Sunday, May 27, 2012

Canada’s broken employment insurance policy


The latest federal government actions to continue Canada’s position as a global leader by amending its employment insurance policy has yet again received criticism from Canada’s socialist-in-chief.

But that's not surprising.

Perhaps Canada’s Opposition could start by basing their lines of attack off the concerns of real Canadians and not what’s trending in the Toronto Star.

Or maybe I’m just expecting too much.

Minister of Human Resources and Skills Development Diane Finley announced that improvements to the employment insurance program would ensure Canadians are better connected to jobs in their community at this “unprecedented skills shortage.” She later expanded to say these improvements would require claimants to travel up to one hour from their home to their job, and accept at least 70% of their previous salary if required.

But the legitimate critics of employment insurance have been saying the problem needs to be addressed for some time, just as the unsustainable old-age security needed to be addressed in the 1980’s and 1990’s.  The CD Howe Institute has been saying for some time that

The goals and intentions of the EI regime should be simplified to better address the needs
of Canada’s unemployed workers. Reforms are needed to better align the incentives of the
EI program with the national interests of a more dynamic, flexible and buoyant labour
market. Regionally based criteria for determining eligibility and the length of the benefit
period should be replaced by uniform, countrywide EI entrance requirements and benefit
entitlement periods. An improved screening mechanism would allow EI parameters to be
tightened as the economy recovers and loosened when it enters a downturn.

John Ivison said these reforms have exposed the “work shy” people in every province: those who purposely take jobs for part of the year – just enough to qualify for employment insurance – then take the rest of the year living off the taxpayer.

The Canadian Taxpayers’ Federation said these changes “should help push people off of a pogey lifestyle and into steadier jobs,” according to National Director Gregory Thomas.

Brian Lee Crowley, former Visiting Economist at Finance Canada and Managing Director of the Macdonald-Laurier Institute, recalled the “shameful damage” EI caused in his eastern Canadian home.  Crowley encountered entitled citizens demanding “make work” jobs outside of fishing season (paid for by the taxpayer).  As a business owner, he encountered people with the audacity to say they would only work if he agreed to lay them off once they gained enough hours to sit on EI.  Government, businesses, and citizens all became complicit in this system.

This is not to say everyone is cheating the system, just that there are cheats out there who know very well how to play the system for the maximum benefit and the least work.

But while the government is tightening the rules on employment insurance, I’m questioning why do we need employment insurance at all?

Employment insurance (previously unemployment insurance) was originally established during the Great Depression under Conservative prime minister R.B. Bennett.  Interestingly, the original program was ruled unconstitutional as the responsibility should have fallen to the provinces according to the Supreme Court.

The existence of the program at that time was obvious: 30% of the labour force was out of work, and 20% were depending on the government.  Wages fell alongside prices as people were desperate to make ends meet.

But the times have clearly changed.  The unemployment rate was eight percent in 2010, and currently sits at 7.3 percent with 58,000 more people working as of April 2012.

Today, employees contribute $1.71 for every $100 they make, and employers remit 1.4 times that amount.

This system prompted the National Post to remark that the system is a scam, since it’s not “insurance” and it’s not insuring against your “employment.”

For the average employee, who makes about $36,000 per year, that’s $615.  Not that it’s earth-shattering money, but it quickly adds up when the government is collecting that amount from millions of Canadians and reinvesting as it sees fit.

Why not give that money back to Canadians and let them save it for themselves?