Posted: Friday, 19 August 2011

The federal government has launched consultations on the setting of Employment Insurance premiums.

Currently, EI premium rates are rising to pay for the deficit of over $10 Billion in the “new” Employment Insurance fund which was accumulated during the recession, even though there was a $57 Billion surplus in the “old” Employment Insurance fund which was wound up in 2008.

The CLC has prepared a background paper which argues that the government should pay for the extra costs of the EI program during recessions, that the EI Account should be managed at arms-length from the government, and that any surpluses in the EI Fund should be used only to fund the EI program.

A Canadian Labour Congress Perspective on Financing the Employment Insurance Program

Introduction: The Importance of Employment Insurance

Employment Insurance (EI) is a critically important program for Canadian workers, paying out some $21 billion in benefits in both 2009 and 2010. About two thirds of EI expenditure is on regular benefits which provides temporary income support for involuntarily unemployed workers to allow them to search for a new job. EI also funds special benefits — maternity/parental/adoption leave, and compassionate care and sick leave. It also provides a range of Employment Benefits and Support Measures which provide training and other adjustment programs to qualified unemployed workers.

EI helped modestly cushion the impacts of the recent recession on the many workers who lost their jobs due to the recent global economic crisis. The total amount of regular benefits paid out increased significantly as unemployment increased, and Canada’s Economic Action Plan temporarily extended regular EI benefits, increased access to work-sharing, and provided extended EI benefits for training. However, the program excluded many unemployed workers, and the current system of EI financing undermines its ability to stabilize the economy. Premiums do not fall in times of recession and are now increasing despite a weak economic recovery and continuing high unemployment.

Regular benefits are important even in non recession periods of relatively low unemployment since, at any given time, there is change and flux in the job market which leads to involuntary layoffs. In the pre-recession year of 2006-07, over 1.3 million new regular claims were filed, and benefits were collected by recipients for an average of 18.6 weeks.
The Canadian Labour Congress has long been critical of cuts to regular EI benefits in the 1980s and early to mid-1990s which have made it difficult for many unemployed workers to access benefits, have reduced benefit duration (especially for workers with relatively low qualifying hours of work in regions with relatively low rates of unemployment), and have reduced benefits as a proportion of insured earnings.

The current EI system provides no, or very time-limited and low, benefits to many unemployed part-time and temporary workers, especially women, young workers, and recent immigrants. The shift from a weeks‑based to an hours‑based system has meant that only one half of part-time workers would qualify for benefits if they were to be laid off. And only one half of all unemployed workers collected benefits during the recent recession, including when the national unemployment rate reached a peak of 8.6%. About one third of unemployed workers who do qualify for benefits — and even more in the recent recession — exhaust benefits before they can find a new job. Benefit periods can be as low as 12 weeks for those who just qualify in regions of relatively low unemployment and reach a maximum of 50 weeks only for workers with high qualifying hours in regions with very high rates of unemployment. The average weekly benefit ($364 in 2008-09) is modest and the maximum benefit is just 55% of average weekly earnings.

This submission speaks to the issue of financing of EI benefits, rather than to the broader issue of EI reform. In our view, workers should gain access to regular benefits based on a uniform national entrance requirement of 360 hours of work; benefit duration should be extended, especially in times of high unemployment; and benefits should be based on 60% of insured earnings based on the average of the previous 12 weeks of work. Access to training benefits should also be expanded. Such changes would not be costly in a low unemployment economy.  Download the rest of the document in PDF format.