “sizable.” He estimated the total fiscal cost to come in around $25 billion, noting that while the federal government had not released the official numbers, that total would be “consistent” with the governments’ estimates for the previous 10 per cent wage subsidy.

Page said he expects more Canadians to be unemployed thanks to COVID-19 than the peak of the 2008-09 financial crisis.

“The number of unemployed increased by 500,000 in the 2008-09 financial crisis. We are likely facing a larger increase in unemployed (now),” Page said.

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