Correcting Course: Employment Insurance Needs a Redesign to Counter Recessions and Achieve Equity

Posted on October 11, 2022 in Policy Context

Source: — Authors: , – Education, Skills And Labour Market
October 6, 2022.   David Gray and Colin Busby

As a primary pillar of Canada’s social safety net, Employment Insurance (EI) has proven itself to be slow to react to downturns, weakening its ability to automatically stabilize the economy. It has also gone off track from its original main goal: to provide insurance against unpredictable job losses.

·       EI should be modernized with an eye to making it a more effective counter-cyclical income support tool by making the access criteria more equitable and ensuring that benefit durations respond quickly and effectively to unemployment shocks.

·       During the Great Recession of 2008/09, the oil price collapse in 2014/15, and the most recent pandemic, however, the program has proven itself unable to meet in timely fashion the needs of many workers who face job losses. During the commodities shock, unemployment rates in some regions in Alberta rose sharply, but there was no immediate increase in either benefit duration or ease of access. A similar pitfall emerged in low-unemployment regions at the beginning of the COVID-19 pandemic.

·       Benefit entitlements should be less oriented to indemnifying chronic unemployment and more responsive to covering unemployment caused by cycles or totally unanticipated shocks like the pandemic.

·       The authors make three main policy recommendations: (i) Implement uniform or more universal entrance requirements. (ii) Sharply reduce the number of EI regions. (iii) Improve the responsiveness of the benefit duration formula to labour market downturns and recoveries.

The Study in Brief
The EI System’s Flaws and History of Ad-hoc Responses
New Solutions Are Required
An Illustration of a Redesigned EI Entitlement Matrix
A Recession-Ready EI for the 21st Century

Download PDF –

David Gray is a Professor of Economics at the University of Ottawa.

Colin Busby was awarded the 2007 C.D. Howe Research Fellowship and joined the Institute as an analyst thereafter. While writing broadly on economic issues, his emphasis is on fiscal and social policy. Appointed Associate Director of Research in 2016, Colin focused his attention on the Institute’s healthcare policy and human capital research.

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