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The case for progressive employment insurance reform


Employment Insurance or EI 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 over seventy-five 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 due to job loss, sickness or care for a new child. Benefits are mainly financed through employer and worker premiums.

While the program is re-distributive overall, 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 re-distributive basic income based on family income.

The Liberal federal government made deep cuts to EI regular unemployment benefits in the mid 1990s, raising entrance requirements in terms of the number of hours worked to qualify for benefits, cutting the duration of benefits, and freezing the maximum weekly benefit for over 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 ten.

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 growing economic insecurity for the middle-class. Contrary to myth and misleading anecdotes about high unemployment regions in rural Canada, only 21.5% of new claims for regular EI benefits are filed by so-called frequent claimants who have collected benefits more than three times over the past five years. This is less than the 26.6% 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% 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 a new job at a much lower wage.

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% 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.

The current entry threshold in a region with a 6% unemployment rate is 700 hours in the past year, which shuts out many part-time and seasonal workers. Others rules exclude the many dependent contractors who are wrongly deemed to be self-employed, many workers who have quit a previous job with just cause; and those whose employers fail to provide a record of unemployment. Even if low income workers do qualify, a benefit of 55% of previous low earnings is not enough to live on.

The Trudeau government recently made it easier for many precariously employed young people, women and recent immigrants to access the EI system by eliminating the 900 hours threshold for new entrants and re-entrants. But there is a need for much closer consultation with labour, employers and community based organizations on the wider reforms needed to make the program more inclusive for those who need the most support.

The Mowat Institute, the Atkinson Foundation and the Broadbent Institute recently convened a roundtable discussion on EI engaging employers, labour, community organizations and activists and academic experts.  While no consensus was reached, there was broad agreement that the federal government should much more closely involve stakeholders in discussions of EI reform.

As detailed in a paper for the Mowat Institute by Donna Wood, UI began as a program run by a tripartite employer, labour, federal government Commission. If EI is to be made more relevant to a changing job market, this tradition of close involvement of the social partners should be renewed.


Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute