Women and the Employment Insurance Program: The Gender Impact of Current Rules on Eligibility and Earnings Replacement

Transcription

1 Women and the Employment Insurance Program: The Gender Impact of Current Rules on Eligibility and Earnings Replacement By Monica Townson and Kevin Hayes Monica Townson Associates Inc. The research and publication of this study were funded by Status of Women Canada s Policy Research Fund. This document expresses the views of the authors and does not necessarily represent the official policy of Status of Women Canada or the Government of Canada. March, 2007

2 Status of Women Canada is committed to ensuring that all research produced through the Policy Research Fund adheres to high methodological, ethical and professional standards. Specialists in the field anonymously review each paper and provide comments on: The accuracy, completeness and timeliness of the information presented; The extent to which the methodology used and the data collected support the analysis and recommendations; The original contribution the report would make to existing work on this subject, and its usefulness to equality-seeking organizations, advocacy communities, government policy makers, researchers and other target audiences. Status of Women Canada thanks those who contribute to this peer-review process. Library and Archives Canada Cataloguing in Publication Townson, Monica, Women and the Employment Insurance Program [electronic resource]: the gender impact of current rules on eligibility and earnings replacement / Monica Townson and Kevin Hayes. Electronic monograph in PDF format. Mode of access: World Wide Web. Issued also in French under title: Les femmes et le Programme d'assurance-emploi, l'incidence des règles actuelles sur l'admissibilité et le remplacement du revenu de chacun des sexes. Includes bibliographical references. ISBN Cat. no.: SW21-158/2007E-PDF 1. Insurance, Unemployment Government policy Canada. 2. Unemployed women workers Services for Canada. 3. Labor supply Sex differences Canada. 4. Women Employment Canada. 5. Canada. Employment Insurance. 6. Gender-based analysis Canada. I. Hayes, Kevin II. Canada. Status of Women Canada III. Title. HD7096.C3T ' C Project Manager: Vesna Radulovic and Jo Anne de Lepper, Status of Women Canada Publishing and Translation Co-ordinator: Cathy Hallessey, Status of Women Canada Editing and Layout: PMF Editorial Services Inc. / PMF Services de rédaction inc. Translation: Lexi-tech International For more information, contact: Research Directorate Status of Women Canada 123 Slater Street, 10 th floor Ottawa, Ontario K1P 1H9 Telephone: (613) Facsimile: (613) TDD: (613)

3 ABSTRACT The Social Security Review of 1994 made reforming unemployment insurance a key part of the federal government s Jobs and Growth Agenda. Changes were made in 1996, when the program was renamed Employment Insurance (EI) instead of the previous Unemployment Insurance underlining a change in policy emphasis from providing income replacement to assisting the unemployed to find work. In addition, various restrictions and penalties were introduced, the impact of which was to reduce the percentage of unemployed people who could qualify for benefits. Benefits were now to be based on total earnings and total hours worked in the 12 months prior to the claim, starting from the first dollar and the first hour. Under the previous program, those working less than 15 hours a week with a single employer were either not insured or not fully insured. The new hours-based system widened a gender gap in EI coverage, largely because the average hours worked by employed women, even when they work full time, are lower than the average hours worked by employed men, As well, the new system does not fully accommodate the family responsibilities most employed women must undertake. While women workers must now contribute to the program from the first dollar of earnings, women who work part time or in other types of non-standard jobs for low wages may not have enough hours to qualify for benefits. As a result, the contributions made by low-income women workers represent a transfer to other higher-income workers more often men who receive benefits from the program. In effect, all these workers are now required to contribute to EI from the first dollar of earnings, but only a minority are able to qualify for benefits if they lose their jobs. Elimination of the gender gap in EI coverage will require changes in the qualifying rules that recognize women s ongoing family responsibilities and different patterns of paid employment. As well, self-employed people must be included in the program, and access to training programs under EI must be improved. The calculation of benefit amounts must be simplified and the program made more transparent.

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5 TABLE OF CONTENTS LIST OF TABLES...iv ACRONYMS AND ABBREVIATIONS...vi PREFACE... vii ACKNOWLEDGMENTS... viii ABOUT THE AUTHORS...ix EXECUTIVE SUMMARY...x 1. THE EVOLUTION OF THE EMPLOYMENT INSURANCE PROGRAM...1 Women and the EI Program...2 Benefits for Married Women Limited...2 Maternity Benefit Restrictions...3 Women s Work Patterns...4 Previous Studies of Women and Unemployment Insurance...4 The 1971 Unemployment Insurance Act...5 The 1970s and 1980s...6 The 1990s...7 A Note on Methodology THE SOCIAL SECURITY REVIEW...12 Key Features of the UI Program at the Time of the Social Security Review...13 The Employment Insurance Act (Bill C-12) of THE IMPACT OF THE NEW PROGRAM ON WOMEN...18 The Gender Gap in UI/EI Coverage for Unemployment Benefits...19 Reasons Why the Unemployed Were Not Receiving Benefits...20 Coverage Varies by Age...22 The Gender Gap in the Provinces...23 Gender Gaps Vary Widely by City...23 Insurable Employment and the Target Population...25 The Gender Gap in Earnings...27 The Gender Gap in Benefit Amounts...28 The Method of Calculating the Weekly Benefit Payment...29 Examples of How a Claimant s Benefit Is Calculated...30 Exceptions to the Divisor Rule...31 Pregnancy, Parental, Sickness and Compassionate Care Benefits...31 The Impact of the 600 Hours Requirement...32 Qualifying for Maternity and Parental Benefits Under the New Program...34 Mothers of Newborns Who Receive Maternity or Parental Benefits...34

