Is Canada’s Employment Insurance System Recession Proof?

The need to broaden access to EI is urgent and a more effective EI system requires regular government contributions to expand

The risk of recession is now in clear sight. But as the Bank of Canada pursues a course of aggressive interest rate hikes designed to wrestle inflation to the ground, the potential cost is hundreds of thousands of jobs.

 The August labour force survey is already revealing a worrying increase in the unemployment rate.

 At the same time, the temporary Employment Insurance (EI) measures brought in to help workers navigate the economic fallout of the COVID-19 pandemic are slated to expire on September 24.

 Two-and-a-half years later, workers are confronting economic turmoil with a tattered EI system that’s not up to the task.

 It was clear from the beginning of the pandemic that EI would not be able to respond to a crisis of this magnitude. Lacking an effective income support program, the federal government moved quickly to create the Canada Emergency Response Benefit (CERB) in March 2020 to pinch-hit for EI.

 The new income support dramatically increased the share of workers covered, made it easier to apply, and offered more liveable benefits to low-wage workers.

 Before CERB, unemployed workers faced a lot of barriers to be eligible to receive EI, which was based on working hours. That eliminated many part-time workers and workers who only work part of the year – mostly women and other precarious workers. Before CERB, EI benefits only reached four out of 10 unemployed workers.

 We can’t afford to go back to those days of old.

 Instead of forcing the unemployed to scrape together 700 hours of work, with 62 different eligibility rules across the country, it is time to establish a new lower threshold for all EI benefits of 360 hours or 12 weeks across the country.

 This threshold will ensure that workers who contribute to the program can access needed income support and training when they lose a job, need to recover from an illness or provide care for a family member.

 The federal government should also be taking proactive measures to expand coverage by tackling the practice of employers misclassifying gig workers as independent employees to get out of paying benefits. It should also restore full benefit coverage to all migrant workers.

 There’s another problem that needs to be fixed: we pay into EI, but when we need it, it doesn’t pay enough.

 Benefit levels in Canada cover 55 per cent of earnings, up to a maximum of $60,300. That’s among the lowest of peer countries.

 That means workers with average earnings struggle to survive on barely half of their normal paycheque. For low-paid claimants working at or about minimum wage, a 55 per cent EI rate means living in poverty.

 A renewed EI program should adopt a standard of at least two-thirds (66 per cent) of the claimant’s normal earnings – as Canada did in the past. It should raise the maximum insurable earnings level and set a liveable benefit floor of $450 a week.

 This last measure would significantly enhance the income security of the working poor – those most at risk of the pending economic downturn.

 There’s a lot to learn from what the government got right with CERB: it improved benefit calculations and simplified Service Canada processing. Good stuff.

 Laid-off employees did not face an EI benefit clawback if they received severance or lump-sum vacation pay with their pink slip. It should stay that way.

 A stronger and more effective EI system requires regular government contributions to expand and enhance program coverage to strengthen the program’s foundations so that it can deliver in good times and in bad.

 The need to broaden access to EI is urgent. We cannot wait for the next pandemic, the next climate crisis, or the next recession to put our income security house in order.

 Canada has an opportunity to haul EI into the 21st century. It’s time for the federal government to rise to the challenge.

By Katherine Scott

 Katherine Scott is a senior researcher with the Canadian Centre for Policy Alternatives.

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