THE CURRENT EMPLOYMENT INSURANCE SYSTEM

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1 THE CURRENT EMPLOYMENT INSURANCE SYSTEM 1. HISTORY Employment Insurance has been an important federal social insurance program aimed at providing unemployed workers with temporary income support when they have lost their jobs. The program is funded by contributions from workers and employers. In the past, the federal government has appropriated program surpluses to its general revenue and the program is currently in a deficit. 2. OPERATIONS Employment Insurance uses regional unemployment rates to determine the number of hours a worker has to work to qualify for benefits. This has resulted in disparities where a worker unemployed in one region may have to work longer and qualify for less benefits than a worker in another region. Some applicants such as youth and newcomers face higher entrance requirements. Women s participation in Employment Insurance has continued to decline and overall less than 46% of unemployed people are eligible for Employment Insurance. 3. SERVICE DELIVERY Years of federal staffing cuts have left EI to operate as virtual office service by Service Canada. Applicants apply on-line and telephone inquires are answered by any Service Canada office. Significant delays occur in the startup of claims. Applicants frequently experience long waits for telephone service and often the advice received varies from agent to agent. Eligibility reviews can occur after the applicant s claim is finished and results in sizable overpayments which remain collectible and bear interest. Additionally, literacy and language service deficiencies are especially problematic for applicants. 1

2 WHAT CHANGES ARE NEEDED The Canadian Labour Congress, Ontario Federation of Labour and other social activists have mounted a continuing campaign for reform. The three main principles are: #1 360 HOURS TO QUALIFY FOR EMPLOYMENT INSURANCE BENEFITS. This would create a national standard for eligibility instead of the current regional assessment of unemployment and varying rates of qualification. Whenever workers are unable to qualify for Employment Insurance, an application for Ontario Works is often the only alternative. This shifts the financial burden from the federal government which has collected premiums from employers and workers to pay for unemployment, onto the taxpayers. #2 INCREASE BENEFIT DURATION TO 50 WEEKS FOR ALL WORKERS AND PROVIDE AN ADDITIONAL YEAR OF SPECIAL EXTENSTION BENEFITS IF NATIONAL UNEMPLOYMENT EXCEEDS 6.5%. EXTEND EMPLOYMENT INSURANCE PART I BENEFITS WHILE A WORKER IS IN APPROVED TRAINING. In recessionary times there should be a correlation between the job market and the availability of unemployment benefits. To pretend that there are sufficient job opportunities when official unemployment rates are in double digits undermines the public s belief in and support for government. Where Employment Insurance provides an inadequate length of benefit, the applicant will be forced to resort to Ontario Works for financial assistance. Employment Insurance regulations require the applicant to maintain an active job search, so the extension of benefits will only provide financial security while that job search is performed. #3 INCREASE BENEFITS TO AT LEAST 60% OF NORMAL EARNINGS, USING WORKERS 12 BEST WEEKS, AND RAISE THE MAXIMUM CONTRIBUTION TO EMPLOYMENT INSURANCE FUNDS. The current 55% former wages benefit is insufficient to support sole income earner families. As a result they often qualify for Ontario Works benefits. Again, the financial responsibility has shifted from the employer and worker, to the taxpayer of Ontario. When we look at the studies of changes in employment, we recognize that growth in employment opportunities has occurred in lower paying and temporary jobs. Therefore when those jobs are terminated, the applicant s financial situation will be more precarious and further taxpayer assistance will be required. The EI plan needs to provide unemployed workers with financial security and independence. 2

3 MOWAT CENTRE EI TASKFORCE INTERVENTION In 2010 the Taskforce conducted extensive consultations with labour, business and communities about the Employment Insurance program. They commissioned a number of studies and reports during the year. In November 2011 they released their final report Making it Work Final Recommendations of the Mowat Centre Employment Insurance Taskforce. The Report failed to effectively address the priority concerns outlined above. In addition some of the recommendations would jeopardize the future of Employment Insurance as a social insurance program. Pam Frache of the Ontario Federation of Labour has completed an excellent analysis of all of the recommendations. Her report can be found at: We have summarized below some of our concerns about the report. KEY RECOMMENDATIONS OF THE MOWAT REPORT 1. INTRODUCE A SINGLE NATIONAL ENTRANCE REQUIREMENT FOR ALL WORKERS ACROSS CANADA The report does not recommend a lower entry requirement. The costing provided in the report states that 560 hours would be a cost neutral measure. In the current system, entry hours start at 420 so if the 560 was established as the new national standard, some workers would have to work longer hours to qualify. 2. TEMPORARY UNEMPLOYMENT ASSISTANCE There is no recommendation to extend the weeks of eligibility in times of high unemployment. Instead the Report recommends the creation of a Temporary Unemployment Assistance Loan. The TUA is fully described in the Fixing The Hole in EI Report prepared by Michael Mendelson and Ken Battle. The loan would be funded outside of the Employment Insurance program. It is suggested that the loan would be available in bi-weekly payments for a period of six months, once every five years. The loan would be based on 90% of minimum wage and would be repayable if the worker s income exceeded $10, NO EXTENSION OF BENEFIT PERIODS IN TIMES OF HIGH UNEMPLOYMENT Temporary Unemployment Assistance is offered as a solution when workers exhaust in EI Benefits. In addition, there is no recommended increase in the rates of Employment Insurance except in the context of parental benefits where the duration of benefits would be decreased to increase the rate of benefits. 3

