Ahead of new reforms to EI, IRPP research shows how to finance rising costs

Montreal – As Canada heads toward what is likely to be another economic downturn, the federal government is poised to announce changes to the Employment Insurance program (EI) – the first major update since the 1990s.

Change is clearly needed, but it comes with a price tag. Under the current system, increased costs mean increased premiums for businesses and workers, something that could be challenging with another recession on the horizon. Two new publications from the Institute for Research on Public Policy offer fresh insights on the challenge: the first report analyzes options to address financing, the second offers a proposal from IRPP researchers for a compromise package of EI reforms.

Over the past year, the IRPP has led a series of workshops and discussions with various experts and stakeholders on how best to modernize EI and how to finance those changes.

There is general agreement across academic experts and unions that the coverage and generosity of the EI program needs to increase. Business associations are concerned that the timing and scale of reforms will lead to higher premiums as companies recover from the pandemic and prepare for a new economic downturn. And while some have suggested that the federal government step in to foot the bill, others have argued it is unfair to burden taxpayers – many of whom are ineligible for EI – with the costs of the program.

There is also a need to think long term, ensuring that the program – and the workforce – is well placed to adapt to the challenges Canada will face in the future.

Economist Armine Yalnizyan, one of the expert presenters at the IRPP’s workshop, argued for greater access to training and skills upgrading: “If we’re talking about modernizing EI in an era of population aging, where we are going to need to maximize the contributions of a shrinking working-age cohort, we do want to make sure that everybody can get access,” she said.

As a compromise, IRPP researchers propose a phased approach with more cautious reforms, adjustments to premium setting, a limited federal role in financing and a renewed emphasis on training:

• 2023: Shift to a uniform 420-hour eligibility requirement to increase the number of unemployed Canadians covered by EI, move from a 55 to a 60 percent rate of salary replacement, cover expenses from pandemic-related extended benefits, and improve incentives for businesses and employees to provide and undertake training.
• 2024: Allow people who quit to pursue training or education to qualify for EI, commit to an ongoing federal role in financing recession-related EI expenses and implement an expanded Work-Sharing While Learning program.
• 2025 +: Implement a program for gig workers financed by a levy on platform companies, increase maximum insurable earnings, and develop a comprehensive strategy for workforce resilience in the face of an aging population, low-carbon transition and the changing nature of work.

The IRPP also welcomes other proposals for EI reform, with the aim of promoting an informed discussion and debate on a policy challenge that is important to Canadians.

Financing Employment Insurance Reform: Finding the Right Balance and Building a Package of Compromise Solutions for EI Reform can be downloaded from the IRPP’s website (irpp.org).