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(Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail)
(Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail)

Economy Lab

Is EI impeding growth in Atlantic Canada? Add to ...

According to the federal government, the Employment Insurance (EI) program is meant to provide “temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills”.

In reality, the EI system has become a large scale income support program for hundreds of thousands of people across the country.

According to Statistics Canada, in 2009 across the country there were 16 persons reporting EI income for every 100 reporting employment income. In New Brunswick, the ratio was over 26 per 100, on Prince Edward Island 31 per 100 and in Newfoundland and Labrador the ratio was close to 30 per 100.

At the low end, in Saskatchewan there were only 10.8 persons reporting EI income per 100 reporting employment income.

The use of the EI program as an annual income supplement is much greater in rural Canada, and in particular rural Quebec and Atlantic Canada. In New Brunswick, excluding Moncton and Saint John, the ratio was 32 people claiming EI income per 100 with employment income and in Newfoundland and Labrador it was 48 per 100. In Quebec, excluding Montreal, Quebec City and Gatineau, the rate was 27 per 100.

The dollar amounts are significant. In Newfoundland and Labrador, nearly $843-million was paid out in EI income in 2009. In Nova Scotia, the amount was $637-million and it New Brunswick it was $696-million. It is important to point out that only a part of this EI income went to persons in seasonal employment. Some of it was was paid out to those who were laid off and were looking for a new job.

For more statistics on EI usage in Canada, visit my blog: It’s the Economy, Stupid.

There are growing signs that the EI program is becoming a real constraint to economic growth in rural Atlantic Canada. Employers are increasingly forced to conform to the reality of an entrenched seasonal work force by converting year round jobs to seasonal ones. I have talked with multiple employers in rural and small town Atlantic Canada who must bring in immigrants because they cannot find local workers who will work year round even with local unemployment rates of 15 per cent and higher.

The routine of working part of the year and collecting EI for the duration has become a dominant labour force characteristic in many communities and this has broader implications for the economy as a whole. In a small province like New Brunswick or Nova Scotia having tens of thousands of people working for only part of the year is a drain on overall economic output and, ultimately, on tax revenues to government.

The concept of employment insurance is sound, but I am concerned when there are signs a program designed to help communities cope with high unemployment might actually be impeding business investment and job creation.

The rural Atlantic Canada economy has been struggling for years and no one should advocate for the end of EI. Reverting to a pure unemployment insurance system would cause severe economic hardship in hundreds of communities and undoubtedly lead to serious social unrest.

However, ignoring the problem won’t make it go away. If indeed EI is a barrier to economic development, the program needs an overhaul.

David Campbell is an economic development consultant and columnist based in Moncton, New Brunswick. He also authors a daily blog on economic issues in Atlantic Canada which can be found at www.davidwcampbell.com.

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