How should employment insurance be reformed?
In recent decades, the Canadian labour force has undergone a dramatic transition. Globalization, the regional resource boom, the influx of new immigrants to big cities and the growth of part-time work have all brought about significant changes to the Canadian labour force – and to the nature of work itself. Given that recent economic turmoil has further complicated the picture, policy-makers should now be taking a close look at whether the country’s employment insurance (EI) system has kept pace, according to a report by the Mowat Centre at the School of Public Policy and Governance. Indeed, the question is whether EI benefits are still doing what they should to support the unemployed as they seek new work, and whether these benefits are making a contribution to the Canadian economy.
Matthew Mendelsohn, the director of the Mowat Centre, notes that when the federal government introduced the current version of EI, in the early 1970s, it was responding to an economy built around a stable manufacturing sector and traditional households with a single breadwinner.
The system was also geared to accommodate the seasonal patterns of rural economies, such as the coastal fishing communities in Atlantic Canada. The result: the qualifying periods for city-dwellers tend to be far longer than for those who live in rural areas. “It was a way for the federal government to funnel money from Ontario to Atlantic Canada and Manitoba as well,” says Mendelsohn.
In the intervening decades, the world turned but the EI system did not keep up. As Mendelsohn points out, the oil and gas economy has buoyed Alberta and Newfoundland. Parts of Ontario, due to global shifts in manufacturing, are looking at structural unemployment that didn’t exist between the 1970s and the 1990s. And the ranks of the unemployed now include recent immigrants who live in cities but have difficulty qualifying for benefits because they lack Canadian work experience and struggle along with two or three part-time positions. There are more self-employed individuals who don’t pay into the system. And a greater number of older workers are losing their jobs, even though they are not economically prepared to retire, while others are seeing their skills become obsolete.
In November, the Mowat Centre released a detailed assessment of Canada’s EI system, with recommendations to make it fairer, more straightforward and more reflective of the 21st-century labour market. The report says that Canada’s EI system has become increasingly unwieldy because it encompasses not just unemployment insurance but also retraining and parental-leave policies. In a bid to direct greater benefits to so-called “have-not” provinces, it links eligibility for EI to local unemployment rates.
This last point makes Canada an international anomaly. Research by PhD candidate Vuk Radmilovic found that Canada is the only one of 17 developed nations to use an individual’s address and regional unemployment rates to determine the level of benefits they receive if they lose their job. Most other countries calculate benefits using metrics such as age, employment duration and family structure.
Mendelsohn observes that Ottawa could look to another pillar of Canada’s social safety net – income support programs for seniors, including the Canada Pension Plan – for clues about how to make EI more equitable to individuals, especially to new Canadians living in big cities and those who subsist on multiple part-time jobs.
He feels that Canadians have become less preoccupied with regional identity in recent decades, and thus would be more receptive to reforms that focus on responding to individuals’ circumstances. “Our recommendations are not driven by a naive belief that we are going to develop from scratch the perfect EI system,” Mendelsohn says. “But it would be good, as much as possible, to focus EI on what it’s supposed to do.”