There is no one set of solutions to address the challenges of EI modernization and financing reform that will satisfy everyone. Those who want to avoid increasing premiums will need to accept compromise solutions that limit increases and provide greater premium stability. Those who want to return to the generous EI system that was in place before 1990 will need to accept a more modest set of reforms that limit growth in EI expenditures. And those who believe taxpayers should not contribute to the program will need to accept the introduction of a targeted role for government funding to support key policy objectives.
[Read the related IRPP report: Financing Employment Insurance Reform]
To facilitate an informed discussion around possible compromise policy packages, we selected a set of illustrative policy changes based on our fall 2022 report on EI financing and our spring 2022 report on EI modernization (table 1). We divide the policy changes into three phases. Phase 1 could be implemented in 2023. Phase 2 will require some additional work to refine the policies but could reasonably be implemented in 2024. Phase 3 changes require more extensive discussion and analysis and would therefore be more appropriate for 2025 or later.
Our choices were guided by a desire to improve near-term readiness for the expected economic downturn without overburdening small and medium-sized enterprises with additional costs as they continue to recover from the pandemic. They were also guided by the clear need to adapt the program to the changing longer-term needs of Canada’s workforce, particularly as Canada faces risks and opportunities associated with an aging population, the transition to a low-carbon economy, a growing number of gig workers and changing skills needs of employers.
In preparation for a possible recession in 2023, the federal government could make some relatively simple near-term changes to improve EI coverage and generosity. These changes will help soften the blow of the recession, with greater support for lower-income and part-time workers who lose their jobs.
One of the simplest ways to increase the number of unemployed Canadians covered by EI is to shift to a uniform 420-hour eligibility requirement. Currently, there are nine eligibility requirements based on regional rates of unemployment, ranging from 700 hours in regions with unemployment rates below 6 percent to 420 hours for regions with unemployment rates more than 13 percent. Experts in the IRPP’s first workshop felt that the current system disadvantaged low-paid, part-time and on-demand workers living in larger cities where unemployment rates are often lower. During the pandemic, the government adopted a uniform eligibility requirement of 420 hours worked, demonstrating that this can be quickly adjusted. The number of weeks that recipients can collect EI benefits would, however, remain differentiated based on regional unemployment rates since it should take less time to find a new job in regions with lower unemployment. We estimate that the change to the 420-hour eligibility requirement will increase coverage by around 8 percent.
Another relatively easy adjustment to make in the near term would be to increase the earnings replacement rate from the current 55 percent to a level closer to the median rate used by industrialized countries (65 percent) or the level previously in place in the EI program (67 percent). The current 55 percent rate places low-income individuals receiving EI below the poverty line in many provinces. When combined with the upper limit on insured earnings, it also disadvantages higher-income individuals. For example, someone earning $80,000 a year in 2022 would only receive 41 percent of their income while collecting EI benefits (because of a maximum insurable earnings level of $60,300). We propose a compromise solution consisting of a 60 percent replacement rate to limit the associated increase in program costs and premium rates. Shifting to a 60 percent replacement rate would lead to a 9 percent increase in the generosity of benefits.
To address concerns regarding the increase in premiums associated with the deficit in the EI account and additional costs from modernization, the government could adjust the premium-rate-setting formula and inject federal funding into the EI account to cover COVID-related costs. There is a strong case to be made for limiting premium increases in the near term as Canada faces a potential recession in 2023. There are also benefits to having more stability in premiums over the long term because year-to-year fluctuations in payroll costs can be difficult for small and medium-sized businesses to manage.
Our analysis shows that some relatively small changes to the premium-rate-setting approach could limit the increase in premiums, improve rate stability and improve EI account sustainability. Combining three options considered in the IRPP’s report, Financing Employment Insurance Reform: Finding the Right Balance, would have a powerful impact. It would: (1) shift the target time frame for the break-even rate from seven to 10 years; (2) limit the decrease in premium rates while the EI account remains in deficit; and (3) inject federal funding into the account to cover the $23.6 billion in pandemic-related extended benefits.
