The stretched safety net of unemployment insurance
TheStar.com – Canada – The stretched safety net of unemployment insurance
November 10, 2008. Joanna Smith, Ottawa Bureau
OTTAWA–Scott Campbell is taking a financial hit, but he counts himself among the luckier ones.
The 43-year-old was laid off from his job assembling chrome bumpers at an Oshawa car plant almost a year ago.
He saw his weekly income drop by more than $250 when he moved from earning a paycheque to collecting unemployment benefits.
With three young daughters and a mortgage, things are getting tight.
Still, he says, he is “all right.” His wife has a pretty good job, unlike many of the people he sees streaming into the provincially funded action centre at the AGS Automotive Systems plant where he used to work but now volunteers to help other unemployed auto workers find new jobs.
“I see everything: guys basically selling their house because they can’t afford their payments. I’ve seen it all. People can’t afford to drive any more,” he said.
As Canadians head into tough times, more and more people will be looking to benefit from Employment Insurance (EI) to help them through the transition.
The problem is, critics argue, changes to the federal program over the years mean fewer of them will qualify for help than during the recession in the 1990s and those who do will get much less of it.
“A major concern is the lack of coverage,” said CUPE economist Toby Sanger, adding that about 40 per cent of unemployed Canadians are covered by EI at any given time. “For those who aren’t covered by it, what do they have to fall back on? Often it’s social assistance, which has been really cut back in a lot of provinces. The social safety net has been much more tattered.”
The low benefit rate – currently 55 per cent of previous earnings capped at $435 a week but frozen from 1996 to 2006 at a maximum of $413 per week – is one problem. But critics say changes to the system more than a decade ago are another source of headaches.
As part of its efforts to eliminate the federal deficit, the Liberal government changed the program in 1997 from a weeks-based system to an hours-based system that in many cases more than doubled the number of hours people had to have worked before qualifying for benefits – particularly in regions where unemployment is relatively low.
That is why Campbell is one of the luckier ones, but a 45-year-old woman from Cobourg, who did not want to be identified, is not.
She had been working at a different Oshawa automotive plant for about a dozen years and was laid off and rehired almost every year that she was there. When she was laid off permanently in November 2007, she figured she would go on EI for a bit while she retrained for a new career.
Then, when her old claim from a previous layoff ran out in April, she learned she was 42 hours short of the number she needed to qualify – a reason that, according to Statistics Canada, kept 9.6 per cent of unemployed people from receiving benefits in 2007. The help suddenly stopped.
“I’ve lost my car. My house is about to foreclose,” she said, explaining that her benefits were paying for the second mortgage on the home she shares with her husband.
“I have been looking for a job, but there’s not a whole lot out there,” she said. “Everybody else is in the same position. The auto industry has gone for a s— and I mean how many thousands of people are out of a job because of it?”
Unions and opposition critics have called for changes to EI that would essentially reduce the number of qualifying hours to a uniform amount across the country and increase the amount and duration of benefits.
The Ontario government, meanwhile, has asserted the average laid-off worker in this province receives $4,600 less in EI benefits than those in the rest of Canada.
But the question of whether the program can afford these changes is a tricky one.
Over the years, the program generated paper surpluses worth about $54 billion by 2007, which the government used to finance other programs and pay down the debt – now the subject of a Supreme Court of Canada challenge launched by two Quebec unions.
The Conservative government changed the way the EI fund is managed by creating a Crown corporation this year to ensure premiums do not disappear into government coffers. The Crown corporation uses any surpluses in good years to reduce premiums in following years – with a $2 billion cash reserve to stabilize rates.
CAW national representative Laurell Ritchie said this break-even approach means the fund could fall short in tough times.
“The system is no longer positioning itself to weather the storm,” she said. “We have none of the cushion in the system, none of the counter-business cycle approach that allowed us to save in the fat years for the lean years. …We’re so tight on the annual incomes in premiums and the expected expenditures that nothing short of the government starting to put back in some of that ($54 billion) that’s been borrowed over the years is going to get us through this period.”