- Critiques of the EI System
- 2012 EI Reforms
- Commentary on 2012 EI Reforms
- Proposals for (further) Reform
The stated aim of Canada's federal Employment Insurance (EI) system is to provide "temporary financial assistance to unemployed Canadians while they look for work or upgrade their skills." The system provides several different types of benefits, including: regular benefits, available to those who lose their job through no fault of their own; maternity and parental benefits for those who need to take time off due to pregnancy or caring for a newborn; compassionate care benefits for those who must miss work temporarily to care for a gravely ill family member; and fishing benefits for qualifying, self-employed fishers seeking work. The latter three types are "special benefits." Apart from fishers, self-employed Canadians cannot access regular benefits, though they are entitled to apply for special benefits. Service Canada provides this and other information about the program here.
Employment insurance premiums are collected from employers and employees according in a uniform manner across the country. Rates are set by the Canada Employment Insurance Financing Board (CEIFB) an arms-length Crown Corporation. The Creation of the CEIFB in 2008 was a significant step toward addressing the issue of imbalance between revenue collected from EI premiums and the total benefits disbursed, and government spending of, rather than investment of, surpluses. It is in the distribution of benefits, however, where the system's complications lie. The country is divided into 58 regions, with varying qualifying requirements, benefit calculation methods, and benefit durations.
This research summary is intended to help readers understand the challenges facing Canada's EI system and to critically examine the solutions proposed. The first part of this research summary describes the shortcomings of the system, especially as identified by various public policy research bodies and think tanks. The second part describes the changes that the federal government recently made to EI eligibility requirements. The third part examines the public commentary on these recent changes from political and policy perspectives, from politicians, think tanks, journalists, and others. The fourth part reviews proposals for (further) reform. In conclusion, I review the common themes and priorities of the existing EI debate and point to themes that are largely absent—an absence which precludes a balanced, full analysis of EI as a key feature of Canada's social architecture.
In 2010-11, the Mowat Centre's task force on EI extensively reviewed our employment insurance system, holding consultations with employers, workers, civil society, and government officials. They identified nine core problems with the system:
- The scheme "is not well-suited to the new world of work," which now includes more young persons, multiple-earner families, multiple job holders, part-time job holders, and self-employed persons (p. 4). The current EI system was not designed to serve individuals in these growing segments of the labour market (p. 6).
- The EI program was designed to deal with a form of cyclical unemployment more typical of an earlier era, but is poorly designed to help people facing structural decline in their sectors (p. 6).
- The current support system is insufficient in facilitating the transition of those facing barriers in the labour market—including immigrant workers, youth, Aboriginals, and the disabled—into long-term employment (p. 7).
- The system has not caught up with new regional realities in Canada. It has always functioned as a regional redistribution program, but the distribution of prosperity in Canada has shifted far more in the last two decades than has the distribution of EI benefits (p. 8, 11).
- Fifth, the inequities in the system cannot be justified on principled grounds. A low income worker in precarious employment who becomes unexpectedly unemployed typically has less support than a worker who is laid off regularly and at predictable intervals. Also, two people with identical employment histories working at the same firm and laid off on the same day may receive different benefits based on where they live (p. 12).
- The system is nearly impossible for unemployed Canadians to understand. Unlike the Canada Pension Plan, for example, which has a simple formula for calculating benefits, the EI system has 58 regions, 12 categories of unemployment, and 41 categories of hours of insurable employment (p. 12-13).
- The funding model is unsound in macroeconomic terms, as premiums are mandated to go up when unemployment increases, thus taking more money out of the pockets of businesses and workers in times of recession (p. 13).
- The system responds poorly to recessions for reasons explained above, but also because the unemployment rate in a region at any point in time is poor basis for allocating EI benefits. A worker in a region with a rapidly deteriorating labour market may be entitled to far lower benefits than someone in a region with higher unemployment but where it is actually easier to find a job. Moreover, many who are hard-hit by recessions, such as the self-employed, are not covered by the EI system at all (p. 14-15).