In the IRPP’s workshops, there was significant discussion about how different aspects of EI policy influence incentives for employees and employers, which affect expenditures. There was also concern that the changing nature of work — such as a shift to remote work and the low-carbon transition — could result in changes to labour markets that increase reliance on EI (Samson et al. 2021). While there was no consensus around some proposals, such as experience-rated premiums, there was substantial support for a greater emphasis on training to improve the long-term resilience of Canada’s workforce. In our view, two near-term proposals could improve incentives for small and medium-sized businesses to provide training, and employees to undertake training.
The Premium Reduction Program, which provides relief to employers and their employees based on employer-provided short-term disability plans, could be extended to provide incentives for small and medium-sized businesses to provide training. Given the limited capacity of these businesses, the incentive could also allow for contributions to sector-wide training mutuals such as those used in Quebec (Blanchet 2022). Premium relief could help to alleviate concerns from small businesses over premium costs, while also encouraging training, which could help address skills shortages and improve long-term workforce resilience. In considering criteria and implementation, it will be important to minimize the administrative burden for businesses, workers and the government.
Another near-term option to encourage uptake of training would be to extend the existing Skills Boost program, which allows EI claimants who are long-tenured workers to pursue full-time training while continuing to receive regular EI benefits. Claimants must request permission from Service Canada, however, and only 612 claimants received permission in 2020-21 (CEIC 2022). The government could expand uptake by allowing some workers who are not long tenured to access the program. The focus could be on low-skilled workers willing to upskill or reskill. These workers are more vulnerable to unemployment, particularly as the nature of work changes. An expanded Skills Boost program could address gaps in the Canada Training Benefit, which is not well suited to low-income and low-skilled workers given that it requires individuals to pay for training up front and claim the credit at tax time, and the pending EI Training Support Benefit, which will only provide four weeks of benefits.
While Phase 1 policy changes would address many of the shortcomings in the current EI program identified through the IRPP’s workshops, more work will be needed to solidify the program’s role as an economic stabilizer and the incentives provided for long-term workforce resilience. Phase 2 policies would go a step further, increasing coverage by an additional 7 percent, implementing a clear rule for federal government involvement during recessions, and expanding the provision of EI to all workers who quit to pursue training or education.
In 2019, around 14 percent of unemployed Canadians were ineligible for EI due to invalid job separation (CEIC 2021). In the IRPP’s first workshop, some experts suggested extending EI eligibility to those who quit their jobs. A compromise solution could be to focus on those who quit to pursue full-time training or education. Such a measure would enhance coverage while also improving the long-term resilience of the workforce to economic shocks and structural change. While the number of workers who quit to pursue education or training was estimated to be around 4 percent of the unemployed in 2019, the measure could result in greater coverage by encouraging more unemployed individuals who quit to pursue training (CEIC 2021).
Building on the Phase 1 proposal of having the federal government contribute to the EI account to cover the costs of pandemic-related extended benefits, the federal government could outline a framework for its ongoing role in contributing to the EI account during periods of recession. The government could determine an appropriate threshold rate of unemployment that would trigger financial contributions to the account. For example, during the recessions in 2008-09 and 2020-21 the national unemployment rate exceeded 8 percent. The appropriate threshold may be slightly lower, however, since some recessions have had national unemployment rates lower than 8 percent. Cyclical contributions from the federal government would help to limit increases in premiums as businesses recover from a recession.
To further encourage employers to provide training opportunities, the government could consider expanding the Work-Sharing Program, which provides EI benefits to eligible employees who agree to reduce their normal working hours and share available work. Currently, employees who are part of a work-sharing unit and working reduced hours may take part in training programs during the time spent not working and while receiving EI benefits. However, this option is limited to workers at firms that have experienced a reduction in business activity. The Work-Sharing While Learning Program, which was in place briefly in the early 2000s, permitted workers in industries in high unemployment regions that were facing structural changes to access EI benefits for a year while attending an employer-funded training program, but had little uptake (Canada 2005).
The federal government could consider reinstating the Work-Sharing While Learning Program and making it available to workers at all firms as a means of encouraging employers to offer training and building workforce resilience. This could be particularly helpful to workers affected by the transition to a low-carbon economy, including those who work in in oil and gas production, coal mining and the many companies that provide goods and services to these sectors. Opening the program to all firms makes sense, however, since it will allow workers to proactively prepare for future market risk rather than only supporting workers where businesses can demonstrate a historical reduction in business activity.
