EI Reform: Who Are We Really Subsidizing?

The Conservative government is making changes to the Employment Insurance (EI) regime. While previous changes to EI have tightened eligibility requirements, making it more difficult for workers to collect EI if they lose their job, the current proposals focus on making it harder for unemployed workers to turn down work that is farther away, significantly lower paying, or in a different field than work that they had done. Andrew Jackson has already nicely described some of the economic implications.

The new changes are intended to deal with “labour market rigidity” – economist-speak for “workers should be more compliant.” Seasonal workers are seen as a particular “problem” because they only work for part of the year, but have families who expect to eat, and rent or a mortgage to pay, all year round! While some seasonal workers might be found everywhere (landscapers, snowplow drivers), they tend to be concentrated in rural areas and especially in Atlantic Canada. Thus Jeffrey Simpson in the Globe & Mail on Saturday characterized our current EI system as one that “sends money from better-off regions to poorer ones.” Two days later, in the same paper, John Ibbitson justifies the changes similarly, saying “Canada just can’t afford rural subsidies. Rural industries must be able and willing to pay their own way.”

There are clear commonalities here with the attacks on the Quebec student movement (Simpson characterized students as “pursu[ing] privilege” the day before his EI column), and with labour unions more generally (who always seem to be threatening our “fragile economic recovery” – most recently workers at CP Rail, who are being legislated back to work less than a week after going on strike). As Jackson points out, eliminating “rigidity” makes the labour market more favourable to employers. Not surprisingly, the Canadian Federation of Independent Business (CFIB) in Atlantic Canada has come out firmly in favour of the changes. Politically, the Harper government is nothing if not calculating, and likely figure that even if they lose a few seats on the East Coast, they can gain more by stoking resentment among urban and suburban voters in Central and Western Canada, who also work hard, and are susceptible to seeing someone else’s “gold-plated gravy train” as the source of their struggle to make ends meet or keep up in the rat race.

One argument against the proposed changes to EI, made by, among others, Nova Scotia NDP premier Darrell Dexter, is that they threaten particular communities and ways of life. A similar point is made more forcefully by Karen Foster and Brian Foster at The Elemental Present. The upshot is: maybe we should consider EI a small price to pay so that a diversity of communities and ways of life can co-exist within this country – we might even consider that an asset, rather than something to be stamped out. It is both true and a nice sentiment, but whether it will work politically when governments across the board (including Dexter’s) are operating in austerity mode, remains to be seen.

Another way of looking at it, though, is to see EI as a relatively small undercurrent, in a national system that mainly channels wealth from the margins to the center. For example, Canada has a nationally regulated banking system that has been structured so that a few big banks, all headquartered in downtown Toronto, dominate the financial services market. Every time Canadians, including landscapers, lobster fishers, and farmers, pay transaction fees or interest on a loan or mortgage, some of that money ends up at King and Bay Streets in Toronto. Why isn’t that considered a “subsidy” that hard-working Canadians pay to bank executives and shareholders? Maybe instead of the proposed EI reform, we’d be better off finding a way to stop sending money from poorer Canadians to better-off ones.

Andrew Biro is an Associate Professor and Canada Research Chair in the Department of Politics at Acadia University. He has been a Research Associate with the Nova Scotia office of CCPA since 2005.

One comment

  1. Great article Andrew. Really drives home the implications of such a shift in governance. Who would have thought that the EI system as it currently operates slows the trend towards urbanization in Canada? I think it’s fruitful to point out the fact that the banking system is also directing a stream of income from the rural communities. If we’re going to have a discussion about urban communities ceasing their EI support for rural ones, then we should also talk about the support banks get from their “transfers”. And on that note: 12-year old Victoria Grant http://www.youtube.com/watch?v=_ae7h8FioX0

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