- The system is in effect regressive, since low income workers pay disproportionately for the program yet have little or no chance of collecting benefits themselves.
C.D. Howe Institute highlights the inherent complexities in the system, and the failure of the variable EI requirements to deliver benefits in a sensible manner. It criticizes the program for treating unemployed workers waiting for the beginning of the next seasonal working cycle the same as those in the same region who have been permanently laid off and who are seeking permanent employment in another field. What Canada needs is a dynamic, flexible labour market, and the EI system as it currently operates creates incentives that push in the opposite direction. It also stated that the system should not support the preservation of rural labour markets dominated by seasonal employment.
In its call for EI reform, the Canadian Chamber of Commerce emphasizes the program's regional disparities. In April, 2009, for example, 37% of unemployed Ontarians received regular EI benefits, compared to 95% in Newfoundland & Labrador and New Brunswick. The Canadian Chamber of Commerce identified systemic unfairness, under-coverage, work disincentives, lack of labour mobility and high program costs as the core shortcomings of the system.
The Frontier Centre for Public Policy calls attention to the fact that EI hurts the western provinces, both by redistributing money from workers in the West to those in other regions and by discouraging the movement of workers to Western provinces. The Fraser Institute contends that the EI system is like a car insurer that "benefits bad drivers at the expense of good drivers." As a so-called insurance system it is fundamentally flawed. People in regions where unemployment is higher contribute less in premiums and receive more in benefits, thus systematically redistributing money from certain regions to others.
The Canadian Taxpayers Federation believes the EI program is very generous. Today, in certain regions, one needs to work only 420 hours to qualify for up to 50 weeks of benefits, whereas at the program's inception a minimum of 6 months of work was required in order to be eligible for any benefits. The CTF points out that "since 1993—including recent government forecasts through fiscal year 2014-15—EI premiums will exceed benefits by $100.5 billion." It describes this as "a staggeringly large amount of over-taxation" that has "helped fuel runaway government spending." Although the Conservatives reformed the system in 2008 to address this problem—turning management of the EI account and premium setting to the Canada Employment Insurance Financing Board (CEIFB)—the CTF appears to question its effectiveness.
The Canadian Centre for Policy Alternatives (CCPA) released a study in 2009 by Lars Osberg comparing Canada's unemployment benefits to other OECD nations. The study says that Canada's benefits are far below the OECD average, in terms of accessibility, duration, and amount of financial assistance provided to the unemployed. The CCPA also produced a technical paper on EI in 2010 that examined how Canada's EI system had responded to the "stress test" of recession. This paper concluded that "Current entrance requirements continue to exclude man workers, even though access, as measured by the ratio of beneficiaries to unemployed, has become somewhat easier as unemployment has risen" (p. 8). Both of these documents indicate that Canada's EI system is inadequate and that it fails to help the vulnerable through difficult economic times. The Centre also found in a 2007 study that women qualify for EI benefits at a significantly lower rate than men. This was also noted as a concern in the 2010 technical paper above.
Writing for the Institute for Research on Public Policy (IRPP), Thomas Courchene and John Allan stress the importance of relating any short-term responses to the problems with the EI system to the long-term evolution of policy. They note two concerns in this regard: "The first is that the structure and breadth of EI make it most difficult to create an appropriate, integrated model for social Canada in our increasingly knowledge-based economy and society." Second is that EI is a social program with various benefits (including maternity, parental, compassionate, sickness, and training), yet we require a person to have a good job to gain access to these benefits. They track the history of changes to EI accessibility requirements and the dramatic behavioural responses of Canadian workers to such changes that result.