6 ii Qualifying for Regular Benefits...37 Entrance Requirements, 1971 to Present...38 Key UI/EI Eligibility Requirements...38 The Family Supplement...40 Women and EI Skills Training...40 Employment Benefits...42 Support Measures THE EI CHANGES IN RELATION TO LABOUR MARKET DEVELOPMENTS...44 Employment and Unemployment...44 Job Permanency...45 Part-Time Work and Other Forms of Non-Standard Jobs...46 Gender Differences in Hours of Work...47 Alternative Work Arrangements...49 Women with Children...50 Overtime Rewarded Under EI Hours System...56 The Impact of Non-Standard Work Arrangements on Hours Worked...57 Job Tenure of Women and Men in Full- and Part-Time Jobs...62 Length of Unemployment Spells...63 Family Responsibilities and Eligibility for UI/EI...64 Hours of Work and Family Responsibilities FEATURES OF THE EXISTING EI PROGRAM THAT CAUSE CONCERN...67 The Impact of the Labour Force Attachment Definition on Women...67 Categories of Those Who Are Unemployed...68 Job Leavers or Voluntary Quits...69 Not in the Labour Force but Wanted Work...70 The Variable Entrance Requirement...71 The Use of the Unemployment Rate in Determining Coverage and Benefits...72 Gender Implications of the Official Unemployment Rate...73 New Entrants and Re-entrants...74 Unemployed Women Heading Families and the Family Supplement...75 Coping with Unemployment...78 Loss of Access to EI Benefits Borne by Those with Lowest Incomes...79 Transparency of the Program: Reports from the Focus Groups CONCLUSIONS AND OPTIONS FOR CHANGE...85 Measuring Labour Force Attachment...86 Lifelong Learning and the New EI Rules...87 Balancing Paid Work and Family Responsibilities...88 Instability in Working Hours...88 Leaving a Job Voluntarily...89 Recommendations...90 The Direction of Our Recommendations...91 Summary of Recommendations...98

7 iii APPENDIX: TABLES BIBLIOGRAPHY NOTES...117

8 LIST OF TABLES 1. Changes in the Replacement Rate of EI Benefits Average Weekly Hours Worked Reasons Unemployed Are Not Receiving EI Benefits Activity Prior to Unemployment in Percentage of Unemployed Receiving EI Benefits Percentage of Unemployed Receiving UI/EI in Ontario Percentage of Unemployed Receiving UI /EI in Canada s Largest Cities The Gender Gap in EI Unemployment Benefits Coverage Distribution of Unemployed by CMA and Non-CMA Geographic Areas, The Gender Gap in Weekly Earnings, Weekly Earnings of Claimants of EI Regular Benefits, The Prescribed Divisor for Averaging Weekly Earnings Average Weekly EI Benefits Canada, Eligibility of Mothers for Maternity and Parental Benefits, Canada Women in Non-Standard Work Arrangements Canada, 1997 and Average of Weekly Hours Worked by Age Women and Men Working Over and Under 35 Hours a Week Canada, Working Long Weekly Hours Overtime Worked by Employees Aged 15 Years and Over in Average Weekly Overtime Hours in Percentage of Workers Paid and Unpaid for Their Overtime Hours Percentage of Employed Women and Men Working Part Time, by Age Reasons for Part-Time Work by Age, Canada, Growth in Multiple Jobholding Multiple Jobholders by Age Group. Canada, 1995 and Types of Temporary Jobs in Permanent and Temporary Jobs Held by Women and Men in Growth in Various Types of Temporary Jobs. Canada, 1997 and Self-employment in Growth in Self-Employment 1976 to 2004 (Average annual percentage change) Job Tenure of Women and Men in Full- and Part-Time Jobs, Average Months Worked Length of Job Tenure by Age Group. All Types of Jobs Average Weeks Unemployed Length of Unemployment Spells Days Lost from Work by Workers Aged 25 to Average Yearly Days Lost from Work by Workers of All Ages by Reasons for Loss Time Away from Work for Personal and Family Reasons Unemployed Who Have Not Worked in the Past 12 Months or Have Never Worked Categories of Unemployed Workers Based on the Previous Year Reasons for Unemployment,

