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Canada's unemployment insurance system was created in response to the misery caused by massive job losses during the Great Depression. But it didn't actually come into existence until the Depression was over and few people were out of work.

Prime Minister R.B. Bennett tried to introduce a scheme of payments to the jobless in 1935, but it foundered when challenged on constitutional grounds.

Mackenzie King, who had opposed Bennett's plan, then created his own in 1940, and managed to get a constitutional amendment to allow the federal government to do it unilaterally, without provincial involvement.

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Ottawa was anticipating a postwar recession - and thus expecting a considerable number of unemployed, especially among returning servicemen - but that didn't happen. In fact, the postwar boom meant that very few people needed UI, and the premiums piled up into a considerable surplus.

It was not until the late 1950s that unemployment levels rose significantly. In that decade, benefits were added for seasonal workers in agriculture, forestry and the fishery.

There were big changes in the early 1970s under the government of Pierre Trudeau, when UI was made easier to get, covered more workers and benefits were increased. That expansion coincided with the blossoming of the view that UI benefits, in addition to helping those who needed it most, would also provide a significant stimulus to the economy during downturns by boosting spending.

"Under Keynesian thinking, that would help stabilize the depth of any recession, counter it, and generate more employment more quickly," said James Struthers, a professor of Canadian studies at Trent University in Peterborough, Ont.

But the generosity of UI benefits, and the ease in getting them, generated a backlash. Everyone heard anecdotes of abuse - UI recipients jetting off to ski in British Columbia - and some economists thought there was now an incentive to stay off work.

Under the governments of Brian Mulroney and Jean Chrétien, UI benefits were pared back, and the focus shifted to retraining.

In 1996, the Liberal government renamed the program Employment Insurance (EI) to emphasize the goal of keeping as many people as possible in the work force.

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But the changes also forced employees to work longer to qualify, gave them fewer benefits and linked the level of those benefits to regional unemployment rates.

Consequently, "the percentage of people who were actually unemployed who were able to collect unemployment insurance dropped from over 80 per cent in 1989 to less than 40 per cent by the 1998 era," Prof. Struthers said. During the same period, the EI fund went from a deficit position to a $25-billion surplus, and it kept growing. That money was used to reduce the overall federal deficit.

It's perverse, Prof. Struthers said, that the fund ended up using workers' premiums to boost federal revenues, rather than helping people "who find themselves out of work through no fault of their own."

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