A better way to reform EI

Posted on May 9, 2009 in Debates, Governance Debates, Social Security Debates

NationalPost.com – Opinion/Editorial – A better way to reform EI
Published: Saturday, May 09, 2009

From a purely fiscal point of view, Canada’s federal unemployment insurance program can be viewed as a spectacular success story. Under the Liberals, the payroll tax became a revenue-spewing money machine, siphoning off pennies from every dollar working-class Canadians earned. Liberal leader Michael Ignatieff should be pointing to Paul Martin’s creation with pride, proof positive of the party’s prowess with the nation’s finances — rather than denouncing it in regular tirades aimed at embarrassing the Tories.

Or maybe, occasional populist that he’s become, Mr. Ignatieff realizes that many Canadians — the ones who tend to keep their jobs, in particular — resent our nation’s EI system in its current form. Their ill will is justified: The outsized EI premiums that Canadians pay contribute to our enormous tax load. And for years, the program has paid out far less in benefits than it has taken in through premiums.

When the Liberals introduced the Employment Insurance Act in 1996, jobless rates around the country were worse than they are now (despite the repeated claims that we are in the worst recession in 80 years). According to federal data, unemployment ranged from 13.5% in St. John’s and Trois Rivieres, Que., to 7.3% in Regina and 10% in the B. C. interior. Today’s figures are, respectively 7.4%, 8.1%, 3.1% and 9.3%.

Nonetheless, as part of Mr. Martin’s belt-tightening measures of the mid-1990s, the act made it harder to collect jobless benefits, and reduced the amount paid out. Contributions, deducted straight from most paycheques, continued unimpeded. The result was what the private sector would call an easy profit. Income far exceeded payouts, and within a few years, labour groups were complaining about the burgeoning surplus.

They were upset because the extra money was not being used to help the unemployed, but was poured into general revenue to fight the deficit. In regards to that goal, it succeeded brilliantly. By 2006, when Mr. Martin’s government was defeated, “Employment Insurance” (which he had rebranded to get rid of the nasty “un”) had collected $50-billion in excess revenues. If Mr. Harper is to be blamed for anything by Liberals, it should be for failing to rake in the same easy profits.

Instead, Mr. Ignatieff is demanding the opposite. He dislikes the practice of linking benefits to the regional jobless rate, says the 58 regions tracked by Ottawa are too many, and proposes a minimum eligibility requirement that would be the same across the country. The effect would be to open the payout floodgates. But the reforms would only be temporary, he says, and would be lifted once the recession is over.

This latter claim is wishful thinking. The Canadian Labour Congress backs the same minimum eligibility requirements adopted by Mr. Ignatieff, but sees them as permanent. Ottawa being what it is, this is what it would almost certainly become. If the Liberals should gain power having delivered easier access to jobless benefits, they would be in no position to tear up the EI amendments once Mr. Ignatieff became PM.

The notion of a one-size-fits-all system makes no sense in any case. As the numbers cited above indicate, the impact of the downturn varies widely across the country. Western provinces continue to do relatively well compared to the East. The system as it exists was designed to reflect the fact that finding work is easier in some parts of the country than in others, and that remains true.

What has changed since 1996 is the identity of the provinces in need. Suddenly, it’s voter-rich Ontario that is suffering high rates of unemployment. Mr. Ignatieff understandably wants to appeal to those votes, and is using EI to do so.

Mr. Ignatieff is correct that taxpayers should be getting a better deal on EI. But the better way to fix the system and stimulate the economy isn’t bloating the payouts, it’s reducing the tax load. What Canada needs is a return to prosperity, which will take care of the unemployment problem and eliminate the need for increased benefits. Liberal proposals will only ensure that when that day comes, we are saddled with a permanent increase in costs.


This entry was posted on Saturday, May 9th, 2009 at 1:00 am and is filed under Debates, Governance Debates, Social Security Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Leave a Reply