The biggest fears over federal Employment Insurance reforms have so far failed to materialize, according to a new report prepared for the Atlantic premiers that nonetheless warns the changes may be fuelling an underground economy.
The report commissioned by The Council of Atlantic Premiers is the first official assessment of the impact of changes Ottawa announced just over a year ago aimed at encouraging Canadians on E.I. to take available jobs in their area, even if it means a one-way commute of an hour or more.
There are several components to the reforms, including rule changes that make E.I. benefits less generous for repeat users of the program. The report says it will take more time to fully assess their impact. However, the study says Atlantic Canadians may be hit harder than the rest of Canada.
Federal statistics show that Atlantic Canadians, particularly in rural areas where seasonal sectors like fisheries and forestry are more common, rely on E.I. far more frequently than the rest of Canada. Payments from E.I. made up 4.3 per cent of total 2010 income in Atlantic Canada, more than double the national average of 1.8 per cent. The figure rose to 7.2 per cent in rural areas of Atlantic Canada.
Economist Pierre-Marcel Desjardins, a professor at Université de Moncton who chaired an expert panel and reported on the issue at the request of the council representing the four Atlantic premiers, said there is a lot of concern but no clear evidence to date that people have been harmed by the changes.
“The impact is less than what a lot of people feared it would be,” he said in an interview.
Mr. Desjardins said he came across lots of concern that the federal government could chose to enforce the new rules more aggressively over time.
“The fear is that after the next federal election, that they’re going to tighten the screws and it’s going to be more severe,” he said.
The report notes that the panel heard repeated warnings that the policy changes were encouraging a cash-based underground economy. Mr. Desjardins said that is based on anecdotal evidence that it is better for E.I. recipients to work under-the-table than to comply with new rules for accepting part-time work.
The report comes at a time of heightened focus on Canada’s labour market during a period of major policy reforms at the federal level. In addition to the E.I. reforms, the federal government is also in the process of launching a new Canada Job Grant training subsidy that is meant to pair workers with available jobs. This month Employment Minister Jason Kenney and Immigration Minister Chris Alexander also responded to months of pressure with a major overhaul of the Temporary Foreign Worker Program.
(What is the Temporary Foreign Worker Program? Read The Globe’s easy explanation)
Alexandra Fortier, a spokesperson for Mr. Kenney, said the premiers’ report shows the federal reforms were reasonable and rejected the suggestion that they are fuelling an underground economy.
At a June 25 “Skills Summit” convened by Mr. Kenney in Toronto, numerous policy experts spoke of the need to improve labour mobility in Canada so that unemployed or underemployed Canadians move to areas of low-unemployment, particularly in Western Canada, which would reduce demand for foreign workers.
Brian Lee Crowley, managing director of the Macdonald-Laurier Institute think tank and a former Halifax restaurant owner, chaired a panel at the skills summit. He said the report contains little hard evidence and is largely a political move to distance Atlantic premiers from an unpopular federal policy.
“Everybody’s talking themselves into a frenzy here and their own report says we have no data to support that anybody’s been harmed by this,” he said.
Mr. Crowley has long criticized the E.I. system for distorting the Atlantic Canadian labour market and creating incentives for Canadians to stop working once they’ve qualified for full E.I. benefits.
“There’s just lots of evidence that people are being pulled away from the workforce by the E.I. system and this is part of what the [federal] reforms were intended to address,” he said. “The politics of it are that you always criticize Ottawa for anything they do that makes it harder to get E.I. And [the Atlantic premiers] all know in their heart of hearts that it’s a vicious system that’s hurt the economic prospect of Atlantic Canada, but politically, they can’t say it.”
The report from the Atlantic Premiers touches briefly on the foreign worker debate, stating that the program is still needed for some jobs in the region. It noted that use of the program could potentially be reduced by spreading out some of the fish processing seasons to alleviate the short-term labour shortages that lead companies to bring in foreign workers.
The report also noted that E.I. rules should not act in a way that penalizes Atlantic Canadians who take short-term work in the West and then return home.
“At a time when the provinces are supporting and encouraging workers to repatriate to the Atlantic provinces this is a concern,” the report states.