Employment Insurance and the recession

Last week the Canadian Centre for Policy Alternatives (CCPA) released a report Is EI working for Canada’s unemployed? Analyzing the Great Recession, by Andrew Jackson and Sylvain Schetagne. The report, part of the Alternative Federal Budget project, evaluates the state of Canada’s Employment Insurance system. In preparation for the release of Budget 2010, the CCPA is calling for an extension of benefits for EI.

Like so many social security and assistance programs in Canada, EI was in place before long before the recent recession, but hard economic times have caused even more people to be in need of its benefits. In the fall of 2008, massive rounds of lay-offs in several industries across Canada caused the unemployment rate to increase from 6.3% in October 2008 to 8.7% by August 2009, an increase of about 38%. The number of people receiving EI benefits increased by more than 60% from October 2008 to 2009, but the number of beneficiaries as a percent of the unemployed only increased by about 8%.

In the past year the government has made efforts to expand EI benefits, granting extensions for benefits of 5 to 20 weeks. However, only people who filed a claim in 2009 qualify, which excludes those that lost their jobs in the first few months of the recession. In addition people must have been working or paying into the system for seven of the last ten years to qualify. While these changes will help thousands currently receiving EI payments, they will not be enough considering the thousands excluded and as unemployment rates remain high making it even harder to find new employment.

Jackson and Schetagne note that even before the recession up to one in four people EI beneficiaries could not find a new job before their benefits expired. A recession only makes these odds worse. Although Canada’s GDP is starting to rise (albeit slowly) and many are claiming the recession is over, many industries and sectors across Canada have only begun to recover. If this recovery follows the trends of post-recession periods of the past few decades, it will take months, if not years, for unemployment to drop to pre-recession rates.

In order to speed up the process of recovery and reach those hit hardest by the recession, the report proposes that beneficiaries who applied for EI after October 2008 be granted an extension of up to 26 weeks. This could potentially cost the government an extra four billion dollars, but the authors expect that only a small proportion will need the full 26 weeks. They also expect that extending payments to those hit hardest by the recession will work to stimulate the economy.

The long road to recovery from recession must look beyond national measures like GDP and invest in the well-being of individuals and groups most impacted by hard economic times such as the unemployed.