Jobless? Why You Might Not Get Employment Insurance
'Reforms' fattened surpluses, failed to prepare for bad times say critics.
*Story updated at 9:25 a.m., Feb. 19, 2009.
If you are one of the 129,000 Canadian workers who lost a job last month, maybe you take comfort that all those employment insurance payments were deducted from your previous paycheques. Now you can count on insurance payments to get you through tough times, right?
Maybe not. The EI safety net features a lot more gaps than it did a decade and a half ago. By some measures, only 42 per cent of Canada's unemployed workers are receiving EI payments, roughly half the percentage covered during the late 1980s.
Just when far more Canadians are poised to need it, the nation's unemployment insurance scheme is broken, say a growing chorus of critics.
"We are going to see a lot of people absolutely desperate," Canadian Auto Workers spokesperson Laurel Ritchie told The Tyee. "If the crisis lasts very long, and I think it will, welfare rolls will grow as unemployed workers are denied benefits or see their benefits run out."
Ritchie said that the numbers for unemployed Canadians receiving employment insurance benefits were so low because changes in the system enacted in 1996-97 have made it harder to qualify for EI and have shortened the length of benefit payments, resulting in more workers exhausting their benefits before finding new work.
Women will bear the brunt disproportionately, worries public policy professor Marjorie Griffin-Cohen at Simon Fraser University.
"Fewer than 40 per cent of all who become unemployed are eligible to receive benefits, and only about one third of the women who become unemployed are eligible," Griffin-Cohen told The Tyee.
Gone are the days when most people who paid for unemployment insurance could count on at least some protection should they be unemployed, Griffin-Cohen said. "It is part-time workers who are most penalized when they become unemployed, and because women predominate among part-time workers, it partially explains their frequent inability to qualify for EI benefits."
Griffin-Cohen predicts this glitch in EI will hasten rather than soften the spiral down for many people.
"As this recession deepens, which it will do, the failure of the EI program will push more people into poverty -- requiring the provincial government to pay for the problem through increased numbers on social assistance. If the province continues to deny large numbers of people assistance, then it will be pushed further down to cities. This is when the real crises begin, as we have seen over the past few years with increased homelessness."
Too much EI as 'moral hazard'
One who resists broadening EI benefits is Darcy Rezak, managing director of the Vancouver Board of Trade. Rezak is worried about eroding Canadians' work ethic.
"Improved insurance always carries with it a moral hazard," said Rezak. "We could see more unemployment because the richer benefits would make some people choose to stay on EI instead of moving to where work is available or taking lower paying jobs."
Mark Leier, who teaches labour studies at Simon Fraser University, told The Tyee that the EI system has been made more difficult to access for a reason.
"It pays fewer people less money," he said. "Business and government made these changes to discipline labour. This is no accident. It reflects the logic of the system. It really poses the central question of whether the economy is designed to create better lives for all or higher profits for a few."
Counting who is eligible
In 2008, according to B.C. Federation of Labour president Jim Sinclair, over 70,000 unemployed British Columbians were ineligible for employment insurance. And the situation is getting worse across the country in 2009. Sinclair says that the EI system is "broken."
But Philip Hochstein, president of the Independent Contractors and Businesses Association of B.C., told The Tyee he was suspicious of the numbers cited by Sinclair and other labour spokespeople on EI coverage.
"I wouldn't take their stats as accurate," he said. "They are trying to make a point. Employment insurance shouldn't become a way of life, where people work for six months and then collect benefits for six. The CLC is right about one thing. We need to look at EI in its totality and reform the entire system, not just tinker around the edges."
A report by Stats Canada for 2007, before the economic crisis hit, found just over a million Canadians were unemployed on average during the year, of which only 452,000 -- about 45 per cent -- were receiving EI benefits.
In January, Canada and B.C. were rocked by record setting job losses: 129,000 nationally and more than 35,000 in this province. The Conservative government's federal budget took a pounding from The Canadian Labour Congress for failing to come to the aid of the mounting unemployed. The left-leaning Canadian Centre for Policy Alternatives, where Griffin-Cohen is a founding director, concurred, saying the "biggest single failure of the budget" was its mere six per cent hike in "the total value of EI improvements [to] address the most significant recession since the 1930s."
But a spokesperson for the ministry overseeing the employment insurance system claimed figures quoted by labour critics of EI are not measuring the right thing.