9 v 41. Job Leavers by Reason for Leaving in 2004 (Total, unemployed and not in the labour force) Reasons Not in the Labour Force but Wanted Work in Required Hours of Work by EI Regional Unemployment Rate Official Unemployment Rates Official and Unofficial Unemployment Rates Number of Unemployed Women Heading Families Number of Unemployed Women Heading Families with Children Under Percentage of UI/EI Claimants with Children by Market Income Quintiles Main Sources of Income of Unemployed People Who Are Not Eligible for EI, Canada, Number of UI/EI Claimants by Gender with and without Children by Income Quintiles, Canada...80 Appendix Tables A1 Percentage of Unemployed Receiving UI/EI Benefits, Canada A2 Percentage of Unemployed Receiving UI/EI, Benefits, Provinces A3 Percentage of Unemployed Receiving UI/EI Benefits, Cities A4 Number of UI/ EI Claimants with Children Under Age 18 by Claim Type A5 Number of UI/ EI Claimants with Children by Family Status A6 Average Market Income of UI/EI Claimants with Children A7 Average UI/EI Benefits of UI/EI Claimants with Children A8 Average Total UI/EI Benefit by Gender of Claimant and Age of Their Youngest Child A9 Average Amount of Child Tax Benefit / Child Tax Credit Received by UI/EI Claimants A10 Number of UI/EI Claimants by Age Of Claimant Receiving Child Tax Benefit /Child Tax Credit A11 Number of Women UI/EI Claimants Above and Below the Statistics Canada Low Income Measure (LIM) Cut-off, by Age of Youngest Child Under 12 Months and Children 1 to 17 Years of Age A12 Number of UI/ EI Claimants with Children and without Children A13 The Monthly Regional Unemployment Rate Grid that Determines the Minimum Hours Needed to Qualify and the Maximum Weeks of Benefits a Claimant Is Entitled to Receive A14 Reasons for Not Receiving EI Benefits During Pregnancy or After Birth or Adoption of a Child, Canada A15 Average Weekly and Annual Hours Worked by Women of Childbearing Age in Non-Standard Jobs, Canada, A16 Weeks of Work Required at Average Weekly Hours in Various Types of Non-Standard Jobs to Meet a Requirement of 600 Hours, by Age Group and Sex, Canada,

10 ACRONYMS AND ABBREVIATIONS AHRDA Aboriginal human resources development agreement AHRDS Aboriginal Human Resources Development Strategy B/U Beneficiaries/unemployed (ratio) CEIC Canada Employment Insurance Commission CLC Canadian Labour Congress CMA Census metropolitan area CPP Canada Pension Plan EAS Employment Assistance Services EBSMs Employment Benefits and Support Measures EI Employment Insurance HRDC Human Resources Development Canada HRSDC Human Resources and Social Development Canada LMDA Labour market development agreement MIE Maximum insurable earnings NERE New entrant/re-entrant NES National Employment Service QPP Quebec Pension Plan SDC Social Development Canada SLID Survey of Labour and Income Dynamics UI Unemployment Insurance VER Variable entrance requirement

11 PREFACE Good public policy depends on good policy research. In recognition of this, Status of Women Canada instituted the Policy Research Fund in It supports gender based policy research on public policy issues in need of gender-based analysis. Our objective is to enhance public debate on gender equality issues in order to enable individuals, organizations, policy makers and policy analysts to participate more effectively in the development of equitable policy. The focus of the research may be on long-term, emerging policy issues or short-term policy issues that require an analysis of their gender implications. Funding is awarded through an open, competitive call for proposals. A non-governmental, external committee plays a key role in identifying policy research priorities, selecting research proposals for funding and evaluating the final reports. This policy research paper was proposed and developed under a call for proposals in September 2004, entitled Social Security Review: Ten Years Later. Research projects funded by Status of Women Canada on this theme examine issues such as: the integration of marginalized women into policy discussions on the Canada Social Transfer; the gender impact of Employment Insurance rules on eligibility and earnings replacement; the impact on women of Canada s social policy regime over the last decade; the treatment of lone parent mothers in new employability regimes; and the link between the availability and adequacy of social programs and women s human rights. A complete list of the research projects funded under this call for proposals is included at the end of this report. We thank all the researchers for their contribution to the public policy debate.

12 ACKNOWLEDGMENTS We would like to express our appreciation to a number of people who provided invaluable help and support in the preparation of this report. Our thanks go to Jacquie Chic, Gord Falconer, Darla Leard, Winnie Ng, Consuelo Rubio, Judy Ryan and Dave Winter who organized and helped with the focus groups; to Marica Almey, Miles Corak, Gilles Groleau, Helene Lavoie, Jacques Ouellet and Paul McPhie of Statistics Canada who provided data; to Barb Byers and Penni Richmond of the Canadian Labour Congress who made contacts for us and were a source of ongoing encouragement and support; and to Laurell Ritchie and Richard Shillington for their interest and assistance. We are also grateful to Zeynep Karman and Jo Anne de Lepper of Status of Women Canada for their understanding and support as the work progressed. Responsibility for the opinions expressed in the report and for any errors or omissions is ours alone.

13 ABOUT THE AUTHORS Monica Townson is an independent economic consultant working in the field of social policy. She is the author of six books and many studies and reports on pensions, income security programs and the economic situation of women. She was the Chair of the Ontario Fair Tax Commission, and has been a consultant to the United Nations Economic Commission for Europe on the economic role of women. Kevin Hayes is a consultant and former senior economist with the Canadian Labour Congress where he was responsible for policy research and legislative action on unemployment insurance, workplace training, technological change, immigration, transportation, the CLC Training and Technology Committee, the CLC Unemployment Insurance Committee and the CLC Transportation Committee.

