In 2009 53% of all calls made to the Employment Insurance call centre were answered within three minutes. By 2011 it was 32%. And little wonder: the system is overwhelmed. The number of Canadians receiving EI remained static between 2006 and 2008 at an average of 748,000 people (most because of day-to-day job loss or because they were taking a parental leave). But in 2008-09, when the recession really got going, the number of Canadians collecting EI jumped by over 300,000. Things got better in 2010 — only relatively, however, 980,000 individuals still were collecting — but the program’s coffers and resources took another hit in November of last year when 19,000 Canadians joined the ranks of the unemployed.
There’s no doubt that there’s an unemployment crisis; but does that mean there’s an EI crisis as well? The program has not reached a breaking point – but it is, however, profoundly flawed and in desperate need of reform. A new report from the University of Toronto’s Mowat Centre contends that Ottawa must create a “nationally standardized EI system, supplemented by new benefits that would help those who are currently outside the EI umbrella.” Some proposed measures include eliminating the higher entrance requirement for new entrants and re-entrants to the workforce; creating a new system of temporary unemployment assistance outside the traditional EI program; and contentiously, to modify benefits in response to economic conditions through an expanded work-sharing system put in place during recessions.
Matthew Mendelsohn, Director of the Mowat Centre, argues that the current EI system is “a vestige of Old Canada” with an “antiquated…understanding of the labour market.” Their report is proposing that Canada adopt a simple and fair client-centered system that offers true universality of treatment without consideration of geography.
One Canadian left unemployed by the 2008 recession was Craig Webster, a former systems administrator at PCL Graphics in Scarborough during the recession. He applied for EI online through Service Canada and found the process straightforward, but nerve-wracking because of the long wait time to get approved.
“They took weeks to review my application,” he notes, “and all the while I was wondering if I checked an incorrect box, or made some other administrative error.” After three weeks, Webster did qualify for EI (and after five months of searching he finally found a job). But the assistance barely began to cover his expenses: he’s now much more in debt.
Webster was fortunate that his unemployment was straightforward enough to make applying online possible. Many do not have that luxury, and are forced to call in to speak with an agent to explain their situation which, given the precariousness of work in this day and age can be… complex.
The basics of EI are straightforward: when you are working, you pay into the system (1.78 per cent of pretax income up to a maximum of $786.76 a year) regardless of who you are, where you live, or what you do. The universality of the system is intended to ensure that a fisherman in Victoria pays just as much as a Bay Street lawyer.
New regional imbalances in wealth, however, threaten to undermine the fairness and integrity of the program. The nature of the Canadian workforce has shifted dramatically in the past decade: think about mass immigration, the explosion of the resource extraction industry in northern Alberta, offshore drilling in Newfoundland and the collapse of the manufacturing economy in Ontario.
For the first time Newfoundland and Saskatchewan are “have” provinces and population-dense, job-poor Ontario is the only “have-not” province. And that imbalance is built into the system. Workers in Ontario and Newfoundland see a significant difference in the ratio of payout made to the benefits received. One recent study found that Newfoundland and Labrador EI recipients receive $5 in benefits for every $1 they put into the system while working. Ontarians, in contrast, receive $0.60 for every $1 they contribute.
In real terms the differences are startling. Take this example from The Globe and Mail: “An administrative assistant laid off in Corner Brook, Nfld., who worked as little as 10 weeks will pocket $468 a week for 45 weeks – the maximum – for a total of about $21,000. A comparable worker in Saskatoon would have to have put in about 18 weeks and could earn benefits for only 36 weeks, or a total of $16,848. Someone doing two jobs who loses one of them is likely to get nothing.”
To say there are serious problems is an obvious understatement. The Ottawa Citizen was right when they wrote, “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.”
Arthur Sweetman, an economics professor and Ontario Research Chair at McMaster University, suggests that regional imbalances pale in comparison to 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.”
He referred me to a 2006 study out of the University of California and Queen’s University. It examined data between 1940 and 1991 from New Brunswick and the adjacent U.S. state of Maine. Both areas had high levels of employment assistance for much of the twentieth century but diverged in the 1970s when New Brunswick added to and augmented its EI benefits and Maine did not.
The report found that in the years following the 1971 reform, unemployed workers receiving benefits rose to 20 per cent of the male workforce in New Brunswick, while dropping to just 6 per cent in Maine. It also found significant resentment from within trade organizations that condemned the “productivity gap” between full-time workers and others who allegedly worked a minimum amount just to qualify for EI.
The Canadian Construction Labour Relations Association best captured the sentiment: “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.”
“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 financial planning non-profit, “but from my experience I can see that there are a lot of people taking advantage of the system.”
And institutions too. Consider the example of school boards laying-off support staff (assistants, secretaries, janitors, etc.) for the summer so they can qualify for EI, only to hire them back in September when the school year begins again. Their jobs were never lost, nor were they ever in jeopardy.
As someone who has paid into EI for many years without collecting, I asked Mason how he feels about those who may be seen as taking advantage of 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,” he says, “but that they are essential for those that need them.
“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.
“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 one 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 (and, indeed, employing workers) full-time that detract from the overall effectiveness and equality of the program? Can we, and should we, attempt 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 one’s motivation to fix regional imbalances “depends on who you are and your priorities.” Effecting change at the political level is challenging on account of the lifestyles and industries built around seasonal labour and EI collection, industries that are likely unwilling to pay more in private wages in order to keep seasonal labourers off EI in the off-season.
“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, unlike 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. “EI is not just social policy,” the researchers note: “it is also economic and labour market policy.” As such, any changes – or failure to make needed changes – would have far-reaching national consequences on everything from our ability to buy a loaf of bread to how we think about the role of the welfare state in our daily lives. We should add to this a sense of urgency, because more Canadians than ever are coming to legitimately rely on EI due to the recent economic downturn.
How then to reconcile those who demand reform with those who benefit from the status quo? These competing interests cannot be satisfied simultaneously.
Original Article
Source: Toronto Standard
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