EI Premium Freeze Leaves Unemployed Canadians in the Cold

I posted the following on the PEF blog yesterday. It is quoted in The Globe and Mail (A3), National Post (FP4), Toronto Star (B1) and other newspapers via Canadian Press and Postmedia:

Finance minister Jim Flaherty announced a three-year freeze on Employment Insurance (EI) premiums, ostensibly because a stronger job market has alleviated the need for additional premium revenue.

Under the current policy, employee premiums were rising each year by 5 cents per $100 earned. Flaherty had announced this policy on September 30, 2010, when 1.5 million Canadians were officially unemployed. Since then, that figure has edged down to 1.4 million, hardly a breathtaking reduction in unemployment.

The number of Canadians receiving regular EI benefits has declined more sharply, from 709,990 to 512,280 between September 2010 and June 2013 (the most recent EI figures available). But the falling number of EI recipients reflects not only the slight reduction in unemployment but also government policy changes that make benefits less accessible. Freezing premiums effectively locks in those benefit cuts.

The losers from this freeze are unemployed Canadians who are more likely to be left out in the cold without benefits given limited funding for EI. The winners are employers, who will pocket significantly more than their employees.

A worker making up to the year’s maximum insurable earnings will save only a nickel for every $100 earned next year. Meanwhile, employers will pocket almost $400 million of the $660 million in estimated savings for “job creators and Canadian workers in 2014.” (As Finance Canada highlights in its own release, employers pay 60% of total EI premiums.)

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

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