October 10, 2017 | By Mowat Centre
Canada’s employment insurance (EI) system is a major plank of the country’s social architecture. However, the system, now 75 years old, is failing to meet its original intent. EI was established to protect workers against income loss while temporarily out of work and to provide access to job opportunities through training. In order to meet those objectives today, EI needs major reforms. Indeed, the shortfalls that exist in 2017 will only be amplified as the employment landscape continues to change significantly in the decades ahead.
Over the past few years, the Mowat Centre has conducted considerable work examining issues related to Canada’s EI system. Most recently, a paper that Mowat released earlier this year by Donna Wood explores the history of EI in Canada and some of its major challenges. In particular, Wood’s paper highlights that while EI is co-funded by workers and employers it is managed unilaterally by the federal government. This is not how the system was intended to work. Wood notes that the missing voices of workers and employers at the table are at the root of many of the problems with the program over the years.
Although Canada’s EI system today also includes “special benefits” for those who are sick, pregnant and caring for family, the temporary income assistance and associated training account for the bulk of EI spending. However, in recent years, the system has not effectively achieved its two primary goals of i) providing income protection to those who are temporarily out of work, or ii) supporting skills training and labour market adjustment.
The percentage of unemployed Canadians who qualify for EI has dropped significantly in recent decades – from 85 per cent in 1989 to generally below the 40 per cent mark today. This figure can often be even lower depending on where the recipient lives. For instance, in 2016, this figure was only 28 per cent in Ontario. EI’s skills training component provides insufficient assistance to the many unemployed Canadians who need training but do not qualify for EI income support benefits. Tax funded programs to make up the shortfall were cut back over 20 years ago and never fully restored. Canada is one of the lowest spenders on labour market adjustment programs in the industrialized world.
Trends related to income inequality and the changing nature of work can further compound these issues amid the context of automation and artificial intelligence – which could potentially put millions of Canadians out of work in the next 10 to 20 years – as well as growing precarity in the workplace. In 2016, for instance, the number of part-time jobs added to the Canadian workforce was close to 2.5 times more than the number of full-time jobs added. This was a significant shift from previous years, which saw much larger increases in full-time employment. These trends directly impact Canadians’ ability to access the EI system, as full-time workers are significantly more likely to receive regular benefits compared to part-time workers who become unemployed.
Changes are needed to address elements of the system that no longer reflect current realities, such as the outdated notion that most workers in Canada hold full-time and permanent positions. Reforms should also take into account that those who are ineligible for EI, including young people and newcomers to Canada, are also unable to take part in training programs due to rigidities and restrictions that leave them out. Such training programs have the potential to play a critical role in the new world of work, which will likely involve ongoing job churn. As advancements in technology replace or transform existing jobs, access to new training or opportunities for life-long learning will be critical to prepare workers for the future.
Unfortunately, the EI system has typically not been well-positioned to address unemployment associated with downturns in specific sectors. The concept of EI as a way to provide short-term relief to Canadians in between jobs may also become particularly outdated within a landscape where a high proportion of jobs will be automated and there may be no next job at all. These trends have prompted some to consider completely new tools to address these issues, such as a universal basic income or a system of portable benefits.
It is time to revamp the way we think about employment insurance in Canada and how we share the risk of unemployment. It has become clear that our EI system is already outdated and no longer serves its initial purpose well. More risks are increasingly borne by those workers least able to bear them. These discrepancies are only expected to grow in the future.
A key first step to address reform of the system lies with its governance. Putting the voices of workers and businesses back at the heart of the EI system is a simple way of ensuring that any reforms are made equitably.
October 11, 2017