The report assesses the impact of last month’s decision by Finance Minister Joe Oliver to maintain E.I. premiums at existing levels, while offering a credit on premiums for small businesses. At the time, the government pointed to a report from the Canadian Federation of Independent Business that said the credit would create 25,000 person years of employment over the next two to three years.
However the PBO argues those estimates are far off the mark. The credit would only create 1,000 person years of employment (or 200 jobs in 2015 and 600 jobs in 2016), according to the PBO. Further, because the government is keeping E.I. premiums at higher levels than necessary to offset the costs of the program, the PBO argues these higher premiums come at an economic cost of 2,000 jobs in 2015 and 8,000 jobs in 2016.
Essentially, the PBO report argues the positive employment impact of the credit combined with the negative impact of the higher-than-necessary premiums means there will be 9,200 fewer jobs in the economy over the next two years than there would have been if the premiums were set to break even and there was no small business credit.
The PBO report argues the higher-than-necessary premiums could also have been used to enhance benefits for the unemployed.
Overall, the report takes issue with the government’s approach to setting E.I. premiums for lacking in transparency.
The government argues its approach to E.I. premiums is a two-year temporary option that will then be replaced by a program to have premiums and costs break even over a seven-year period.
The PBO urges Parliamentarians to have a closer look at that approach.
“The break-even mechanism will require lower contributions during good times and higher contributions during bad times,” the report states, expressing concern that this could prove counter-productive during a tenuous economic recovery.
The PBO report says the effect of the government’s premium decisions – including the credit for small business – is that Ottawa will take in $4.4-billion more in E.I. revenue than necessary from 2014-15 to 2018-19.
The NDP said the report shows the government’s hiring credit is wasteful and ineffective and suggested in a statement that surpluses should be used to enhance benefits.
Liberal finance critic Scott Brison said the report shows the government is using E.I. revenues in order to produce an artificially high surplus on the eve of a federal election.
In September, Mr. Oliver announced that small businesses would receive credits worth an average of about $350 to partially offset the cost of E.I. premiums. However all employees and all other employers would continue to pay existing rates for another two years.
In 2017, the government said the existing contribution rate of $1.88 per $100 of insurable earnings would drop to $1.47.
The PBO report points out that the amount of employment created by the government’s new credit comes at a steep price.
“These jobs are created at an average cost of $550,000 per person year,” the report states.
Another aspect raised by the PBO is the declining percentage of unemployed Canadians who qualify for E.I. In 2007, 46.6 per cent of unemployed Canadians qualified for benefits. That figure dropped to 38 per cent in 2014.
The PBO says this decline has less to do with government policy reforms and more to do with “a persistent restructuring of the labour market.”
The projected surplus in the E.I. fund could be used to temporarily extend benefits to an additional 130,000 unemployed workers in 2015 and 2016, according to the report.
Original Article
Source: theglobeandmail.com/
Author: Bill Curry
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