FEWO Committee Report

This chapter provides a short overview of the EI program including current reforms being considered for extending EI maternity and parental benefits to the self-employed. The chapter begins with a description of how the EI program has evolved since its inception in 1940. It then discusses the program’s coverage, benefits and eligibility criteria.

I. Evolution of the Employment Insurance Program

Employment insurance (EI), formerly known as unemployment insurance (UI), is a national program that provides financial support to the unemployed. EI was first enacted in Canada in 1940. The Unemployment Insurance Act set out to “provide financial assistance to unemployed persons, to find suitable employment for Canadians, to move people from areas of high to low unemployment, and to provide aid to the disadvantaged.”[4] During its first year of operation, UI coverage[5] represented approximately 42% of the workforce. By the end of the 1960s, this coverage had expanded to about 68% of the workforce.[6]

Significant reforms were made to the program with the enactment of the Unemployment Insurance Act of 1971. An important objective was to provide “adequate” income support for all persons experiencing temporary earnings interruptions. The UI Act of 1971 provided “nearly universal coverage, eased eligibility, and added new special benefits such as sickness, maternity and retirement benefits.”[7] During the 1970s, the Variable Entrance Requirement (VER) was introduced which determined the claimant’s qualifying requirement for UI based on the unemployment rates prevailing in the claimant’s region of residence.[8]

Major changes were again made to the program in the 1990s. Following the federal government’s Skills Security Review in 1994, the Employment Insurance Act was enacted in 1996 and the program was renamed Employment Insurance (EI). Program changes were designed to ensure that unemployed workers returned to work as quickly as possible.[9] The program was converted to an hours-based system with 35 hours a week representing the average hours worked by Canadian workers. However, women were averaging less hours of work;  hence it became much more difficult for unemployed women to qualify for EI.[10] The Committee heard from several witnesses that as a result of these reforms, EI coverage rates have dropped for many unemployed workers, including women, largely because minimum qualifications requirements became more stringent.[11]

Other reforms were put in place in the mid-1990s such as reducing the maximum duration of benefits from 50 to 45 weeks; changing the rules for new entrants and re-entrants so that more hours of work were needed to qualify for EI; the introduction of a family supplement for low-income families; and, a premium refund for workers earning $2,000 or less. The EI program’s special benefits were enhanced in 2000. For example, the federal government extended the duration of parental benefits and reduced qualification requirements for maternity, parental and sickness benefits from 700 hours to 600 hours. In its 2009 Budget, the government proposed to extend maternity and parental benefits to the self-employed.

Financing of the EI program initially involved employer, employee and government contributions. In the 1990s, this financing arrangement was altered so that employers and employees became the sole contributors with employers paying 1.4 times the amount contributed by employees. The EI Act also established the Employment Insurance Account. In an effort to improve the management and governance of the EI Account, [12] Budget 2008 announced the creation of the Canada Employment Insurance Financing Board (CEIFB). This Crown corporation will manage a separate $2 billion EI reserve[13] and set EI premium rates under a modified rate-setting process.

II. Reforms Introduced In Budget 2009

Budget 2009: Canada’s Economic Action Plan[14] provides $30 billion in support to the Canadian economy. The Budget indicated an intention to strengthen benefits for Canadian workers by implementing the following initiatives related to the EI Program:

• Increasing for two years all regular EI benefit entitlements by five extra weeks and increasing the maximum benefit duration to 50 weeks from 45 weeks at an estimated cost of $1.15 billion.
• Providing $500 million over two years to extend EI income benefits for Canadians participating in longer-term training, benefiting up to 10,000 workers.
• Extending work-sharing agreements by 14 weeks, to a maximum of 52 weeks, so that more Canadians can continue working. This measure is estimated to cost $200 million over two years.
• Consulting with Canadians and developing options to provide self-employed Canadians with access to EI maternity and parental benefits.

In addition, the 2009 Federal Budget freezes EI premium rates at $1.73 per $100 of insurable earnings for both 2009 and 2010 at a cost of $4.5 billion. It will also increase funding for training delivered through the EI program by $1 billion over two years.

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III. Overview of the Employment Insurance Program

This section presents an overview of the EI program including EI coverage, qualification requirements, premium rates, and types of benefits. Issues raised by witnesses and suggested reforms will be discussed in Chapter 3.

