Everyone agrees that it is time to substantially reform employment insurance (EI). The consultations carried out by the Federal Ministry of Employment confirm that the system is not adapted to the realities of the labor market. Moreover, it has become too complex and creates many frustrations among the population.
Whether due to a recession created by monetary policy or an unpredictable crisis related to climate change, at the pace of reform, EI will not be ready to face new unforeseen events. And yet, EI is supposed to be the flagship program in the arsenal of public measures to financially support people in times of unemployment, ensure the automatic stabilization of the economy and encourage the necessary structural adjustments.
When will we have a clear vision of the reform that the federal government wants to undertake? Employment insurance is like an ocean liner stuck in the Rideau Canal.
Let us recall how and why employment insurance became a federal responsibility in 1940.
Following the Great Depression of the 1930s caused by an unprecedented financial crisis, large corporations’ private insurance plans all failed. The misery of the unemployed, left without income, snowballed and dragged the Canadian economy into one of the worst recessions in history. Pressured on all sides and unable to respond to the scale of the crisis, municipalities, provinces, unions and charitable groups have all called for federal intervention. As a result, a constitutional amendment was passed to allow the federal government to create such a social insurance program.
Initially, the scheme was administered by a tripartite agency, the Unemployment Insurance Commission, and supervised by a local network of employment offices. The federal government contributed 20% of the costs. The federal contribution was self-evident since the unemployment insurance program became the greatest economic stabilizer in times of crisis and recession. I repeat, it is precisely because of the federal government’s financial capacity to assume a role of economic stabilization that the provinces accepted the constitutional change.
Today, the context is different from that of 1940.
First, the cost of the system is currently borne entirely by businesses and workers. Indeed, in 1990, the federal government decided unilaterally to put an end to its direct contributions and, ironically, then used the surpluses to reduce its deficit. Yet EI still plays an economic stabilizing role.
In the near future, the federal policy of fighting inflation, which is based on interest rate hikes, will slow down the economy. Is it legitimate to think that it will be companies and workers who alone will bear the economic cost of this strategy? The federal government must contribute financially to the economic stabilization role of the regime, that is its role.
Moreover, the tripartite agency that managed unemployment insurance has been gradually replaced by a tripartite commission whose powers are now largely consultative. Employment insurance is now managed by the Ministry of Employment, and not by an agency independent of political powers. How to explain that companies and employees are not more involved in the governance of the scheme, when they are the funders?
Second, to end the use of fossil fuels and make provincial economies greener, provinces must drive structural change in their respective economies and labor markets. Should they not then, according to the principle of subsidiarity, play a more important role in the management of regular benefits and skills development programmes? Is it reasonable to deprive the provinces of the possibility of implementing strategies funded by the employment insurance program that would allow them to better face unforeseen economic crises?
EI failed during the COVID-19 crisis. The federal government intervened through the Revenue Agency. His intervention could have been more effective and less costly. He admitted it himself on several occasions. While preserving the federal government’s fiduciary role in this program, the reform could give more latitude to the provinces and labor market partners to innovate in the labor force to address shortage problems workforce, aging and professional transitions.
To this end, Quebec and labor market partners played a major role during the 1990s in the changes made to employment insurance. They have since demonstrated their ability to effectively manage EI Part 2 for certain labor measures. They also manage the parental insurance and, since always, the social insurance scheme for health and safety at work. I strongly hope that they will be able, even today, to play the role of the boat-trailer which will help the steamer of the AE to leave the channel.