The bitter reality of employment insurance
TheStar.com – Canada – The bitter reality of employment insurance
January 25, 2009. Laurie Monsebraaten, SOCIAL JUSTICE REPORTER
Millions of Canadian workers pay employment insurance premiums their entire working lives giving little thought to what would happen if they lost their jobs tomorrow.
But as the global economic crisis deepens, tens of thousands facing layoff are learning the cruel truth.
Cuts in the early 1990s mean barely half of the country’s unemployed today – and fewer than a quarter in Toronto – are eligible for benefits. Those lucky enough to qualify often get far less than poverty-level incomes. And for almost everyone scrambling to find work as the economy crumbles, benefits run out too soon.
As Stephen Harper’s Conservatives put the final touches on Tuesday’s budget, labour and business leaders alike are calling on Ottawa to mend Canada’s tattered employment insurance program – and put money in the hands of those who need it most and are most likely to spend it now.
The United States Congress has already passed two federal extensions to state employment benefits, and a new bill could see many American workers laid off in the beginning of 2008 collect benefits for up to two years.
Most Canadian observers believe Ottawa is also ready to act.
For about 2,400 auto-parts workers who lost their jobs when Vaughan’s Progressive Moulded Products plant went bankrupt last July, the fix cannot come soon enough.
* Balvir Kaur Singh worked full time at the factory for 17 years before dropping to part time last year after a workplace injury. As a result of changes to EI in the 1990s that boosted the number of hours a person has to work before qualifying for benefits, Singh initially didn’t receive a cent. However, she was later awarded 17 weeks of EI sickness benefits.
* Single mom Duc Phung Diep is drowning in debt because EI is paying her just $325 a week – or 55 per cent of her previous income. Laid-off workers during the last recession were eligible to receive 60 per cent of their earnings.
* Lincoln Meikle’s EI ran out Jan. 6 after just 38 weeks. Like most of his co-workers, he is still jobless and wondering how he will survive with no income. During the early 1990s, he could have received 50 weeks of employment insurance and then turned to a relatively generous welfare system to support him.
“I am trying. Sometimes I cry. It’s too hard,” Balvir Kaur Singh says quietly in halting English.
The 40-year-old mother of three, who immigrated to Canada from India in 1990 as a new bride, worked the midnight shift so she could be home during the day with her children, who are now age 17, 16 and 7.
But a slip on the factory floor in September 2007 put Singh’s “happy life” in Canada into a tailspin. After five months off work, Singh was only able to return to work part-time. Many days she wasn’t able to work at all.
When the company went bankrupt several months later, Singh didn’t have the minimum 665 hours in the previous 52 weeks needed in Toronto to qualify for regular EI benefits.
She eventually received 17 weeks in EI sickness benefits. But that ran out last fall.
Coupled with her husband’s reduced hours as a truck driver for another company, the Singhs, who live in a four-bedroom home in Maple, are now facing financial disaster.
“How do we pay our bills?” she asks, her eyes brimming with tears.
Economists, academics and unions want Ottawa to scrap EI entrance requirements based on regional unemployment rates and allow workers everywhere to qualify if they have worked 360 hours in the previous year. This would include new entrants and those on special benefits, such as maternity or sick leave.
Workers currently need between 420 and 700 hours depending on regional unemployment rates before they qualify. New workers or those returning to the workforce after a two-year absence need between 840 and 910 hours and those seeking maternity or sick benefits need 600 hours.
Before 1996, when Unemployment Insurance was renamed Employment Insurance, workers only needed the equivalent of between 180 to 300 hours to qualify. For new entrants, it was just 300 hours.
“How do we care for our children?” asks single mom Duc Phung Diep, who came to Canada from a refugee camp in Vietnam in 1996 with her 4-year-old son.
Despite her poor English, Diep found work immediately in the garment industry and then in an electronics firm. She started at Progressive in 2000, earning as much as $800 a week with overtime. Just over a year ago, as she was nearing the end of maternity leave for her second child, she bought her first home in the Jane-Finch community.
The company’s financial ruin has put enormous pressure on Diep, who extended her mortgage to 40 years last summer.
Still, Diep’s mortgage eats up most of her $325 weekly EI payments, forcing her to rely on her monthly child benefits of less than $400 for everything else.
