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Human Resources Minister Diane Finley announces changes to Employment Insurance in Ottawa, May 24, 2012.

Adrian Wyld

Economists and consultants welcomed changes in Employment Insurance eligibility as a needed reform that could open up a new vein of talent for small businesses.

The requirements announced by Human Resources and Skills Development Minister Diane Finley to take effect next year require benefit recipients to look further afield and be willing to accept lower wages to get back in the job market.

"We believe the changes to defining suitable employment, based on how frequently EI is claimed, will help to remove disincentives to work and hopefully make it easier for small firms to find the people they need," said Catherine Swift, president of the Canadian Federation of Independent Business.

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The requirements could also mean small businesses will benefit from more access to talent laid off from big employers who may not have applied to small- or medium-sized businesses before, Ms. Swift said. In the first quarter of the year, the CFIB found 46 per cent of its members were having trouble find employees with the skills they needed.

Because of that, about 4 per cent have brought in foreign workers on a temporary basis. There is so much cost, aggravation and paper work involved with the foreign worker program, "they only did it as a last resort, and they wouldn't if they were able to hire someone who was local," she said.

Under the current system, 22 per cent of small-business owners said they've had potential hires who turn down job offers saying they would rather stay on EI benefits. Another 16 per cent said they had an employee ask to be laid off to be able to collect benefits, she said. "Employers agree that EI should be there for those who lose a job through no fault of their own, but do not accept that the system should be used as some form of paid vacation or ongoing lifestyle for those who choose not to work."

The change may only be part of the solution but it will help solve a chronic shortage of skilled labour in Canada, said Benjamin Tal, deputy chief economist at CIBC.

"In Canada is we have 200,000 job vacancies that are going unfilled. That's not because we don't have skilled workers, but they are unwilling to move to where the jobs are," particularly in mining and oil and gas, he said.

"I think the ability of workers to go on EI was part of the reason for that," he said. "This change will give people more incentive to move to get the job they are after. A more mobile labour market is a more efficient labour market."

However, the new EI policy's requirement that people who have been unemployed for a long period take "any work"– even if in some cases that requires taking up to a 30 per cent pay cut – could backfire, said Karen Fischer, a partner with small business consultancy RK Fischer & Associates, in Uxbridge, Ont.

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"The problem is that a lot of small employers are not willing to hire people who will take a pay cut of 20 per cent of their income and a lesser title, because there's a risk the hire is just taking a job until another that pays more comes along," she said. That's a particular concern in a small business, where staff turnover can be highly disruptive and costly.

The new EI rule may actually increase that risk because it could make people feel they were coerced to move to get a job they hadn't considered taking, she suggested.

At the same time, the added nudge to get back to work could be an eye opener for people frustrated in their job hunts, Ms. Fischer suggested.

"I don't think small business are perceived as an option by people who have had a job with a big employer. They don't realize the majority of employers in Canada are small businesses."

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