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Employment Insurance Reform Proposed in 2012

Tories announced reform on employment insurance

After Minister of Finance James Flaherty presented his 2012 federal budget on on 29 March 2012, the Tories revealed details of its proposed reform on Employment Insurance (EI) in May. Some highlights of the proposed changes are as follows:

Proposed changes will divide EI claimants into three categories:

  1. Long-tenured workers who have paid into the EI system for the past 7 of 10 years and who, over the last 5 years, have collected EI or fishing benefits for 35 weeks or less.
  2. Frequent claimants who have had 3 or more claims for regular or fishing benefits and collected benefits for a total of more than 60 weeks in the past 5 years.
  3. Occasional claimants would be all other claimants.

As depicted in the table below, proposed changes will affect each group differently. Long-tenured workers will be given more time to find a job in their usual occupation and at a similar wage (starting at 90% of previous hourly wage.) After 18 weeks on EI benefits, long-tenured workers would be required to expand their search to jobs similar to the one they normally perform and to accept wages starting at 80%of their previous hourly wage.

EI changes 2012

From the onset to 6 weeks of their EI claim, frequent claimants would be required to expand their job search to jobs similar to their last job and accept wages starting at 80% of their previous hourly wage. After receiving benefits for seven weeks, they would be required to accept any work they are qualified to perform (with training, if required) and to accept wages starting at 70% of their previous hourly wage.

Occasional claimants could limit their job search to their usual occupation and wage (at least 90% of previous hourly wage) for the first six weeks of their claim. After that, they would be required to expand their search to jobs similar to the work they normally perform with wages at 80% of previous earnings. After 18 weeks, they would be required to further expand their job search to include any work that they are qualified to perform (with training, if required) and to accept wages starting at 70% of their previous earnings but not lower than the prevailing minimum wage.

Definition of Suitable Employment

Suitable employment is defined based on six criteria:

Alleged Causes of the Changes

Since the 2012 federal budget was announced, the government had been tight-lipped about the details on the planned EI changes. Opposition MPs and other critics speculated that the government was going to force unemployed Canadians to move and accept jobs outside their occupation. Minister Finley denied this and said that EI claimants will be assessed based on their job search activities, the intensity and frequency of their efforts, the type of work they are looking for and on the evidence they have to prove their efforts.

Like the current requirements, EI recipients will be required to apply for positions, attend interviews, go to job fairs and workshops, search for vacancies and to do these activities. However, the new changes will require them to do the foregoing every day that they are receiving benefits. They have to keep a record of their activities. Those who fail to comply with these rules will be disqualified from receiving EI benefits.

One reason given be the government is to reduce the need of foreign laborers in some seasonal industries such as agriculture, tourism and fisheries. The idea is to link those receiving EI cheques to employers who are hiring. The new changes may compel some EI recipients to fill seasonal jobs often filled by temporary foreign workers. Immigration Minister Jason Kenney supported these changes while addressing the Halifax Chamber of Commerce on 19 April 2012.

This raised concerns on the fairness and practicability of the new changes. Opposition is concerned that the proposed rules will force people to take low-skilled, low-paying jobs and will jeopardize the economic security of communities that rely on seasonal industries. There are suggestions that the changes are sending a message that the unemployed are lazy and do not want to work. The Canadian Labour Congress also criticized the changes as "ridiculous economic policy".

Costs of the EI Overhaul and Proposed Effective Date

$21 million is set aside in implementing the new information systems to enhance information sharing between the EI and the temporary foreign worker program. Most of that money will go to the new job alert service and some will be dedicated to enforcing the new rules.

New EI regulations are expected to be effective in early 2013. Maternity benefits remain unaffected.

Remarks

The Ministry of Human Resources anticipates that less than 1% of EI claimants would be cut off due to the new rules. The actual figure could be higher than 1%.

Employment insurance (formerly known as unemployment insurance) in Canada is a legacy of the Great Depression, and remains a pillar of the nation’s modern social programs to ensure financial security of unemployed workers in need. Since its creation in August 1940 by way of passing the Unemployment Insurance Act, the program has undergone many significant philosophically and structurally evolutions summarized as follows:

Legislation

Date

Program Reforms

Bill C-69

1976

  • Disqualification increased from 3 to 6 weeks for those who quit without just cause, were fired because of misconduct, refused to accept suitable employment, failed to attend a placement interview, or refused to follow instructions from personnel handling their claims.
  • Maximum age for coverage reduced from 70 to 65
  • Wage replacement rate reduced from 75% to 66.67% for claimants with dependants

Bill C-27

1977

  • Maximum benefit period reduced to 50 weeks

Bill C-14

1979

  • Eligibility requirements tightened
  • Wage replacement rate reduced to 60%
  • Benefit clawback introduced to recover benefits paid to high income recipients

Bill C-156

1984

  • Seasonal fishermens’ benefits modified
  • Maternity benefits modified
  • Adoption benefits introduced

Bill C-21

1990

  • Penalty increased from 6, to 7 to 12 weeks for quitting without just cause, for
  • being dismissed for misconduct, or for refusing to accept suitable employment

Bill C-113

1993

  • Those who quit without just cause, were fired for misconduct, or refused to accept suitable employment became ineligible for benefits
  • Wage replacement rate lowered to 57% (from 60%)

Bill C-17

1994

  • Wage replacement rate lowered to 55% (raised to 60 percent for low-income earners with dependants)

Bill C-12

1996

  • Program renamed to Employment Insurance
  • 20 weeks of use in the past five years, to a maximum 5%
  • Repeat claimants face a benefit clawback of up to 100%, depending on earnings and weeks of benefits in the last five years
  • Weekly maximum insurable earnings revised to $750

Prior to 1990, the cost of unemployment insurance was shared by employees, employers, and the federal government (through general government revenues). In 1990, the federal government eliminated its financial responsibilities, making the program completely self-financing. At the time of writing, the Employment Insurance program is administrated by the federal Department of Human Resources and Social Development (also known as Human Resources and Social Development Canada or HRSDC).

The EI program is due for a major overhaul. There are two sacred cows are not touched by the new changes: school teachers and maternity leave. Teachers are entitled to EI benefits during the summer season. Maternity benefit claimants will receive 60% of their earnings for almost 12 months after giving birth. Workers and employers who pay EI premiums are collectively funding these two types of claimants. It is noteworthy to remark that school teachers and certain types of employment, such as agriculture, forestry, fishing, logging, hospital care and any employment earning more than $2,000 per year were excluded at the outset. EI will continue to challenge our politicians and policy makers to meaningfully reform the program according to meet the needs of our changing economy and society.

           

           

[This page was conceptualized on 24 May 2012, published on 7 June 2012, last revised on 8 June 2012.]