Genevieve Simms

The Organization for Economic Co-operation and Development (OECD) predicts the current economic downturn will push Canada’s unemployment rate up to seven per cent this year and up to 7.5 per cent by 2010 from 5.8 per cent less than a year ago. To date, worker contributions have created a healthy $54.1 billion Employment Insurance (EI) fund, but despite this, it appears the EI system is letting the jobless down. They’ve not just lost their jobs; they’re also receiving inadequate EI benefits, if any at all.

EI, formerly Unemployment Insurance, was introduced in 1940 with the objective of providing financial assistance to unemployed workers. Benefit rates have historically been around 75 per cent (of insurable earnings) for claimants with dependents and 67 per cent for those without dependents. The maximum number of weeks a claimant could receive benefits was 51. Throughout the 1980s and 1990s though, increasingly conservative federal social policies saw the dismantling of many social programs, including EI. According to the Canadian Labour Congress, the EI program is “broken” and “in recent years, six in 10 unemployed men and seven in 10 unemployed women failed to qualify for any benefits, even though they paid EI premiums.”

True, today’s EI benefits have been clawed back extensively from years past. The basic benefit rate is now 55 per cent of average insurable earnings, or $447 per week — whichever is lower. The average weekly benefit paid out in 2007 was $317.65 per week. Even the maximum payment, which can only be paid out for up to 45 weeks, adds up to just $20,115 (before income tax deductions since EI is considered taxable income). With the poverty line assessed at around $24,000 per year, recipients of EI are therefore expected to live below it.

In fact, the average EI benefits of $1,270.60 per month would not cover modest living expenses for a single person in Calgary. Based on average monthly costs from 2008, a single Calgarian pays $951 rent for a one-bedroom apartment, $250 for groceries, $83 for a transit pass and $30 for a phone. With EI benefits, the average Calgarian would come up $43 short and that isn’t accounting for debt payments, utilities, dependents or any other expenses.

Not only do EI benefits fail to cover reasonable expenses, recipients have to wait more than a month to find out if they will receive benefits. Service Canada reports the average time to process applications is now 40 days. Benefits are also not paid for the first two weeks of unemployment — call it the deductible. Over 60,000 Calgarians are just one paycheque away from homelessness. One wonders how going without three paycheques could affect the average Calgarian.

Understanding the impacts of unemployment, some employers pay employees a severance package when they’re laid off. However, EI treats severance as wages and deducts it from any benefits. Arguably, though, severance should be seen as compensation for the long-term costs of job loss. Those hardest hit by the economic downturn are those in the manufacturing and automotive industry who may have been with the same company for decades. The chances of finding comparable work with similar benefits and wages are small — hence severance pay. The transition from one job to another may also reduce pension and other benefits. Further, EI treats severance pay as regular wages, creating a disincentive for employers to pay it.

Service Canada, the government agency that delivers EI as well as other programs and services, declares that EI fraud, defined as knowingly withholding information or providing false or misleading information, is a serious offense. The agency recorded close to $150 million in fraudulent claims in 2007-08. Such fraud constitutes possible prosecution and fines of up to three times the benefits received. The agency expects to recoup all but $60 million of the fraudulent claims. In contrast, the federal government redirected surplus EI premium revenues to general government purposes from the mid-1990s through to 2007, and Canadians will never recoup those misdirected revenues. Most notably, former prime minister Jean Chrétien and former finance minister Paul Martin, redirected over $50 billion of EI surplus funds to general revenues. Canadian workers contribute EI premiums from their paycheques with the understanding that those premiums are being used for the purpose of supporting unemployed workers, yet the government knowingly redirected those funds for other purposes, arguably committing fraud of over $50 billion without consequence. In a case brought to the Supreme Court of Canada by the Syndicat National des Employes de l’Aluminium and the Confederation des syndicats nationaux, Quebec’s second-largest trade union with more than 300,000 members, Justice Louis LeBel concluded in December 2008 that it was up to Parliament, under its general taxation powers, to spend the EI surplus as it sees fit.

The current federal government has announced it will create an independent Crown corporation, the Canada Employment Insurance Financing Board (CEIFB), to restrict the use of premiums for EI only, starting with a reserve or “rainy-day fund” of $2 billion. The chief actuary, though, recommends a minimum reserve of no less than $10 billion to $15 billion. Either way, these numbers are significantly less than the current EI surplus of $54.1 billion, which begs the question, what is the plan for the remaining $52.1 billion Canadian workers have paid into the EI system if the government is only applying $2 billion of it to the new reserve?

Labour unions and workers alike called upon the federal government to include the expansion of EI benefits into the economic stimulus plan announced January 27. Surely, if consumer spending is expected to help us out of this recession, the $54.1 billion surplus in the EI account should be duly paid to unemployed workers who now need it. The January 27 federal budget announcement, however, has made clear that other than increasing funds available for retraining and increasing the maximum benefit period from 45 to 50 weeks, there will be no increased benefits for the thousands of unemployed Canadians (70,000 full-time jobs lost in December 2008 alone) now dependent on the EI program they thought would be there for them.