Business & Policy
All Things Considered: April 2009
Revenue’s Other Name
By Jim Knisley
About 15 years ago I was visiting Ottawa and went for lunch with a
friend at the Ottawa press club across the road from the Parliament
About 15 years ago I was visiting Ottawa and went for lunch with a friend at the Ottawa press club across the road from the Parliament Buildings.
The topic of the day was recent changes to the unemployment insurance program. I was very concerned and since he was an assistant deputy minister in the finance department I figured he would calm my fevered brow. Didn’t happen.
Faced with mounting deficits and a burgeoning public debt finance was pulling out all the stops to raise revenue and get spending under control. A key to this were reforms to unemployment insurance that raised premiums, cut payouts and made it much more difficult to qualify.
The changes worked out better than the government of the day had anticipated. Over the past 15 or so years, the employment insurance fund accumulated more than $50 billion in surpluses.
If this money had been set in a separate account it would be more than adequate for the current difficult times. But the money wasn’t put into a separate account: it flowed into general revenue. As a result the money paid by individuals and employers for employment insurance was actually tax revenue by another name. For many years, this wasn’t necessarily a bad thing. Money paid into EI was responsible for more than a third of the reduction in government debt and has been extremely helpful in reducing and then eliminating government deficits.
But, way back then, I told my friend the changes frightened me. I grew up in an industrial town where there were boom decades and bust years. When things were good everyone was OK. Nobody made a fortune working at the steel mill, the nickel refinery, the chemical plant, the cement plant or the flour mill, but they did alright.
But occasional shutdowns and layoffs were a way of life. Even in the good days of Unemployment Insurance the payouts were barely enough to keep the mortgage paid, food on the table and gas in the car so you could look for a job to tie you over. Under the lower Employment Insurance payouts I knew things could get grim.
They didn’t – until now.
We now have more than 1.3 million unemployed. We now have fewer than half of that number – 538,000? – collecting employment insurance. And those figures don’t count the 400,000 thousand people who have given up and are therefore not considered unemployed. These figures only include December 2008 and January 2009. Unless you’ve been away visiting Mars, you know that the situation has only worsened since then.
This isn’t just an industrial problem. In percentage terms agriculture lost more jobs than any other sector. From January 2008 to January 2009 the number of people employed in agriculture fell 9.6 per cent, which is more than even manufacturing which lost 7.4 per cent.
In January of this year 307,800 people were employed in agriculture compared with 340,400 the previous January. In manufacturing there were 1.85 million employed this January compared with 1.95 million a year earlier.
In the economy as a whole 100,000 jobs disappeared from December to January and 256,000 people lost their jobs between January 2008 and January 2009.
Back in the old days before the changes to unemployment insurance the payout rate was about 65 per cent of previous earnings. Now it is 55 per cent. In the past if you were laid off you could collect for almost a year now there are regional restrictions. In some areas people can collect for 45 weeks, in others for less than 30 weeks.
In more normal times 30 weeks might be enough for the factory to reopen or for someone to find a new job. Now, many factories and companies are gone and they are not coming back. As for finding a new job, good luck. The unemployment rate is up everywhere except Saskatchewan and even there 2,700 full time jobs were lost and 4,300 part time jobs created from December to January.
Under EI, the maximum payment is $447 per week though it could be less depending on your earnings and work history. There is also a two-week waiting period before EI payments begin.
You must also report in every two weeks and tell the EI people what you’ve been up to. You may have worked for 30 years, been a dedicated hard worker who lost a job through no fault of your own and wants nothing more than a new job, but the government is watching over you as if you are a delinquent 15-year-old. That may be justifiable, but it is also deeply, deeply insulting.
Perhaps our MPs and cabinet members should receive the employment insurance rate for a while. At $447 a week – or less – they could then check out the local food bank and see what they can afford to rent on the poor side of town.
And at some point I’m going to have to call my friend, who is no longer with the finance department, and say: “I told you this could happen.”