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The Progressive Economics Forum

Re-defining (Un)Employment Insurance

Several key changes to Employment Insurance came into effect on Sunday.  The EI program is about to get Grinch-ier, especially for who happen to have needed it more than once.

What Changed

Some of the changes made are reasonable, some are technical, and some are misguided.  Together, these changes go some way toward redefining what employment insurance is all about, and changing how Canadians think about employment insurance.

Here is a run down of changes that came into effect on Sunday:

  1. The creation of three categories of EI users – frequent, occasional, and long-tenured.  The definition of suitable employment that applies to an individual claimant will vary depending on their category and the length that they have been on claim.  HRSDC & Minister Finley assert that this confusing and clunky categorization will in no way increase errors or appeals (I, myself, am sceptical).
  2. The definition of reasonable job search.  Mostly clarification, and mostly reasonable.
  3. The definition of suitable employment. Focused on a quick return to work, and emphasizing that no one will be financially worse off working than they were while they were on claim.  Forces claimants to accept wages between 70% and 90% of their previous earnings.  Good news: Higher travel or childcare costs will be taken into account when determining if someone is better off in a given job situation.  Bad news: This is an incredibly short sighted view of ‘better off’.  The purpose of EI is to allow for better job market matches, not faster job market matches.
  4. Job alerts system.  Sends targeted emails to claimants based on Postal Code.  A good idea, but it falls into “it’s the least you could do” category.  Only works for those with access to the internet.
EI Myths & Facts
Discussion of these changes invariably bumps into one or more common EI myths.  In fact, getting support for these changes requires voters to buy into the following myths.
  1. Myth: Employment Insurance is taxpayer funded.  It is paid for entirely by employers and employees.  The government stole $56 billion, but they don’t pay back into it.  So there are no savings to government coffers from changes to EI.  To qualify for EI, you have to have paid into it.
  2. Myth: Employment Insurance prevents people from leaving Atlantic Canada. Anyone who thinks this has never been on a flight from St. John’s or Halifax heading west.  Since 2008, over 7,000 (net) Canadians left the Maritimes for other Canadian provinces.  During the same time period, over 55,000 (net) Canadians moved to Saskatchewan and Alberta from another province. (CANSIM 051-0018)  This doesn’t include those who commute incredibly long distances to get work in the oil patch.
  3. Myth: Seasonal workers are lazy fishermen.  Many seasonal workers are highly skilled, and some of these skills even transfer between seasons (think heavy machinery drivers that plow snow in the winter, and dig basements in the summer).  But the fact that their employment is seasonal makes it more precarious, and more likely that on any given change of season there simply won’t be enough work to go around.
  4. Myth: Claimants will always be better off working under these changes.  This is more the official line than a myth, but it’s wrong nonetheless.  As I already noted, the purpose of EI is to allow for better job market matches, not faster job market matches.  A parent who is eight weeks into their claim, and is presented with an evening job at 80% of their previous wage would be better off continuing to look for a job that paid higher wages and allowed them time with their child in the evenings.
There are some other EI Facts, that help make sense of why these changes are misguided.
  1. Fact: EI is not terribly generous in the first place.  Claimants receive up to 55% of their average weekly income, up to a maximum of $485 / week. The average payment is around $370 / week.
  2. Fact: There are over 5 unemployed Canadians for every job vacancy in Canada. News reports of labour shortages are grossly exaggerated.   Where they do exist, the solution is often more spots for training and apprentices, and maybe (gasp) higher wages.
  3. Fact: Most jobs created since the recession have been temporary. A rise in precarious employment will mean a rise in the number of unemployed without access to Employment Insurance, even without these changes.  These changes will increase the tendency toward precarious employment, as people are encouraged to take ‘bad jobs’.
What the Changes Mean

The previous definition of ‘suitable employment’ in the Employment Insurance Act had the clear intent of ensuring that  unemployed workers did not unduly impact wages and working conditions for the broader labour market.  The system was set up to ensure that claimants had time to assess their labour market situation, determine if they needed to switch fields, get training, or move.

The new hurry-up approach to EI will act to lower wages, lower productivity, and threaten seasonal businesses.

Combined with other changes announced in the last budget, such as the consolidation of EI, CPP, and OAS appeals into one Social Security Tribunal, these new regulations are depressing start to the New Year for unemployed workers.  At least the Grinch eventually had a change of heart.

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