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Going into the recession, the concern was that the rules had been tightened too much and that too many of those who had lost their jobs would find themselves ineligible for EI. (Dave Chan/Dave Chan for The Globe and Mail)
Going into the recession, the concern was that the rules had been tightened too much and that too many of those who had lost their jobs would find themselves ineligible for EI. (Dave Chan/Dave Chan for The Globe and Mail)

Economy Lab

EI solid during recession but struggling in the recovery Add to ...

The Employment Insurance (EI) reforms of the mid-1990s faced their first full-blown recession in 2008-09, and the EI program was the subject of a political psychodrama in the summer of 2009. Just how well did the new EI perform?



The goal of the reforms was to tighten up the eligibility rules: payments out of the old Unemployment Insurance (UI) program had become increasingly concentrated on a small number of repeat users. In the words of this HRSDC report, “the UI system [was]a transfer program from full-time workers to people who [chose]to work on a part-year basis.”



The changes to UI and EI in the 1990s were wholly successful in their goal of making it harder for people to claim benefits. Although more than 80 per cent of those who contributed to EI continued to receive benefits, the tightened eligibility rules meant that EI payments were made to a much smaller share of the total number of unemployed. Going into the recession, the concern was that the rules had been tightened too much and that too many of those who had lost their jobs would find themselves ineligible for EI.



As it turned out, unemployment increased by 450,000, and the increase in the number of EI recipients was somewhere around 70 per cent of that -- a share significantly higher than what the pre-recession coverage rate would have suggested.



But the most recent data are less encouraging: the number of EI recipients has almost returned to pre-recession levels, but there are still 250,000 more unemployed. EI coverage has gone below 40 per cent for the first time, possibly because of an increase in the number of people who have exhausted their benefits.



EI may have performed well during the recession, but for reasons that are not yet clear, it seems to be having problems dealing with its aftermath.



Stephen Gordon's recent posts and Twitterfeed can be viewed here.



Economy Lab, winner of the 2011 Eppy Award for best business blog. Follow Economy Lab on twitter

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