Employment insurance is at the heart of Canada’s social safety net.
You pay into the system when you work, and you collect if you’re laid off.
But EI might be one the most unjust and economically inefficient government programs.
You pay 1.78 per cent of pretax income up to a maximum of $786.76 a year whether you’re a logger in Nanaimo, B.C., or a doctor in Yarmouth, N.S.
But what you earn and how long you must work to collect is determined by the unemployment rate in 58 zones rather than real need.
A new report this week from the Mowat Centre for Policy Innovation at the University of Toronto says the $22-billion EI system is out of step with the modern workplace. Canada should have a simpler and more equitable EI regime, with common eligibility standards and identical benefits, concludes a Mowat task force that spent months consulting Canadians and researching. A recent C.D. Howe Institute study urged similar reforms.
It’s a long way from what the country has now.
An administrative assistant laid off in Corner Brook, Nfld., who worked as little as 10 weeks will pocket $468 a week for 45 weeks – the maximum – for a total of about $21,000. A comparable worker in Saskatoon would have to have put in about 18 weeks and could earn benefits for only 36 weeks, or a total of $16,848. Someone doing two jobs who loses one of them is likely to get nothing.
Local unemployment rates are a bad predictor of how hard it will be for an unemployed worker to find a new job, the Mowat report says.
“EI is the last program left that is a hangover for handling interregional problems,” Mowat Centre director Matthew Mendelsohn said in an interview.
Newfoundland recoups about $5 in benefits for every $1 it puts in. Ontarians get about 60 cents.
Fewer than half of jobless Canadians get EI. That’s down from about 80 per cent in the mid-1990s, when Ottawa made the program less generous to save money.
“The number of people outside Canada’s social safety net is growing and growing,” said Mr. Mendelsohn, an academic and former top federal and Ontario government official.
The program was built for the 1970s, when workers spent most of their careers with one employer. Today, Canadians are more likely to change jobs, work part-time or be self-employed. Structural changes in the economy mean some lost jobs may never return and some workers will need more training to make them employable.
“We are going through a period of transition from labour surpluses to labour shortages,” Mr. Mendelsohn said. “We need people to be participating in the labour market as fully as possible.”
In some parts of the country, work is scheduled around the seasons to squeeze the more out of EI.
It isn’t efficient, says Arthur Sweetman, an economics professor and Ontario Research Chair in Health Human Resources at McMaster University. “It’s hard to make the labour market work well because of EI,” he said. “People are sitting at home when they could be productive.”
Employers have also learned to exploit the system. Auto makers use EI to subsidize the retooling of their plants by essentially mothballing their workforce. Municipal school boards lay off bus drivers, cafeteria workers and cleaners in the summer.
“A lot of companies across the country structure their work life around the parameters of EI,” says Dr. Sweetman, who reviewed some of the Mowat research. “It’s a way that Canada has chosen to operate and politicians are fully aware that this is happening.”
The Mowat Centre estimates its proposals would cost $2.3-billion. The biggest single expense would be a $900-million wage insurance program.
EI critics see the new majority government as a chance for change, especially as Prime Minister Stephen Harper isn’t beholden to regions that would lose out, including Atlantic Canada and rural Quebec.
The Mowat Centre is calling for single, national eligibility requirements. The result would be stronger safety net and a more efficient labour force.
“There’s been an economic shift within Canada, and that may open up some political space for reform,” said political science professor Keith Banting, research director on the Mowat task force.
Call for reforms
Other recommendations from the Mowat Centre for Policy Innovation:
- Expand EI-sponsored work-sharing during economic slumps.
- Test a system of wage insurance for long-tenured unemployed workers so they don’t drop out of the labour market
- Transfer special retraining funding from the EI system to the provinces. That would reduce premiums and mean that funds could benefit workers who aren’t eligible for EI.
- Create a system of temporary unemployment assistance outside EI for workers who don’t qualify, including part-timers, immigrants, young workers and the self-employed.
- Barrie McKenna