Did we learn nothing from the recession? [Employment Insurance]

TheStar.com – opinion/editorialopinion
Published On Thu Sep 01 2011.    By Carol Goar, Editorial Board

Canada went into the last recession unprepared. Our political leaders were in denial. Our employment insurance system was outdated. Our bankruptcy laws were inadequate. Our financial safety cushion — a healthy surplus — had disappeared.

We weathered the economic storm better than most western nations, thanks largely to a strong banking sector and steady consumer spending.

But everything that was broken in 2008 is still broken.

And we will soon pay the price. Our economy has been losing steam since April. Over the summer, the debt crisis in Europe, the political paralysis in Washington and the high exchange rate of our dollar have taken their toll. Forecasters are warning of more upheaval in the fall.

We have less manoeuvring room today than we did three years ago. Our budget is $30 billion in deficit, our employment insurance account has a $10.4 billion shortfall and we have the highest level of household debt in our history.

If Canada falls back into a recession — or if we’re already in one that hasn’t shown up in the statistics — millions of families will have no cushion.

It didn’t have to be this way. Our government had the time, had the money (it poured $39.9 billion into economic stimulus) and had the incentive to tackle these problems. Yet it brushed off calls from business, labour, the opposition parties and the unemployed to fix Canada’s broken economic stabilizers.

Fortunately, there is one flicker of light in the gloom. In 2008, a new think-tank, the Mowat Centre for Policy Innovation was launched to address the issues governments were ignoring. One of its top priorities was EI reform.

For the past year, the centre’s founding director, Matthew Mendelsohn, has been canvassing employers, unions, workers and social service agencies; commissioning research papers; and brainstorming with his colleagues to come up with a blueprint for a modern EI system.

The Mowat Centre will release its findings in October. “It will be a set of specific proposals and recommendations with costing options,” Mendelsohn says. “If we go into a recession, there will something out there that the government can come pick up.”

Judging from the think-tank’s research and Mendelson’s remarks, here are some of the report’s major thrusts:

• Treat all laid-off Canadians equally. Under the current system, those living in “high unemployment” regions qualify for higher EI payments for a longer period than their counterparts in “low unemployment” regions. In Toronto it takes 16 weeks of full-time work to qualify for a maximum of 42 weeks of benefits. In eastern Nova Scotia, it takes just 11 weeks of work to qualify for a maximum of 50 weeks of benefits.

• Extend EI coverage to everybody who pays into the fund. More than 50 per cent of Canadians — contract workers, temporary workers, part-time workers, casual workers and workers laid off and hired back repeatedly — are not ineligible for benefits.

• Change the rate-setting mechanism. Under the existing formula, the EI account must be in balance every year. This means premiums have to go up in hard times. A more sensible approach, Mendelsohn says, would be to balance the fund over the course of a business cycle.

• Allow older workers to job share and reduce their hours gradually.

The cost will be “pragmatic,” Mendelsohn says. But there will be winners (precarious urban workers) and losers (workers in small rural communities). That, plus the government’s evident lack of interest, will make it a hard sell in Ottawa. “Many people have laughed at me during this project.”

He admits the odds are long. But what is driving him is the belief that Canada needs an employment insurance system that supports its people when market forces falter.

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