Why EI has to end

With 58 different geographic regions and countless rows and columns on its eligibility charts, it’s an understatement to say that Canada’s Employment Insurance system is complicated.

Perhaps that’s why a small handful of critics have difficulty wrapping their head around the proposed changes the Canadian Taxpayers Federation makes in its latest EI report. It’s very simple, despite being a significant reform.

While we say our Employment Insurance Savings Account idea is simple, our detractors call it simplistic, even stupid.

We propose letting Canadians keep the EI taxes currently docked from every paycheque in a personal Employment Insurance Savings Account they could use in the event that they, their spouse or a family member find themselves out of work.

Those Canadians who manage to avoid lengthy bouts of unemployment would end up with a sizable nest egg at the end of their working lives, money they could roll, tax-free, into a retirement account.

This year, the government will extract $4,277 from every working couple who each earn at least $47,400, docking the funds directly from their paycheques and their employers’ payroll remittances.

Invested with the kind of returns the Canada Pension Plan has been earning, this money could grow into a nest egg of $60,000 or more in 10 years, and half a million dollars in 30 years — provided they remain gainfully employed.

A young couple in their 20s, starting out today, could end up with more than a million dollars by the time they retire, assuming the sort of inflation we’ve experienced since the 1990s.

Yet, those who disagree with the plan argue that a savings plan is an ineffective, inadequate tool or weapon in the fight against a catastrophic circumstance: losing your job, and with it, your means of putting food on the table and a roof over your head.

An insurance plan, they suggest, is far superior. And in theory, it is.

Few of us could afford to set aside enough money to care for survivors if we died in our 30s. And most of us would be in a lot of trouble financially if we suddenly became quadriplegics.

The few who are stricken with these catastrophes benefit immeasurably from life insurance, car insurance and disability insurance — purchased by the many to assist the few.

In theory, this is how employment insurance should work.

Why force everyone to set aside their own rainy-day fund in the event of an unexpected job loss, when we could all make a much smaller contribution to a much larger fund, a fund that need only assist those who actually do lose their jobs?

In practice, once employment insurance becomes mandatory, it’s no more than a tax. Once the government seizes control of the EI tax revenue, and once politicians decide whom to insure, the insurance model goes out the window. It’s even worse when politicians compete to trade so-called insurance benefits for votes at election time.

The biggest beneficiary of the EI scheme has always been the federal treasury: when the former EI fund was legislated out of existence in the 2010 federal budget, it contained a $57-billion surplus, money that had long since been siphoned away for other government pet projects.

The second-biggest beneficiary of the EI scheme has been frequent claimants in those parts of the country where vote-buying has been most prevalent. Today, you can be employed for 592 hours in Ottawa, earning $28 an hour, and pay nearly $700 in EI taxes. Lose your job and you’re out of luck. Your employment insurance benefits? Zip. Zero. Nada. Nothing.

Work those identical hours at those identical wages in some parts of rural Quebec and you will collect nearly $17,000 in EI benefits, more than you earned on the job.

If car insurance worked that way, you’d only get compensated if your accident occurred during rush hour.

It’s no wonder that among all working-aged rural Newfoundlanders who filed a tax return, 89 per cent reported income from EI benefits between 2008 and 2010. And among all Newfoundlanders who filed an EI claim, over 60 per cent have filed at least three in the past five years. At least three.

There are those who would reform Canada’s Employment Insurance system by tweaking the eligibility requirements, hiring a battery of auditors to police it, or writing a new 2,000-page Employment Insurance Act, accompanied by 10,000 pages of regulations.

We at the Canadian Taxpayers Federation know better than to think of EI as resembling anything like a real insurance system.

After 40 years of failed tweaks to the insurance model, we simply say: give us our money back.