Tweak EI to help jobless Canadians regain their footing
Pandemic changes offer valuable insight, Colin Busby and Stéphanie Lluis argue.
During the pandemic, the government moved quickly to extend regular EI benefits and introduce temporary emergency supports, which are set to expire later this year. These measures helped jobless Canadians weather the worst of the storm. Colin Busby and Stéphanie Lluis
The events of the past year have revealed some gaping holes in Canada's Employment Insurance system, which are underscored in a recent House of Commons committee report. Although the 2021 federal budget committed to consulting with Canadians on how to revise Employment Insurance and make it more flexible, it neglected some swift fixes that would better position unemployed Canadians as the pandemic recedes.
In a study recently published by the Institute for Research on Public Policy, we argue that the federal government should improve EI “working-while-on-claim” (WWC) rules to help unemployed workers find permanent jobs.
These rules allow claimants to take part-time or casual jobs while still keeping a portion of their EI benefits. The rules are meant to help unemployed Canadians keep a foothold in the labour market and provide a stepping stone to permanent employment. By working part-time, EI claimants are more likely to maintain their skills and network of contacts, and demonstrate to prospective employers their commitment to work. Yet only half of EI claimants take advantage of WWC provisions.
The pandemic has caused massive work disruptions and layoffs. Although employment has rebounded somewhat, the number of people who had been unemployed for more than six months stood at 478,000 in May, a near-record high. As a proportion of all unemployed Canadians, these long-term unemployed workers tripled from 9.7 per cent before the pandemic started last year to 28.9 per cent in May.
To support workers left jobless by the pandemic, the federal government extended regular EI benefits and introduced a suite of temporary ones for those who didn't qualify for EI. The Canada Recovery Benefit (CRB) provides for up to 50 weeks of coverage for all workers who aren't entitled to EI benefits. The CRB also offers much more generous work rules than EI. CRB recipients can earn up to $38,000 a year from working part-time jobs before their benefits are clawed back at a rate of 50 cents for each dollar of net income earned above this amount. In contrast, EI beneficiaries see their benefits clawed back by 50 cents with the very first dollar of weekly earnings.
Policy-makers should revise WWC rules and set an earnings limit under which claimants won't have EI benefits clawed back, and a modest clawback rate on earnings above that threshold — much like the CRB. Our review of Canadian and international evidence found that under these proposed rules more people, especially those displaced from low-earnings jobs with weaker labour force attachment, would be encouraged to work while collecting EI and to work more hours. Policy-makers should also consider setting an annual earnings limit rather than a weekly one.
We also encourage the federal government to make WWC provisions temporarily more generous during economic downturns by allowing claimants to keep more of their employment earnings without having their EI benefits reduced and by lowering the clawback rate.
Despite the upsides of the
WWC provisions, many unemployed workers choose not to take advantage of them, perhaps because they have a long history of full-time employment and don't see the benefit of taking on low-paying or part-time jobs. These workers may benefit more from alternative policies such as wage insurance, which allows qualifying EI beneficiaries to accept new full-time employment at a reduced wage while receiving benefits that partially cover the difference between their previous and current earnings.
EI exists not only to provide laid-off workers with income support, but also to help them find permanent work. During the pandemic, the government moved quickly to extend regular EI benefits and introduce temporary emergency supports, which are set to expire later this year. These measures helped jobless Canadians weather the worst of the storm.
But as the economy now begins to reopen, the federal government should consider ways of revising WWC rules to help those who have lost their jobs get back to full-time work.
Colin Busby is a research director at the Institute for Research on Public Policy. He holds an MA in economics from the University of Ottawa. Stéphanie Lluis is a professor of economics at the University of Waterloo. Since 2016, she has been the director of the SouthWestern Ontario Research Data Centre.