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October 1, 2012

Unemployment: Shifting the Burden to Workers

SS Editorial


After every recession there is an attack on unemployment insurance. After the 2008-09 recession the Harper Conservatives are acting to further cut benefits by changing the definition of what is a suitable job. The courts have defined a suitable job as 90% of previous salary, within one’s occupational and geographic range (with a current national average commute of 26 minutes one way) and acknowledging personal considerations.

Beginning in 2013 there will be three categories for those who qualify for unemployment insurance that will bypass 70 years of judicial decisions as to what is suitable employment:

Occasional users – 58% of applicants – can search for jobs at 90% of their previous salary for seven weeks; then at 80%; and finally 70% after eighteen weeks on employment insurance;

Long tenured workers – 25% of applicants – are workers who have paid Employment Insurance premiums in seven of the last ten years and have only drawn thirty five weeks insurance in the previous five years. They will be given four and a half months to search for a suitable job at 90% of previous salary. Then they will have to look for a suitable job at 80% of previous salary; and

Frequent claimants (seasonal workers) – 17% of applicants – will have to accept 80% of salary as suitable immediately and then 70% after eighteen weeks at any job.

All workers will now also have to look at a one-hour commute one. Appeals, which have been handled by tripartite Boards with a union representative (usually appointed by the local Labour Council) may be replaced with a government controlled Social Security Tribunal.

To add insult to injury as the number of workers at Service Canada has been cut, processing times for claims have doubled. In 2007 the number of waiting claimants was 181,931. In 2011, 360,481 claimants are waiting. Only one in three calls are answered.

It appears from early experience that the new rules mean that claimants only get the same amount of benefits under the new rules if you earn at least $20 an hour.

In Atlantic Canada, rural Quebec, and northern Canada, where the majority of claimants are seasonal workers, the use of employment insurance as a safety net for more poorly paid and irregularly employed workers and as a national economic stabilization mechanism, may come to an end. And for the majority of applicants, from five to eight percent of the workforce in the last decade, unemployment insurance becomes even more a tool to coerce workers towards short term employer defined needs for temporary, cheap and flexible labour.

A suitable job has indeed been redefined.

Shifting the risk of Unemployment

Canada was one of the last major developed countries to develop an unemployment insurance system. Only in the context of a war emergency did the federal government manage a constitutional amendment in 1940 to introduce a national labour market strategy through unemployment insurance.

Still, in the context of the long boom, when the national economy expanded from the 1940s to the early 1970s, coverage and the level of benefits were increased – from 42% of the work force in the 1940s to 75% in the face of the 1957 recession. In 1971 the Trudeau Liberals revised the act to substantially raise benefits (10 weeks work could get you 42 weeks insurance at 75% wage replacement of the average salary) and added disability and parental benefits. The act was also amended to introduce a training component. Coverage rose to 96% of the labour market. Tripartite Boards of Referees governed appeals with final recourse to federal courts

But since the market has slowed, through the 1980 and 90 recessions, Liberal and Conservative governments have been chipping away at unemployment insurance as if the unemployed were to blame for business decisions.

In 1990 the federal government ended funding unemployment insurance. Now only employers and workers pay in. Eligibility requirements also changed. Where over 80% of those who paid premiums could collect, now less than 50% are eligible with regionally adjusted hourly thresholds. The economic risk of unemployment has been privatized and thrown onto workers.

Rebuilding Unemployment Insurance

Instead of treating employment insurance as a way to force greater market flexibility in the face of sluggish economic growth, unemployment insurance should address workers’ needs when hard times hit as well as labour market needs.

This means raising the wage replacement level back to 75% of the average wage (not the current 55%) with a better calculation formula for a longer period of time (as only 44% of claimants can claim the maximum benefit); funding other labour market needs such as parental leave and training out of general revenue rather than privately through a payroll tax; and developing a second tier of large scale unemployment programs when a recession happens.

Reform could also mean that unemployment insurance is a legitimate tool to offset regional economic issues where seasonal work is a normal feature of the economy or, when seasonal work disappears, as a means to a planned, gradual transition to other forms of employment.

None of this is financially impossible, as nearly forty percent of the premiums collected have been diverted to general revenue since 1995 to pay down the deficit (about $10 billion dollars a year since 2000 - even if Harper claims to have halted this practice recently).

But is it politically possible? Certainly the way the Conservatives have made these changes through the budget omnibus bill, and by regulatory rather than legislative change, indicates the employers party is quite aware these are strategic choices to increase the power of capital over labour, to force workers to accept lower wages (including using the new Working Income Tax Benefit as a way to keep workers in the low wage sector than file for employment insurance) than changes driven by a government budget shortfall.

For further updates on fighting for a better Unemployment Insurance system see the Canadian Labour Congress web site.