Also for IRPP, Janice MacKinnon explains how the EI system discourages labour mobility, causing labour shortages in some regions while unemployment remains high in others. The system "rests on the assumption that it is in the best interests of individuals and the economy or unemployed Canadians to remain within their region, hoping jobs will come to them," instead of moving to areas with better job opportunities, thus encouraging people to remain in areas of high structural unemployment where the EI benefits are better and easier to access. EI thereby hampers Canada's productivity growth, as growing sectors of the economy experiencing labour shortages are unable to realize their growth potential. MacKinnon describes how the program often fails to provide adequate benefits to long-time premium contributors who fall on difficult times, while at the same time EI premiums are being used to fund non-insurance benefits like parental leave and to subsidize seasonal employment.
Barbara MacLaren and Luc Lapointe, also for IRPP, look specifically at how the EI system treats foreign workers. Temporary foreign worker programs have become an important tool for addressing labour shortages in Canada, but foreign workers are highly vulnerable in economic downturns as they are more likely to lose their jobs and less likely to be able to access social security benefits. Foreign workers pay EI premiums, with temporary foreign workers and their employers contributing $303 million in 2008; yet less than 1% of temporary foreign workers are able to claim regular EI benefits.
In a somewhat dated report (2000), the Atlantic Institute for Market Studies noted that Atlantic Canada remained disproportionately dependent on EI transfers as it had for some time, that "Too many 'high-income' Atlantic Canadians receive EI benefits," and that "Young Atlantic Canadians continue to go into highly seasonal occupations at a rate significantly higher than the national average"(p. 43). These issues remain relevant today. AIMS recommended tightening access to EI benefits in order to reduce the distortions and dependency that the program has created in Atlantic Canada.
Looking at the nature of social insurance schemes more generally, economist Herbert Grubel describes "the inherent bias of social insurance programs to overspend and cause unexpected harm to many of those they were designed to help." He analyzes the incentives created as a by-product of social insurance schemes in light of moral hazard and rational adjustment. Grubel disagrees with those who argue that people can be persuaded to suppress personal interest for the benefit of society as a whole and therefore not change their behaviour in order to reap personal benefits from social programs: "The fact is . . . until the ideal social man has been created, moral hazard behaviour is also rampant in the context of public social insurance programs," he says. Remarkably, not only have individuals changed their behaviour to access EI, but the provincial governments of Atlantic provinces have launched job creation programs with jobs lasting just long enough to qualify workers for EI benefits.
Grubel explains that before the introduction of EI in Atlantic Canada, accepting government benefits came with a public stigma and there was a widespread sense that honest, hard-working people did not accept such benefits. The stigma eroded and attitudes changed, however, when people were "encouraged by their governments and social activists, who argued that receipt of these benefits was a right of citizenship and a legitimate return to the premiums they had paid." Grubel declares, "This change in public moral values is equivalent to the depreciation of a social asset, which in the future it may be difficult to re-establish" (emphasis added).
Bernard Valcourt, a federal cabinet minister from New Brunswick in charge of the Atlantic Canada Opportunities Agency, has expressed his frustration with what EI has created: "In New Brunswick, where we have one of the highest claimant rates in Canada, we have too many people who only entered the labour market to get EI benefits. It's become a way of life" (emphasis added).
Finally, it is worth noting, as the Mowat Centre has, and as Green Party leader Elizabeth May was keen to point out, that corporations also benefit from EI. Since employees do not rely on their wage alone to support themselves through the year, EI in effect allows corporations to pay workers less for seasonal work, therefore driving down wages.
The Mowat Centre's task force produced a detailed explanation of the changes made to EI this year. Two main changes were made. First is defining "suitable employment"—the types of jobs EI recipients are expected to seek and accept. Before this year, suitable employment was not defined in legislation or regulations, but developed through the adjudication of EI appeals. Second, and related to the first, is introducing a form of experience rating into the system.
Under the new regulations, EI recipients will be expected to take all available hours of work, including at times that fall outside of previous working hours and to accept work within a one hour commute (may vary in cities), but not if they have a health problem, disability, family obligation, or limited transportation preventing them from taking a particular job. These changes will affect all EI claimants equally from the first day of their claim.
