Social Policy in Ontario

Jobless insurance needs a new manager

Posted on May 1, 2015 in Policy Context

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TheStar.com – Opinion/Commentary – Rather than managing the EI fund on workers’ behalf, Ottawa helps itself to their money.
Apr 30 2015.   By: Carol Goar, Star Columnist

Canada’s jobless insurance fund needs new management.

The current manager, the Conservative government, raids the $23.1-billion fund at will; collects more in premiums than it pays out in benefits; denies coverage to the most vulnerable workers; dispatches officials to recipients’ homes to catch them loafing; and withholds income support from laid-off Canadians who get one computer keystroke wrong.

The employers and workers who pay for the fund did not ask Ottawa to do this. The government of the day runs the program to suit its needs and priorities. Last week’s federal budget is a good example.

Finance Minister Joe Oliver kept EI premiums at their current rate until 2017 although the fund produced a $3.6-billion surplus last year and is expected to run a $7.2-billion surplus over the next two years.

There was no economic rationale for maintaining higher-than-needed premiums. But there was a powerful political imperative: the Tories needed extra cash to balance the budget and sprinkle pre-election goodies across the land: an enriched baby bonus (now called the universal child-care benefit); a multibillion-dollar investment in public transit; an array of tax cuts for manufacturers, small business owners and parents who split their income; and more room to stash unneeded cash in tax-free savings accounts.

There is always a possibility that jobless claims will spike, eating up the surplus. But that is not what the federal finance department is projecting. Neither are private-sector economists.

The Liberals used similar tactics when they were in power. On Paul Martin’s watch as finance minister, the EI surplus ballooned to $54 billion. He whisked the whole amount into the federal treasury to balance Ottawa’s budget for the first time in 28 years, winning widespread praise as Canada’s deficit-slayer.

When workers complained he’d spent their money, Martin insisted that all revenue was the same. EI premiums were just a payroll tax to be used as the government saw fit. Most economists accepted his sophistry. Most workers strenuously disagreed — and still do.

In fairness to policy-makers, it is virtually impossible to keep the EI fund in balance. Governments can’t control the ups and downs of the labour market. Finance ministers never know precisely how much Canada Revenue will collect in premiums or how much Employment and Social Development will dole out in benefits. A sudden development such as last year’s precipitous drop in oil prices can turn Ottawa’s calculations inside-out. A small policy change such as Oliver’s 20-week extension of compassionate care can add an unexpectedly large burden on the public purse.

What can be controlled, however, is the political manipulation of the fund. Take responsibility for rate-setting out of the hands of the finance minister and Ottawa would no longer be able to overcharge employers and workers for the benefits it provides. Take responsibility for rule-setting out of the hands of the employment minister and Ottawa would no longer have the authority to deny 60 per cent of the jobless EI benefits.

Bring in a non-partisan manager whose sole mandate was to act in the interests of the unemployed and the current tangle of unfair rates and rules would unravel. There are three ways to accomplish this:

– The owners of the fund — workers and employers — could take control. Ottawa hasn’t contributed since 1990. But it charges a hefty fee to administer the account. Surely business and labour could do better themselves. It would take extraordinary co-operation. But both sectors have plenty of talented managers in their ranks.

– They could bring in outside professionals. There are plenty of qualified money managers available. Before handing over the fund, the owners would have to reach a consensus on the role of EI in today’s job market and the eligibility rules. After that, their chief task would be oversight.

– They could attempt to restore the original tripartite arrangement. As a contributor to the fund, Ottawa would have less incentive to dip into kitty and more accountability to its partners and the public. Admittedly, no government is going to chip in voluntarily. But a strongly-worded ultimatum from the two paying participants — pay a share or forfeit control — would shorten the odds. At the very least, it would put the prime minister in an embarrassing predicament.

At the moment, none of these reforms is being discussed. Workers feel powerless. Employers are preoccupied with their bottom lines.

This would be an opportune time for voters — 68.5 per cent of whom are working age — to speak up.

< http://www.thestar.com/opinion/commentary/2015/04/30/jobless-insurance-needs-a-new-manager-goar.html >

Tags: budget, economy, featured, globalization, ideology, participation, standard of living, tax

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