There is a great irony in Ottawa’s response to the COVID-19 crisis. Prime Minister Justin Trudeau’s government is being forced to rebuild the social safety net that a previous Liberal regime deliberately dismantled. This is the essence of the so-called federal stimulus package that Trudeau announced Wednesday. In effect, the government is admitting that measures originally designed to protect Canadians from catastrophic income loss no longer work. They must be rethought.
Nowhere is this more true than in the program now known as Employment Insurance. Originally called Unemployment Insurance, it was created out of the experience of the Great Depression of the 1930s. That depression taught the world that market forces alone can’t always solve the problems posed by an advanced capitalist economy and that in moments of crisis firm government action is necessary. In particular, it underlined the need for governments to provide income to those who, from no fault of their own, found themselves unable to work.
In Canada, the primary vehicle for this was Unemployment Insurance, a national program that required a constitutional amendment before it could come into play in 1940. Financed by payroll taxes levied on employers and employees, the program allowed Canadian workers to survive several post-war recessions.
It worked. Indeed, it worked so well that policymakers began to believe it was no longer necessary.
In 1995, Jean Chrétien’s Liberal government effectively gutted what it by then was calling Employment Insurance, reducing payouts and making it much more difficult for the jobless to qualify for benefits. In one blow, the federal government rendered irrelevant one of Canada’s premier social programs. That irrelevance only grew as governments across the country allowed businesses to avoid payroll taxes by treating their workers as self-employed, independent contractors ineligible for EI.
By last December, only 39 per cent of the unemployed qualified for EI. But jobless rates were low anyway and no one much cared. Until the coronavirus epidemic struck.
Now workers are once again losing income. The reasons differ from the experience of the 1930s. People are staying away from work for health rather than economic reasons. But the effects are the same. Through no fault of their own, large numbers of Canadians are effectively unemployed.
No surprise then that the federal government has created two new programs to provide money for those out-of-work Canadians who don’t qualify for EI. The Emergency Care Benefit will provide up to $450 a week for up to 15 weeks to those required to stay home from work who don’t qualify for either paid sick leave or EI.
The Emergency Support Benefit will provide an as yet unspecified amount of money to those facing unemployment who don’t qualify for EI.
In effect, the Liberal government is reinventing an unemployment insurance scheme that will actually cover the unemployed.
Finance Minister Bill Morneau is pitching this as a temporary measure to deal with a short-term emergency. He should be more ambitious.
First, there is no guarantee that this epidemic will be over soon. Even the eternally optimistic Trudeau says this emergency could last months.
Second, we will almost certainly face more emergencies. Some will be epidemics like this one. Some will result from climate change. Some will stem from the financial and economic contradictions in world markets.
Whatever the cause, it’s better to have something in hand to deal with such crises rather than start all over again from scratch.
A real unemployment insurance scheme, one that took into account all the jobless, would be a good first step.
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