How mild? Compare them with the last attempt at EI reform, the package of changes introduced by Lloyd Axworthy, the great stalwart of the Liberal left, in 1996. The current exercise would oblige EI claimants to be a little less choosy in the jobs they are willing to take, depending on their claim experience and how long they remained on benefit. Frequent users, in particular, would be expected to take a job paying as little as 80 per cent as much as their previous employment, dropping to 70 per cent after six weeks.
But if no such jobs were available they could carry on more or less as before: the same benefits, the same duration, the same frequency. By contrast, the Axworthy reforms directly reduced their benefits, again depending on how often they claimed, a system known as the "intensity rule." From the standard 55 per cent of insurable earnings, a percentage point was reduced for every 20 weeks of benefit received in the previous five years, to a maximum of five percentage points. Another reform clawed back benefits from higher income recipients at a steeper rate if they made frequent claims.
Mind you, the Axworthy reforms were small beer themselves compared to earlier reform proposals. The Mulroney-era Commission of Inquiry on Unemployment Insurance, headed by the former Quebec Social Affairs minister Claude Forget, recommended "annualizing" benefits — that is, basing them on claimants' earnings over an entire year, rather than the few weeks in which they might actually have worked: a sharp incentive to work longer before filing a claim.
And before Forget, there was the Macdonald Commission, headed by the former Liberal finance minister Donald Macdonald, which recommended setting employers' EI premiums according to how frequently their employees made claims: a system known as "experience rating." This is how unemployment insurance (as it is called in other countries) works in the United States, among other places. It is also the principle on which Workers' Compensation operates in this country.
And before Macdonald there were other studies and reports, going back to the early 1970s, when the system really began to run off the rails. What had begun as a fairly strict insurance program in the 1940s had almost immediately started to unravel. Seasonal workers — that is, workers who become unemployed for part of the year, every year, not by some remarkable string of bad luck but by design — were first entitled to benefits in 1950. Initially they could only receive benefits for the part of the working season they missed: the 1971 "reforms" extended this to the entire year. Thus was born "Lotto 10/42": 10 weeks' work was enough, depending on where you lived, for 42 weeks of benefits.
The result was predictable enough. Workers and firms in seasonal industries found it in their mutual interest to time spells of employment and layoffs to the rhythms of the EI rules. Though anecdotes abound, the statistical evidence of this sort of mass gaming of the system is unequivocal. A famous study by the economists David Green and Craig Riddell found a huge spike in claims filed every year by employees with precisely the minimum 10 weeks' work required: when the minimum was temporarily increased to 14 weeks in 1990, the spike moved with it.
So no one is in any doubt about what is going on. Differences arise over what, if anything, to do about it. If the costs of maintaining workers in unstable or seasonal employment were paid for by some bottomless cash machine called "the government," then its defenders would be right to object to any reform. But in fact, the costs are paid in other jobs.
While everyone pays the same premiums, not everyone claims the same benefits — indeed, workers in high-unemployment regions can claims benefits for longer, in return for fewer weeks' work, than workers in other regions. Workers and firms with unstable employment records are in effect being subsidized by those with more stable histories: the former's premiums are too low, relative to how much they cost the system, while the latter's are too high — with all the consequences this implies for employment.
What previous reform efforts had in common was that they attempted to address this problem at its roots: whether by experience rating of employer premiums, or cutting benefits to frequent claimants (a form of experience rating), the aim was to reduce the subsidies to unstable employment. The current reform exercise, by contrast, tackles it from the back end. While encouraging claimants in seasonal industries to look a little further afield for employment, it does nothing to rebalance the skewed incentives that sucked them into those sectors in the first place.
It is a hard thing, as critics of the Conservative plan note, to ask workers in their fifties who have never done anything but seasonal work to adapt to something new. But those workers were just entering the labour force when the first reports were landing on ministers' desks urging that the system be reformed, to little lasting effect (the Axworthy reforms were soon repealed, after the loss of 20 Liberal seats in Atlantic Canada in the 1997 election). Perhaps there is little that can be done for them. But we can at least try to prevent the same thing happening to the next generation.
Original Article
Source: canada.com
Author: Andrew Coyne
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