Another set of changes will affect EI claimants differently through the course of their claim and differently based on their past use of the EI system. The meaning of suitable employment now changes over the life of the claim, meaning that the longer a person has been without a job, the broader the definition of suitable employment becomes. For example, in the initial weeks of job searching, the EI recipient may not have to take any job paying less than 90% of their previous salary, but after several weeks this may fall to 80%.
The exact percentages and time requirements that apply to a particular worker will depend on what category of EI user they fall into under the new experience rating system. The new regulations split EI recipients into three groups based on their past use of EI: frequent claimants, occasional claimants, and long-tenured workers. Frequent claimants have the least favourable requirements for accepting a new job (less time to search and an obligation to accept lower pay), whereas long-tenured workers have the most favourable requirements.
There are some changes to job search requirements as well, making them more specific and more stringent. The benefit calculation method has been changed to base benefits on the highest 14 to 22 weeks of earnings within the past year, depending on the regional unemployment rate. Changes to "working while on a claim"will see the clawback of EI benefits changed, allowing some claimants to keep more of what they earn in a week and others less (for details, see link above, p. 8-9).
Nationally, it is estimated that about 36% of EI recipients would fall into the newly created "frequent claimant" category. In Atlantic provinces, however, the percentage is much higher: 80% in Newfoundland, 78% in PEI, 60% in New Brunswick, and 56% in Nova Scotia (Quebec is next highest with 43%). The number of annual frequent EI users has been steady at around 500,000, increasing only slightly during the recession. In light of the stability of the number of frequent claimants, University of Ottawa economics professor David Gray, who has studied and written on EI extensively, said that the labour market is not responding to changes as it should be and supports the government's decision to create a frequent-user category.
The Atlantic premiers were cautiously critical of the changes. New Brunswick Premier Alward said that they needed to ensure that the province's employers and employees would not be hurt by the changes, but also said he recognizes the fact that governments can't fund expensive programs based on a six-month economy. PEI Premier Ghiz noted the province's dependence on fisheries, agriculture, and tourism—all seasonal in nature—and expressed concern about impact of the EI changes on these sectors. "There seems to be a real disconnect between what the federal government is trying to achieve and the reality of peoples' lives in rural parts of the country,"Newfoundland and Labrador Premier Dunderdale said. Nova Scotia Premier Dexter commented: "They seem to be saying there's some widespread abuse that needs to be fixed. The people who they most seem to be targeting are actually those who are in seasonal jobs. That's not an abuse, that's part of the rural culture of Canada" (emphasis added).
The Mowat Centre, however, made the following statement:
Our conclusion is that the package of reforms does very little to address the structural problems within the system. Despite the fact that the reforms have raised concerns in Atlantic Canada, rural Canada, and seasonal industries, the reforms are likely to have a disproportionately negative impact on young, urban, and immigrant workers and businesses in Ontario and the Western provinces. Although there are some positive features in this package of changes, another round of reforms is clearly needed.
The Mowat Centre's EI task force said that clarifying what "suitable employment" means in law is useful, but lamented the fact that the changes add yet more complexity to an already bafflingly complex system. Administration of the system is expected to become more difficult, with uneven enforcement across Canada.
The Canadian Taxpayers Federation supports the reforms made this year "as a step in the right direction," though it continues to call for more dramatic reforms. In a similar vein, the Fraser Institute stated: "Unfortunately, the changes do not address fundamental problems with the EI system. To truly reform EI for the benefit of Canadians, the EI system needs to operate like a true insurance system where premiums are adjusted for the risk of making a claim."
The Canadian Labour Congress says that the changes "are focused on a quick return to low-wage work, rather than training for in-demand job skills," with "no new resources . . . given to support skills training for unemployed workers and to support helpful interventions, such as job search counselling."
