April 16, 2012
Explanations and a Simple Solution
This paper makes the case for a significant adjustment to how the federal government supports the unemployed.
This new study follows on the heels of the Mowat Centre EI Task Force, which released its recommendations in November, 2011. Deepening and expanding upon a core argument of the Mowat Centre EI Task Force, the new paper suggests a Temporary Unemployment Assistance (TUA) program to plug some of the gaps left by the federal EI system.
The paper begins with an extensive analysis of who is left out of the current EI program and why. Following on this analysis, the paper further explores the idea of TUA proposed by the Mowat Centre EI Task Force and initially designed by the Caldedon Institute. The paper proposes two potential designs for TUA along with a potential modification that could be made to either approach.
Reforming EI so that it is fairer and more responsive to the modern Canadian labour market should be a federal priority. Implementing TUA should be part of the overall reform package. TUA would be a new form of federal support for unemployed workers. It would be easily available for short periods of time and would increase federal income support for unemployed workers who are currently excluded from or cannot access the EI program. It would be particularly beneficial to non-standard workers, new labour force entrants, and EI exhaustees who need more time finding work.
Executive Summary
Canada’s signature and only federal social support program for the unemployed, Employment Insurance (EI), has not kept up with fundamental changes to the Canadian labour market. The program is failing as an automatic stabilizer, it is failing to protect most workers against the risk of unemployment, and it is failing to treat workers equally across regions, communities, and sectors.
Assumptions about the nature of work and unemployment are embedded in the design of EI. Workers without traditional employment patterns or whose unemployment is inconsistent with these assumptions are excluded from the program’s protection.
EI caters to workers who are either seasonally employed or who have stable, full-time employment and experience occasional or periodic layoffs. Workers in non-standard forms of employment—such as the self-employed, temporary contract workers, and multiple jobholders—are not well-served by the program. Neither are workers who are new to the labour market and have no recent work attachment. These workers are more likely to be young, to be immigrants, and to live in urban areas.
Changes to the EI program are needed but even an ambitious reform would not address these problems. Extensive analysis done by the Mowat Centre’s EI Task Force shows that loosening EI rules would provide even more coverage to those already reasonably well protected and would do little to bring other workers in. Other changes, such as allowing more non-standard workers or workers without recent work attachment to access EI, would erode the insurance principles on which the program is based by too large a degree.
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This paper makes the case for Temporary Unemployment Assistance (TUA), a repayable form of federal support for unemployed workers. TUA would be easily available for short periods of time. It would have no asset test and no up-front income test, making it flexible and responsive.
The objective of TUA would be to increase federal income support for unemployed workers who are currently excluded from or cannot access the EI program. It would be targeted particularly at non-standard workers, new labour force entrants, and some EI exhaustees who need more time finding work. If successful, the program would begin to even out the large differences in federal support across demographic groups, regions, and communities that EI is unable to bridge.
Two examples of TUA are presented in this paper. First, a “more generous” program design, with a higher weekly benefit and softer repayment requirements. Second, a less generous design with a lower weekly benefit and stronger repayment requirements. A design option that allows TUA to be repaid over several years is also presented.
TUA would be affordable, representing modest cost for the federal treasury, with a more generous example having an estimated net cost of about $1 billion in the first year of implementation. This cost is projected to decrease over the following two years. This is a relatively small cost considering that TUA should fill major holes in the federal social safety net that are regionally and demographically skewed. When government resources are particularly scarce, it is essential that any proposed new spending is necessary, carefully focused, and cost effective. TUA passes these tests.
TUA would begin to reduce the regional disparities and urban-rural divide that have become defining aspects of Canada’s approach to supporting its unemployed. The federal government has a responsibility to provide protection against the risk of temporary unemployment in a manner that keeps up with changes in the Canadian labour market. TUA presents an opportunity for the federal government to address the current gap in support left by EI.