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The Mowat Centre and Employment Insurance

November 17, 2011

6-minute read

The Mowat Centre final report on Employment Insurance (EI) released today has won a fair bit of media attention, and will serve to deepen the national debate over Canada's most important income security program for working age adults and families.

The Task Force has commissioned and published a number of important research studies which improve our understanding of the way in which the current EI system works, and does not work. (I would particularly recommend Leah Vosko's study which analyzes how and why many precariously employed workers are excluded from the current EI system, and and the study by Day and Winer which thoroughly debunks the old canard that EI significantly impedes inter-regional labour mobility.)

The final report has been written from a generally progressive and well-intentioned perspective, based on concern about the many unemployed Canadians who fall through the cracks of the current EI system. That said, it is (intentionally) very vague, and could well be used by the federal Conservative government to justify some perverse changes.

The key recommendation is for a nationally standardized EI system, with a single national entrance requirement; a single national range of benefits in terms of duration; and a single national benefit level relative to prior earnings. It also calls for a new "Temporary Unemployment Benefit" outside of EI.

The CLC has long called for a single national entrance requirement of 360 hours , a bit below the 420 hour standard now in place in the very high unemployment regions and well below the 7oo hours required in very low unemployment regions.

The key rationale for a single entrance requirement is that an unemployed worker has lost a prior job through no fault of her/his own and needs and deserves income support while searching for a new job. One can debate 360 hours, but it is effectively the level in place prior to the deep cuts to EI in the early to mid 1990s.  While often seen as too low, it must be recalled that getting into the system with the minimum number of numbers qualifies a worker for as few as 14 weeks of benefits, and that benefits themselves are quite limited.

It is critically important whether we get a uniform national entrance requirement by leveling up or down compared to the current grid. The report entertains three possible levels of qualifying hours, but clearly tilts towards raising the requirement in the high unemployment regions.

Constant references are made to the unfairness of net EI transfers to Quebec and Atlantic Canada at the alleged expense of the other provinces in general and Ontario in particular. (It is not irrelevant that the Mowat Centre is based in Toronto and that its work is funded in significant part by the Government of Ontario.)

Unfortunately the report does not provide any new analytical understanding of why Ontario is relatively penalized by the current EI system. In point of fact, there are no “provinces” in the EI system, only regions within provinces. The proportion of unemployed workers collecting EI benefits in Ontario is indeed much lower than the already low national average, and this indeed makes the system very unfair. But the low Ontario average is due mainly to the very low proportion of unemployed workers collecting benefits in the Greater Toronto Area (about one in three last time I looked.) . This is probably caused by the combination of a high proportion of recent immigrants in the work force, and an especially high proportion of very precarious jobs.

The report does not demonstrate that low unemployment rate cities in Atlantic Canada (eg Halifax or St. John’s ) are relatively advantaged compared to cities with the same unemployment rate in Ontario or any other province, or that high unemployment cities in Ontario like Windsor are worse off than cities with the same unemployment rate in other regions.

The clear danger here is that the report will be used to roll back alleged EI “generosity” in high unemployment regions in the name of fairness, at the expense of workers in high unemployment regions across the country.

The report rightly calls for getting rid of the especially high entrance requirement of 910 hours for new entrants and re-entrants which excludes many recent immigrants, young workers and women returning to the work force after a parental leave.

The report calls for an unspecified national duration range which would reduce the current range of 14 weeks (the bottom of the range in low unemployment regions) to 50 weeks (in the very high unemployment regiona pilot projects.) The range would still be determined by hours worked. It further suggests, positively, that the duration range and thus maximum benefit periods, might be increased in times of recession (as with unemployment benefit extensions in the US.

Again, the key problem is the issue of whether a national standard means we are leveling up, or leveling down. The danger is that duration might be severely reduced in high unemployment regions, while perhaps being only slightly increased or not at all in low unemployment regions.

The report argues, quite rightly, that the unemployment rate at any point in time tells us very little about the job prospects of unemployed workers in a region, and that duration should be conditioned more by changes in the unemployment rate or other labour market indicators such as the number of job vacancies, as opposed to the level of the unemployment rate. In the recent recession, many workers in regions of low unemployment before the downturn were laid off and received only a few months of benefits due to the prior low unemployment rate, even though very few if any new jobs were available. However, no clear recommendations are made on how to deal with this important issue.

The report also argues with respect to the duration issues that there has been only limited correlation in the recession between the unemployment rate and the duration of unemployment. While true, it is probably the case that in “normal” times, the high unemployment regions experience both high levels of unemployment AND above average spells of unemployment. If true, they would be doubly hit by the proposed national standardized system

After noting that the current 55% replacement rate of insured earnings is very low compared to other countries, the report recommends no improvements and suggests again a single national standard. This could jeopardize rules which try to take into account specific patterns of seasonal work, especially in the higher unemployment regions.

A key recommendation of the report is for a new Temporary Unemployment Assistance program outside EI, loosely based on proposals from the Caledon Institute.

The argument – which has merit – is that reducing the entrance requirement alone will not benefit many precariously employed workers – especially women, temporary workers and the self-employed – now excluded from the EI system. Even those who would get in from a reduction of the entrance requirement would typically get very limited benefits for short periods.

They propose that unemployed workers not eligible for EI be able to draw upon an income support benefit as and when needed – something amounting to less than $300 per week which could be collected for a short period with a limit on aggregate use (eg a maximum of 6 months every 5 years.) The benefit would be paid back from future earnings though the income tax system, and work income would be needed to requalify for future benefits.

Unlike EI, this new benefit would not be based on social insurance principles in which premiums paid convey a right to benefits.

The danger is that this benefit – which would be low in dollar terms and with a very low cap on use -  might replace EI for many workers excluded from a "reformed" system by an upward harmonization of entrance and duration levels in a single national system.

The report did not examine ways of bringing precarious workers into the EI system, and indeed proposes phasing out the fishers benefit which represents one novel expansion of the system. Leah Vosko's study proposed to explore ways to cover the many workers who combine paid employment with periods of solo self-employment.

The report proposes an experiment with wage insurance for older displaced workers (ie a wage top up to encourage such unemployed workers to take a lower paid job rather than collect benefits). The danger here is that this would further reduce wages in the low wage job market, and that young workers might be pushed out of jobs.

The report proposes expanding the role of the Canada – EI Financing Board so that they would be responsible for approval of pilot projects and program evaluation as well as service standards. They do call for labour and employer representation on the CEIFB, but there is a danger that the design and actual administration of the EI program could be devolved from a democratically accountable government department.

The report proposes taking active labour market programs including training out of EI, and replacing them with a single transfer payment to the provinces for such programs paid for from general government revenues.

While there are merits in reducing barriers to access to training on the part of non EI-eligible workers, this approach is light on details concerning accountability and standards; would reduce federal transfers to provinces with relatively high EI caseloads; and would undercut the use of EI revenues to fund programs which reduce EI expenditures.



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