A. EI Coverage

Except in the case of self-employed fishers, EI does not cover self-employed workers. For workers who have an employer-employee relationship, coverage is essentially universal, with a few exceptions however. Some examples of employment not covered under EI include: the employment of a member of a religious order who has taken a vow of poverty; the employment of a person involved in rescue work provided that person is not regularly employed by the employer for that purpose; and employment of a person in connection with a circus, fair, parade, carnival or similar activity. These exceptions are identified in subsection 5(2) of the Employment Insurance Act as well as sections 7, 8 and 9 of the Employment Insurance Regulations.[15]

The Committee heard that coverage for both unemployed women and men has significantly declined since 1976 as demonstrated in Figure 1. As one witness pointed out, the gap between women and men has widened since the mid-1990s.[16]

Figure 1: Percentage of Unemployed Receiving Regular Employment Insurance Benefits, by Gender, 1976-2008

Source: Ken Battle, “Gender aspects of Employment Insurance, presentation to the Commons Standing Committee on the Status of Women, FEWO Evidence, March 2009.

Witnesses raised concerns over the extent that the EI program provides insurance coverage for unemployed women. The Committee heard that coverage rates have declined for unemployed women from 82.6% in 1989 to 39.1% in 2008.[17]

The Committee learned that these figures are based on the regular EI beneficiaries to unemployed ratio or B/U ratio, where U, the denominator, represents the total unemployed population. For Human Resources and Skills Development Canada (HRSDC), this type of ratio does not provide an accurate measure of coverage rates. For other witnesses, such a measure provides a much more accurate picture of the insurance coverage of unemployed Canadians. As one witness noted, “it is absolutely essential to look at the reality of the labour market, that is, who's unemployed versus who's receiving benefits.”[18]

The EI coverage rate can also be measured using another ratio that considers the unemployed who have paid EI premiums in the previous 12 months. This alternative ratio is the B/UC ratio, or the ‘beneficiaries to unemployed EI contributors’ ratio. The B/UC ratio consists of a modification of the B/U ratio in which the number of unemployed (U) is replaced by the number of unemployed who had been paying EI premiums in the previous 12 months (UC).

The Committee heard from HRSDC that 81% of women were eligible for regular benefits. This 81% figure represents women who were able to fulfill the minimum qualification requirements under the EI program.[19] As Mr. Richard Shillington explained to us:

Think of EI as a series of hurdles. To be eligible for your benefit, you first of all have to have had paid employment—self-employment doesn't count. You have to have a certain number of hours. You have to have left your job for the right reason—you can't be fired; it has to be a lay-off.[20]

Another witness further elaborated on the usage of government EI statistics:

The government likes to argue that 80% of all currently employed workers would qualify for regular EI benefits if they were to lose their jobs. However, this ignores the fact that job loss particularly affects those with unstable patterns of work, such as workers on reduced hours before a layoff as well as part-time, temporary, and contract workers. It also ignores the fact that many unemployed workers qualify for EI for a shorter period of time but quickly exhaust their benefits.[21]

Even though the Employment Insurance Coverage Survey provides data on B/U and B/UC rates, as shown in Figure 2, these data are not disaggregated by gender. Only the eligibility rate for unemployed people with a recent job separation is disaggregated by gender but not for all groups identified including people who worked full-time and people who worked part-time.

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Figure 2: Eligibility Measures Collected via Statistics Canada’s Employment Insurance Coverage Survey, 2004-2007

* The beneficiary to unemployment ratio represents the proportion of unemployed individuals who received or will receive EI regular benefits. The denominator includes many unemployed individuals for whom EI has never provided access to benefits, such as for example, individuals with no employment in the last 12 months and self-employed workers excluding fishers.

** The beneficiaries to unemployed EI contributors ratio is a modification of the B/U ratio in which the number of unemployed is replaced by the number of unemployed who had been paying EI premiums in the previous 12 months.

*** Proportion of EI contributors who received or will receive EI regular benefits.

Source: Human Resources and Skills Development Canada, 2008 Monitoring and Assessment Report, http://www.hrsdc.gc.ca/eng/employment/ei/reports/eimar_2008/chapter5_1.shtml.

Given that the Committee heard witnesses discuss various approaches to measuring EI coverage rates, there is a need for HRSDC and Statistics Canada to monitor and track coverage rates disaggregated by gender for all three rates: B/U, B/UC and the eligibility rate for unemployed people.

RECOMMENDATION 1:

The Committee recommends that Human Resources and Skills Development Canada, in coordination with Statistics Canada, produce a public monthly report on Employment Insurance coverage rates using gender disaggregated data for the B/U ratio, B/UC ratio and for the proportion of Employment Insurance contributors who received or will receive Employment Insurance regular benefits, including full-time and part-time workers and age category 15 years and older so as to improve monitoring of the Employment Insurance program’s coverage of unemployed women and men.