Writing in the Financial Post, Dan Kelly, senior-vice president of legislative affairs for the Canadian Federation of Independent Business (CFIB), believes that the "outcry over Jim Flaherty's comments that there is 'no bad job' is evidence of an erosion of the work ethic in Canada" (emphasis added). He said the EI changes are designed to nudge frequent claimants into accepting locally available jobs. While he would prefer more significant changes, Kelly described the CFIB's main concern at this point, which is that even the moderate changes "may not amount to much change at all." He goes on to say, "Much will depend on an EI officer's ability and willingness to implement them. . . . And EI staff does a terrible job of this as it is." For the recent changes to have any effect they will need to be carefully monitored and enforced. Still, CFIB president Catherine Swift welcomes the changes, as they are a step in the direction of making it easier for small businesses to find the people they need. Benjamin Tal, deputy chief economist at CIBC, said that the change may only be part of the solution but it will help solve the problem of chronic skilled labour shortages in Canada.
Andrew Coyne compares the recent changes to past attempts at EI reform, demonstrating just how mild the recent changes really are. He points out that past reform efforts tried to address the core problem of the EI system at its roots—either by experience rating of employers or by cutting benefits to frequent claimants—thereby reducing subsidies to unsustainable forms of employment. The Conservatives' 2012 reforms, however, while encouraging people to put more effort into looking for a job, do "nothing to rebalance the skewed incentives" at the heart of the system. John Ivison draws on statistics on the use and misuse of EI across Canada, concluding that there are a significant number of EI abusers in every province. He opines that the new provisions "appear reasonable and well-designed" and that they will help fill job vacancies with "the added bonus of making the rest of us feel like we're not being fleeced by the minority of EI claimants who are gaming the system."
Murray Dobbin claims that the EI reforms are indicative of the Conservatives' "neo-liberalism," which fails to recognize and therefore "destroys community." The "pro-business premiers of the Atlantic region" are fighting the changes, Dobbin suggests, "because they know their communities have for decades been maintained on part-time seasonal work." He goes on to say, "Community—the commons—is at the core of what we have lost and reclaiming it will be at the core of any successful social movement that halts and reverses the current trends." The EI reforms are, in his mind, a part of "the current trends" devaluing community in Canada.
The Mowat Centre maintains that our EI system should accomplish seven core objectives: provide adequate support in times of need, be transparent and client-centred, encourage labour market attachment, support the development of human capital and fill labour shortages, be integrated with other support programs, be fiscally responsible, and be responsive to changing economic conditions. To that end, it came up with 18 recommendations for reform, grouped under 4 headings. I focus on the first three sets of recommendations in the report; the fourth and final set deals briefly with technical management details.
First, Mowat Centre's task force on EI proposes a nationally standardized support system for the unemployed. It argues that those in higher unemployment regions should not be treated more generously since it is often no easier to find a job in a region with low unemployment than in one with high unemployment. "The unemployment rate does not capture the direction of change in unemployment and ignores the relative number of job vacancies" (p. 25). One option is to try to differentiate the EI system with more relevant factors such as the seasonally adjusted change in employment rates, job vacancy rates, and employee turnover rates. Doing so would make the system better tailored to a worker's actual needs, but would be an administrative nightmare. Therefore, their report advocates eliminating existing differentiation instead. National standardization would help the unemployed "as individuals rather than as residents of regions" (p. 27). It contends that this would strengthen the social safety net, strengthen the Canadian economic union, and complement existing efforts designed to encourage the free flow of goods, services, and people across Canada.
National standardization means a single entrance requirement for all workers across Canada (recommendation 1). It makes no sense why those who commute to work in urban centres should be able to access EI benefits more easily than those who live in those same urban centres. Standardization also means a single benefit duration (r. 2). "Canada is the only country among its peers that differentiates benefit duration based on region so aggressively" (p. 31). In Ontario, because unemployment rates have been lower than in Atlantic Canada, benefit durations have long been shorter. Yet, in 2010, Ontario had the highest average unemployment duration in the country. Introducing a national weekly benefit formula (r. 3) would eliminate region-based differences in the size of the EI cheques. Standardization means removing the higher entrance requirement for new entrants (r. 4) and re-entrants to the workforce, which penalizes some of Canada's most vulnerable workers. The existing rule requires new entrants to work significantly more hours before losing their job in order to qualify for EI benefits.
