Exhausting EI

The following is an extract from the CLC publication “Recession Watch” available at
http://www.canadianlabour.ca/sites/default/files/Recession-Watch-03-Fall-2009-EN.html

Before the recession, more than one in four (27.9%) of claimants exhausted their benefits (29.9% of women and 26.5% of men) and more than one in three (34.3%) older workers exhausted their benefits. Currently, claimants are eligible for between 19 weeks and 50 weeks of benefits depending upon how many hours of work they put in in the 52-week qualifying period before a claim and the regional rate of unemployment. (This includes the temporary five weeks of benefits added to the system in all regions in the 2009 Budget.) In an “average” region with an unemployment rate of 8% to 9% ― the same as the average national rate ― eligibility ranges from 23 to 47 weeks depending upon the number of hours worked in the previous year. More than 1,820 hours or essentially a history of working in a full-time, permanent job are required to get the maximum 47 weeks of benefits. (The 50-week maximum only applies in regions with an unemployment rate above 12%.)

It can be estimated that a new EI claimant today will, on average, qualify for about 38 weeks or nine months of benefits. That is the average of 31 weeks before the recession (2006-07), plus the extra five weeks added in the last Budget, plus the extra two weeks generated on average by a two-percentage-point rise in the national unemployment rate.

We can expect that the total number of new regular claims in 2009 will hit about two million. If the exhaustion rate were to remain the same as in 2006-07, we could eventually see some 500,000-plus exhausted claims in late 2009 and into 2010. It is open to question if the exhaustion rate will remain the same as before the recession. On the one hand, a higher unemployment rate automatically triggers somewhat longer benefit periods, and five weeks have been temporarily added for two years. About 400,000 workers were expected by HRSDC to qualify for the extra five weeks in 2009-10. On the other hand, it will be far harder than in 2006-07 for those on claim to find a new job before their eligibility period comes to an end.

At this point in the recession, jobs are still very hard to find. Between the start of the recession and September 2009, the average duration of a spell of unemployment has risen from 13.6 to 17.0 weeks, and more than one in five unemployed workers in September had been out of work for more than six months, clearly placing those on EI at risk of running out in the very near future if, in fact, they have not already exhausted.

While no direct data are available on the number of exhaustees, the number of EI regular beneficiaries appears to have peaked by the summer of 2009, even though the number of unemployed workers has continued to rise.  And the gap between the number of unemployed workers and the number of regular EI beneficiaries has greatly increased in communities which were hit hard in the early stages of the recession, such as Windsor.

In response to the reality of many unemployed workers exhausting their benefits, the Conservative government legislated in November to further extend EI benefits by five to 20 extra weeks of benefits on a temporary basis, but only for a small subgroup of claimants. The government estimates that 190,000 workers, so-called “long tenure” workers, will qualify over the short life of the program at a cost of just under $1 billion. The payments will be made over the final months of 2009, 2010, and until the fall of 2011. A “guesstimate” is that only about one in five potential exhaustees will qualify for this additional extension. (If there are three million claims in 2009 and the first half of 2010, and the exhaustion rate is 30%, close to one million claims will be exhausted.)

To be eligible for the second round of extended benefits, a worker must have initiated a claim after January 4, 2009, thus excluding the many workers who lost their jobs in late 2008. Eligibility for the extended benefit will be rapidly phased out between June and September of 2010. To qualify, a worker must also have been paying into the system (defined as paying at least 30% of the maximum premium) for at least seven of the past ten years. The maximum additional 20 weeks goes to those who have been paying in even longer, for at least 12 of the past 15 years. Finally, to qualify, a worker must have claimed no more than 35 weeks of regular EI benefits over the last five years. This temporarily re-introduces an element of experience-rating into the EI system.

The target group was, very explicitly, older workers who have made very limited use of the EI system in the past ― meaning younger workers, many women, workers in high unemployment regions, workers in seasonal industries, and many industrial workers will not qualify. The 35-week cutoff will exclude many industrial workers who have been temporarily laid off to reduce inventories, to allow for retooling of plants and other normal workforce fluctuations in operations. It will also exclude many claimants in provinces which experienced relatively high unemployment rates over the past five years ― notably Atlantic Canada, Quebec, and rural and northern regions in other provinces ― as well as the many workers impacted by the manufacturing and forest industry jobs crisis which began well before the Great Recession.

The 35-week cutoff makes an invidious and unsupported distinction between the “deserving” and the “undeserving” unemployed based on previous use of the system, ignoring the fact that any EI claim has to be based on an employer layoff as opposed to any choice exercised by a worker. (Workers who quit or are fired from a job are ineligible under the rules which have been in place for the past decade.)