In the IRPP’s workshops, participants weighed the benefits of allowing those who voluntarily quit their jobs without just cause to be eligible for EI benefits. These workers haven’t been eligible to collect EI since 1993. Between 2013 and 2020, 93 percent of those who quit did so to return to school, take another job or retire (CEIC 2022). To encourage Canadians to pursue education and training, the federal government could consider allowing those who voluntarily quit to return to school or pursue training to collect EI benefits.
The government would need to determine the types of training and education that would be covered and for how long the benefits could be received, but it should not limit the program to regions with high unemployment. Previous initiatives have shown that uptake is likely to be low in areas where post-training opportunities are limited. Instead, program costs could be limited by providing employees in all regions a set number of weeks to use over their working life, allowing them to access EI to pursue shorter training courses over several years or to use them all at once to pursue a longer training program.
In addition to the near- and mid-term proposed changes in Phases 1 and 2, our Phase 3 proposals take a longer view and require more extensive discussion and analysis. As the economy and labour force continue to evolve, so too will the EI program need to do so. These proposals are meant to kickstart a discussion on a broader reimagining of the program that would be more responsive to the changing nature of work and the transition to a low-carbon economy.
One of the recurring themes in our workshop discussions was the exclusion of self-employed and gig workers from the EI program. Many spoke passionately about the urgency of addressing the needs of these workers — especially those who are low income and precariously employed. But there was no consensus on how to achieve this, and several participants noted the difficulties involved in trying to craft a program or policy that meets the needs of both high-earning self-employed workers and lower-paid gig workers.
The 2022 Fall Economic Statement provided funding to Employment and Social Development Canada to take stronger action against companies that misclassify their workers as independent contractors, in contravention of the Canada Labour Code. This is an important step, which could go a long way to increasing EI coverage. A pilot project to educate federally regulated transportation employers found that more than 60 percent were in contravention of misclassification rules (Canada 2022).
If coverage concerns remain, the federal government could explore the feasibility of a program — separate from EI — for gig workers. It could be funded through an annual levy on companies based on the number of independent contractors they use. Gig workers could be eligible to receive a minimum benefit per week (e.g., $300) for a maximum number of lifetime weeks. This would limit the incentive for independent contractors to declare themselves unemployed as they would want to save their allotment of benefits for when they need them most. The weeks of EI could be used for periods when they have no work or for lifetime events such as the birth of a child or illness of a family member. The levy would also provide an incentive for app-based companies to shift their independent contractors to employment.
Once the economy is on stable footing, the government could evaluate a potential increase in maximum insurable earnings (MIE). An increase in the MIE would increase both premium costs and benefits, with differential impacts on lower- and higher-income employees. While some IRPP workshop participants suggested substantial increases to the MIE, others expressed concern about the associated cost implications for businesses and exacerbating the existing imbalance between full-time and seasonal workers.
Some workshop participants suggested an MIE similar to Quebec’s Parental Insurance Program. However, the associated increase in costs — particularly for small and medium-sized businesses — would likely be too onerous. The government could consider a more modest increase in the MIE. For example, it could be set at 1.1 times the average industrial wage. This would bring the MIE for 2023 to $67,700, increasing the maximum yearly contributions for the year by roughly $100 for employees ($140 for employers) and the maximum weekly benefit rate by $72 (assuming a 60 percent replacement rate).
To address concerns relating to the impact of a higher MIE on benefits for seasonal workers, the government could impose stricter clawback provisions at tax filing time (e.g., maximum annual earnings of 1.1 times the MIE instead of the current 1.25). There could also be a federal financial contribution to the program to cover the difference between contributions paid by seasonal workers and the benefits they receive. Such changes would reduce inequities between the treatment of seasonal and nonseasonal workers while preserving broader policy objectives relating to certain regions and sectors.
A prominent theme among workshop participants was the effects that the predicted labour market shortages, the changing nature of work, the low-carbon transition and the anticipated changes in demand for skills would have on Canada’s labour force. Many called for expanded federal government involvement in supporting training programs and policies, and a revamp of existing programs that have had little uptake.
The federal government provides funding for Employment Benefits and Support Measures under Part Two of EI. These include skills development, help with job searches and individual counselling, among other things. To improve the use of these services by Canadians, the government could consider enhancing the personal counselling and career-planning services it provides so that Canadians can more easily identify and access them, seek help with career planning, and identify the training and education programs that are best suited to their needs.