14 EXECUTIVE SUMMARY The Social Security Review conducted by the newly elected Liberal Government in the fall of 1994, triggered major changes to the unemployment insurance program. With the implementation of the Employment Insurance Act in 1996, Unemployment Insurance (UI) became Employment Insurance (EI), underlining a shift in policy emphasis from a focus on providing temporary income support for those whose earnings had been interrupted by layoff or job loss to programs that were supposed to help the unemployed find work. As the government saw it, the change in emphasis was designed to provide a better targeted UI program to help all Canadians be gainfully employed. Ten years after the changes ushered in by the Social Security Review, it is clear that women have been seriously disadvantaged by the new EI rules. By 2004, only 32 of unemployed women, compared with 40 of unemployed men qualified to receive EI benefits when they lost their jobs. This calculation is sometimes referred to as the beneficiaries/unemployed or B/U ratio and is a measure of the actual number of EI benefit recipients divided by the total number of unemployed, including those who may be disqualified from receiving benefits. Before 1997, eligibility for unemployment benefits was based on the number of weeks of work the employee had completed in a certain period prior to making a claim. Only weeks of more than 15 hours of work or $163 of earnings were counted. Under the new EI program, benefits were to be based on total earnings and total hours worked in the 12 months prior to the claim, starting from the first dollar and the first hour. In theory, the changes should have been beneficial to women workers, many of whom are employed in non-standard work arrangements, such as part-time, casual, temporary and contract jobs, as well as multiple jobs with different employers. Under the new rules, all the hours worked and earnings from all jobs would count. (It should be noted that the self-employed, who constitute a significant portion of those in non-standard work arrangements, are not covered by the EI program.) However, the number of hours required to qualify for benefits was set at a level where few part-time workers could qualify. Depending on the unemployment rate in the region where they lived, workers with regular employment were required to have a minimum of 420 to 700 hours of work in the previous 12-month period to qualify for benefits. In most of the country, this meant a minimum of 560 hours instead of 240 hours under the previous program. New entrants and re-entrants to the work force were required to have 910 hours of work to qualify instead of the 300 hours that had been required under the old system. (Under a pilot project, introduced in February 2005, this requirement was reduced to 840 hours in areas of high unemployment.) Claimants of special benefits, such as maternity, parental and sickness benefits were required to have 700 hours of work in the pervious 52-week period later reduced to 600 hours. Following the changes, EI coverage for the unemployed dropped sharply and a significant gender gap in coverage between women and men opened up with serious implications for women workers. Women s average weekly hours of work are generally much lower than those of men, even when both work full time. In addition, women s

15 xi predominance in non-standard work arrangements means women are much more likely than men to face instability in hours worked over long periods of time. As well, women s unpaid work and family responsibilities were effectively penalized under the new rules, which required workers to demonstrate labour force attachment in the period immediately before the 52-week qualifying period. While women now must contribute to the program from the first dollar of their earnings, their likelihood of being able to receive benefits if they become unemployed is much less than that of men. In effect, the EI contributions of women workers are being used to subsidize the benefits of other workers who find it easier to qualify under the new rules. The EI program has specific provisions for contributors with very low incomes who are unlikely to qualify for benefits whereby individuals whose earnings were less than $2,000 are entitled to a refund of their EI premiums when they file an income tax return. According to the Canada Revenue Agency, in 2002, the government refunded over $15 million in EI premiums to 656,870 individuals. Although no gender breakdown was available, the significant amount of the refund underscores the benefit loss because of the very high qualifying requirement. In addition, under the new program, benefits were cut back; the maximum weekly benefit was frozen at $413, where it still stands; and the method for calculating a claimant s average weekly earnings was radically changed by prescribing a divisor based on the EI regional unemployment rate. The divisor formula includes weeks that a claimant has not worked and had no earnings. As a result, even claimants who have enough hours to qualify for benefits can find the amount of the benefit they receive is so low as to be meaningless. A claimant who participated in one of our focus groups had worked enough hours to qualify for benefits but received only $3 a week, because she was on call before losing her job and her benefits were based on weeks when she had little or no earnings. In addition, the program lacks transparency. Benefit calculations are complex and obscure. Workers are generally unaware of the administrative procedures and of their right to appeal decisions. Almost no participants in our focus groups understood how the program works or what benefits they might be entitled to if they lost their jobs. The input we received from our four focus groups highlighted concerns many women have about the program and gave us concrete examples of the impact on women workers of the various rules. Where appropriate, we used those examples to supplement our analysis of the data. The focus group input was also used to help shape our recommendations for reform of the program. Our recommendations are designed to correct the gender imbalance in the program and return it to its primary role as an income replacement program for women and men who become unemployed or face a temporary interruption of earnings for other reasons, such as sickness, pregnancy, parental leave and compassionate care. Program rules must not penalize women who must combine paid employment with family responsibilities. Training programs available under the EI Act must also recognize the need for ongoing training and lifelong learning and be made available to both women and men without bias. The transparency of the program must be improved.

