A Disguised Welfare Scheme: EI isn’t an insurance program. It’s an interregional transfer of wealth

Worth A Look, Equalization, Frontier Centre

It’s surprising that Employment Insurance (EI) hasn’t been a bigger deal since the economic downturn began in 2008. Sure, the Liberals blustered about extending benefits last year. They even threatened to bring down the Tory minority if more people weren’t paid. But finding little constituency for their EI crusade, the Grits quickly lost interest and the subject slipped once more beneath the surface of the murky Parliamentary waters.

Not even the NDP have found much to drone on about.

Such was not the case in the last big recession (1991-93). Then EI was top of mind, and so were the regional disparities in the scheme.

It was well known the plan was set up to pay out too easily to residents of Quebec and Atlantic Canada and to deny benefits where possible to Ontarians and Westerners.

One EI researcher at Statistics Canada told me off the record that white collar workers in Ontario or Alberta would almost never be able to claim, no matter how long they had paid in.

Eligibility is determined by region according to how long one has worked before making a claim and how long it is likely to take to find a new job. Workers in “have” provinces have to work much longer than their counterparts in “have-not” provinces before their claims are even considered — almost a year versus four months or less. And since they are also more likely to find work quickly once laid off — especially if they work in white-collar positions — the chances they will ever receive benefits are almost nil.

That means EI isn’t an insurance program, despite its name. It is both a tax on employment and an inter-regional transfer of wealth.

If it were truly an insurance program, premiums would be charged according to the likelihood a worker would make a claim.

In the not-too-distant past, there have been times when 40% of workers in Atlantic Canada and 20% in rural Quebec have claimed EI benefits every year. In the mid-1990s, more than half of Atlantic Canadian EI recipients had claimed at least six times. There were two towns in New Brunswick with populations over 1,000 where every adult had claimed EI at least once — every one.

Were EI a real insurance program — rather than a welfare scheme masquerading as insurance — premiums would have been so high for Atlantic Canadians and rural Quebecers that most wouldn’t have been able to afford them.

Thanks to changes made by the Liberals in 1995, EI use has fallen by nearly half. But premiums haven’t gone down proportionately, which is even more proof EI is not an insurance plan. When not using EI to denude one half of Canada to fatten up the other, the federal government — Liberal or Tory — is content to milk the plan to boost government revenues.

All of this means that a study on EI disparity in the recent recession comes as absolutely no surprise. How could it be otherwise? The system is set up from the get go, to favour some parts of the country over others.

Released Wednesday by the University of Toronto’s Mowat Centre for Policy Innovation, the study shows that during the 2008-09 recession, Ontario and Western workers received half the benefits per capita that unemployed workers in Atlantic Canada and Quebec received.

According to researchers, only 38% of unemployed workers in Ontario and 39% in B.C. received benefits, despite those provinces being among the hardest hit with job losses. And while 42% of Canada’s unemployed lived in Ontario, laid-off workers in that province received only 25% of training funds available through EI. Not only did unemployed Ontarians receive fewer payouts, they got less help retraining for new careers, too. It would be difficult for the results to be different given the way EI has been deliberately set up like a pipeline to pump cash from the West and Ontario to regions that have come to depend on EI handouts.

“Simply stated,” the report concludes, “a national social program that does not work for Ontario or the West is not in the national interest.”

Perhaps not. But given that it works in favour of regions with swing seats important to politicians seeking a majority of seats in the House of Commons, EI seems destined to be with us for a long time in its present form, whether it’s in the national interest or not.