Employment Insurance for modern times
Last year turned out to be a disappointing year for employment growth in Canada. The year was also indicative of the broader structural changes that have been underway in our labour force for a long time. Unfortunately, the federal Employment Insurance system can't accommodate the "new normal" in our labour market.
Premiers are meeting today in Victoria to discuss what the federal government should be doing to improve Canada's prosperity. EI reform should be high on their agenda. During the forth quarter of 2011, 63,000 full-time jobs were lost. The loss was partially offset by increases in part-time positions. This is to be expected. An increase in part-time work and self-employment is normal during and after recessions. People take on whatever work is available and accept more uncertainty and less pay until circumstances improve. But even in good times, Canada's labour market is increasingly defined by work that doesn't fit the traditional model. When the EI system was designed, steady, full-time employment was prevalent. These jobs are less common today.
According to Statistics Canada data, since the 1970s, the incidence of part time work has increased by over 50% and self-employment by about 30%. Multiple jobs holders are 2.5 times more common among workers than they used to be. This "new" type of work is clustered both geographically and demographically. That is, it is increasingly taken up by youth and new Canadians. And, it is increasingly concentrated in large urban centres, from St. John's to Vancouver.
In short, there has been a fundamental shift in the structure of the labour market across the country. The latest downturn will likely accelerate this longer-term trend. Unfortunately, our national safety net has not kept up. Less than half of Canada's unemployed in 2011 qualified for EI benefits. And the numbers who qualify vary drastically from province to province. In some provinces, over 90% of unemployed workers receive EI benefits at any given time; in Ontario and Alberta, barely one-third do. These ratios hardly budged during the recession. Now, the "softness" we see in recent job growth poses a particular problem for those workers who are most likely to have periods of little or no earnings, unstable employment, or underemployment. The system needs to be made more responsive to this kind of worker and the modern labour market.
The Mowat Centre's recent EI task force recommendations suggest ways to do so in a fiscally responsible manner. As a start, the system needs to be standardized so that all Canadians face the same rules and have access to the same benefits no matter where they live. Second, for those who fall outside the EI umbrella altogether, a different type of repayable support is required. With respect to this second point, a temporary unemployment assistance program would be a repayable form of support for those who cannot access EI. Specifically, it would assist those who have exhausted their benefits, or have moved into self-employment or other non-EI insurable work, or are in part-time positions and cannot accumulate sufficient hours, or have lost one of their multiple jobs.
This type of program would be flexible and responsive. It would also be cost effective because the assistance it provides would be temporary and narrowly targeted at a particular group. The benefits would be repayable in part or in full for those who ended up with a higher income by the end of the year.
Some have questioned the wisdom of introducing yet another new program, and believe it would be more effective to expand EI so that it covers more workers. But this approach would simply provide more benefits to those already covered. It would also worsen the regional disparities that already define the system. In an era where government resources are so scarce that programs are being cut, the social safety net must be highly effective and carefully targeted.
Temporary unemployment assistance would be just that.
Some forecasters believe that Canada's labour market will not start growing again until well into 2012.
An updated EI that can accommodate the "new normal" is all the more urgent. Premiers should take this opportunity to demand reform to the program.
Mary Davis is an executive researcher with the Mowat Centre.
The final recommendations of the Mowat Centre Employment Insurance Task Force can be found at:
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