The CLC has long called for an EI program with a single national entrance requirement of 360 hours, and eligibility for up to 50 weeks of benefits based on 60% of the best 12 weeks of earnings in the qualifying period. As detailed in a recent CCPA report by Lars Osberg, “Canada’s Declining Social Safety Net: The Case for EI Reform,” our EI program is one of the least generous in the high income countries and excludes many unemployed workers from benefits completely. The “stress testing” of the current system has shown that current entrance requirements continue to exclude many workers, and average benefits remain very low.

A major challenge facing Canadians is the prospect of very large numbers of unemployed workers exhausting their EI benefits today and over the coming months. Many will, after using up their financial assets, be forced to turn to provincial social assistance programs. In the United States, the federal government has ― as is usually the case in periods of very high unemployment ― temporarily extended benefits by up to 33 weeks in states with very high unemployment rates.

Extending benefits would result in higher EI benefit costs until such time as high unemployment rates begin to decline. However, these benefits are a highly effective form of temporary economic stimulus, flowing directly to the principal victims of the recession and to especially hard-hit communities. The huge surplus accumulated in the EI Account before the recession can and should be drawn upon if it is needed.

10 comments

  • rentier fungicide

    Would one be right in supposing that Canada’s labour force growth in November, and the concomitant rise in part-time (mostly service sector) employment detailed in an earlier post (More Jobs, Limited Paycheques), actually is the result of EI exhaustion?

  • If you’ll recall, the EI surplus was magically disappeared early on in Harper’s reign.

    With regards to benefits, well, if you are able to work 12 out of the last 15 then you’re a good worker bee, healthy, probably white collar or upper blue-collar, with a well-defined career path and, likely, a university education. However, if you’ve been working wage-labour in seasonal industries or high-turnover service industries – or undertaking childcare, or been underemployed or working part-time – you’re screwed. As usual.

    Worse: as it stands now, if you’re working at a place like WalMart and don’t get enough hours, you’ll never get laid off – just not “called in” – and have no possibility of getting EI benefits. The longer it goes on, in fact, the less you qualify for. You can’t quit, because the you really won’t qualify.

    My father-in-law used to be an employment counsellor (back in the ’70s) and would recommend, if you were in a crappy job and couldn’t pay the bills, quitting and going on EI to qualify for the job retraining opportunities. A lot of his clients (granted, this is purely anecdotal) were able to better their lot and land decent, permanent positions.

    The government isn’t interested in helping people, it’s interested in looking like it’s helping people – minimally, at least.

  • Rentier, that is totally plausible. Not sure if we could actually prove it but if my memory serves me right there is a question on employment history within the current LFS questionnaire that one could examine.

    One would query this huge growth in part-timers on the history, I just cannot recall if it was the LFS employment history or WES that covers the EI origin prior to labour force engagement.

    Also wanted to note that there is talk that parliament may be prorogued, and if it does, we could lose the EI enhancements that the NDP helped put in place.

    That my friends would be a tragedy and all because Harper wants to wind down the public furor on the role of his party in torturing Afghan detainees. THat just to me is mind bogglingly dictatorially obtuse of civilized.

    Uhhhhhhh. that is so sad.

  • Good post Andrew.
    A small comment re the housing market. Here is a quote from Mark Carney, Governor of the bank of Canada at his appearance before the senate committee on banking, trade and commerce on October 28, 2009, indicating that the best way to rein in the housing market at present, if required, is through regulation.

    “The housing market is subject to considerable regulation and policy influence. The institutions that supply the credit are regulated; mortgage insurance is regulated, and we are in open dialogue with those regulators.

    If it were appropriate — and I am not saying it is at this stage, the first line of defence should be adjustment to those prudential regulations and standards in conduct to have sustainable housing finance in this country. I have every reason to expect that that will continue to be the case. Speaking hypothetically, that would be the way to approach it.“

  • “Also wanted to note that there is talk that parliament may be prorogued, and if it does, we could lose the EI enhancements that the NDP helped put in place.”

    Bill C-50 received Royal Assent Nov 5th, so it is a done deal.

    That means the deal for NDP support has long expired. It’s been surprising that no one has mentioned that the government has been running without any commitment for support in the House such a long time.

  • It needs to be senate approved still, at least that was a report I read today- which if parliament gets put on hold means the senate will not have passed the final bill.

    (trust me I am no parliamentary expert, nor would I want to be, but somebody mentioned that to me today)

  • rentier fungicide

    Paul Tulloch — thanks for those leads; with my meager capacities, I will look into it. I think that Service Canada’s In-person Operations Directorate might also have some useful EI termination data in their data “cubes”.

