Will the new Employment Insurance be up to the job?

In coming weeks, Ottawa has a golden opportunity to finally reinvent an outmoded Employment Insurance (EI) system, and greatly strengthen the social safety net that helps bind this country.

When the COVID-19 pandemic first struck in March, the existing EI system was so slow and inflexible, and its assistance to Canadians in financial distress so meagre, that Ottawa was obliged to quickly create a parallel income-support program from scratch.

Historians will note the success of that new program, the Canada Emergency Response Benefit (CERB).

The CERB has helped keep its approximately 8.5 million Canadian recipients whole during an unprecedented health and economic crisis. Those recipients, in turn, have helped drive Canada’s economic recovery with their continued spending on necessities.

And that, in turn, has contributed to a “soft landing” for a Canadian economy that has been largely shut down for much of the year in order to protect Canadians from a deadly virus.

The Canadian economy is expected to shrink by about five per cent this year, and strongly rebound in 2021, growing by about 5.4 per cent.

And that’s largely due to the $63 billion Ottawa has invested in Canadians — or, more accurately, the money we have invested in ourselves — so that we can return to normality with a minimum of permanent economic damage.

As there have always been critics of the “dole,” there are critics of the pandemic-era income-replacement programs widespread in affluent economies. The critics say these programs undermine or even destroy the work ethic.

That view is bunkum. But it could impede progress on devising the world-class reformed EI system that

Canadians deserve. So, more on the work-ethic myth later.

Intended since its April inception as a temporary program, the CERB will soon end. The last period of the CERB program expires Sept. 26. And for Canadians receiving CERB payments since the program began, it ends Aug. 29.

The Trudeau government has vowed to “transition” CERB recipients to a reinvented EI. The goal is to create a new long-term income-replacement system that incorporates features that made the CERB work well.

We’ll see the details in coming days and weeks. What would make the new system ideal?

Like the CERB, it would be a rapid-response provider of replacement employment income. And unlike EI, which covers only a fraction of lost employment income, the CERB’s $2,000 monthly payments did not fall short of covering basic living expenses.

We should pause here to note the unwarranted “mission accomplished” sentiment that has taken hold in parts of North America that think the worst of the pandemic and its economic fallout is behind us.

Even before an anticipated second wave of the pandemic, expected to coincide with flu season, we have experienced renewed COVID-19 outbreaks across Canada in jurisdictions where the virus was thought to have been defeated.

And while it’s true that Canada has recovered approximately 55 per cent of the jobs lost in the pandemic, 1.3 million Canadians workers are still without jobs due to COVID-19. Canada’s current jobless rate, of 10.9 per cent in July, is about double the prepandemic rate early this year.

Meanwhile, job recovery has slowed. Last month, the Canadian economy added just 418,000 jobs, down sharply from June’s addition of 953,000 jobs.

The pandemic recession is also a racialized and genderimbalanced one, afflicting women more than men.

The unemployment rate for racialized Canadian workers is 16.2 per cent compared with 9.3 per cent for white Canadians. The jobless rate for Black workers is 16.8 per cent, and for South Asian and Arab Canadian workers it is more than 17 per cent. In all those groups, joblessness is higher among women than men.

Those worker populations are largely concentrated in the economic sectors hardest hit by COVID-19, including retail, tourism, airlines, restaurants, hotels and the arts. And those sectors will be among the slowest to recover.

Standard & Poor’s estimates that even by 2022, the Canadian economy will still be 2.5 per cent smaller than pre-pandemic forecasts had expected it to be by then.

One of Canada’s biggest employers, the $102-billion hospitality sector, expects it will not fully recover from the pandemic until 2022.

All to say that many Canadians will continue to require income support for quite some time.

Late last month, Prime Minister Justin Trudeau provided an outline of what his proposed long-term incomereplacement program will look like.

Describing it as “a better, 21st-century EI system,” Trudeau said EI will finally expand to cover self-employed, contract and gig-economy workers. And EI’s notoriously cumbersome eligibility requirements will be relaxed to enable recipients to “work more hours and earn more money while receiving the (EI) benefit.” That’s a good start. But a reformed EI also needs to cover 75 per cent of lost income, rather than the paltry current 55 per cent. It needs to pay recipients at the beginning of the month, as CERB does, not at the end, as EI does.

A sophisticated system would go further, calibrating support for women, people of colour, new Canadians and other workers with special circumstances. And about that work ethic. The Fraser Institute, the Vancouver think tank, said in a June study that “overly generous employment insurance can discourage workers from rejoining the workforce.”

The Canadian Federation of Independent Business (CFIB), the small-business lobby, said in July that the CERB has “created a disincentive to return to work for some staff.”

Toronto real estate tycoon Michael Cooper, CEO of Dream Office Real Estate Investment Trust, weighed in with, “People are getting addicted to getting paid and not working.”

And Republicans on Capitol Hill in the U.S. have thwarted the renewal of pandemic unemployment relief to 30 million jobless Americans because they believe that relief to be a “disincentive to work.”

Several generations’ of studies have shown that belief to be bunkum.

And in the U.S. alone, five recent studies made by economists at leading universities during the pandemic have found that income supports have had no discernible impact on aggregate employment numbers.

What does make a difference is that there are not enough jobs for all the workers seeking one. The Hotel Association of Canada reports that, with 30 per cent occupancy rates, its member hotels simply can’t afford to rehire workers laid off from COVID-19.

In the U.S., it has been estimated that there are currently about 14 million more jobless workers than job openings.

We’ll soon see what the Trudeau government replaces CERB with. Fortunately, Ottawa’s starting point is that people want to work, and need to be kept whole in times when paid work is hard or impossible to find.

is a Toronto-based business columnist for the Star. Follow him on Twitter: @TheGrtRecession