4 THE IMPACT OF TEMPORARY UNEMPLOYMENT ASSISTANCE ON SOCIAL ASSISTANCE Temporary Unemployment Assistance benefits could be considered income and thereby preclude social assistance eligibility. The Taskforce Report states social assistance recipients would not be eligible for TUA. Social assistance applicants and recipients could be required to pursue TUA benefits and exhaust their eligibility for TUA before they are allowed to apply for social assistance. Provincial governments would support this initiative because it would reduce their social assistance program costs. Many low income workers do not have any prescription or dental coverage, so even where the person remains employed at one part time job, TUA will not provide those benefits which could have been covered under social assistance. The benefit amount, duration of eligibility, and repayment schedule are critical components of this benefit program. Temporary Unemployment Assistance is proposed as the solution for those who don t qualify for Employment Insurance, and those who have exhausted their EI benefits. This is a diverse group of workers with very different needs. The effect of this proposal is to remove employer and societal responsibility for poor working environments where workers can only access temporary, low paying employment. In addition, self employment has been promoted as a solution to high unemployment. In reality, once a worker has been self employed, the support systems like social assistance have routinely disqualified their applications for assistance based on the belief that the business is still in operation and the applicant will be double dipping. The problem is that the self employed worker does not often get the required help to launch a business and in an economy where there is high unemployment, the consumer is less likely to support niche services offered by the self employed. 4. FUND ALL TRAINING AND ACTIVE EMPLOYMENT MEASURES THROUGH A GENERAL REVENUE FUNDED TRANSFER TO THE PROVINCES. Current training occurs in the Employment Insurance system and through labour market agreements between the federal and provincial governments. Removing worker and employer financial support for training places unrealistic expectations on the federal government to replace and supplement those dollars, especially in these deficit cost-cutting budgetary times. In 2007 Human Resources and Skills Development Canada projected that by 2010, 75% of all new jobs created will be high skilled and only six percent of jobs will be open to those with less than a high school diploma. The loss of thousands of manufacturing jobs in Ontario alone has highlighted the need to focus extensive resources on training and upgrading. This will not be achieved if this recommendation is adopted. 4

5 WHAT IS NOT IN THE TASKFORCE REPORT The Taskforce asked the same questions in person and workbook consultations. Their report Consultation Report Back contains a section on Service Delivery problems. The report notes that this topic was not covered in the workbook; however significant issues were raised by participants. The issues address the problem with EI delivery system that is perceived to be remote, unresponsive, counter-productive and confusing. None of the recommendations in the final report address the service delivery issues. This is interesting because the participants clearly articulated a need for an in person, comprehensive service. This is significant because recommendations like the TUA program will result in further dismantling of the EI system which is already compromised by ineffective delivery of service Furthermore, recent cuts in the number of Service Canada centers will make access more difficult. These cuts should be reversed and staffing should be increased. ACTION REQUIRED #1 MEET WITH YOUR MEMBER OF PARLIAMENT It is important to make sure your member of parliament understands that the Mowat Centre Taskforce Report does not effectively address the problems we encounter with Employment Insurance. We want to affirm EI as a social insurance program which requires continuing financial support from both workers and employers and proper governmental administration and delivery of services to the unemployed. #2 SIGN AND CIRCULATE THE JOINT STATEMENT A joint statement of principles has been drafted. Please endorse this statement as an individual and on behalf of your organization. #3 MEET WITH YOUR MEMBER OF PROVINCIAL PARLIAMENT IF YOU RESIDE IN ONTARIO The Drummond Report endorsed the Mowat Report recommendations. It will be important to make your Ontario Member of parliament aware of our concerns with this report. This could be addressed when meeting with your MPP to discuss our concerns about social assistance and WSIB. This Backgrounder was prepared by Marion Overholt, a staff lawyer with Legal Assistance of Windsor. LAW is a joint project of the University of Windsor & Legal Aid Ontario. 5