The number cited by critics is called the beneficiary to unemployment ratio (B/U), and "it includes many unemployed who have not paid premiums such as those who have never worked; have not worked in the past year; or have been self-employed," the spokesperson, who wished to be unnamed, said in an e-mail to The Tyee.
The B/U ratio includes individuals who paid premiums but are ineligible for EI benefits because they voluntarily quit their jobs or they return to school.
The ministry spokesman cited an HRSDC report that says once workers who are ineligible under the current rules are excluded, 82.3 per cent of unemployed workers were eligible to receive benefits in 2006.
The government spokesman who corresponded with The Tyee in February did acknowledge that the B/U ratio was over 80 per cent in the 1980s, and has dropped to around 42 per cent since the major changes enacted on the unemployment system in 1996-97.
In the same HRSDC report, the government authors say there were more than 1.03 million unemployed workers in Canada in 2006. In the reference week in 2006 chosen by the researchers for attention, only 311,000 of these workers were receiving regular benefits. By the anonymous government spokesperson's accounting, that would mean that well over half a million unemployed people in 2006 just walked away from their working lives for school or other reasons.
Calls to move the bar again
What do all these competing and contested numbers add up t? A radically different landscape for Canada's unemployed, according to a 2004 Canadian Employment Commission paper. It called the 96/97 changes, "the most fundamental restructuring of the Unemployment Insurance program in 25 years."
And a McGill university study published at the same time concluded those changes sharply increased the number of insured hours a worker has to log before she qualifies for EI benefits. They'd gone up from between 180 and 300 hours to a much more demanding minimum of from 420 to 700 hours.
Labour critics like the CAW and the CLC want to lower the bar again. They say a worker should qualify for EI after 360 hours logged and his benefits should last at least 50 weeks in all regions. Currently, different parts of Canada gear their EI qualifying requirements to regional unemployment levels.
This year's new budget will extend coverage for those already receiving EI benefits by five weeks, a temporary measure designed to disappear in two years.
On average, current recipients qualify for just 32 weeks of benefits, less than the theoretical maximum of 50.
In addition, the budget extends the life of work-sharing agreements in which workers receive EI benefits and work shorter hours while employers recover.
The new maximum for these programs is now 52 weeks.
The budget also freezes premiums paid by workers and employers for two years, and increases funding for job training and apprenticeship programs.
Critics point out that such improvements will do nothing for the majority of unemployed workers in Canada, who will still be unprotected by the insurance scheme when they lose their jobs.
When the good times rolled
Critics also say both Liberal and Conservative governments have misused an EI surplus of over $50 billion accrued since the system was changed. Those governments re-directed the money paid by workers and employers into debt and deficit reduction and into general revenue when the surplus should have been saved for an economic rainy day.
Now the monsoon season has arrived, critics say, and the government ought to replace the money that was removed and use the resulting surplus to provide better and longer lasting insurance coverage for the unemployed.
In a recent ruling, the Supreme Court of Canada said that the diversion of EI premiums to other government expenditures was constitutional.
But four years ago, a parliamentary committee's report declared government has "a moral obligation... to restore integrity to the Employment Insurance Act. This necessarily requires that the cumulative surplus in the EI Account be returned to the EI program."
From its inception until 1990, unemployment insurance was funded by contributions from employees, employers and the federal government. Since then, only employees and employers have contributed.
The system was both self-financing and generating surpluses in 1996-97 when the most sweeping changes, including the shift to the EI branding, were implemented.
The system ran a $3.5 billion surplus in 1994 and close to $6 billion in both 1995 and 96.
Raise the rate?
Since the changes implemented by the Chretien government, the EI system has accrued a surplus of over $50 billion, most of which flowed into general revenue and underwrote deficit reductions.
Now that Canadian workers need to draw on what they and their employers paid in, the system is straining to deliver on its promise.
"The bottom line is that our new EI system has not been tested by a recession since its inception," said Marc Lee, an economist for the CCPA. "And there is good reason to believe that it is a shadow of its former self as an automatic stabilizer in a recession"
Not only are fewer workers eligible for EI now than they were before government tinkered with the unemployment insurance formula in the 1990s, Lee says, but your payout if you are lucky enough to qualify for it, won't buy as much.
"The current rate of $447 per week (maximum) has been heavily eroded by inflation; to be back where we were in the early 1990s, it should be more like $600 a week."
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