EI rules need to be changed to reflect today’s workforce

The federal government is engaged in another of its policy cat- andmouse games, hinting what it might do to change the way employment insurance works. The budget omnibus bill will give the government carte blanche to change the system by regulation, but to what end?

Based on what little information the federal government has shared, its focus will be on reducing payments to people who are habitual collectors of EI. This would be a minor tweak of a system that requires a major overhaul.

The fact the current EI regime is almost impossible to explain is the first clue that it’s time for a rethink. There are 58 EI regions in the country, each with different standards for who can qualify, how much they receive and how long they get it. No other major country takes this approach.

The rules represent the realities of the 1970s, when the program was designed, not the realities of a 21st century workplace that features more part- time work, more instability and more self- employment. The Mowat Centre think- tank describes today’s program as “an outcome of decadeslong inertia and tinkering.”

The government is fortunate in that a great deal of work already has been done to identify the problems with the EI system, and potential solutions. The Mowat Centre has conducted extensive consultations leading to a major research report and 18 recommendations.

Mowat’s work identified three key principles. A reformed system should: be there when workers need it; contribute to a dynamic labour force and enhance productivity; and treat workers equitably. Those are really common sense principles, but the system we have now fails all three tests.

The ability to collect EI repeatedly has encouraged people to stay in communities where there is not enough work to support them, or to choose not to take the work that there is.

In effect, this creates an artificial economy in some regions at the expense of workers and businesses elsewhere in the country. The government wants to address this problem, somehow, but there is far more that requires change.

One of the flaws in the system is that it treats individuals according to the general employment situation in their region. A more robust local economy certainly helps one to find work, but it’s no guarantee of a job. An analogy might be not providing you with medical benefits, even though you pay taxes, because people like you are generally healthy.

The EI system has not caught up to the changing realities of Canada. Of particular importance is that Ontario has become a hot spot for unemployment and the province’s workers are out of a job for the longest periods of time.

And yet, the EI system treats all other Canadians more generously. Ontarians pay heavily into EI, a net contribution of $ 20 billion between 2000 and 2010, but the province has the lowest percentage of unemployed people receiving benefits.

This is a big money issue. Canadian workers and employers pay around $ 20 billion a year in EI premiums. The government intends to steadily increase premiums over the next four years to eliminate an accumulated deficit in the EI account.

That sounds reasonable, until one considers that EI money went into general revenue until 2006 and that government took in $ 57 billion more than it paid out in EI benefits before the rules were changed.

Workers and businesses overpaid for years, now they have to pay more because government has changed its method of accounting.

Canadian workers and businesses should expect a clear, principled and fact- based assessment of what’s wrong with the system now, and how proposed changes will improve it.