Ottawa Should Leave Unemployment Insurance to the Provinces

Worth A Look, Role of Government, Frontier Centre

It’s said that in life you get what you pay for. Including unemployment.

Globe and Mail columnist Neil Reynolds drew attention last week to an important recent study about the long-term effects of unemployment insurance. It provides more proof (if more were needed) that Ottawa should leave social policy to the provinces.*

In the U.S., unemployment is a state concern, in Canada it’s federal. So how do two jurisdictions compare which share a common border, common resources, and half a century of dissimilar unemployment insurance?

The conclusions are striking.

Because Maine can only pay benefits its local economy can afford, it has not changed its unemployment insurance system much in fifty years. To qualify, beneficiaries must have worked a whole year, can draw only 13 weeks of support, and the more often they claim the less they get.

Benefits in New Brunswick (as in all Atlantic provinces) are financed by other regions through federal transfers, so they can be much more generous.

When provinces voluntarily surrendered jurisdiction for EI to Ottawa in 1941, seasonal workers weren’t covered at all. After 1946, and only in the Atlantic, they were covered for the season in question, but could not draw benefits for the rest of the year. In the 1970s, Ottawa allowed Atlantic Canadians to work 10 weeks and draw EI for the rest of the year – inaugurating the now-famous “Lotto 10-42.” At the same time the feds began funneling temporary “job creation grants” into the region, so more people could qualify for EI.

The result? Unemployment in Maine is 3.9% compared to 9.1% in New Brunswick – two-and-a-half times higher.

Seasonal work has become rare in Maine. By 1990, only six percent of men in Maine still worked less than half a year, compared to 20% in New Brunswick. In Maine, seasonal idleness has decreased. In New Brunswick it has increased. EI payments accounted for 6% of New Brunswick’s economy by 1990, compared to 1% in Maine.

Long ago seasonal work in the Atlantic region, supported as it was by subsistence agriculture and tough-minded thrift, made sense. There was no choice, except to move west to Ontario.

But it makes no sense today. As Brian Crowley of the Atlantic Institute told our Calgary Congress last month, what is holding the region back now is a lack of full-time workers, while 10% draw pogey. And not just engineers and computer programmers, but truck drivers and receptionists.

The puzzle is what to do about it. The Atlantic fills 10% of the seats in the Commons, and 29% of the seats in the Senate – this with only 7% of Canada’s population. No national party – not even the Conservatives – can afford to offend maritime voters by telling them to grow up and join the 21st century.

The solution rests with the “have” provinces – Ontario, Alberta, B.C. and Saskatchewan. The governments of these provinces must insist that Ottawa restore the first principle of Confederation — that each province will be responsible for its own social and economic future.

You may think, “Sure, but that will never happen.”

You might be right. But think back. Did you say the same about governments balancing their budgets before the mid-1990s?

The strong provinces have far more leverage over Ottawa than the weak ones. They need to use it.

Link Byfield is chairman of the Edmonton-based Citizens Centre for Freedom and Democracy, and an Alberta senator-elect.

“Just Between Us” is a feature service of the Citizens Centre for Freedom and Democracy. The purpose of the Citizens Centre is to enhance freedom and democracy by enabling ordinary citizens to become active and effective on important issues outside the normal processes of party politics.

*NOTE: “The Long-Term Effects of a Generous Income Support Program: Unemployment Insurance in New Brunswick and Maine, 1940-1991,” by Chris Riddell and Peter Kuhn.