Our concerns
The Alberta Federation of Labour believes that the federal government's EI proposals are not in the best interests of most Canadians. We have ten major objections:
1) The $2 billion cuts to program spending announced in the budget and written into the new EI legislation cannot be justified in terms of cost.
By next year, at current rates of revenue generation and expenditure, the UI fund will have a $9 billion surplus. It is difficult to understand the need for continued cuts when the fund is in such good financial shape.
2) Under the new EI system, it will become too difficult for unemployed workers to qualify for benefits.
By the government's own estimates, about 90,000 Canadians currently collecting UI (about five percent of the total) will not qualify under the new rules. Another 480,000 (those working fewer than 35 hours a week) will have to work longer to qualify.
Taken together, that's about 570,000 Canadians who will be denied UI or who will have to work longer to qualify each year. The government seems confident these people will find some way to make ends meet without help or with reduced help from UI. We don't share that confidence.
That's not to say that we oppose any changes to eligibility criteria. We agree with federal officials when they say that the UI system must be changed to respond to the changing nature of the labour market. For example, we support the concept of calculating eligibility by hours instead of weeks. This kind of change could potentially help workers, particularly women and younger workers, who are working part-time or in temporary positions.
But the proposed system would end up excluding most part-timers from coverage because it sets the threshold for hours worked much too high.
For example, under the current system, workers in Alberta need a minimum of 18 weeks at 15 hour per week to qualify for benefits. This translates into a total of 270 hours. But under the proposed EI system, workers in Alberta will need a minimum of 630 hours to qualify. In other words, Albertans will have to work 133 percent longer to qualify for unemployment benefits !
The situation is even more alarming for new entrants to the job market. Under the current system, these people must work a minimum of 20 weeks at 15 hours per week. That translates into 300 hours. Under the new system, these same workers will have to work 910 hours in order to be eligible for EI. That's an increase of 203 percent! New entrants will need triple the hours that are currently required to qualify for benefits!
Of course, the number of hours needed to qualify will vary from region to region depending on the prevailing rate of unemployment. But in all cases the trend is the same — Canadians will have to work between one-and-a-half and three times longer to qualify for unemployment benefits.
The result of these changes is clear — UI benefits are being placed out of reach for thousands of Canadians. We think this is unconscionable at a time when unemployment rates are still near historic highs. In today's harsh and extremely competitive marketplace, Canadians need more protection when they are between jobs, not less!
3) By lowering the maximum duration for benefits to 45 weeks from 50, the government will be throwing many people — as many as 200,000 — off UI before they have been able to find work.
This change — together with the tighter rules regrading eligibility — will mean that the percentage of the unemployed who qualify for assistance will drop from its current, dismal rate of 50 percent to as low as 25 or 30 percent.
The question that members of the federal government should be asking themselves is this: What happens to unemployed people who don't qualify for EI or have run out of benefits before finding work? In the long run, it's clear that many of them will simply end up on welfare.
So, it can be argued that these changes aren't really "reform" — it's really about down-loading services to other levels of government. The Alberta Federation of Labour is convinced that the new EI legislation will lead to increased pressure on the provinces already over-burdened social assistance programs. We are equally convinced that the new law will lead to increased human suffering.
4) Once the new rules have been implemented, many UI recipients will no longer be able to make ends meet financially as a result of dramatically reduced benefit rates.
It's clear that the proposed changes will drastically reduce benefit rates for most UI recipients. Once again, the government's own figures tell the story.
Under the new EI system, the maximum weekly benefit will be reduced to $413 from $449 today. The new maximum will be frozen at least until the year 2000, regardless of inflation. That's the best case scenario — for most workers the cuts in benefit rates will be much deeper.
The biggest problem in this regard is the new rule basing benefit levels on total earnings over a fixed period of consecutive weeks. For many workers — especially seasonal and part-time workers — this means that weeks in which they earned little or no income will be used to calculate their benefit rates.
To illustrate this problem, let's look at the case of a newly unemployed Canadian living in a region of the country with 12 percent unemployment who had earned $4,620 over 14 weeks of work.
Under the current system, this worker is eligible for weekly benefits of $330. But under the proposed EI system, this same worker would only receive $257 each week because his earnings would be averaged over a set period of 18 weeks. This would mean averaging in four weeks when he had no income at all — leading to a 22 percent cut in his benefit rate.
The impact of the new formula for setting benefit rates will vary widely from worker to worker. Some unemployed Canadians will see their benefits cut by 20 percent, some by as much as 45 or 50 percent. At the very least, all UI recipients will have their benefits cut by 8 or 9 percent. The result of these cuts will be that many UI recipients, who currently are only barely able to scrap by financially, will be plunged into poverty.
5) The proposed penalties for unemployed workers who apply for UI more than once over a five year period are unethical and do nothing to attack the real causes of unemployment.
By introducing penalties for repeat users, the government is obviously attempting to "discipline" workers and discourage them from making use of the system. But, this is exactly where they are missing the point. The government's own statistics show that the majority of UI recipients are unemployed because of lay-offs, not because they chose to leave their jobs. With this in mind, it's clear that the proposed penalties are merely punitive — they punish unemployed workers for something they have little control over.