16 xii Our key recommendations are as follows. A two-track qualifying system where the minimum time worked to qualify for benefits would be either 360 hours in a 12-month qualifying period before an interruption of earnings or three years of insurable employment that averages 360 hours a year in the previous five years. The qualifying requirement would be the same for all categories of benefits, that is, regular, work-sharing, maternity, parental, sickness, compassionate care and training. Eliminate the two-week waiting period for all types of EI benefits. Under the current system, claimants for all types of benefits do not receive benefits for the first two weeks of their claim, effectively reducing the replacement rate of their total EI benefits to well below the 55 rate specified in the program. The maximum weeks of benefit entitlement for regular unemployment benefits should be separated into two tiers. Under the first tier, a claimant would be entitled to one week of benefits for every 30 hours worked in the most recent 12 months. The second tier would be an extended benefit to be available to claimants in areas where regional unemployment rates are higher, with one week of extended benefits for each half percentage point that the regional unemployment rate is above 6. The maximum length of sickness benefits and compassionate care benefits should be extended from the current 15 weeks and six weeks respectively to an initial 26 weeks for both types of benefit, with the potential to extend this further depending on experience. The weekly benefit amount should be raised to 66 of a claimant s average weekly earnings in their best 14 weeks of earnings during the most recent 12-month period. This is in line with a current EI pilot project where claimants in areas of high unemployment may receive benefits based on their best 14 weeks of earnings in the 52-week period before their claim. The calculation of average earnings using a divisor related to the regional unemployment rate should be abolished. All self-employed individuals should be entitled to EI special benefits. Self-employed individuals who are dependent contractors (mainly dependent on earnings from one employer) should be entitled to regular EI benefits. Employment Insurance funding for training should be expanded beyond apprenticeship so regular EI benefits are available for all forms of workplace training. Women should be assured of equal access to training programs without bias. The definition and categories of just cause for voluntarily leaving a job should be expanded to provide for more flexibility in interpreting what constitutes just cause.

17 1: THE EVOLUTION OF THE EMPLOYMENT INSURANCE PROGRAM Employment Insurance (EI) is an earnings replacement program for workers who have lost their jobs as well as for those who must temporarily withdraw from the paid work force as a result of sickness or take maternity or parental leave as well as temporary leave for compassionate care. For women workers, it is a particularly important program because, in addition to providing a replacement income when they are unemployed, EI reduces the financial penalty imposed on women who must give up their paid employment for periods of time as a result of childbearing and the care of children or some other caregiving activities. Canada has had a national program to provide financial support to the unemployed for almost 70 years. There have been major changes to the program over that period as policy makers attempted to keep pace with changing socio-economic conditions and labour market developments. While the program was designed initially only to replace income lost during a period of unemployment, major changes were made in 1971 when benefits were extended to those whose earnings were interrupted because of sickness or pregnancy. The Social Security Review of 1994 proposed further significant changes which were implemented through the Employment Insurance Act of December 1995 (Bill C-12). In a recent judgment, the Supreme Court of Canada summed up the four characteristics essential to a public employment insurance program. It is a public insurance program based on the concept of social risk the purpose of which is to preserve workers economic security and ensure their re-entry into the labour market by paying temporary income replacement benefits in the event of an interruption in employment (Supreme Court of Canada 2005: 21). Federal jurisdiction over the program required the agreement of the provinces and a constitutional amendment before the first unemployment insurance (UI) program could be established in 1940 by the government of William Lyon Mackenzie King. Prior to that time, there had been several studies on the issue of unemployment insurance and even an attempt to introduce an employment and social insurance act in However, the act was ruled beyond the authority of the federal government. Canadian policy in the early years of the 20th century still reflected the belief that obtaining and retaining employment and providing the basic essentials of life were largely an individual matter. It also reflected the general assumption that the British North America Act gave only provincial governments the authority to create social programs. But the Great Depression of the 1930s evidently had a salutary impact on the attitudes of Canadians and their governments to unemployed people. It was no longer possible to categorize them as lazy and of bad character, or to suggest there was something ennobling about poverty (SDC 1996: Chapter 3). Governments in other countries were responding to the unemployment crisis, and there was pressure for the Canadian government to act as well. At the same time,

18 2 it was generally realized that even if provincial governments had the authority to act, most provinces did not have the capacity to finance such programs. The Royal Commission on Dominion Provincial Relations (the Rowell-Sirois Commission) appointed in 1937 to examine the division of powers between the federal and provincial governments, recommended the adoption of a federal social insurance program to deal with unemployment. The newly elected King Government then sought agreement from the provinces for an amendment to the British North America Act to provide exclusive authority for legislation by the federal government. The Unemployment Insurance Act of 1940 received royal assent in August that year and remained in force until Speaking in the House of Commons debate on the original bill, the Minister of Labour said the fundamental purpose of UI was to promote the economic and social security of Canadians by supporting workers between jobs. Not all types of employment were covered by the original UI program. For example, workers in agriculture, horticulture, forestry and fishing were specifically excluded. Nurses and teachers were also excluded and most public sector workers were left out. In effect, about 42 of the labour force became insurable under the original program. Higher benefits were paid to claimants with dependants. Strong economic conditions prevailed from 1940 to 1955, which increased revenues flowing to the UI fund and enabled the federal government to expand coverage and respond to changes in the labour force and the economy (SDC 1996: Chapter 5). The 1940 Unemployment Insurance Act was repealed in 1955 and replaced with a new act. Coverage was extended to some occupations previously excluded and along with other changes, there were special benefits for seasonal workers set at about 80 of the regular benefit. The new UI Act covered about 75 of Canada s 4.4 million wage earners and salaried employees (SDC 1996: Chapter 6). Women and the EI Program Almost from the beginning, women have been treated differently under the UI/EI program. In the early days, in some cases, punitive rules were imposed on women claimants, apparently in a reflection of societal views about the appropriate role of women. Program requirements sometimes reflected implied stereotypes of women in paid employment as secondary workers working for pin money and not serious about paid employment. Some of the changes in the EI program over the years seemed to reflect a view that women might enter the paid work force just to qualify for EI benefits before leaving again. More recently, changes in the program that appear, on the face of it, to be neutral in their impact have actually had an adverse impact on women workers, because of their different patterns of paid and unpaid work and labour force participation. Benefits for Married Women Limited In the immediate years following World War II, for example, the unemployment situation of married women had been a recurring issue. In the 1940s and 1950s, married women were