B. Applying for Benefits

In order to receive EI benefits, individuals must submit an application either on-line or in person at a Service Canada location. In the case of unemployment, this application should be made as quickly as possible after the last day of work. Failure to apply within four weeks after one’s last day of work could result in a loss of benefits.

The Committee heard that for unemployed rural women who do not have access to the internet, applying for EI benefits can be a challenge. In particular, women have to travel long distances to reach a Service Canada location.[22]

Individuals must satisfy several conditions to be eligible for benefits. If the claimant disagrees with an EI-related decision, he or she has the right to appeal the decision to a Board of Referees[23] or to an Umpire.[24]

C. Employment Insurance Premium Rates

The employee premium rate was set at $1.73 per $100 of insurable earnings by the Canada Employment Insurance Commission in 2008 and 2009. For 2009, Maximum Yearly Insurable Earnings (MYIE)[25] are $42,300. In 2009, the annual maximum employee contribution is approximately $732. The employer contribution to EI is equal to 1.4 times the premium paid by the employee. Thus, the employer premium rate is $2.42 per $100 of insurable earnings up to this year’s MYIE. In 2009, the maximum annual employer contribution per employee is roughly $1,025. The premium rates presented above are applicable to all Canadian provinces and territories excluding the province of Quebec.

In 2009, the EI premium rate in Quebec is set at $1.38 for every $100 of insurable earnings up to this year’s MYIE. The annual maximum contribution made by an employee in Quebec is roughly $584. The employer premium rate in Quebec is $1.93 per $100 of insurable earnings up to MYIE, for a total maximum annual contribution per employee of approximately $817. Lower premium rates in Quebec as compared to the rest of Canada are explained by the fact that this province finances its own parental benefits.

Figure 3 presents the employee/employer premium rates, the maximum insurable earnings and the maximum employee/employer contributions under the EI program for Quebec and the rest of Canada.

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Figure 3: Employee and Employer Premium Rates, Maximum Insurable Earnings and Maximum Contributions under the Employment Insurance Program, Quebec and the Rest of Canada (Effective January 1, 2009)

Source: Human Resources and Skills Development Canada and Department of Finance Canada.

D. Types of EI Benefits, Qualification Requirements and Duration of Benefits

There are four types of EI income benefits: regular benefits, special benefits, work-sharing benefits, and fishers’ benefits. Our focus in this report is on regular and special benefits.

The weekly benefit level for regular and special benefits is equal to 55% of average weekly insurable earnings.[26] Average weekly insurable earnings are calculated over the larger of the following two divisors: the number of weeks in which a claimant had earnings in the last 26 weeks of the qualifying period (also called the maximum rate calculation period) or the divisor (i.e. 14 to 22 depending on the regional rate of unemployment).

1. Regular benefits

According to HRSDC, individuals who become unemployed due to a shortage of work, either seasonal or cyclical, may be eligible for regular benefits under EI.

In order to qualify for EI regular benefits, the claimant must be involuntarily unemployed, be without earnings for at least seven consecutive days and meet the minimum number of hours of insurable employment[27] (i.e. the minimum qualification requirement) for the regional rate of unemployment during the qualifying period (i.e. during the last 52 weeks or since the individual’s last claim). Note that the minimum qualification requirement varies inversely with the unemployment rate: from 420 hours in regions with an unemployment rate over 13% to 700 hours in regions with an unemployment rate below 6%. Please refer to Appendix 1 for the minimum qualification requirement per regional rate of unemployment.

New entrants to the labour market and re-entrants (NERE),[28] however, are required to obtain at least 910 hours of work to qualify for regular benefits. Under the previous Unemployment Insurance program, new entrants and re-entrants were required to work an equivalent of 180 to 300 hours, depending on the regional unemployment rate.[29]

As part of the government’s Budget 2009 temporary initiative, "The extended duration of Employment Insurance (EI) Regular Benefits", the length of time regular benefits can be paid is between 19 and 50 weeks. Once this initiative lapses in September 2010, the duration of benefits will range from 15 weeks to 45 weeks. For new entrants and re-entrants to the labour market, the current duration of regular benefits varies between 22 and 50 weeks.