Following the main recommendations for standardizing the system (above), Mowat's task force proposes a number of additional measures to implement an effective, nationally standardized system in recommendations 5-11, including modifying benefits in response to economic conditions, treating temporary foreign workers fairly, and transferring benefits for self-employed fishers—the only self-employed Canadians in the system—out of EI.
Its second set of recommendations falls under the heading "Changes to Active Employment Measures." It recommends removing all training programs from EI and funding them through a general revenue-funded transfer to the provinces (r. 12). Currently, one must qualify for EI in order to benefit from most of the active employment measures funded from EI through the Labour Market Development Agreements. "Although it is appropriate to have criteria that determine eligibility for training programs," it explains, "There is no reason to presume that these criteria should be the same as those used to determine who has access to EI income support" (p. 58). Often, it is those who fall outside EI who are most in need of active employment measures and training programs. Related to this, recommendation 13 suggests making the Forum of Labour Market Industries the leading institution in a pan-Canadian human capital and labour market development strategy, and 14 calls for allowing individuals to receive EI benefits while pursuing skills development through education. Currently, to receive EI benefits, one must be "available for work in Canada." Those pursuing training or education for more than 10 hours per week can currently lose their benefits.
The Mowat task force report's third set of recommendations are "Changes to Special Benefits."The EI system currently delivers a suite of special benefits: maternity and parental benefits, sickness benefits, and compassionate care benefits. The Mowat task force commends the special benefits system for treating all Canadians identically wherever they live. However, it recommends (r. 15) allowing recipients of these benefits some choice between receiving higher benefits for a shorter period or lower benefits for a longer period. For parents, this could reduce financial constraints during the first months of parenting. The task force also recommends (r. 16) removing the two-week waiting period for special benefits, since, unlike the same waiting period before regular EI benefits are given, it lacks any rationale. Lastly in this category, it recommends (r. 17) testing a change to sickness benefits to support labour market participation of persons with disabilities. "There is currently no income support available to help individuals with sporadic or episodic illnesses or disabilities to remain in the workforce or to avoid other forms of assistance" (p. 68), the report says. Rather than having disabled persons end up reliant on special government programs, allowing them under set conditions to receive sickness benefits concurrently with employment, along with eliminating the two-week waiting period, could greatly enhance their participation in the labour market.
Courchene and Allan argue that regular unemployment benefits "should be funded by premiums set in general accordance with insurance principles." Like Mowat's EI task force, they advocate a uniform entrance requirement. Courchene and Allan also call for a uniform way of calculating duration of benefits, one which is based on the number of weeks worked. By making these changes, they believe it would not be necessary to have special provisions for repeat users, since the amount of benefits they can receive is limited by the number of hours of work they have completed. Due to concerns about a moral hazard, they would not change the system to include the self-employed. Rather than play around with the rules for accessing special EI benefits, they propose removing them from EI, making them available to all Canadians rather than the EI-eligible only, and funding them from general revenues.
Brian Lee Crowley, former president of AIMS and current managing director of the Macdonald Laurier Institute, has advocated in the past for the complete phasing out of EI benefits for seasonal workers, since economy would be better served if seasonal workers were trained to do other jobs in the off-season. Herbert Grubel believes that the use of deductibles, coinsurance and experience rating—making EI operate on insurance principles—would help to deal with the problems of a moral hazard and rational adjustment. However, the use of such tools, he points out, is restrained by the political process. Workers benefitting from the system in place are very politically active because their concentrated benefits encourage them to be. The political cost of attempting to reform the system in the 1990s was a severe loss of seats for the Liberals in Atlantic Canada. Janice MacKinnon, accounting for such political realities, suggests moving from 58 regions to 3 general sets of standards—urban, rural, and a special standard for remote regions—rather than having uniform national standards.
