Justin Trudeau promised to reform Employment Insurance. What happened?


Employment Insurance is, in theory, Canada’s front-line defence against a recession, and now is the program’s time to shine.

But for years it’s been a mess, and the minister tasked with fixing it is months behind schedule — even as a recession breathes down our necks.

The problems with today’s EI regime are well-known.

It used to be that about 80 per cent of workers could access the marquee program when they were out of work, but that has declined over the years to about 40 per cent.

The eligibility rules have become stricter, but at the same time EI has grown many tentacles. It’s not just about unemployment. It’s also the channel for parental benefits, skills development, seasonal work support, caregiving benefits, people who are self-employed and people who are precariously employed.

And many of us remember what happened in the spring of 2020 when the government shut down the economy, prompting employers to send many of their workers packing. The EI system was not up to snuff, the technology was antiquated, and Ottawa quickly saw it did not have the agility to respond to the pandemic. It had to create the Canada Emergency Response Benefit (CERB) instead.

Meanwhile, the labour market has been changing dramatically, both before and during the pandemic era. And that turmoil in what work looks like is here to stay.

None of this is remotely newsworthy to anyone connected to Employment Insurance. Recipients well know the difficulties of accessing the system, businesses are aware of the shortfalls and costs, and the opposition Conservatives have placed rising premiums at the top of their agenda.

The Liberals, for their part, have also had EI reform on their agenda for years now. Justin Trudeau committed to it in his August 2020 throne speech and in subsequent budgets, and he specifically instructed Employment Minister Carla Qualtrough to make it happen. In her mandate letter of 2021, he even gave her a deadline of this past summer.

Several sets of consultations later, we are still waiting — even as the economy slows dramatically, inflation remains stubbornly high and there’s a growing unease about what happens to job stability.

“We heard from stakeholders that the EI program continues to be a crucial part of Canada’s social safety net but it has not kept up with the realities of today’s labour market and changes in the workforce,” federal officials from Employment and Social Development Canada (ESDC) state in a report on “what we learned” after the first round of consultations earlier this year.

“Simplifying it also needs to be a priority.”

A workable EI system — one that kicks in only when needed, targeting exactly those who need the money to tide them over — would be just the thing to have right now. Since we seem to be entering a strange type of slowdown where labour shortages persist for now, but many fear they may not, having a flexible system that is quick to respond is really important.

That said, there are good reasons for the reform having taken so long.

Consultations over the past two-and-a-half years by ESDC and, separately, by the Institute for Research on Public Policy (IRPP) are not able to show much common ground about how to resolve the system’s shortcomings.

Some say EI benefits need to be richer to better cover off living expenses for people who lose their jobs. Others argue more generous benefits could serve as a deterrent to taking a new job.

Some say premiums should be raised to modernize the system. Others say premiums should stay fixed because businesses can’t afford them as they stare down a slowdown.

Some say the federal government should be a partner in paying into the system, rather than just employers and employees. Others say employees and employers should be splitting the cost 50-50, rather than today’s system of putting a slightly large burden on employers.

Everyone says the system is too convoluted and tries to accomplish too many things, but there’s no agreement on what to chop out or how to better streamline government services and income-support benefits.

And Qualtrough’s mandate letter says the next iteration of EI also has to offer better support for self-employed people, adoptive parents, long-tenured workers, artists and cultural workers.

There’s no one single system that can make everyone happy, says the IRPP’s vice-president of research, Rachel Samson, because the “wildly different opinions” are so deeply rooted in whether you see EI as an insurance plan or a social policy.

But there are some basic improvements the federal government could make immediately in order to confront the coming slowdown while buying themselves some time to deal with the rest, Samson says.

After leading some of the public consultations, Samson and her IRPP colleagues recommend some quick action:

  • Give everyone the same eligibility requirements, rather than having stiffer requirements for employees in areas of low unemployment. It worked during the pandemic and helped low-income and precarious workers.
  • Increase the replacement rate to 60 per cent of earnings — more than the 55 per cent of today but less than the 65 per cent demanded by some advocates.
  • Give the system 10 years to be in balance rather than seven; and the federal government could help out by paying off all the pandemic bills, now worth about $24 billion.
  • Extend incentives for training so they encourage participation from low-income workers.

These are easy first steps that won’t make everyone happy, but would at least get the ball rolling towards some more serious reform.

If we’ve learned anything from the pandemic, it’s that the social safety net needs to be far more nimble and in tune with the challenges facing low-income workers. And that goes for government decision-making, too.

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