Stop shortchanging workers on jobless benefits

Posted on July 24, 2015 in Policy Context – Opinion/Editorials – Reforming Canada’s unfair Employment Insurance system should be high on the agenda of the next federal government.
Jul 23 2015.   Editorial

Like other Canadians who are thrown out of work, hundreds of Loblaw employees may find themselves applying for jobless benefits when the company closes 52 unprofitable stores in the coming year. And depending where they live and how many hours they’ve worked they are going to get very different levels of help.

Canada’s support system for the jobless is a mess that shortchanges workers, says a new report from the Institute for Research on Public Policy. By design, the Employment Insurance system discriminates against workers based on where they live and whether they hold down full-time or part-time jobs. It has been turned into a cash cow by successive federal governments. And far too many jobless go without the benefits they have paid for.

Little wonder the report’s authors contend that “the broken EI system needs to be overhauled.” And they should know. Michel Bédard was chief actuary for the program. And Pierre Fortin is an economics professor at l’Université du Québec à Montréal.  Bédard and Fortin illustrate the inherent unfairness of the system by comparing three full-time workers, each earning $560 a week, in Cape Breton, Rimouski and Saskatoon.

In Cape Breton where the jobless rate was highest earlier this year, someone would have had to work for just 12 weeks to qualify for benefits. In Rimouski, it’s 16 weeks. And in Saskatoon, where the jobless rate was lowest, 20 weeks.  They’d also get very different levels of support: the Cape Breton worker would have qualified for $7,920 doled out over 30 weeks, the one from Rimouski $5,480 over 20 weeks and the one from Saskatoon just $3,920 over 14 weeks.

And all three would have counted themselves lucky. Of Canada’s 1.3 million unemployed, only about 40 per cent currently get benefits. And a large share of payouts, nearly 40 per cent, go to anything but direct income replacement. That includes sick leave, parental leave and training.

To add insult to injury, Prime Minister Stephen Harper’s Conservative government, like its Liberal predecessors, has been charging employers and workers higher EI premiums than are needed to fund the system, racking up billions of surplus dollars that can be diverted into pet projects and used to cut the deficit.

What’s the solution?

Bédard and Fortin call for a single, national standard for benefit eligibility and duration, to replace the current 62 regional standards based on local jobless rates. Basically, workers would qualify for the same benefits wherever they live. They suggest workers be required to put in 20 weeks to qualify, with a minimum 15 hours per week. Benefits would be based on a worker’s best 20 weeks worth of insurable earnings prior to losing a job. And payouts would reflect the length of time the person had been employed.

In addition to simplifying the system the report recommends that insurable earnings be hiked to $104,000 from $49,500. And that the income replacement formula be changed from a flat rate (currently 55 per cent of insurable earnings) to a progressive rate (still averaging 55 per cent) that provides higher income replacement for lower-income workers and less for higher earners.

The authors would cut the waiting period from two weeks to one.
They would split the premium costs evenly between employers and employees. Employers pay 58 per cent now.
They would deliver non-core programs separately from the EI system.
And they’d have the fund financed and run independently from government, and transparently.

Given the complexities involved, this report may not get the traction it deserves in the run-up to a federal election campaign. But it would be good to know where the party leaders stand on its proposals. It should be high on the agenda of the next government.

This is a sensible blueprint for reforming a program that millions of Canadians rely on. It’s also a stark reminder of just how far we have strayed from the ideal of providing fair benefits in an even-handed way to workers who fall on hard times.

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