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Digital Journal Reports

article imageReform needed to modernize Employment Insurance Special

Toronto - A recent report released by the Mowat Centre for Policy Innovation is calling for massive reforms in the government assistance program for unemployed workers.
The recent release of Making It Work, the latest report from the Mowat Centre at the University of Toronto, has prompted a new round of public discussion over the current state of one of Canada's most vital social assistance programs.
Pronouncements that claim the current system of EI is broken are premature, but understandable. Yet a strong need for critical reform does not indicate that the program is beyond salvage: rather, it lends itself to the argument that since people have come to rely on EI (sometimes too heavily) it behooves the government even more to make the program as efficient, useful, and balanced as possible for all Canadians - those that collect it as much as for those who pay into it.
The number of Canadians receiving EI benefits held steady between 2006 and 2008 at an average of 748,000 people, the overwhelming majority because of typical job loss and parental leave. But in the full year after the 2008 recession, according to Statistics Canada the number of Canadians receiving these benefits jumped by over 300,000 in 2009.
And while the numbers receded slightly in 2010, over 980,000 Canadians are still on EI, a significant increase from the 2006-2008 average.
One of those Canadians left unemployed by the 2008 recession was Craig Webster, a former system administrator who lost his job at PCL Graphics in Scarborough, Ontario. Mr. Webster applied online for EI through Service Canada and found the process straightforward, if not slightly nerve-wracking because of delays.
"They took two weeks to review my application," he notes, "and all the while I was wondering if I checked an incorrect box, or some other administrative error" that would end in his not receiving federal assistance.
"But I felt just fine about [receiving EI]," he told me. "The recession is what caused my layoff, so I was glad that our government was able to take care of me while I searched for a new job." And while Mr. Webster did eventually qualify for EI benefits, and has subsequently found a better job, after five months searching for a new job, the federal assistance helped minimize the debt he would eventually incur, but it did not prevent it.
The Mowat Centre Task Force put forward 18 recommendations centred around four themes - "a nationally standardized system for determining qualification and benefits, active employment measures (e.g. training), special benefits (e.g. parental and sickness leave), and financing and management."
In other words, EI reforms are needed to suit the changing labour market, close loopholes to exploitation, and remove the disincentive to work full time that so often accompanies EI payouts. Because when the Ottawa Citizen writes that "Canada needs an employment insurance plan that meets the needs of a modern economy and its workers, not a jury-rigged plan that favours some workers at the expense of others," they are not far off.
A regional imbalance exists within a benefits framework that has not fundamentally or ideologically shifted much since the 1950s. As Digital Journal wrote about previously, workers in Ontario and Newfoundland see a significant difference in the ratio of payout made to benefits received. And the regional imbalance has deep roots.
"It was built into the very design of the system," argues Arthur Sweetman, an economics professor and Ontario Research Chair in Health Human Resources at McMaster University. The current EI system is also prone to "influencing worker, firm and government behaviour " Sweetman told me, while "sustaining and encouraging those high levels of unemployment."
But Sweetman notes that regional imbalances are of less note to him than another flaw in the system. "I am less concerned about redistribution than are some policy analysts," he notes, "but I am much more concerned about the deleterious effects that EI has on productivity than are some commentators."
Sweetman referred me to a 2006 study conducted by Peter Kuhn at the University of California, Santa Barbara, and Chris Riddell of Queen’s University in Kingston, Ontario. It examined data from the Canadian province of New Brunswick and the adjacent American state of Maine that spanned over half a century between 1940 and 1991.
The study aimed to examine productivity levels in an area chosen for its high levels of employment assistance provided to unemployed workers, and the different paths the two regions took after EI benefits were strengthened in New Brunswick in the early 1970s but not in Maine.
The report found that in the years following the 1971 reform until 1991, unemployed workers receiving benefits rose to 20 per cent of the male workforce in New Brunswick, while dropping to 6 per cent in Maine. It also unearthed documents from numerous trade organizations condemning the "productivity gap" that emerged from workers viewing employment as something to do minimally in order to qualify for EI.
From the Canadian Construction Labor Relations Association within the study:
“The members of our association are absolutely convinced that many persons voluntarily make what amounts to a way of life out of working only long enough to establish benefits, then drawing them for the maximum period, and then repeating the cycle.”
This kind of exploitation is entrenched in some communities and fields of labour, and runs the risk of engendering a distaste of social assistance programs more broadly. The Canadian welfare state operates on the goodwill of those citizens who continue to pay into the system when working to assist their fellow citizens who they must feel are deserving of that assistance. If the sense of exploitation becomes to widespread, Canadians may demand more radical alterations than mere reforms.
"I think that EI is an important program that helps a lot of Canadians during transition from one employer to another," writes David Mason, Director of Member Services for a Toronto non-profit, "but from my experience I can see that there are a lot of people taking advantage of the system."
As someone who has dutifully paid into EI for many years without collecting, I asked Mr. Mason if he harboured any resentment towards those who exploit loopholes in the system.
"My thoughts on social welfare programs are that there will always be people who take advantage of the programs and receive money unfairly, but that they are essential for those that need them," he told me. "I'm of the mindset that I'd rather have a system that pays out too much and too easily than one that doesn't serve its purpose and doesn't help those that need it, or that doesn't help them enough."
"Obviously," he is quick to add, "I would prefer that the system be managed prudently. But I will always err on the side of generosity when it comes to those who need social assistance."
Does this king of exploitation effect how Canadians think about the EI system?
"I don't think people think about EI," Mr. Mason wrote. "It's deducted at the source and so we never have to think about it. I would be surprised if more than 1 per cent of Canadians could even tell you how much they pay into EI." He argues that "if Canadians received a bill at the end of the year instead of having it deducted at the source, I'm sure there would be more outrage about those who would exploit it."
Are there ways around the regional imbalances and disincentives towards working full time that seem to detract from the overall effectiveness and equality of the program? Can we achieve a truly universal system of EI that pays a worker in Ontario the same as a worker in Newfoundland?
"In terms of geographic regions it's certainly possible" to correct the imbalances, writes Dr. Sweetman. He told me about the current system in the United States where each state is responsible for standard benefits while the federal government pays for "extended benefits" during recessions out of general tax revenues. But in Canada, desire to fix the prevalent regional imbalance "depends on who you are and your priorities."
Effecting change at the political level is challenging on account of the long-entrenched lifestyles and industries built around seasonal labour and EI collection.
"If, for example, you're currently a representative of one of the individuals...or regions that is receiving a greater number of dollars in benefits than dollars of premiums paid then you might have quite a different perspective than if you're one of the regions paying in more than you’re receiving back."
Ontario, in other words, may be much more open to reform on account of receiving only $0.60 cents back for every dollar put in than Newfoundland, which receives $5 for every dollar injected into the EI system.
Yet the Mowat Centre report indicates the hazards of our collective failure to act. We should add to this a sense of urgency because more Canadians than ever are coming to legitimately rely on EI on account of the recent economic downturn. And while the Citizen writes that a report condemning the current state of EI is nothing new, they still conclude that the time to act is now.
And it is.
article:314575:12::0
More about Employment insurance, Great recession, Social assistance
 
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