  • Rentier- no problem, in fact I will try in the next couple of days to verify what I said above.

    (I know for sure the workplace and employee survey (WES) had it in there, I designed a good chunk of the survey! LFS not so sure, WES is only an annual though so that would not be of any help)

    Let me know if you find anything with the EI termination data- not too familiar with that data source. There is also the record of employment file, (ROE) but it only measures when someone leaves a job.

    However at the higher end I do believe concluding that the increase in part-time work is due to EI exhaustion should be quite acceptable at the qualitative end of the explanation.

    I guess though if you want to push this dimension of change then the quantitative would be handy to have and hopefully not that far off in terms of accessibility and measurement.

  • “It needs to be senate approved still, at least that was a report I read today- which if parliament gets put on hold means the senate will not have passed the final bill.”

    Maybe they where talking about the EI bill for the self-employed, C-56 which was given Royal Assent yesterday.

  • @Paul Tulloch “Also wanted to note that there is talk that parliament may be prorogued, and if it does, we could lose the EI enhancements that the NDP helped put in place.”

    Prorogue again ?
    Wow! the audacity of hypocrisy!

    This sitting government which was ready to table a “back to work” legislation for the CN rail worker’s impeding strike on Monday 30th Nov 2009 has not ruled out proroguing the parliament.

    “No. 7 — November 28, 2009 (10:16 a.m.) — The Leader of the Government in the House of Commons — That, notwithstanding any Standing Order or usual practices of the House, a bill in the name of the Minister of Labour, entitled An Act to provide for the resumption and continuation of railway operations”

    The last work stoppage at CN was in 2007, at which time Parliament ordered more than 2,700 conductors back to work.

    Besides what kind of prorogue is it when government is free to make appointments – must be Alternative Conservative style because this is not how traditional prorogue works. Yeah, the pain that NDP feels is very real.

    It helps too that the privatised CN’s US shareholders expectations are in congruence with the actions of the the government.

    Incidentally Jim Stanford pointed out in his writing :

    Get ready for Canada-bashing (again)

    http://v1.theglobeandmail.com/servlet/story/GAM.20091214.COLABOUR14ART1327/TPStory/TPComment

    “Collective bargaining is weaker in America than in any other developed country. Unionization has been battered for decades by sophisticated (often illegal) employer campaigns, so-called right-to-work laws and a Labour Board that stood by while unions were creamed. Mr. Obama’s proposed Employee Free Choice Act would arrest, and perhaps modestly reverse, this long decline in collective bargaining. New laws would enhance workers’ shots at forming a union, and their chances of getting a first contract once they have one…..

    In the labour law debate, the quislings include the Fraser Institute (which urges America to “steer clear” of anything that strengthens unions) and the Bank of Montreal (which dispatched lobbyists to Washington to warn of the dangers of Canadian-style labour laws). The Fraser Institute line was predictable. But the Bank of Montreal’s Canada-bashing was offensive. After all, this corporation raked in $20-billion profit over the past decade (courtesy of Canadian consumers and its virtually union-free work force) and, as gravy, received massive government financial assistance this year. They must have dug deep to find anything at all negative to say about Canada – but I guess corporate solidarity trumps national loyalty every time.”

    The think tanks like Fraser Institute in their zeal against any social cohesion will never advocate to Arrest the Fractal Nature of Corporatist’s . As if there was any dearth of support the Fractional Banking sorts have joined them too.

    Is Bank of Montreal still stinging from this ruling:

    In one landmark case, Bank of Montreal (1985), the CLRB defended its requirement that employers remain neutral during representation campaigns after the employer had held captive meetings and personal interviews intended to dissuade employees from voting for unionization. The board ruled that, because of the economic power of the employer over its employees, simply by holding a captive meeting, the bank had run foul of the law: “The economic power of the employer puts it in a position to compel an audience. The purpose of making a captive audience meeting an unfair labour practice is to remove that leverage…. Even though there may be no actual threat, the employer’s taking the initiative to convey its anti-union views amounts to undue influence because it restricts the employee’s real freedom of choice.”
    Union of Bank Employees, Local 2104 v. Bank of Montreal, decided June 17, 1985.

    However, I think the Banks of Moolah are not into petty stuff and definitely not across borders. They have larger interests in mind. The day loonie achieved near parity with US$, wasn’t their economist on the tv early morning justifying that?

    Clouseau, My name is Inspector Clouseau.
    Oops! knocked over my Martini!

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