EI reform now urgently needed

Chances are that you know someone who has lost their job recently. The recession has caused such a sharp increase in unemployment that few Canadians are untouched, whether it’s because of a family member, friend, or co-worker. As a result, the inadequacies of our employment insurance (EI) system have been highlighted, leading to widespread calls for change.

Even before the recession EI did not work particularly well. The goal of EI, as its name implies, is insurance: workers contribute premiums in exchange for collectively sharing the risk of lost wages. In the 1990s, new rules cut off access for many Canadians and created regional variations in access and benefits.

As a result, only 4 in 10 unemployed Canadians qualified for EI. In Ontario and the Western provinces, only 1 in 3 unemployed workers qualified for benefits. In Quebec and the Atlantic provinces, 4 out of every 5 unemployed workers qualified. In half of Canada’s major cities, the proportion of unemployed who qualify for benefits is less than 30%.

Because of regional variations in the threshold of hours required for EI, there have been some absurd situations, where two people working in the same plant were laid off and one qualified for EI based on her home address while the other did not.

Access to EI was also very uneven within regions. 45.5% of unemployed men can count on EI, but only 39.1% of women. Those in precarious or non-standard work tend to have difficulty accessing EI, even though they are more vulnerable to unemployment, because of the challenge of accumulating enough hours.

Once the recession hit, the already broken system could not react quickly enough to the crisis. Despite the fact that Ontario’s economy was devastated, workers in Ontario were turned down because Ontario was still classified as a low unemployment area. Oil field workers in Alberta who originate from Atlantic provinces can get higher benefits than their co-workers simply by returning home if they are laid off.

As the number of EI applications surged, Service Canada has been unable to keep up with demand. The mandatory two week waiting period has now been stretched. Some people are waiting up to six weeks for benefits, despite the fact that bills won’t wait.

Already before the recession, 1 in 4 Canadians exhausted their benefits without finding new work. Now that unemployment is climbing, it seems likely that benefits will run out for more Canadians before they find new employment.

Those Canadians who run out of benefits or don’t receive EI at all face a desperate situation. Before they can turn to social assistance, they must use all of their personal savings, including RRSPs. If they own assets, some provinces require them to sell their assets. Social assistance in almost all circumstances is below the poverty line.

By helping Canadians who lose their jobs to participate in the economy, EI acts as a stimulus for our economy. The alternative could be a downward spiral, as decreased consumption leads to more layoffs, and more unemployed Canadians cannot participate in the economy.

Because of the high profile of the economy and unemployment, EI has become a political hot potato recently. There are even threats of an election over EI.

Those who oppose changes to EI worry that a more generous EI system would create a “moral hazard,” leading people to work for a few weeks and then live the rest of the year off EI. Those who voluntarily leave a job do not qualify for EI anyways, but this concern also reveals a double standard. We did not worry about moral hazard when we bailed out the banks or the auto companies earlier this year.

Rather than worry about the moral choices of a few individuals, we need to recapture our understanding of EI as part of a social contract. When people work hard and pay premiums, they should receive support when they lose their jobs.

Others choose to emphasize training, rather than benefits. Training is certainly helpful in some cases, allowing employees to pursue new areas of work that might be at a higher wage level. But training does not help in situations of mass unemployment when there simply are no new jobs to be had. Evidence also shows that training is limited in gaining higher earnings or additional hours of work.

Significant emphasis must be given, then, to the financial support provided by EI. Coverage is very low – up to 55% of insurable earnings, but with payments capped at a maximum of $430 a week. The most anyone receives from EI is $21,500 per year. This is hardly a system of radical generosity.

There are many voices calling for EI to be fixed, and there are a number of changes that could be made immediately to provide better support to Canada’s unemployed and help to stimulate our economy. They include:

• Standard access rules across the country, set at 360 hours of insurable employment.
• Doubling the available length of benefits, from a maximum of 50 weeks to a maximum of 100 weeks.
• Removing the two week waiting period.
• Raising the rate of coverage from 55% to 60% of insurable earnings.
• Extending participation to the self-employed.

The urgency of the situation means that reform cannot wait. The fact that EI is also a good economic stimulus suggests that there is no good reason for waiting. Parliamentarians of all parties should work together to deliver a better EI system for Canadians.