Could the pandemic prompt employment insurance reforms?

More than eight million Canadians have received the $2,000 monthly Canada Emergency Response Benefit over the course of the pandemic. But labour experts say its very existence, while a triumph of policy-making on the fly, proves the need for significant reform to Canada’s employment insurance system.

The pandemic quickly exposed long-standing issues with the EI system in March, when self-employed and gig workers, as well as workers who didn’t meet the system’s hours qualifications, couldn’t get support when they were laid off or had their hours cut.

As of 2018, just 17 per cent of self-employed workers and 20 per cent of permanent part-time workers who became unemployed were able to access EI benefits, in comparison to 48 per cent of permanent full-time workers and 50 per cent of non-permanent seasonal workers, according to an EI coverage survey. It also found 38 per cent of unemployed men and 33 per cent of unemployed women were able to access EI in that same year.

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The most common reasons Canadians reported being unable to access the benefits was they hadn’t worked in the past two years or had never worked (24 per cent) or they hadn’t worked enough hours to qualify (21 per cent).

“This is a system we all need and, in fact, when people fall through the cracks, everyone can pay the price,” says Jim Stanford, a Canadian economist and the director of the Centre for Future Work. “It took a pandemic to wake us up to that. You had a situation where people were losing their jobs because of the pandemic and it was instantly obvious that the EI system was not up to the task — both of providing people with emergency income support at that time and, particularly, ensuring that people could stay away from work when public-health instructions told them to.”

Born in 1940 in the wake of the Great Depression, the EI system underwent its last significant reforms in 1996 when then Prime Minister Jean Chretien’s government implemented a cap on premium payments based on insured earnings and hours-based eligibility.

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“It was supposed to be promoting a more stable attachment to work and [there were] all kinds of psychological arguments that people were becoming addicted to government handouts and [that] this would be a way to make sure people knew they had to work for a living,” says Stanford. “The outcome of that system though was, given at the same time work was becoming so insecure, precarious and contingent in Canada, most unemployed people couldn’t qualify for benefits. We had a safety net that had so many holes most people were falling through.”

Today, workers must have worked between 420 and 700 hours of insurable employment, depending on the unemployment levels in their region, to qualify for EI benefits and can receive up to 55 per cent of their average insurable weekly earnings to a maximum of $573 per week.

The requirements are particularly ill-fitting for an economic landscape that’s increasingly made up of temporary and part-time work, says Sunil Johal, a fellow at the Brookfield Institute and Public Policy Forum who chaired the federal expert panel on modern labour standards in 2019. In a June paper for Public Policy Forum, he noted recent immigrants, gig workers, young people and women — who are overrepresented in these types of work — are most likely to go uncovered by EI.

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“The program was really designed for folks in what we call standard employment relationships — full-time, full-year jobs — but it has a lot of gaps as you move into folks who are part-time, temporary and so on.”

One way to modernize the EI system would be to adopt a consistent and lower hours requirement, he says. “One of the reasons is, you can imagine the kind of cases where there’s significant unfairness. If you have two people working for the same company in different locations and they’re both laid off or downsized, one of them, theoretically, could be eligible and the other one [couldn’t] if the hours threshold was higher in the region of one of the workers. That just doesn’t really make sense.”

Johal, who also advocates for tightening the legal definition of the term independent contractor to prevent companies from skirting employment responsibilities, says there’s merit to rethinking the idea of EI as a contributory insurance program that’s funded just by employee and employer contributions.

“If you wanted to bring in self-employed workers and more part-time and precarious workers, the federal government could make contributions to the program on their behalf so [they become] contributors to this scheme. And if they lose work or are out of work they could pull from the EI program.”

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A slightly more complicated approach would be retooling the CERB after the pandemic as a temporary unemployment assistance program that could be used by workers who have non-traditional employment relationships or aren’t eligible for EI for other reasons. “You could design a program that looks like the CERB, [where workers get a] flat benefit every week for a set period of time and then make it repayable, potentially. If [workers] find work in high-paying employment, they could repay it in full. And if it’s lower wage work they could pay back part of that . . . benefit.”

Stanford, who authored a paper in June outlining 10 ways work should permanently change after the pandemic, including by making changes to income support benefits for unemployed workers and relaxing the qualifying criteria for those supports, also says the CERB could serve as a template for a more inclusive EI system. While he says the emergency benefit isn’t perfect — according to an April analysis by the Canadian Centre for Policy Alternatives, roughly 1.4 million Canadians weren’t able to access it, he notes — it’s “night and day” compared to EI.

“The aspects of CERB we have to maintain are true access to benefits when you need them. Abandon the former EI hours system and have a system that people can access even if they’re working one precarious job after another and not getting regular hours.”

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He also suggests maintaining a minimum floor for income support benefits and then scaling to income level from there. “I think $2,000 on the CERB is reasonable — it’s not rich but you can live on it — and then for people who had higher incomes there should be a scaler factor. . . . If someone was making a median income, say $50,000 or $60,000 a year, falling back to $2,000 a month is too damaging.”

The provisions under the CERB that allow people to earn up to $1,000 per month without facing clawbacks should stay in place, says Stanford, though he notes there could be a more sophisticated formula for how much Canadians would be able to earn while still receiving support.

The government should also use the pandemic as an opportunity to improve its skills-training programs, especially given that certain sectors will take much longer to return to normal, says Johal. He advocates for separating eligibility for skills-training programs from EI eligibility and instead moving toward a system where Canadians could receive benefits for a longer time if they were training for a new career. “We should really be incentivizing people to learn new skills and prepare for areas that might have higher demand going forward, rather than making that harder for them to do.”

Read: Feds expand CERB to workers earning up to $1,000 per month

As well, he notes, there’s an economic incentive for the government to invest in better skills training: if Canadians use the programs and are able to move into higher-paying positions as a result, the federal government will benefit from higher income tax payments.

With millions of Canadians accessing EI or the CERB during the pandemic, the political discussion around unemployment supports may change fundamentally. While expanding government programs has traditionally elicited concerns about ballooning deficits and debt — and indeed, according to last week’s fiscal snapshot, the federal government is facing a $353-billion deficit due to its suite of coronavirus supports — the pandemic has demonstrated government can and should find the resources to help Canadians when they need it, says Stanford.

“Lo and behold, [the government has] managed the pandemic extremely well, in part by putting all that money on the table. The old logic about needing to balance the budget . . . and that’s why we have to basically throw people on their own ability to survive? That logic is gone.”

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