19 3 not expected to work outside the home. While many may have left paid employment voluntarily when they married, many employers including the federal government forced married women to quit. In November 1950, the UI Commission implemented a regulation imposing additional conditions on married women who claimed UI benefits. The objective was to restrict benefit payment only to those who could show they were actively interested in obtaining employment. Applying only to women who terminated their employment, the regulation required women claiming benefits within two years of becoming married to show by their employment record that they had not left the labour market willingly as a consequence of their marriage. Some exemptions were allowed. For instance, the rules did not apply to a married woman who became a widow or who had to work because of her husband s illness to support herself and her family. Exemptions also applied to married women who became breadwinners because of desertion or permanent separation from their husbands. Married women discharged from employment because of a shortage of work or because the employer would not keep married women in jobs were also exempted (SDC 1996: Chapter 5). The introduction of the married women s regulation sharply reduced the number of claimants from that group. But stereotypical views of married women as secondary earners persisted until well into the 1980s. For example, a background paper prepared in 1984 for the Macdonald Royal Commission on the Economic Union and Development Prospects for Canada proposed a major overhaul of the UI program including special employment or training programs for persons who did not qualify for UI benefits. But only one or more persons per household would be certified for these positions, depending on the gap between the household s income and the minimum assured income for households of that size and locale. In the majority of cases, according to this study, secondary workers with another full-time worker would not qualify for special employment (Kesselman 1984: 295). In effect, the proposal would have excluded married women with an employed spouse from the proposed programs. Maternity Benefit Restrictions Restrictions were also placed on eligibility for maternity benefits when these benefits were introduced in Claimants who qualified were entitled to 15 weeks of benefits including a two-week waiting period. The benefits had to be drawn in a period starting eight weeks before the expected birth and ending six weeks after the birth actually occurred. But there was also a magic 10 rule requiring a maternity benefit claimant to prove she had been in paid work 10 weeks before conception. It has been suggested that the policy history of maternity benefits reflects a concern about potential program abuse by new mothers; in other words, some women might enter the paid work force before having a child to gain access to benefits (Phipps 2000: 416). The magic 10 rule, intended to prevent this, was abolished in The decision appears to have been a response to strong public pressure following the Supreme Court ruling in the case of Bliss v. the Attorney General of Canada that discrimination on the basis of pregnancy is not

20 4 discrimination on the basis of sex. Bliss had argued that the 20-week work requirement for eligibility for maternity benefits was discrimination on the basis of sex (Phipps 2000: 432, fn 2). Changes to the Canadian Human Rights Act were made in June 1983 to include pregnancy as an additional ground of discrimination under the Act (SDC 1996: Chapter 18). Nevertheless, eligibility conditions for maternity benefits are still generally tougher than for regular EI benefits. While maternity benefits claimants must have worked at least 600 hours in the 52 weeks before their claim, applicants for regular EI benefits are required to have worked between 420 and 700 insurable hours in their qualifying period depending on the unemployment rate in their region at the time of filing their claim for benefits. It is easier to qualify for regular EI benefits in regions where unemployment rates are higher, but the 600 hours requirement for maternity benefits applies in all regions, regardless of the regional unemployment rate. Women s Work Patterns It is well known that women s participation in paid employment has increased dramatically since the establishment of the original unemployment insurance program. At the time of the 1941 Census, for example, only 4.5 of married women worked outside their homes. By 1971, when maternity benefits were introduced into the program, 37.0 of married women were in the paid work force (Connelly 1978: 84). By 2005, 82 of women in the prime age group of 25 to 44 participated in the paid work force (Statistics Canada 2006a). But rules on eligibility for EI benefits have not always kept pace with women s changing work patterns. While women have continued to enter paid employment in ever-increasing numbers, more and more women are employed in non-standard work arrangements, such as part-time work, contract and temporary work, own account self-employment and multiple job holding. Employed women are much more likely than men to be in this kind of work, which can have a significant impact on their eligibility for EI benefits, as we see later in this report. As well, because they are still largely responsible for family caregiving, employed women generally work shorter hours than employed men even when both are employed full time. In a system where eligibility for benefits is based on hours worked, these differences may mean women are less likely than men to be eligible for benefits under the program. Women who temporarily leave paid employment to care for family members may be considered as new entrants or re-entrants when they return to paid employment. But these categories of workers are required to work 910 hours in the previous 52 weeks before being eligible for EI benefits if they lose their jobs. In most areas of the country, other workers generally need a minimum of 560 hours to qualify. We return to these issues in later sections of this report. Previous Studies of Women and Unemployment Insurance There is a wealth of studies on women s changing role in the labour market and the paid labour force as well as the evolution of income security programs and benefits. While space does not permit us to review the findings of all these studies here, the work of scholars who