Supporters of UI penalties have argued that the changes are necessary to remove "disincentives." This argument is based two faulty premises. First, that unemployed workers have chosen to be out of work — that they want to be collecting UI. And, second, that penalties imposed on unemployed workers will somehow reduce unemployment.
These premises are faulty because they fail to recognize the real roots of unemployment. As the both the National Council on Welfare and the Canadian Council on Social Development have concluded, unemployment is caused by a lack of jobs, not by laziness or lack of training. No amount of training, penalties or 'incentives' will get the majority of unemployed people back to work. There are simply not enough good jobs for the number of people ready and able to work.
Here in Edmonton, for example, federal statistics show that 43,000 people were unemployed in February. That same month, there were about 1,700 jobs posted at the federal government's Employment Centre.
These numbers tell the real story of unemployment in Canada — 43,000 looking for work and only 1,700 jobs. To make matters worse, the job postings were for the entire province, so an unemployed worker here in Edmonton is actually competing with job seekers from Calgary, Red Deer and other communities.
The bottom line is that, by introducing penalties on unemployed Canadians, the government is applying pressure in the wrong place. They are penalizing individuals for taking the only kind of work that is available (i.e. seasonal, temporary, part-time). And they are ignoring the fact that our economy is moving to a greater reliance on part-time and temporary work — exactly the kind of jobs workers will be penalized for taking under the new system.
If the government really wants to reduce unemployment, they should focus on strategies to create good jobs. And they should exert pressure in the proper place — on employers, not workers. After all, as the government is fond of saying, business people are the ones who create jobs.
When making its finally decisions in this policy debate, the government should remember this simple truth: penalties for repeat user will create only hardship for individuals — they won't create jobs.
6) We are also deeply troubled by the government's seeming willingness to abandon the basic principles that formed the foundation of the original UI program.
By reducing benefits and making it more difficult to qualify, the government is essentially putting pressure on unemployed workers to take any job, at any wage, just to survive.
This is fundamentally and ethically unacceptable. It runs contrary to the traditional focus of the UI program, which was originally designed to provide replacement income so unemployed workers could maintain their living standards and their dignity while looking for work.
The pressure on unemployed workers to accept any job, will also distort the labour market, putting downward pressure on all wages — not just for those on UI.
The decision to use UI dollars to pay for things like job training, wage subsidies and programs for low income families also runs contrary to the original principle of UI. These programs may all be worthy of support. But it is inappropriate to use UI funds — which have been set aside specifically to replace the income of temporarily unemployed workers — to finance general social assistance programs. Such changes confuse the purpose of UI and betray the trust of workers and employers who have paid into the system.
7) Individual workers won't be the only ones to suffer as a result of the proposed changes. Without the money generated by UI cheques, many communities and regions will also suffer financially.
Here in Alberta, federal figures show that the proposed benefit cuts will take $120 million dollars out of the provincial economy each year — a cut of almost nine percent in the benefits currently paid out to unemployed Albertans. The changes will have even more profound effects on the economies of Maritime provinces like Newfoundland, where about $140 million dollars will be taken out of the pockets of UI recipients. Overall, the federal government's proposed UI cuts will drain $1.9 billion from the Canadian economy each year.
These numbers may seem small relative to the overall size of the provincial and federal economies — but they are not insignificant. Money taken out of the pockets of UI recipients is money taken away from local businesses and out of local communities.
8) We question government claims that the new focus on "active employment measures" will have better results than the traditional approach of income replacement.
The government argues that its new approach to unemployment insurance will provide Canadians with improved "incentives" to work. As we have already argued, we don't think the so-called "disincentives" in the current system are the real cause of Canada's persistently high levels of unemployment. In fact, we believe workers have great incentive to get back to work under the current system. After all, most UI recipients are receiving only 55 percent of their previous income. For most Canadians that's a pretty big incentive to find another job.
We also oppose the new focus on "active employment measures" because we believe it will lead to more economic hardship and job instability, not less. Under the old model, unemployed workers were in a better position to wait for a job that suited their skills and experience — a job that would allow them to make an optimum contribution to the economy and society. Under the new system, workers will either be pushed onto provincial social assistance programs — which are already over-burdened — or they will be forced to accept low paying work.
Either way, both the individual worker and the economy in general will suffer.
9) Wage subsidies and income supplements are not the answer.
These measure distort the labour market and drive down wages. What's worse, experience shows that the jobs created by these programs tend to last only as long as the government subsidies keep flowing.
The bottom line is that subsidies, training programs and other measures are no replacement for job creation. At best, they are of limited short-term value. At worst, they distort the labour market and make it easier for employers to pay low wages. These "active employment measure" are no panacea — and they certainly should not be allowed to displace income replacement as the central focus of the unemployment insurance system.
10) Finally, the proposed devolution of responsibility for unemployment services — from the federal government to the provinces and community or business groups -- will inevitably lead to a hodge-podge of services across the country.
Given our experience with areas where the federal government has transferred responsibility to the provinces or backed off of ensuring national standards, it's clear that the quality of service and the level of access to services will vary greatly from province to province.
