Employment Insurance (EI) reform has entered the public discourse in recent weeks, and many experts agree that there are serious problems with how the current system operates. EI is at the core of our social safety net, not only for its traditional role in providing assistance to workers in times of unemployment, but also in providing special benefits in situations requiring an absence from the labour market. With Canada’s rapidly changing economy, modern workforce, and aging population, we need creative solutions to ensure that special benefits meet 21st century needs.
‘Special benefits’–such as parental, sickness, and compassionate care benefits–account for a large portion of EI expenditures. These programs are vital to a well-functioning society and healthy economy. Parental leave benefits allow parents caring for a newborn to be available during the first year of the child’s life, but also return to full-time work with ease and, ideally, a minimal financial loss. Sickness and compassionate care benefits allow people to be away from work when they are sick or injured, or when a loved one is ill and in need of personal care and comfort. Compassionate care is also a way to contain health care costs and reduce burdens on the system in the long-run. Enhancing this benefit has been proposed and demands serious consideration.
To the extent, however, that special benefits are meant to help all workers during necessary labour market absences, they fall short. There are serious problems with the provision of special benefits under EI, especially when it comes to access. For instance, in order to qualify for the special benefits, workers must first qualify for EI. This means that if a worker has not worked the requisite 600 hours, he or she is not eligible to claim the benefits. Such barriers to access are particularly troubling in a time when part-time and precarious employment is on the rise. Human Resources and Skills Development Canada notes that while 97 per cent of women working full time have sufficient hours of work to qualify for special benefits, only 66 percent of women working part-time would be eligible for the benefits. It is often those with low incomes and fewer hours who most need the assistance of special benefits.
The question remains, then, of how best to tackle this issue. The Mowat Centre EI Task Force recently convened a conference of experts and industry professionals on this question and others surrounding EI, and there are a number of options available. Some argue that the best way to increase access to special benefits is to take those benefits out of the umbrella of Employment Insurance and create a separate program paid for out of general revenues. Proponents of this measure argue that running social programs separately with general revenues would use the progressive tax system where higher income Canadians pay proportionately more than lower income Canadians. As it stands now, EI contributions are inherently regressive as they are capped at the first $42,300 of income, resulting in lower income workers paying a larger proportion of their income than higher income workers.
The other option is to work within the system to overhaul and make the changes necessary to meet the needs of a modern workforce. Increasing access to EI in general would naturally expand the provision of special benefits, while creating a more progressive contribution scheme makes sense from both a fairness and economic sustainability perspective. Shrinking the system and removing parts in the name of access and equity, however well intentioned, will not serve the larger needs of major system reforms.
The problems facing EI are not insurmountable. One potential solution for a more progressive contribution scheme might be a compromise between the above options. Introducing the government of Canada as a third-party contributor to the employer and employee EI contributions, while reforming the $42,300 cap, might indeed be the way to go.
Whatever reforms are ultimately chosen, a necessary component must be increased access, with no deterioration of the quality of benefits. However, no scheme is fully immune to political pressures. In a time of public austerity around the globe, the removal of special benefits from EI might be tempting–but short-sighted–for the federal government as it struggles to balance its bottom lines. In the long term, budgetary pressures could bring further cutbacks to a separate special benefit program. Whether or not two smaller programs would be more susceptible to political pressure than one well-functioning program is up for debate, but it is something to consider when weighing reform options.
Whatever happens, we must work to create a social system that meets these needs, for both a healthy society and economy. The Canadian labour market is undergoing a large transformation as younger people are engaged in more precarious employment, women make up half of the workforce (with an even larger proportion of part-time work), and our population ages and requires more care. These realities form the context in which any reforms will happen, and the importance of special benefits under EI cannot be ignored.
– By Phil Donelson