As part of a broader training strategy — including programs within and outside EI — the federal government could undertake a comprehensive evaluation of training programs, in collaboration with provinces and territories, to support the long-term resilience of the Canadian workforce. The evaluation could include forward-looking analysis of potential labour market risks and opportunities, and a greater focus on the vulnerabilities of workers to labour market change. The evaluation could also seek to identify opportunities for greater coordination across the various federal, provincial and territorial initiatives. Based on the evaluation, the federal government could provide additional funding to address gaps in the current system.
Our suggested compromise package is only one possibility among many. It likely goes too far for some, and not far enough for others. Many of our workshop participants would disagree with the measures we propose. However, we recognize that the federal government needs to move forward and that it has spent two years in extensive consultations. We would rather see some progress in the near term than more deliberation.
Sometimes, perfect can be the enemy of good. Better may be a more practical goal for EI reform.
As Canada heads toward what is likely to be another recession, the country’s Employment Insurance (EI) program seems no more ready to deal with the expected increase in demand for benefits than it was when the pandemic hit in early 2020. The proportion of unemployed Canadians able to collect EI has fallen from 80 percent in the 1980s to 40 percent, and many of those who do receive EI benefits struggle to make ends meet.
[Read the related IRPP commentary: Building a Package of Compromise Solutions for EI Reform]
During the pandemic, the federal government introduced temporary measures, including the Canada Emergency Response Benefit, to cover self-employed and other Canadians who lost their jobs and didn’t qualify for EI benefits, and to mitigate the effects of the downturn on the Canadian economy.
Signs of a renewed slowdown have started to emerge, and there is a growing consensus among economists that economic growth in Canada and around the world will slow in 2023. It remains unclear how severe the downturn will be. However, there are concerns that the EI program may once again not be up to the task of covering an increase in the number of unemployed Canadians, and political leaders and others have urged the government to implement reforms. The government has indicated that it will announce changes to EI following its two-year consultation process that concluded in the summer of 2022.
At the same time, the federal government is facing pressures to avoid increasing EI premiums as many businesses are still recovering from the pandemic and are likely to face another economic downturn. And while some have called for the federal government to contribute financially to the program to limit premium increases, others have expressed concern about burdening taxpayers and adding to the federal debt.
The government will have some difficult choices to make. The IRPP has hosted a series of workshops and undertaken its own analysis to inform these choices. Our first report, How to Modernize Employment Insurance: Toward a Simpler, More Generous and Responsive Program, focused on EI modernization (IRPP Working Group 2022). This report looks at how to finance modernization costs.
Many of the choices considered raise important policy questions about the purpose of the EI program, and who should pay for it. Some see the program as an insurance mechanism for employees who pay into it, arguing that taxpayers (many of whom are not eligible to receive EI benefits) should not be on the hook for financing it. Others argue that it fulfills broader policy objectives that benefit all Canadians, such as stabilizing the economy during recessions, and some taxpayer contribution is warranted.
These views were reflected in discussions among our working group participants, who included academic experts and representatives from business groups and unions. There was little consensus among the participants, and their discussions made it clear that there are no easy solutions to addressing the financing challenges that EI faces. All options will involve trade-offs and compromise.
The challenge for the federal government will be to find a compromise package that does not push too far in any one direction, and that is sustainable for the long term under various economic and labour force conditions.
In a separate commentary, IRPP researchers propose a possible package of compromise solutions for the government to consider.
Canada is on the cusp of a major leap forward in child care with the roll out of a Canada-Wide Early Learning and Child Care system that promises to lower child care fees by the end of 2022 and achieve $10-a-day child care by 2026. As federal, provincial and territorial governments develop implementation plans, it is worth evaluating progress on indicators of affordability, accessibility and quality of child care over the last 30 years.
Comparing data from the 1980s and 1990s with 2019 shows significant progress in many areas. However, child care fees have continued to rise over time and there has been mixed progress across provinces and territories on staff-to-child ratios, wages for early childhood educators and funding for low-income families.