21 5 have contributed to this extensive body of literature has informed our work in this report. We have surveyed a wide number of studies and papers on the profound changes in the labour market and have referenced those studies where appropriate. While Statistics Canada has produced for a very long time gender-specific labour market and labour force statistics, and has published data on coverage of parental benefits by gender, it has not published EI eligibility statistics for regular benefits by gender and age or by EI region. To our knowledge, there are very few independent gender studies or statistics on either UI or EI eligibility. In this study, we examine the EI eligibility architecture in some detail, emphasizing the major reasons why, under current rules, the majority of unemployed women and men are not eligible for EI regular benefits. Many of the unemployed now excluded from benefits were eligible at various times under the former program. In effect, the EI program design does not recognize that key features of the labour market have changed dramatically in the last two decades. In particular, it does not recognize significant gender differences in the nature of paid employment. For example, the eligibility rules are designed for workers with permanent full-time jobs, but a large number of women s jobs do not fit this definition. As well, the nature of unemployment and the reasons for being unemployed are very different for men and women. Men are job losers and women are job leavers. The quit rules, for example were not always highly restrictive as they are now. The current restrictions were ratcheted up in four stages: in 1990, 1993, 1994 and Before 1990, workers who quit their jobs were generally eligible for EI. The 1971 Unemployment Insurance Act Major changes were made to the UI program with the introduction of the 1971 Unemployment Insurance Act, following the 1970 White Paper that reviewed the program and proposed sweeping changes. The program was expanded dramatically as part of Prime Minister Trudeau s Just Society initiative (CLC 1996: 1). Coverage under the new program was to be universal. It was to be extended to virtually all workers who could be considered employees, with enriched benefits and lower contributions. (It should be noted that selfemployed workers generally were not covered by the program.) The new program would cover not only interruption of earnings because of layoff, but also when earnings were lost because of sickness or pregnancy. A special severance or retirement benefit was introduced for insured workers who qualified for a retirement pension under the Canada or Quebec Pension Plan. Regionally extended benefits were introduced so claimants living in areas where the unemployment rate exceeded the national jobless rate could draw benefits for a longer period. The benefit rate for claimants with dependants was set at 75 of insurable earnings up to certain limits, while those without dependants received benefits equivalent to two thirds of their usual earnings, up to a limit.

22 6 The 1970s and 1980s According to government documents, the 1971 legislation led to growing costs for the UI program at a time of mounting inflation, unemployment and a world economy that was undergoing major structural changes, placing a premium on adaptability (HRDC 1994: 7). Various changes were made to the program. For example, the special benefit rate for claimants with dependants was eliminated in Then in 1977, some UI funds were made available for developmental uses: for unemployed workers participating in approved training, work-sharing or job-creation programs. By the end of the 1970s, about 80 of unemployed workers were covered by UI. At the same time, unemployment continued to rise throughout the 1970s, reaching 8. But during the recession of , unemployment shot up to 12, levelling off at 8 during the boom years of the late 1980s. The unemployment rate did not return to pre-recessionary levels the first sign of the emergence of long-term structural unemployment in Canada (CLC 1996: 1). In the meantime, two reports recommending major changes for the UI program were released. The Task Force on Unemployment Insurance (the Forget Commission) reported in 1981 and the Royal Commission on the Economic Union and Prospects for Canada (the Macdonald Commission) reported in The Forget Commission made a number of recommendations affecting women claimants, including eliminating the special entrance requirement for new entrants, re-entrants and special benefits (including maternity benefits) and moving to a single requirement of 15 to 20 weeks of work in the qualifying period based on the regional rate of unemployment, up from the existing 10 to 14 weeks for regular benefits, but lower than the existing 20 weeks for maternity benefits. The Task Force also recommended the extension of maternity benefits to adoptive parents and improving the income security of working women by enhancing maternity/adoption benefits. The Task Force estimated the financial impact of its proposals for would mean women claimants would receive $10.4 million more in UI benefits, while men would receive $230.4 million less. But a recession in 1982 halted work on legislative changes to implement the recommendations (SDC 1996: Chapter 17). In 1983, Bill C-156 introduced 15 weeks of adoption benefits, effective January 1, As well, maternity benefits were simplified and adjusted to conform to the Canadian Human Rights Act. Among other things, the magic 10 rule was dropped and the benefit period for maternity claims made more flexible to allow for premature or delayed births and to allow pregnant women to claim regular or sickness benefits. In 1989, Bill C-21 provided for 10 weeks of parental benefits in addition to the existing maternity benefits, payable to either men or women. These benefits replaced both paternity benefits, introduced in 1988, and adoption benefits. The bill also broadened special benefits (maternity, parental and sickness) to provide for a total of 30 weeks of combined special benefits.

