November 11, 2011
Ross Finnie, David Gray, Ian Irvine, and Yan Zhang chart the labour market outcomes and income sources of individuals who exhaust EI regular benefits. The focus is on individuals who worked for an extended period prior to receiving EI.
This research has two main goals. The first is to track those individuals who exhausted a spell of regular Employment Insurance (EI) benefits during the 1990s and early into the new millennium in order to investigate the labour market outcomes in their post-EI periods. We focus particularly on individuals who experienced an extended work period prior to receiving EI benefits. The second objective is to examine whether there have been shifts in these patterns following the numerous reforms to EI and Social Assistance (SA) that took place in the 1990s.
A prime motivation for the paper springs from the state of the EI and SA regimes at the end of the first decade of the new millennium. The EI regime presently covers a smaller percentage of unemployed individuals than at any time in the Program’s recent history. Furthermore, currently SA entry involves more stringent qualification conditions, and leaves individuals who depend upon it far below the poverty line. There may thus exist a chasm in Canada’s social safety network, in that many individuals who would be deemed to be in need of, and worthy of, income support may not have access to it. These concerns were central to the Mowat Centre EI Task Force as well as the report by the Expert Panel on Older Workers (2008).
With a view to establishing the facts of how individuals exhausting an EI benefits spell generate income in subsequent years, we use a database that merges the Longitudinal Administrative Database (LAD)—a tax-based file containing several million observations per year, and the EI-LINK file. The EI spell exhaustions are observed from 1994 to 2002, and the LAD data containing post-exhaustion information are exploited until 2007.
The paper has a number of novel aspects. First, while the interactions between EI and other social insurance programs such as SA, Workers’ Compensation (WC) and Canada and Quebec Pension Plans (CQPP) have been examined before, this is the first time that a national database has been used. Second, our data cover a relatively recent time period.
Third, we consider transitions from EI receipt to several states and sources of income receipt, as opposed to SA receipt alone.
The principal conclusions are:
- Despite more exigent EI qualification conditions and entitlement provisions, there is no evidence of an increased degree of subsequent recourse to SA: the numbers and percentage of those exhausting EI spells and subsequently going onto the SA rolls has declined. Empirically the incidence of that transition is not particularly high—in the range of four to five per cent of all EI exhaustees in the years following the end of the EI spell for recent cohorts. Furthermore, just two per cent of EI spell exhaustees depend solely on SA within a year or two of the spell completion date.
- There appears to be a decline in the proportion of those EI exhaustees moving onto government pension programs (CQPP) and disability pension programs (CQPPD) toward the end of our period of study. This transition decision is no doubt complex, and clearly depends upon the age structure of EI spell exhaustees. Yet the recent decline in this transition in our data is consistent with the economy-wide trend in Canada observed in this millennium for individuals to prolong their attachment to the labour market.
- Frequent/repeat use of EI after the event of exhaustion, even among these selected samples of individuals who formerly did not have histories of frequent use of EI income, is one of the strongest patterns to emerge from the data. Subsequent EI claims are observed not just in the immediate period following an exhausted spell, but for several more years at a comparable incidence rate. There is no obvious tendency for this pattern of repeat use to decline during our estimating interval. While the number of individuals qualifying for EI support in general has dropped dramatically, the percentage of EI spell exhaustees who rely on this form of income support in subsequent periods is strikingly stable.
A sizable percentage of individuals generate earnings within a year of exhausting their EI spell. This trend has been strongly positive over time. Between eighty and ninety per cent of individuals in the 2002 cohort of EI exhaustees generated earnings in the subsequent years, albeit many in conjunction with other forms of social insurance income.
Moving to WC from EI is a relatively uncommon event, and the percentage of EI exhaustees doing so remained consistent at a level below one per cent over the 1990s.
Ross Finnie, David Gray, Ian Irvine, Yan Zhang
November 11, 2011