Achieving $10-a-day child care across Canada needs to be done in conjunction with addressing shortages in spaces, and in recruiting and retaining sufficient early childhood educators. It is also not clear that the funding allocated will be sufficient to bring fees down to $10 a day in high-cost jurisdictions such as B.C., Alberta and Ontario. In addition, as the federal government considers changes to the Employment Insurance program, it should remember the importance of supporting parental care for children for those currently ineligible for benefits.
This paper provides four recommendations for governments, drawing on analysis of national and regional progress:
4. Close gaps in maternity and parental benefits. There is a stark difference in the coverage and generosity of maternity and parental benefits between Quebec, which has its own program, and the rest of Canada, which relies on federal Employment Insurance. The federal government should address these gaps, encourage greater participation of fathers in parental leave and follow through on the 2019 Liberal election platform commitment to provide income to currently ineligible parents during the first year of their child’s life.
Adult education provides skills development opportunities to help Canadians find better jobs and improve well-being. Yet it remains a “poor cousin” of compulsory and higher education, disconnected from social policy and the education system at large, with its learners and teachers stigmatized. This paper looks at Canada’s past efforts to address these issues by creating a national adult education strategy. It then offers insights from Aotearoa New Zealand, which went a long way to making adult education mainstream by integrating it into the country’s education system, professionalizing its teachers and standardizing assessments. Granted, New Zealand’s reform cannot, and should not, be replicated in the context of a vast federated nation such as Canada. Nevertheless, it offers important lessons to Canada’s federal, provincial and territorial governments in devising a well-functioning and coherent adult education strategy to create a better future for everyone.
As the main pillar of Canada’s social-safety net for working-age adults, Employment Insurance provides temporary income support in the event of job loss or of other major life changes that require an absence from work, such as caring for a newborn, an adopted child or a critically ill family member.
The COVID-19 pandemic has been the greatest shock to the Canadian economy in decades, yet EI failed to cover a significant share of individuals without work, and it could not process the surge in claims in a timely manner. However, many of EI’s shortcomings were evident long before the onset of the pandemic.
The federal government has started a two-year review of the EI system, the first major one in more than 25 years. To inform this review, in December 2021 the Institute for Research on Public Policy convened a working group of researchers and experts to discuss ways to address the government’s priorities and propose options for reform. This report presents many of the policy proposals that were discussed at the two-day virtual event. Over the course of the event, we heard that the current EI system, with its many layers of complexity and glaring gaps in coverage, has become increasingly ineffective.
New forms of work arrangements and the lingering economic effects of the pandemic have added enormous pressure on this already strained program. EI’s shortcomings are likely to persist, even when the pandemic subsides. Participants in IRPP’s working group noted that, because of Canada’s aging workforce, the transition to a low-carbon economy and other factors, EI will continue to face pressures. At the same time, the significant pool of self-employed workers and the shift to more short-duration, contract and temporary jobs means that a large swath of workers could continue to be excluded from this important program. The growing number of individuals who work for digital platforms and are classified as self-employed poses a particular challenge.
The participants agreed that it is high time to revise and update EI to meet the needs of today’s labour market and better reflect the changing nature of work. More tinkering at the margins will not be enough.
Specifically, there was broad agreement on the following points:
The scope of the EI system has expanded greatly since it was first introduced in 1940. What started out as a social insurance program designed mainly to support temporarily unemployed workers has, over the years, come to include maternity, parental, sickness and compassionate-care leaves; income support for seasonal workers; and funding for job training. The eligibility and generosity of the various benefits have expanded and contracted over the years, based on the prevailing economic and fiscal conditions. The time has come to modernize EI to make it simpler, more generous and more responsive to today’s economic realities.
In the past few years, skills development for working age adults has become increasingly important, especially in the context of technological change and an aging population. Despite a range of policy incentives to encourage workers and firms to invest in training, less-qualified individuals and employees in small- and medium-sized enterprises (SMEs) are less likely to participate, even if they would benefit from it greatly. To improve the resilience and mobility of the workforce and increase business productivity, governments must address the barriers to training, such as lack of funding and fear of losing employees to competitors.
Since the early 2000s, mutual training organizations, or training mutuals, have been an innovative, Quebec-based approach whose aim is to reduce these barriers. In this study, Yves Blanchet examines this system, which helps SMEs and other businesses to pool and coordinate the resources they need to meet their training requirements and reduce costs. Looking at the trajectories of four training mutuals in operation between 2008 and 2017, Blanchet identifies the key factors that contributed to their success, especially in enlisting companies in a given sector to invest the time and resources in training.
