EI premium credit will create only 800 jobs: report

OTTAWA — Canada’s spending watchdog is warning the federal government that its much- touted $ 550- million employment insurance credit for small businesses will result in scant job creation — a warning business leaders say fails to take into account the overall benefits to the economy of leaving more money in company pockets.

The Parliament Budget Office, in a report released Thursday, calculated that only 800 net positions will be created over the next two years — 200 fulltime equivalent jobs in 2015 and 600 new hires in 2016 — under Ottawa’s Small Business Job Credit program.

The government’s freeze on EI premiums, which was announced Sept. 11 and takes effect Jan. 1, could actually cost the country 10,000 jobs by 2016 because the current premiums are higher than needed to cover the cost of the job credit, the PBO said.

The planned cut in premiums will not be passed on to employees until a new sevenyear self- sustaining EI regime begins in 2017.

“The premium rate freeze will reduce full- time equivalent employment by 2,000 jobs in 2015 and a further 8,000 jobs in 2016,” the PBO said in its report.

“Over a longer outlook, any employment created or lost in 2015 and 2016 is mostly offset by equal and opposite changes to premium rates after 2016 as a result of the seven- year break- even rate- setting mechanism,” it said.

“If the rate in 2007 is misestimated for 2017, it could require several years of capped increases or decreases to rates to eliminate the resulting surplus or deficit on the account. This acts against the goal of stable premium rates.”

But the Canadian Federation of Independent Business questioned the PBO’s job tally, adding that regardless of how many people are hired, any additional money left over for companies will still benefit the economy.

“It seems odd that a half- a- billion ( dollar) tax reduction over the next two years would be thought to create only 800 jobs,” said CFIB president Dan Kelly.

“Our analysis was 25,000 personyears of employment, and there’s a difference between jobs and person- years, even as the PBO outlines,” he said.

EI premiums will be cut to $ 1.60 for every $ 100 earned by small businesses in both 2015 and 2016, from the current level of $ 1.88, with the changes targeted at companies that pay $ 15,000 or less in EI premiums that works out to about 90 per cent of small operators in Canada. Larger companies will continue to pay the existing EI rate.

But Gregory Thomas, federal director of the Canadian Taxpayers Federation, said: “We think they should cut the EI premiums — both for employers of all sizes and for the people who work. We think that’s good politics.”