2. Special benefits

Four types of special benefits are provided to eligible claimants: sickness, maternity, parental, and compassionate care benefits. In order to qualify for EI special benefits, individuals must have at least 600 hours of insurable employment in the qualification period[30] (i.e. in the last 52 weeks or since the last claim). Below is a description of the qualification requirements and benefit entitlements as stipulated in the EI Act and on the Service Canada website:

• Sickness benefits provide income support to those individuals who are unable to work due to illness, injury and quarantine. Claimants receive up to 15 weeks of insurable benefits.
• Maternity benefits are payable to the birth mother or surrogate mother for a maximum of 15 weeks.
• Parental benefits are payable to a ‘major attachment claimant’ to care for one or more new-born children of the claimant or one or more children placed with the claimant for the purpose of adoption under the laws governing adoption in the province in which the claimant resides. A claimant can receive up to 25 weeks of parental benefits.
• Compassionate care benefits are intended for individuals who have to be absent from work to provide care or support to a gravely ill family member at risk of dying within 26 weeks. These individuals must also show that their regular weekly earnings from work have decreased by more than 40%. A claimant receives six weeks of compassionate care benefits.

The Committee heard from HRSDC departmental officials that “[o]verall, women are net beneficiaries of the EI program, as they receive more in benefits than they contribute in premiums.” In particular, 97% of women working full-time qualify for special benefits. As one departmental witness testified:

Women's access to these EI special benefits, which include maternity and parental, is very high. In fact, 97% of women working full-time qualify for these special benefits.

Women accounted for 68% of the special benefit claims and received 84% of the $3.7 billion paid in special benefits in 2006-2007.[31]

However, women are not the net beneficiaries when it comes to regular EI benefits. Mr. Geoff Bowlby, Director of the Labour Statistics Division, Statistics Canada, indicated that in 2008, women made up 39.6% of all regular EI beneficiaries with 192,000 women on average per month receiving regular EI benefits compared to 293,000 men. During the same year, women accounted for 43.5% of total unemployment, with 485,300 unemployed women compared to 631,400 unemployed men. These statistics indicate that women's share of regular EI benefits (39.6%) is lower than their share of the unemployed (43.5%). The female share of all regular EI recipients is lower than men’s for all the provinces as shown in Figure 4.

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Figure 4: Female Share of All Regular EI Recipients, 2008

Source: Statistics Canada, “The Labour Market Situation for Women in Canada”, FEWO Evidence, March 3, 2009.

Furthermore, women’s average weekly insurable earnings for special benefits are less than men’s, as Figure 5 demonstrates.

Figure 5: Women and Men’s Average Weekly Insurable Earnings — Special Benefits

Type of Special Benefits	Average Weekly Insurable Earnings (Women)	Average Weekly Insurable Earnings(Men)	Earnings Gap for Women
Parental	$331.00	$382.00	- $51.00
Sickness	$277.00	$343,00	- $66.00
Compassionate Care	$318.00	$363.00	- $44.00

Source: Ms. Barbara Byers, Executive Vice-President, Canadian Labour Congress, FEWO Evidence, March 5, 2009 (1110).

E. Extending Access to Self-Employed Individuals

As reported by HRSDC, “[t]he government is now looking at how best to provide self-employed individuals with access to EI, maternity and parental benefits, and is in the process of establishing an expert panel to consult with Canadians on this topic”[32] The Committee heard that extending EI benefits and support initiatives to self-employed individuals would generate the problem of moral hazard[33] and this essentially explains why EI coverage has been limited to employed individuals.[34]

A measure which can be taken to limit the problem of moral hazard would be to extend exclusively EI special benefits to self-employed individuals. The Quebec Parental Insurance Plan (QPIP) has extended its coverage to self-employed individuals for maternity and parental benefits. The Committee heard from several witnesses that QPIP can serve as a possible model for a federal program. In Chapter 3, we will discuss our recommendations for extending coverage for the self-employed.

The QPIP is more generous and offers more flexibility than EI program’s maternity/parental benefits. It also includes paternity benefits for the father. Figure 6 presents an overview of these benefits under the federal and provincial plans.

Figure 6: Maternity and Paternal Benefits under the Employment Insurance Program, the Quebec Basic Plan and the Quebec Special Plan

1. Under the basic plan, the future mother could be entitled to a total of 50 weeks of benefits, that is, 18 weeks of maternity benefits and 32 weeks of parental benefits.

2. Under the special plan, the same mother could be entitled to 40 weeks of benefits, that is, 15 weeks of maternity benefits and 25 weeks of parental benefits.

Source: Adapted from Shelley Phipps, “Working for Working Parents. The Evolution of Maternity and Parental Benefits in Canada”, IRPP Choices, May 2006, Vol. 12, No. 2, p. 10 http://www.irpp.org/choices/archive/vol12no2.pdf and QPIP http://www.rqap.gouv.qc.ca/prestations/index_en.asp.

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