Shaimaa Yassin | August 21, 2025
Building major projects and growing the economy is a worthy goal given the range of risks Canada faces. But as the federal government prepares its fall budget, it must be just as focused on supporting struggling families—before further economic shocks push more people into hardship
In July, employment fell by 41,000 jobs, the employment rate slipped to 60.7 per cent, and youth unemployment climbed to 14.6 per cent—the highest since 2010 outside the pandemic.
Inflation has eased to 1.7 per cent, yet shelter and food costs remain persistent strains. Owning a typical home requires about 55 per cent of a median household’s pre-tax income, and average asking rents are about $2,120—barely below last year’s peak. In 2024, one in four Canadians lived in a food-insecure household. In Ontario alone, an estimated 234,000 people are homeless, many of whom live with a disability and rely on social assistance.
Shaimaa Yassin is senior research director at the Institute for Research on Public Policy. Handout photograph
Trade tensions are adding to these pressures. Tariff hikes from the United States and China risk disrupting key Canadian industries, lowering incomes in affected sectors, and creating ripple effects across communities.
Supporting people and communities through hard times is not only the right thing to do, but it can also improve Canada’s overall economic resilience by limiting the cascading effects of job and income loss that reduce overall demand for goods and services.
With these objectives in mind, the budget should focus on three priorities:
1. Reduce the cost of essentials, while better targeting income supports.
The federal government could help lower the baseline cost of living for households, particularly in housing and energy. The proposed Build Canada Homes organization should prioritize non-market housing on public land, with deep affordability covenants and high energy-efficiency standards that help to control monthly costs. Linking land, finance, and construction innovation in an integrated portfolio approach and recognizing the capacity of the not-for-profit and co-operative housing sector could help deliver large-scale, lasting affordable and future-ready housing solutions.
Scaling up programs like the Greener Homes Affordability Program, which targets retrofits at low-income households, and recapitalizing interest-free loan programs for middle-income households, could help cut utility bills and reduce energy poverty, while creating new jobs in the retrofit industry.
Since housing solutions take time to deliver, better targeted income supports are an essential complement. Programs such as the Canada Child Benefit could be reoriented to strengthen support for low- and middle-income families, while cutting back on payments to high-income households. Likewise, restructuring and expanding the GST/HST credit into a permanent monthly “Groceries and Essentials” benefit could smooth household budgets and better reach lower-income households.
2. Modernize employment insurance to protect today’s workers
Canada’s Employment Insurance (EI) system was built for a labour market that looked very different from today’s. In recent years—from the pandemic to industry-specific shocks triggered by American and Chinese tariffs—the federal government has often had to introduce ad-hoc, temporary measures to make the program more responsive. These targeted changes help in the moment, but they also highlight a bigger problem: EI is not flexible or inclusive enough to act as a strong automatic stabilizer when economic shocks hit.
Broader EI reforms are needed to improve coverage, adequacy, and financial stability. Many workers—particularly those in part-time, contract, or gig roles—cannot access benefits when they lose work. During the pandemic, shifting from a complex system of varying regional EI eligibility requirements to a uniform 420-hours of work proved successful, extending coverage to more workers when it was needed most. Increasing the amount of money EI recipients receive from 55 to 60 per cent would also help ensure benefits can cover essentials such as housing and food. Adjusting the approach to EI financing could help cover the costs of reform while reducing volatility in EI premiums.
EI can also play a bigger role in supporting skill development, helping those who leave low-wage, precarious work to train for in-demand occupations while receiving income support. Reviving the Work-Sharing While Learning program could also help workers to reskill or upskill while remaining attached to the workforce.
3. Place-based transition tools for communities
Economic shocks—whether driven by trade disruptions, shifts in global demand, technological change, or the global net-zero transition—do not affect communities equally. Some communities will feel the impacts sooner and more severely, particularly smaller, rural, or remote areas with high concentrations of employment in exposed sectors and limited local economic diversification. Our research has identified 19 communities with nearly 740,000 workers facing heightened exposure to both trade disruptions due to U.S. tariffs and industrial change resulting from global emissions reductions.
One approach to building resilience in these communities is to provide flexible, place-based supports combined with community-led transition planning. Locally designed economic diversification plans, skills training linked to real projects, and wrap-around social supports are critical to improving resilience to disruption. For example, the European Union’s Just Transition Mechanism and Western Australia’s Collie transition have demonstrated that when communities are given greater control over planning and investment decisions, uptake of skills development programs improves and outcomes are better aligned with local realities.
Incorporating an inclusive-growth mindset into the federal budget will have a dual benefit for Canada. It could help people and communities withstand rising trade pressures and economic uncertainty, while improving Canada’s overall economic resilience.
Shaimaa Yassin is senior research director at the Institute for Research on Public Policy.
