Tories freeze EI premiums for 3 years

More money in pockets of employers, workers: Flaherty

The federal government is stepping back from planned increases in employment insurance premiums and freezing costs at current levels for three years.

Finance Minister Jim Flaherty said Monday that EI costs for employers and employees will be unchanged, beginning in 2014, reducing overall payments that year by $660 million, while not affecting the government’s plan to balance its budget by 2015.

“While Canada has seen steady job creation since the end of the global recession with over one million net new jobs, significant challenges remain in the global economy,” Flaherty told reporters at a camping trailer outlet in Ottawa.

Flaherty said the change will leave more money “in the pockets of job creators and Canadian workers in 2014 alone, which will help provide the certainty and flexibility employers, especially small businesses, need to keep growing.”

The location of Monday’s announcement, at Ottawa Camping Trailers Ltd., was chosen because it is an example of a small company that could benefit from the EI premium freeze.

The current premium rate is $1.88 per $100 of insurable earnings and will remain at that level through 2016. In the March budget, Ottawa had originally planned to raise the rate by five cents a year to $1.98 in 2016 — when the deficit is scheduled to be eliminated — and then subsequently revert the figure to $1.93.

Flaherty said the freeze will have “no fiscal impact” on the budget-balancing goal of 2015, “because the EI account, the operating accounts, stands by itself, so it doesn’t affect the budget of the government of Canada.”

Fewer people are collecting EI benefits and more are working, he said, but he acknowledged growth in both the economy and jobs has slowed. “This move will keep hundreds of millions of dollars in the pockets of employers and employees, which can only be a positive for the Canadian economy.

“As employers pay 60 per cent of the cost of the EI system, small firms can use these savings to hire, improve wages or help grow their businesses,” Dan Kelly, president and CEO of the Canadian Federation of Independent Business, said in a statement.

“As payroll taxes like employment insurance are particularly challenging for small business, (Monday’s) announcement of an EI rate freeze is fantastic news for Canada’s entrepreneurs,” said Kelly.

He was with Flaherty at the announcement.

Erin Weir, an economist at the United Steelworkers union, said the number of Canadians receiving regular EI benefits “has declined more sharply, from 709,990 to 512,280, between September 2010 and June 2013.”

“But the falling number of EI recipients reflects not only the slight reduction in unemployment but also government policy changes that make benefits less accessible. Freezing premiums effectively locks in those benefit cuts,” he said.

“The losers from this freeze are unemployed Canadians who are more likely to be left out in the cold without benefits given limited funding for EI,” Weir said.

The Canadian economy grew by a weaker-than-expected 1.7 per cent in 2012.

Flaherty’s March budget has estimated 2013 growth at 1.6 per cent.

In the third quarter of this year, GDP rose by 2.2 per cent, followed by a 1.7 per cent advance in the second three-month period.