Employment Insurance and Displaced Older Workers

Since 2002, almost 250,000 manufacturing workers have lost their jobs because of the high dollar and our huge and growing trade deficit with developing Asian countries.  Many are older workers who will typically face a long stretch of unemployment, followed by employment in a new job at much lower wages.

Our Employment Insurance (EI) program still provides an important income bridge.  But displaced older workers deserve much better.

Older workers aged 55 and over have, on average, been with their employer for about fifteen years.  Those who are unlucky enough to be permanently laid-off typically face greater adjustment difficulties than other workers.

As a group, laid-off older workers are less likely to have up-to-date skills matching those demanded in new jobs, and are less able to move to new jobs.  They average twenty weeks of unemployment compared to an average of fifteen weeks for all workers.

And Statistics Canada research shows that, when displaced older workers find a new job, it is usually at much lower rates of pay.

A typical laid-off older worker in manufacturing who has been steadily employed with a single employer faces a wage cut of at least $5 per hour.  That’s the minimum gap between good industrial jobs paying more than $20 per hour plus benefits, and private service sector jobs in fast-growing sectors.  In March 2007, CIBC World Markets revealed that its Employment Quality Index has fallen to its lowest level since the early 1990s because the new jobs replacing lost industrial jobs have been mainly in low-paying sectors.

Employment Insurance income support for displaced older workers is much less “generous” than was the case a decade ago.  The maximum benefit is 30 percent less when adjusted for inflation, and almost 4 in 10 older workers exhaust their EI claim before finding new employment because of a reduced benefit period.

Older workers would benefit greatly from current CLC proposals to improve EI regular benefits for all workers.

We also need to introduce a program similar to the expired Program for Older Worker Adjustment (POWA) which used to provide income support for displaced older workers with limited realistic prospects for re-employment in the period of transition to public pension eligibility.

The CLC is also calling for an end to the EI rules which require workers to exhaust severance pay before collecting EI benefits.

Policy-makers like to talk about compensating workers who lose out from big structural changes in the economy which supposedly make society as a whole better-off.  But nothing beyond a short-term and meagre EI benefit is now being offered to the tens of thousands of older industrial workers being displaced by forces out of their control, namely the high dollar and rising manufactured imports from China and other Asian countries to North America.

Many workers have invested a significant period of their lives with their current employer, and will lose out even if they find a new job. Responsible employers recognize the need for reasonable compensation in the form of severance pay.

In his recent review of Part III of the Federal Labour Code, Professor Harry Arthurs endorsed the view that severance and termination pay represents compensation for economic losses.

However, the EI rules create a real disincentive to paying such compensation.  An employer may reasonably ask why the enterprise should pay severance beyond the legal or contractual minimum if it will result in little or no net benefit to the laid-off worker.

Similarly, provinces are discouraged from raising minimum severance pay requirements under employment standards if the benefit to the worker is largely recouped by the federal government’s EI program.

The federal government should undertake a thorough review of the adequacy of federal income support programs, specifically the EI program, in the current context of major displacement of industrial workers.

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