How not to fix EI

Posted on in Policy Context – opinion/editorials
22 Nov 2013.   Editor

The Canadian Taxpayers Federation has published a damning critique of Employment Insurance that the government would do well to consider as it contemplates how make the system better. But the CTF’s call to turn the program into a personal savings account — as argued by Gregory Thomas below — is misguided and should be rejected.

There is no doubt the EI system is cumbersome and inefficient. In 2011-21, it cost $1.9 billion to administer. Several provinces, including Ontario, pay more into it than they get back in benefits. A program established to provide a temporary safety net to Canadians who lose their jobs has morphed into a giant bureaucracy with complex rules that doesn’t even serve the interests of all workers — at least not equitably. Eligibility rules are so arbitrary, a worker laid off in one part of the country can get benefits, while a counterpart in another region with similar needs is denied. Often workers in the same region are treated differently when it comes to employment insurance.

There is a lot that ails the EI system in Canada and reform is certainly needed, but we should be careful not to make the problem worse by leaving many vulnerable Canadians unprotected. The idea of turning EI payments into savings accounts is very attractive, especially when people are told the money they contribute and the matching funds from their employers would go into a fund similar to a registered retirement savings plan. Who’d be against that?

But there is a reason such a proposal would not work. The system is meant to be an insurance program, in a similar spirit to, say, your average auto or home insurance policy. It is a collective pooling of resources, and yes, often, you don’t see a direct benefit. You may never have the need, but the idea is that, if ever a time came when you did, it would be there for you to provide greater immediate help than personal savings ever could. It is the same with EI. We have collectively decided that the social cost of people being out of work and destitute is unbearable, and it is best to give them temporary help while they try to find a new job. There are many government transfers to individuals that are untargeted and wasteful — child benefits and boutique tax credits, for example. Employment insurance is different: it exists to help people who need the help but cannot provide it for themselves.

Does the EI system need reform? Absolutely. It’s a mess, and the CTF deserves credit for its critique. But the solution is not what the taxpayers federation is proposing. >

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