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Workers, employers face EI premium hikes: report Add to ...

Canadian workers could see their employment insurance premiums rise by $632 over four years while employers may face even bigger hikes if the government is to meet its economic update targets, according to economic forecaster Dale Orr Economic Insight.

The analysis, released Tuesday, estimates that Finance Minister Jim Flaherty's revenue projections on the EI account builds in a sizable employment tax hike for both workers and employers of about $15.5-billion by the 2014-15 timetable laid out in last month's update.

When it issued the update, Ottawa said it could return to balancing the budget after the 2014-15 fiscal year without raising taxes, but did acknowledged it will likely entail increases in employment insurance premiums to balance the account over time.

The new analysis puts a firm figure on just what it will take to do so.

Economist Dale Orr says premiums must rise from the current $1.73 per $100 of earnings - which will be frozen for another year- to $2.33 over the next five years.

That will result in an accumulated extra payment of $632 for every worker earning more than the bottom threshold of $42,300.

As well, employers will need to fork over about $884 per worker during the period.

"The government may not call it a tax, but if it quacks like a duck, it's a duck," Mr. Orr said in an interview.

The economist added that employment taxes are among the worst a government can levy because it discourages employers from hiring by making employees more expensive.

Mr. Orr, who usually does not make recommendations in his report cards on government fiscal policies, made an exception in this case, saying Ottawa would do better to increase the GST by one percentage point for two years to make up the difference.

He said if Ottawa were to do neither - raise premiums or the GST - it would set the date for balancing the budget back by about two years, to 2017-18.

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