The study shows that the trajectories of the training mutuals differ markedly — their objectives vary considerably, and they do not always orient training toward the employees or companies that need it the most. The ability of a training mutual to achieve its objectives depends on two key factors, among others: (1) the willingness of the institutional actors in the economic sector to become actively involved in its operation, and (2) its complementarity with other organizations in the area, on which the mutual depends for material, organizational and financial resources.
Blanchet points out that, compared with other types of training, mutuals have the potential to be more successful in encouraging SMEs to invest in skills development. In order to reap greater benefit from this type of training, however, it would be in Quebec’s interests to evaluate more closely the factors that contribute to the success of some training mutuals, and learn from the failure of others. To this end, it should collect data on the mutuals’ performance, particularly the potential benefits to employers and employees in terms of productivity, salaries and job retention. It is also important to understand what motivates companies to participate or to not participate in them.
As is the case in Quebec, training mutuals could complement training policies elsewhere in Canada, given that the stakeholders involved — the institutional actors, businesses and unions in the sectors targeted for the intervention — are motivated and prepared to make the necessary investment.
Disruptions to labour markets caused by the COVID-19 pandemic, with some sectors of the economy shedding jobs and others frantically searching for workers, made one thing clear. Workers’ ability to quickly identify and take advantage of emerging employment opportunities will determine their resilience, over the short and long terms. To help Canadians make the best career and training choices, we need to develop and implement more effective information tools.
In this study, Matthias Oschinski and Thanh Nguyen propose a two-pronged approach to career guidance — one that is primarily focused on skills. Their method consists of first determining suitable employment opportunities based on overlaps between the competencies, work activities and interests in a person’s current or most recent occupation and those in alternative occupations, then identifying the skills gaps that must be addressed to make these job transitions possible. The employment alternatives the authors propose are also selected based on whether they have growth prospects as well as wages that are at least as high as those the worker currently earns or recently earned.
To illustrate their method, the authors look at employment alternatives for retail salespersons, cashiers and administrative assistants — three occupations that are at high risk of automation and viral transmission, and that also happen to be among the most affected by the pandemic. Workers in these three occupations are predominantly women, youth and racialized Canadians. They also tend to be low paid and less educated. The authors find that cashiers, for example, could become demonstrators and product promoters, as this occupation has similar features and requirements. To make this transition, however, workers currently employed as cashiers would need additional training to sharpen some skills — for example, technology design — that are used more intensively by demonstrators and product promoters.
Determining viable occupation alternatives and skills gaps is only one component of career guidance, however. Workers would also need information on available job opportunities and relevant training options in order to pursue and qualify for these jobs. Hence, for their framework to be most effective, the authors recommend that it be integrated into a comprehensive career guidance system.
As the world of work constantly evolves, under a wide range of pressures — be it changing demographics or new technologies — the ability to effectively navigate employment and training options is becoming increasingly important for working-age adults. For some workers, such as those currently employed in the energy sector, the need to find good job alternatives will likely become more acute, given Canada’s expected transition to a net-zero economy. To avoid the harmful effects of economic restructuring experienced in the past, policy-makers and individuals should be equipped with the necessary evidence-based career guidance tools so they can trace possible employment paths and identify the skills upgrades needed to make those paths viable. The approach Oschinski and Nguyen develop in this study is the first step toward making these career guidance tools a reality.
The catastrophe that occurred in Quebec’s Centres d’hébergement de soins de longue durée (CHSLDs) during the pandemic should have come as no surprise. The problems facing these facilities have long been known, and the pandemic highlighted the extent to which prior health care reforms failed to resolve them. The Quebec government should make urgent reforms to improve the quality of elder care by adopting a three-pronged approach: it should reassess the needs of older adults across the full continuum of care and invest accordingly; review the governance and organization of CHSLDs and bring them up to modern standards; and create a “Qualité Québec” agency to enhance the learning capacity of the province’s health care system and promote the ongoing evaluation of policies and practices.
