Closing the gap between EI and welfare

TheStar.com – news
Published On Sun Jan 01 2012.    Laurie Monsebraaten, Social Justice Reporter

Tiffany McDowell was thrilled to land a customer service position at an Oshawa technology firm last January, several months after her daughter’s first birthday.

The job, which required no night work and was located on a bus route near her daughter’s babysitter, seemed like a perfect fit for the financially strapped single mom who had worked in a book store and a call centre before Alexandra was born.

But her hopes of climbing out of poverty were dashed last July when IQT Solutions went bankrupt and McDowell discovered she didn’t have enough insurable hours to qualify for employment insurance.

“It was a real blow to lose that job,” she says. “And without EI, I had no alternative but welfare.”

McDowell, 25, is among a growing number of area workers who either aren’t covered by EI or don’t qualify and could benefit from a proposed “Jobseeker’s Loan” designed to bridge the gap between employment insurance and welfare, says social policy researcher Michael Mendelson.

Last year, more than 700,000 unemployed Canadians were either not covered by EI or ineligible, he says. Across the GTA, only about one-quarter of unemployed workers received EI.

Under Mendelson’s proposal, income-tested forgivable loans would be available in bi-weekly payments of almost $700 for six months. The loans would be repaid based on total earnings for the year the money was received — they would be completely forgivable for those with incomes below about $10,000 and fully repayable for those earning about $71,000. At about $51,000, recipients would have to repay half of the Jobseeker’s Loan. All adults looking for work would be eligible for the full loan of almost $9,000 every five years and it would could cost the federal government about $1 billion annually.

“I hope people will explore it and think about it as an alternative to welfare, which is a very oppressive, paternalistic and stigmatizing program,” says Mendelson, who came up with the scheme with colleague Ken Battle as part of a larger review of EI released in November by the University of Toronto’s Mowat Centre.

“It would fill a large hole in Canada’s income security system, at a reasonable cost,” he adds.

The labour movement and others have urged Ottawa to expand EI coverage, beef up payments and extend benefits for up to two years. But Mendelson argues it would be difficult and prohibitively costly to design a more generous program that would include self-employed and contract workers. Liberalizing welfare would be equally onerous, he adds.

However, Mendelson thinks both programs would likely be easier to reform if there was a loan program to provide a time-limited, income-tested bridge between the two without the asset stripping, myriad rules and stigma of welfare.

He compares his Jobseeker’s Loan to the income-tested Guaranteed Income Supplement for low-income seniors receiving Old Age Security (OAS) payments.

It would be non-stigmatizing and give all adults actively seeking employment the opportunity to get back on their feet “without losing everything and having to restart financial life from zero” by being forced onto welfare.

“I see it as a sort of ‘Working Income Supplement’ paid in advance,” adds Mendelson, a senior scholar with the Caledon Institute for Social Policy.

But the Ontario Federation of Labour, which has been highly critical of the idea, has called it “little more than a payday-loan scheme for unemployed workers in precarious and non-standard work.”

The plan downloads the cost of unemployment supports to workers who can least afford it, says Pam Frache, the union’s research and education director.

“It undermines any incentive for government to expand access to EI,” she says.

More worrisome, Frache sees Mendelson’s proposal as another form of Australia’s Income Contingent Loan Repayments (ICLR) for post-secondary education.

When first implemented about 20 years ago, student incomes were relatively high before they had to repay their college loans. But government cost-cutting over the years has pushed the threshold lower and increased student fees, adding significantly to students’ debt burden in that country, she says.

“Even if the authors truly believe the majority of jobseekers’ debt would ultimately be forgiven and funded out of general revenue, the lived experience with ICLR schemes for more than 20 years is one of decreasing generosity,” she says.

But Mendelson says governments can cut any program, as witnessed by cuts to EI in the 1980s and 1990s. Moreover, the proposed Jobseeker’s Loan would be a new program in addition to EI and welfare, not a replacement.

For McDowell’s part, she thinks the Jobseeker’s Fund would be a welcome boost.

Most of her $922 monthly welfare cheque goes toward rent and utilities, while she struggles to pay for groceries, transit, clothing and other costs on her monthly child benefits and tax credits of less than $500 a month.

“Diapers alone cost $50 to $60 a month,” she says.

Under Mendelson’s plan, McDowell would be eligible for bi-weekly payments of $692 — a 62 per cent increase over what she receives on welfare.

After six months, if she was able to find a job similar to the one she lost (which paid $11 an hour), her loan repayment would be less than $5.

“A loan program would certainly help people like me,” she says. “It would be great to give it a try.”

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