The trouble with EI: 'It's a postal code lottery'

Thursday, January 20, 2011

Byzantine employment insurance system leaves some jobless collecting benefits, others out of luck


OTTAWA -- Chris Johnston understands the ins and outs of Canada's Employment Insurance regime. It's the logic he's fuzzy on.

For the past four years Mr. Johnston has helped hundreds of workers laid off from Daimler AG's shuttered Sterling Trucks plant in St. Thomas, Ont., navigate the EI system and get on with their lives.

Workers living near the plant typically got the maximum 50 weeks of benefits. But if their home happened to be 70 kilometres down Highway 401 in Woodstock, Ont., where the regional jobless rate is a bit lower, they would get 10 weeks less.

One plant, identical employment prospects, and two sets of EI rules.

Dozens of workers were unfairly short-changed simply because of where they live, said Mr. Johnston, co-ordinator of the plant's adjustment centre. "They should be treated equally," he said.

Regional bias is just one of the bizarre anomalies facing unemployed workers trying to collect EI in Canada. Those chronically left outside the system include young people, new immigrants, part-timers and residents of the country's largest cities, according to the latest in a series of research papers by the Mowat Centre for Policy Innovation at the University of Toronto. A special EI task force, which is meeting in Toronto Friday, is conducting public consultation sessions and plans to release recommendations for overhauling the EI system early next year.

It's all part of a renewed push, endorsed by the federal NDP and the Ontario government, to nudge EI modernization back to the top of the political agenda.

But reform could prove to be a tough sell. The minority Harper government doesn't have much of an appetite for change, particularly if it could stir up regional passions. While Ontario, B.C. and Alberta would gain from making EI benefits more uniform, many of the traditional have-not provinces would resist. So far, Ottawa has contented itself with temporary fixes, including extending the duration of benefits in the 2009 federal budget and, more recently, limiting premium increases.

Meanwhile, the recession has exposed gaping holes and anomalies in Canada's employment insurance rules.

Most problematic is the fact that fewer than half of jobless Canadians are able to actually collect EI. And among those who do, benefits vary wildly from place to place, industry to industry, and worker to worker.

The current system spawns dependency on EI among seasonal workers in some parts of the country, while providing no cushion at all in hard times for millions of workers and employers elsewhere. For businesses, no EI means workers may not be available when orders pick up again if they have moved or changed fields. It's also unfair because these workers and their employers share the cost of EI, but rarely get to tap its benefits, including the funds offered for retraining.

Ontario may have the most to gripe about. Its unemployment rate has shot up to the fourth highest in the country at 8.2 per cent, and yet fewer of its jobless are collecting EI than in any other province - just 40 per cent.

Compare that with Newfoundland and New Brunswick where more than nine out of 10 unemployed collect EI.

Millions of people in major cities, such as Toronto, Calgary or Vancouver, pay into the system, but have a slim chance of collecting if they're out of work.

That fewer Canadians are getting EI isn't a particularly new phenomenon. The participation rate - the percentage of unemployed who actually get EI - has been steadily declining since the government tightened eligibility rules in the mid-1990s - to 48 per cent last year from a peak of 83 per cent in the early 1990s.

What has changed is the composition of the work force. Far more Canadians than ever are working part-time, in more than one job, or on contract - all of which makes them less likely to qualify for benefits if they become unemployed.

"Large chunks of the labour force on not eligible for EI," pointed out Keith Banting, a professor of public policy at Queen's University. "The way the labour market is going, those categories of employees (part-timers and the self-employed) are growing, but EI is shrinking in its coverage of the labour force."

About 10 per cent of the jobless have paid EI premiums, but are underemployed and haven't worked enough to qualify for benefits. Another 30 per cent of jobless Canadians were self-employed, which means they don't contribute to EI and can't collect regular employment insurance benefits when work dries up.

New entrants to the labour market (who have never worked in Canada or have not worked in the past two years) face the highest bar - 910 hours, or nearly six months of full-time work. That compares with a normal entry level of 420 to 700 hours.

"It's kind of scandalous," said Matthew Mendelsohn, the Mowat Centre's director and a former top Ontario government bureaucrat. "Our economy is not creating a whole lot of full-time jobs for low-skilled people right now. So you pay into the system, working 20 hours a week at Tim Hortons, and you'll never get your 910 hours."

The regional variations in eligibility and benefits often bear little relation to how difficult it is to find a job. They are simply the consequence of a system that doles out benefits unevenly, based on the unemployment rate where people live.

"It's a postal code lottery," said Prof. Banting, who is among the economists commissioned by the Mowat Centre to look at EI. "No one is happy with the system."

For purposes of EI, Ottawa divides the country into 58 zones. The higher the unemployment rate in your zone, the more you can collect and the fewer hours you need to qualify.

"EI has become a redistribution system, but not in any targeted way," argued Queen's University economist Robin Broadway, another of Mowat's researchers. "Redistribution occurs between industries and regions, but it has little to do with actual need."

The zone system has long favoured areas with chronic employment and a tradition of seasonal work, such as Atlantic Canada and rural Quebec. In some areas, seasonal workers can work as few as 12 weeks and then collect 45 weeks of benefits.

"The system is designed and wholly fashioned for seasonal workers," complained David Gray, a labour economist and University of Ottawa professor. "That's the carousel effect. You can get on and off EI in perpetuity."

The result is that the EI regime encourages repeat users, and ultimately dependence, he added.

Ontario will always be discriminated against as long as the rules of eligibility remain rooted in local unemployment rates and not a single national standard. "It's never going to favour Ontario's labour market," he said.

Other experts, however, argue that creating a common national standard would introduce a new form of bias, by treating all laid-off workers the same, regardless of often wildly different local economic conditions.


Regional variations

Some provinces' jobless did much better than others in the recession:


Unemployment rate: 8.3%

Percentage of jobless receiving benefits (2009): 48.3%


Unemployment rate: 9

Percentage of jobless receiving benefits (2009): 38


Unemployment rate: 6.6

Percentage of jobless receiving benefits (2009): 39.1


Unemployment rate: 5.2

Percentage of jobless receiving benefits (2009): 45.4

British Columbia

Unemployment rate: 7.6

Percentage of jobless receiving benefits (2009): 45.5


Unemployment rate: 4.8

Percentage of jobless receiving benefits (2009): 49


Unemployment rate: 8.5

Percentage of jobless receiving benefits (2009): 55.7

Nova Scotia

Unemployment rate: 9.2

Percentage of jobless receiving benefits (2009): 71.7

Prince Edward Island

Unemployment rate: 12.1

Percentage of jobless receiving benefits (2009): 89.7

New Brunswick

Unemployment rate: 8.9

Percentage of jobless receiving benefits (2009): 97.9

Newfoundland & Labrador

Unemployment rate: 15.5

Percentage of jobless receiving benefits (2009): 104.3

NOTE: EI benefit rates can exceed 100 per cent because Statscan doesn't count some EI recipients as unemployed, including seasonal workers.

THE GLOBE AND MAIL // SOURCES: Statistics Canada, Mowat Centre for Policy Innovation