C.D. Howe Institute, like Mowat's task force and others, also recommends the replacement of regional standards with uniform national standards and benefit entitlement periods in order to serve the "national interests of a more dynamic, flexible and buoyant labour market." To make the system more responsive to changing economic conditions, it adds this:
New benefit criteria should be linked to the national unemployment rate, or better yet, the rate of growth or decline in national employment. Such a mechanism would allow the program's parameters and requirements to be tightened as the economy recovers and loosened when it enters a downturn. Using a growth-of-employment measure would better capture the local labour market's degree of fluidity, which is more closely associated with the probability of finding a job.
Fraser Institute, not surprisingly, advocates reforming EI to make it operate like a true insurance system. One option they recommend is to introduce experience rating on both the employer and employee side. A more unique option for reform that the Fraser Institute suggests is the creation of a system of individual employment accounts. The Canadian Taxpayers Federation also promotes this model. In such a system, which has been successfully implemented in Chile, workers pay premiums into their own account and the account is portable between jobs. Fraser Institute explains:
The money in the account can only be used to finance the worker's needs during periods of unemployment. For those who make little or no use of the account over their work life, they can use any excesses for retirement. Such a system would strongly reduce the distortions to decisions regarding working, quitting and searching for a job that exist under the current system . . . Evidence from Chile, published by the U.K.'s Centre for Economic Policy Research, found that Chile's system has increased job-finding rates and reduced unemployment duration. Not surprisingly, workers who rely on individual unemployment accounts search harder for jobs than those not relying on them.
Les Routledge, at the Frontier Institute, suggests on his blog that the provinces create their own EI systems to replace the federal system, the way Quebec has pioneered its own pension system. He has also proposed allowing individuals to opt out of EI and self insure.
The Canadian Chamber of Commerce articulates its desired long-term goals of EI reform as: improved fairness, reduced work disincentives, increased labour force mobility, and limited program costs. The Chamber recommends gradually trimming EI benefits to "foster a more flexible labour market." It calls for the simplification and easing of variable entrance requirements, but warns against having the entrance requirement too low. It also recommends standardizing the benefit duration. The Chamber recommends keeping the 2-week waiting period, and not increasing EI benefits above 55% of recent salary, which is what it is currently. It also recommends phasing in an employer-based experience rating system, which would see firms that lay off fewer workers paying lower premiums, promoting employment stability. It recommends reducing employer premiums to be equal with employee premiums, since many EI benefits are totally unrelated to layoffs and therefore beyond the employer's control, and because EI is a significant cost for businesses, particularly small and medium-sized firms. Another way to deal with the distortions caused by special EI benefits would be to remove them from EI, which the Chamber also recommends. This would enable government to lower EI premiums. As for setting premiums, the Chamber recommends that the rate-setting formula be changed with a view to balancing the EI Account over the business cycle (10 years), rather than annually.
The Canadian Centre for Policy Alternatives calls for a single national entrance requirement of only 360 hours and up to 50 weeks of benefits based on 60% of the best 12 weeks of earnings in the qualifying period (p. 8). Canadian Labour Congress demands these same changes, plus the creation of better training and labour adjustment programs, and more funding for work-sharing arrangements under EI to reduce layoffs.
The discussion of EI by the various think tanks, as might be expected, has been dominated by a concern for the health of the Canadian economy as a whole. A common message appears to be that EI must be reformed in order to help the Canadian economy to grow, to overcome slow productivity growth, to tackle labour shortages in expanding economic sectors, and to keep government taxes and expenditures low (EI is seen by many as a tax). Macroeconomic concerns in an increasingly globalized economy appear to be the driving impetus for policy change. It is typically the language of economics to which politicians are sure to pay attention. No surprise, then, that this theme has been well covered in the EI debate.
