The case for EI reform - Part III

According to the budget leaks over the past week, we will see some changes to EI in today’s budget. The speculation is that premiums will be frozen to prevent rising premiums from contributing to unemployment. Nothing has been said yet about raising benefit levels or reforming access rules.

Over at the Progressive Economics blog, Andrew Jackson has posted the Executive Summary of a report commissioned by Human Resources and Social Development Canada on “Income Redistribution Impacts of the EI Program.”

The study provides solid evidence for the importance of EI in an economic downturn. Among its findings, the study noted that EI has a strong redistributive impact for individuals and contributes substantially to poverty reduction.

EI benefits put purchasing power in the hands of the unemployed, who otherwise would have none or would need to turn to social assistance. This, as noted before, acts as an automatic stabilizer for our economy, as more benefits are paid out as our economy moves into recession.

The impact is cyclical, as fewer people require EI when the economy strengthens. This contributed to a lessening in the redistributive impact following the mid-1990s, although changes to EI rules also contributed.

EI’s role in redistribution and poverty reduction is of course less than that of social assistance, but social assistance is aimed at those in greater need while EI is intended to help workers transition between jobs. This study suggests that it’s working. Rules to enhance – and not limit – the ability of EI to play this role are therefore needed.