EI and work in comparative perspective

That Employment Insurance is inadequate to respond to the current economic crisis has already been well documented. But today, a study by Lars Osberg on behalf of the Canadian Centre for Policy Alternatives revealed that EI is just plain inadequate.

The study compares EI to unemployment insurance programs in OECD (Organisation for Economic Cooperation and Development) countries. Canada ranks last, tied with the United Kingdom, for replacement of income.

The top three countries, Denmark, Belgium and France, provide at least three times as much as Canada.

One of the oft-cited reasons for keeping EI benefits low is the so-called “work incentive.” Some people believe that if the income from EI is too high, people will not want to work (the assumption being that the only thing that motivates people to work is money). However, while writing my paper on the work disincentive, I came across a study from Sweden, where the replacement benefits of unemployment insurance are twice as high as Canada, that found that non-financial motivations for work remain high among the unemployed. The study concluded that “Low employment motivation is not a primary cause of unemployment.”1

Osberg notes that Canada adopted a “labour/leisure choice” to EI, assuming that jobs at the wage level someone has left remains open, and people are choosing the “leisure” of not working.

This idea has never made sense, that people enjoy being unemployed. Surely in this recession, it has become nothing more than a farce. It’s time to abandon the notion that there is a work disincentive in supporting Canadians who have fallen on hard times.

Osberg’s report calls for changes to EI, including lowering the entrance requirements and creating a second-tier benefit system so that the long-term unemployed are not cut loose after one year.

1. 1. Mikael Nordenmark, "Non-Financial Employment Motivation and Well-Being in Different Labour Market Situations: A Longitudinal Study," Work, Employment and Society, 13 no.4, (December 1999), 615.