Another important issue that arises is national unity. The current system, according to most commentators, does not promote unity. The governments of provinces that the system disadvantages, especially Ontario, Alberta, and B.C., are continually critical of the existing system. Governments of provinces that benefit disproportionately from EI, on the other hand, often claim to be insulted by reform advocates who suggest that it would be better for workers to move to where the jobs are rather than take seasonal work and depend on a government program for their livelihood. Are the critics of reform right when they say that people shouldn't be expected to move away from the place they call home whenever it is necessary to find work? Are there ways to sustain communities, valuing them as unique, without creating systemic dependence on government? These are important questions that deserve thoughtful responses.
Other issues include work ethic, social and human capital, and culture. Some commentators have blamed the EI system for the destruction of social and human capital, the erosion of work ethic, and the distortion and stagnation of certain regional economies. As we have seen, Brian Lee Crowley, Minister Valcourt, and others lament the attitudinal change among many eastern Canadians and the fact that many young people continue to enter seasonal employment in order to benefit from EI. And as Dan Kelly of the CFIB noted, the reaction to Jim Flaherty's comment that the only bad job is no job tells us something of the view of work that, regrettably, many Canadians hold. And while they lament the apparent change in work ethic and growing dependency on government, others resist reform and insist on the necessity, even legitimacy, of the continued reliance on EI to sustain specific industries and communities.
Those commentators who pick up on the important matters of work ethic and culture, however, seem to subsume these into the issue of dependence on government, which in turn is subsumed into the general concern for the health of the economy. Systemic dependence on government is clearly economically unhealthy and unsustainable on a broad scale in the long run. Young people lacking a solid work ethic deliberately entering seasonal occupations also creates long-term disadvantages for the Canadian economy. Such matters ought to capture our attention, but not blind us from other important concerns, or preclude discussion of other matters as important in and of themselves.
What is largely absent from the conversation is a discussion of the nature of work itself as crucial element of Canada's social architecture. There are more reasons to be concerned with how EI operates than program costs and measures of macroeconomic performance alone—although we should by no means disregard the importance of a healthy Canadian economy and the prudent use of public monies. Work has intrinsic value, it is dignified. We find fulfillment in work. Work meets timeless human needs that go beyond providing for our material welfare. It is a vital social institution.
Here I acknowledge and commend Lars Osberg for including, in his 2009 paper for CCPA (see above), contributions from the field of social psychology on the subject of work. Research affirms that people do not like being unemployed and that unemployment has serious negative effects on individual well-being. Moreover, Osberg cites a leading social psychologist in the field, Marie Jahoda, who found that the benefits of work include giving structure to one's day, shared experiences with people outside the family, links to goals that transcend the individual worker, and defining individual identity.
But Osberg's use of social psychology is largely intended to refute those who believe EI disincentivizes work. It is true, as he says, that the assumption that people always prefer leisure to work is misguided. Still, there is ample evidence that EI does create incentives and disincentives that adjust worker behaviour (see Courchene and Allan's essay for IRPP, above). Exploitation is a legitimate issue.
Evidence suggests that EI does create incentive for individuals to forego retraining, moving to a new part of the country, or taking available work of a different kind. In a rapidly changing global economy, wracked by overlapping recessions, it is especially serious when any system disincentivizes retraining.
Furthermore, as the reactions to the recent reforms have demonstrated, once workers begin to rely on EI, especially where regular seasonal unemployment is prevalent, it can be seen and used as a regular entitlement. Yet it is not intended as a seasonable subsidy, but a program offering "temporary financial assistance to unemployed Canadians while they look for work or upgrade their skills." The dignity of work and of the human person demands that the key terms "temporary" and "upgrade" be given renewed attention. These are issues which exceed a myopic macroeconomic perspective, and get to the heart of the nature of work and Canada's social architecture.