23 7 The 1990s A variety of changes to the EI program were made in the early 1990s. 1 Bill C-21 in 1990 increased the number of weeks of work needed to qualify for benefits; reduced the replacement rate from 60 to 50 of insured earnings for those who declined suitable employment, quit without just cause or were fired; training programs previously funded from the government s general revenues were now to be funded from the UI fund; and the direct federal contribution to UI was eliminated. Bill C-113 in 1993 reduced the regular benefit from 60 of insurable earnings to 57, and benefits were eliminated for workers who quit or were fired from their jobs. Then in 1994, benefits for most claimants were reduced from 57 to 55 of insured earnings. There was a further increase in the number of weeks needed to qualify for benefits and a decrease in the benefit period. A form of dependants allowance, abolished in 1976, was re-introduced. At the same time, the government launched its Social Security Review, which included a review of Unemployment Insurance. The tougher rules introduced during this period were justified by the perception and repeated anecdotal stories about widespread abuse and UI dependency. Statistics on repeat use and the so-called lottery a reference to the number of weeks needed to qualify for benefits and the number of weeks a claimant could receive benefits fuelled hostility toward both the unemployed and the perceived lax eligibility rules. Despite the severe restrictions on voluntary quits, the much higher qualifying requirements and the deep cuts in the length of the benefit and the amount of weekly benefit entitlement in the early 1990s, the preoccupation of the Social Security Review and the subsequent EI Act was to restrict eligibility and weekly earnings replacement even more severely. Some changes were designed to be punitive for workers who quit or had had EI claims in previous years. The primary declared goal of most of the UI reforms in the 1990s was to transform the program from passive income support to active measures mainly retraining and other labour market programs that would get the unemployed back into the work force more quickly. The 1990 legislation in fact did expand the use of UI money for training and other developmental purposes. It was the justification for cuts to the so-called passive measures in 1990 and again during the Social Security Review and eventually in the EI Act. Gender was not a major consideration. Except for the introduction of parental benefits in 1990, the gender impact of the changes was not a preoccupation in the four rounds of legislation that tightened eligibility and cut the weekly benefit entitlement in the 1990s. But the increased authority to use more UI money for active measures was used to replace labour market programs for women financed from general government revenues. The cancelled programs however were for women who were not eligible for UI under the old rules and would have served many who failed to be EI eligible with much higher minimum work hours. It was only after the new EI program was implemented in 1996 that the public begin to see the enormous gender impact of the changes. When critics raised the possible negative

24 8 consequences of the tough eligibility rules on women, it was defended by the stock answer that workers were insured (paying premiums) from the first dollar of earnings and first hour of work. It was only in 1998 that statistics on the gender differences in coverage appeared, and the government began to respond to the evidence. The qualifying requirements for special benefits were cut from 700 hours to 600. Parental benefits were extended by 35 weeks and a number of other changes easing eligibility and benefit calculation were introduced. But most of the eligibility architecture that disadvantages women remains in place. Table 1: Changes in the Replacement Rate of EI Benefits Legislation Effective Date Replacement Rate ( of insurable earnings) Unemployment Insurance Act June 27, for claimants with dependants, 66.7 for those without dependants Bill C-69 January 1, for claimants with dependants Bill C-14 January 1, 1979 Replacement rate reduced to 60 for all claimants Bill C-113 April 4, 1993 Replacement rate lowered to 57 from 60 Bill C-17 July 7, 1994 Replacement rate raised to 60 for claimants with low earnings and dependants; lowered to 55 for others Bill C-12 July 1, 1996 Replacement rate reduced progressively for repeat claimants of regular benefits Source: Lin (1998: 44 and 47).

25 9 A Note on Methodology This study was undertaken as a contribution to the research theme The Social Security Review: Ten Years Later, established for Status of Women Canada s Policy Research Fund. The Social Security Review, conducted in the fall of 1994, proposed far-reaching changes to what was then called Unemployment Insurance. Major changes in the program were implemented through legislation proclaimed in For this study, our objective was to document the impact of those changes on women workers and, in particular, to observe any adverse impact on women workers of the way in which hours and earnings are currently used as the basis for benefits, eligibility for training and other services, and financing of the EI program generally. In particular, we examined the impact of the switch to an hours-based system, given that many employed women work in non-standard work arrangements where they may be part-time workers, on call or standby, employed in temporary jobs or selfemployed and therefore not eligible for EI benefits. We wanted to analyze labour market developments in relation to women workers for the period under review, concentrating on 1996 to In addition to the types of work employed women do, we also concentrated on hours of work and overtime, as well as earnings and family status. Then, given the position of women in the labour market, we undertook an assessment of the impact on women workers of the new program design. By comparing UI /EI coverage and labour market characteristics of women with that of men, we were able to assess the gender impact of current EI eligibility and earnings replacement rules. To this end, we commissioned special tabulations from Statistics Canada, including data from the Labour Force Survey, the Employment Insurance Coverage Survey, the Survey of Labour and Income Dynamics (SLID) and other relevant sources. Where possible, we made use of the extensive database at Human Resources and Social Development Canada (HRSDC) and we used administrative data where available. Analysis of these data then enabled us to highlight differences in the labour market characteristics of women compared with men especially in relation to hours of work and overtime, which is rewarded under the EI hours system and thus to assess the extent of gender inequities in the current design of the program resulting from the way in which hours of work and earnings are defined and used to determine the level and duration of benefits. The Beneficiaries/Unemployed (B/U) Ratio One method commonly used to measure the percentage of unemployed persons who qualify for EI benefits is the beneficiaries/unemployed or B/U ratio. In effect, this is a measure of the actual number of EI benefit recipients, as reported monthly in administrative statistics, divided by the number of unemployed reported monthly by Statistics Canada in its monthly Labour Force Survey. However, the Labour Force Survey counts a person with earnings from employment as employed not unemployed, while some EI beneficiaries may also have earnings from employment. To make the numerator consistent with the denominator, our calculation of the B/U ratio excludes beneficiaries who had any earnings while on their EI claim.