Diep, 36, whose EI runs out at the end of the month, says she is lucky to be accepted into a basic English and math course offered through the province’s Second Career program and hopes it will lead to further training as a hairdresser. But the living expenses included in the program are even less than what she received on EI. And now she has child-care expenses of $150 a week while she attends class every day.
“I’ve used my savings. No more savings. I’m very worried,” she says, her fear palpable.
Business and labour groups are calling on Ottawa to boost EI benefits – frozen for a decade after the cuts – to at least 60 per cent of earnings based on the best 12 weeks of pay in the previous 26 weeks.
Currently, weekly benefits are 55 per cent of earnings based on average weekly earnings for the previous six months. The maximum weekly payment for 2009 is $447.
During the early 1970s, unemployed workers received 75 per cent of their earnings. But benefits have declined considerably since then. By the end of the decade they had fallen to 60 per cent. In 1993, they dropped to 57 per cent and then to 55 per cent in 1994.
The more generous benefits during the last recession combined with the ensuing 10-year rate freeze, means an unemployed worker in 1991 received the equivalent of up to $600 a week – almost $150 more than today.
Lincoln Meikle, 53, worked almost two years at the plant as a machine operator where he earned more than $15 an hour.
When the company went bust, he qualified for 38 weeks of EI benefits – the maximum duration for the unemployed in Toronto under the current system’s regional rules. Those benefits ran out earlier this month.
Meikle has drained his meagre savings and RRSPs and last week his TV and home phone services were cut off because he can no longer make the payments.
The Scarborough father of four grown children who are either in school or out of work has turned to friends for help this month. But he doesn’t know how he is going to pay February’s $830 rent and $140 auto insurance.
He is loath to turn to welfare, a program that has also been stripped to the bone and would likely require Meikle to sell his car – his only remaining asset and lifeline to a new job – in order to qualify.
“I’ve looked for work and, trust me, there isn’t any to be had. I hope I can get into training. But if a job comes, I’m gone. I can’t live this way.”
Labour groups want Ottawa to increase the duration of benefits to at least 50 weeks in all regions and provide an additional year of special extension benefits if the national unemployment rate exceeds 6.5 per cent. National unemployment for December was 6.6 per cent.
Currently, the maximum benefit period is 45 weeks. But only the jobless in areas of high unemployment receive benefits for that long. Where unemployment is less than 7 per cent, the maximum varies from 36 to 38 weeks or just eight or nine months.
Before the changes of 1996, unemployed workers could receive benefits for up to 50 weeks. Older workers and others in special programs could receive benefits equivalent to EI for longer periods.
Unemployed workers in many American states may soon receive benefits for up to two years under a proposal supported by President Barack Obama. Canadian labour groups say Canada must follow suit.
“The focus should be on (EI) access and duration,” agrees TD Bank’s chief economist Don Drummond.
The respected banker and former senior federal finance official supports the call to standardize EI access across the country at 360 hours and to extend the benefit period beyond the current 45 weeks to support training.
“The purpose of EI is to provide a temporary cushion to someone when they become unemployed so they don’t become destitute … and it’s just not doing its job,” he says.
“The culprit is the relationship between the number of hours that you work and the unemployment rate where you happen to live,” he says. “That’s got to change.”
CURRENT EI RULES
• Eligibility is based on regional unemployment rates and the number of hours worked in the previous 52 weeks. In areas where unemployment is less than 7 per cent, laid-off workers need between 665 and 700 hours before they can receive benefits. Where unemployment tops 13 per cent, they need just 420 hours. New entrants need between 840 and 910 hours and those seeking sickness or maternity benefits need 600 hours
• Weekly benefits are based on 55 per cent of average earnings over the previous 26 weeks to a maximum of $447.
• Benefits last between 14 and 45 weeks depending on regional unemployment rates and hours worked during the previous year.
SUGGESTED EI CHANGES
• Eligibility for all workers – including those seeking sickness and maternity benefits – set at a uniform 360 weeks.
• Weekly benefits based on at least 60 per cent of average earnings based on the average of the best 12 weeks in the previous 26 weeks.
• Benefits should last for at least 50 weeks for all eligible workers with an extra year of “special extension” benefits if national unemployment exceeds 6.5 per cent.