At the end of this month, the consultation period ends for the second phase of the federal government’s employment insurance reform efforts. The way the discussion documents are framed and subsequent statements by government officials during consultation meetings make it clear that it is the government’s intention to make it easier to get EI benefits, to make them more generous and to provide them for longer.
With almost all COVID-19 Public Health restrictions eliminated and economies beginning to recover from the pandemic, employment opportunities have returned to pre-pandemic levels, but labour availability has lagged. This pending expansion of EI will hamper business’ ability to recover and, in some cases, their ability to sustain their operations entirely. The lack of available workforce had become the number one issue for businesses even prior to the pandemic and now it is a full-blown crisis that is a threat to just about every business in the province.
The government appears, in part, poised to make permanent, some of the temporary changes to the program implemented in the early days of the pandemic, such as lowering the minimum hours worked threshold, standardizing that number across the country, and a longer benefit duration. The critical piece that seems missing from the current system and the government’s way of thinking is, as its name suggests, EI is supposed to be insurance with a narrow and limited scope that provides needed support with the overarching goal of returning folks to work as soon as possible. While we obviously need social programs, EI should not be the mechanism to deliver them, nor should it be designed to withstand a once-in-a-century event like a pandemic. We should be prepared for that scenario, but EI is not the right way to provide either of these things.
EI’s sole intended purpose should be as an insurance program, and this is one of the reasons why the provincial government was right to end the practice of providing EI to full-time students last month. That being said, the issue of access to post-secondary education and skills training still exists and we hope that the government is prepared to fill that gap with a more appropriately funded program. We can understand why students that planned to rely on this funding in the fall are upset about the abrupt timing of that decision. In the immediate term, businesses need students to work, but in the long term, it is critical that people can more easily obtain credentials, upskill and prepare for the future of work. Student employment also creates important connections to our communities and therefore makes it more likely that we will retain them after graduation.
Having an efficient and financially stable Employment Insurance system is a needed safety net – both employees and employers benefit from a program that is properly designed and implemented. If someone has paid into the system and loses their job, the insurance pays them temporarily until they are able to find another job. Individuals collecting EI should be both looking for work and available to work – baseline expectations, and critical to returning the fund to a sustainable position. Currently the fund is $29 billion in debt and the government’s proposed expansion will add billions more to the annual cost. Given that the system is funded entirely by employers and workers – the EI rate will have to be dramatically increased over the next few years to return to balance, which is a federal legislative requirement – this will come out of the pockets of workers and in many cases, small businesses – neither of whom can afford more costs.
We have listened to labour groups and government officials state during the consultation process that EI is not a disincentive to work. However, studies in multiple jurisdictions[1] confirm that EI benefits prolong joblessness and there is a strong correlation between EI benefits coming close to ending and recipients funding employment[2]. That is to say – regardless of how long one receives benefits, on average they tend to get a job just as benefits are ending. This would indicate either that the current duration of benefits is adequate, or the current duration of benefits is a disincentive to find work. We experienced this effect at our office this summer trying to hire a student intern – we were told specifically by one candidate that they couldn’t take the job because they would lose their EI benefits.
At a minimum, to mitigate the negative effects on the economy of expanding EI, the government must ensure the integrity of the program by stepping up enforcement of the rules to prevent abuse of the system and enhance efforts to match EI recipients with job vacancies. If work is available, that should be the first and only option – which is already the case but seemingly unenforced. To design EI properly, the government should focus on its fundamentals – an insurance system for a limited and temporary purpose.
Krista Ross is CEO of the Fredericton Chamber of Commerce, a nationally accredited organization with more than 1,000 members, is an active business organization engaged in policy development and advocacy that affects the competitiveness of our members and the Canadian business environment. The Chamber’s vision is ‘Stronger Community Through Business Prosperity’.
[1] Lauringson, A. (2011). Disincentive effects of unemployment insurance benefits: maximum benefit duration versus benefit level. Baltic Journal of Economics, 11(1), 25–49. https://doi.org/10.1080/1406099X.2011.10840489
[2] DOĞAN, F. İ. (2019). Unemployment Benefits and Unemployment Duration in France and Poland. Marmara Journal of European Studies, 27(1), 191–216.