The COVID-19 pandemic has highlighted flaws in Canada’s income-support programs and job-protection laws for sickness and caregiving leaves. Federal, provincial and territorial governments had to enact emergency measures to address serious gaps in the system. With these measures set to expire, policy-makers should take this opportunity to permanently reform Canada’s sickness and caregiving leave regime. When workers decide that they cannot take time off because of inadequate benefits or job protection, the resulting costs are borne by both individuals and society. All persons engaged in paid work should be eligible for paid and protected leave to cover both sickness and caregiving needs.
Canada’s Employment Insurance (EI) program provides income support for workers who have lost their jobs. The program also strives to help recently unemployed Canadians keep a foothold in the labour market and provide a stepping stone to new permanent work. It does so through working-while-on-claim (WWC) provisions that encourage claimants to take part-time or casual jobs and still keep a portion of their EI benefits. The objective is to prevent them from being unemployed for prolonged periods, help them maintain their skills and network of workforce contacts, and demonstrate their commitment to work to prospective employers.
In this study, authors Colin Busby, Stéphanie Lluis and Brian McCall investigate whether working part-time does indeed help EI claimants transition to permanent work. They review evidence from a series of pilot projects that the federal government launched between 2005 and 2018 to determine if adjustments to WWC provisions would encourage more claimants to take up part-time work or to work more hours. They also survey the outcomes of similar provisions in other countries.
The Canadian pilot projects tested two key changes to the WWC provisions. The first raised the threshold of employment earnings claimants are allowed to attain without having their benefits reduced. Compared with prior rules, this change encouraged more claimants to take on temporary work. The second change eliminated the earnings threshold and reduced the rate at which benefits were clawed back on all earnings. This encouraged claimants to take part-time jobs that offered more hours and higher earnings.
As the authors point out, however, the EI administrative data that were used to evaluate the pilot projects provided postclaim job information only for individuals who returned to the EI system with a subsequent claim. The findings were, therefore, based mainly on the behaviour of repeat and seasonal EI claimants. This means that not much is known about those who used the provisions but did not file a subsequent claim, and whether the revised provisions helped them find permanent work.
Research conducted in other countries that have similar working-while-on-claim rules, but collect more comprehensive data, provides a better indication of how the rules affect the ability of claimants — including nonrepeat claimants — to transition to permanent work. An evaluation of the provisions in France found that, for most unemployed workers, taking on part-time work during a claim did indeed act as a stepping stone to permanent work. Similar research in Germany and Belgium suggests that long-term unemployed workers who take up casual or part-time work during a claim are more likely to find permanent employment. In Belgium, researchers found this was especially true for women. However, research findings from other countries suggest that poorly designed provisions may lock some workers into a pattern of part-time or casual work.
Busby, Lluis and McCall conclude that WWC provisions can help unemployed Canadians successfully transfer to permanent jobs. But the rules should be improved and new programs introduced for those unlikely to benefit from part-time, casual work. They urge policy-makers to collect postclaim data for all EI claimants to enable experimenting with the provisions and conducting comprehensive evaluation of how well they support transitions to permanent work.
The authors recommend that policy-makers revise current WWC provisions to reintroduce a fixed weekly allowable earnings threshold below which there is no reduction in benefits, while keeping a modest clawback rate for earnings above the threshold. Canadian and international evidence suggests that, under these proposed rules, more people would be encouraged to work while on claim and many would be encouraged to work additional hours.
They also urge the federal government to make WWC provisions more generous during economic downturns. This recommendation is especially timely as the economy recovers from the COVID-19 pandemic and the massive work interruptions it has caused. During economic recessions, there tend to be more part-time jobs available than full-time. To encourage displaced workers to stay connected to the labour market during such times, policy-makers should temporarily allow claimants to keep more employment earnings without having their EI benefits reduced.
A comprehensive evaluation of EI WWC provisions would help to establish clearly the extent to which these measures support unemployed workers’ transitions back to work. They may be beneficial for some claimants but not for others. For instance, about half of EI claimants choose not to work while on claim. This is likely the case for displaced long-tenured workers, who may not see the benefit of taking low-paying or part-time work. For them, alternative programs — for example, wage insurance, which subsidizes the take-up of full-time work — may be more appropriate. As Canada’s postpandemic economy enters its recovery phase, this would be an opportune time to introduce and test such measures.