Dennis Darby is the President and CEO of Canadian Manufacturers & Exporters.
The hottest file on the federal government’s plate right now is reform of Canada’s Employment Insurance (EI) system – and it’s barely registering among employers, employees and Canadians.
But here’s the thing: it should.
On the surface, the goals of the reform are straightforward. The government wants to improve the system, increase the generosity of EI payouts, expand secondary benefits such as training, extend benefits to previously unserved groups, such as gig workers, and ensure the system is financially stable.
Here’s the catch. Expanding the EI program to deliver more generous benefits than the system currently does will cost money – a lot of money. And the federal government will not be picking up the extra cost because EI is entirely funded by the contributions of employers and employees.
The consequence of this is that workers and businesses are now being asked to contribute even more to the EI system all at a time when they face many, many economic headwinds.
Our view on EI reforms is clear. Canada’s EI system should remain a simple insurance regime funded by the contributions of employers and employees. The system must encourage people to work and support them while they are looking for work. That was how the program was designed, and more importantly, how funding of the program was originally structured. And that is why every other program that has been tacked on to the EI system ever since should be moved out, delivered and paid for by the federal government.
The main reason why the system should not be continuously expanded beyond the original scope is that the costs to businesses and workers are not sustainable.
As part of Canadian Manufacturers & Exporters’ submission to the consultation, which was undertaken by Employment and Social Development Canada and just closed, we calculated the cost of the scenarios being floated by the government.
The scenarios include everything from removing the freeze on EI premium rates to lowering the minimum hours required to qualify for EI. In each case, the proposed changes for an averaged sized business of 34 employees ranged from additional costs of $6,000 to $11,000 in employer premiums per year. For small and medium enterprises, a payroll cost increase of this magnitude hurts already strained bottom lines. And that’s not mentioning the increased premiums workers will have to pay – between $100 and $250 more every year.
There are approximately 90,000 manufacturing companies in Canada today. So industry wide, these proposals could cost the manufacturing industry upward of $500-million in additional EI payments each year.
Given the challenges manufacturers are facing with supply chain disruptions, labour shortages, rising inflation and geopolitical uncertainty, do we really need to add half a billion dollars in new payroll taxes to the mix?
To compound the issue, the EI system incurred significant debts delivering extraordinary relief benefits to workers on behalf of the federal government during the pandemic.
At the time, the government assured employers and employees it would pay for those overruns, as it has in the past and most recently in the 2008 recession. Fast forward to today and the government is reneging on this promise and plans to burden companies and workers with those costs through higher EI premiums. The dinner bill just got put on the table and now the government has alligator arms.
So, Canadian manufacturers, businesses, and workers are facing a double whammy – paying the costs incurred during the pandemic, and higher contribution rates to cover more generous EI benefits. This is another tax on workers and business.
I want to state clearly that manufacturers and employers do not object to any of the social policy aims the government is proposing. We support strengthening the social safety nets of our country, as it only leads to more resilient and robust workforces.
But, worthy programs, such as parental leave, caregiver benefits, and training, shouldn’t fall squarely on the shoulders of the EI system. The government must play a role and fund these initiatives through its general revenues.
The EI reform discussion should not be a continuous slide down the slippery slope of expanding the program to fix all problems. Such mission creep will overload employers and employees, who are the only contributors into the system, with a financial burden they cannot afford. Given today’s economic challenges, the timing of these hidden payroll taxes could not be worse.
We must stop this now before it is too late.
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