Why Canada needs progressive reforms in employment insurance

Andrew Jackson

Special to The Globe and Mail

24 hours ago October 26, 2017

Andrew Jackson is adjunct research professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute.

Employment Insurance flies beneath the political radar much of the time, but remains an important and relevant part of the Canadian social safety net. Changes are needed to respond to new labour market realities, but the program should not, as some argue, be folded into a universal basic income.

EI consists of regular unemployment benefits; special benefits such as maternity, parental and sick leave; and employment benefits such as job-search assistance and training. In 2015-16, 1.9 million new claims were made, and total income benefits paid amounted to $17.7-billion.

Introduced more than 75 years ago in the aftermath of the Great Depression, EI is a social insurance program primarily designed to provide income security during periods of temporary unemployment owing to job loss, sickness or care of a new child. Benefits are mainly financed through employer and worker premiums. While the program is redistributive over all, coverage of employees is universal, and most workers benefit from it at some time in their working lives. The objective of income stabilization for individuals is at odds with most calls for a redistributive basic income based on family income.

The Liberal federal government made deep cuts to regular unemployment benefits in the mid-1990s, raising entrance requirements in terms of the number of hours worked to qualify, cutting the duration of benefits and freezing the maximum weekly benefit for more than a decade. Some $60-billion of surplus premiums were used to reduce the federal deficit as the proportion of the unemployed eligible to collect benefits fell to less than four in 10.

It is often argued that EI does not adequately respond to today’s reality of more precarious, insecure and low-paid work. This is true to a considerable degree, given the decline of full-time, permanent, stable jobs, but also misleading.

Involuntary unemployment is a risk facing many of today’s workers, and changing times underpin increasing economic insecurity for the middle class. Contrary to myth and misleading anecdotes about high unemployment regions in rural Canada, only 21.5 per cent of new claims for regular EI benefits are filed by so-called frequent claimants who have collected benefits more than three times over the previous five years. This is less than the 26.6 per cent of claimants who are “long tenure” workers who have made very little, if any, use of the program in the past. The remaining 51.9 per cent are occasional users.

The average claimant receives a weekly benefit of $446 for twenty weeks, a little short of the maximum weekly benefit of $543. This is a limited social safety net for a world of work in which job loss is likely to become an even more frequent occurrence, often leading to workers taking new jobs at much lower wages.

EI could and should be changed to provide greater income security to higher paid workers; for example, by raising the level of maximum insurable earnings from the current level of $51,300 and raising the replacement rate from today’s 55 per cent of insurable earnings up to the maximum.

For low paid and insecure workers, roughly the bottom one-third of the work force, EI provides at best only limited support and assistance during periods of unemployment. Most fail to qualify at all due to insufficient hours of work and other reasons. This also excludes them from maternity leave, sick leave and EI-funded training programs.