EI is Not Actually Helping the Poor

Who does employment insurance help? It seems like an obvious question. One would assume that EI is for Canadians who’ve lost their jobs and are therefore going to be low income. EI is meant to support them through hard times as they hopefully get another job and get back on their feet.

But…. what if we look at what income quintile EI recipients formerly found themselves? Were they low-income, middle class, or rich before they got laid off? I did some digging and I was surprised by the result.

My off-the-top assumption was that most EI recipients would be formerly low-income. They have more precarious employment and are more likely to be laid off. But in fact, the lowest income quintile before being laid off only made up 16% of all EI recipients. In most years, the lowest income folks were no more likely to be an EI recipient than the richest Canadians.

Proportion of EI recipients by family income quintiles in previous year
Source: Survey of Labour and Income Dynamics (Custom request)

You might wonder “How could it be that the lowest income families are among the least likely to receive EI?” The answer is that the lower your income, the less likely you are to be able to surmount the 910 hours barrier to qualifying for EI in the first place. The more frequent bouts of unemployment experienced by low income Canadians paradoxically makes it harder for them to access the benefits that would help them while unemployed.

The richest 20% of families for their part are much less likely to be unemployed in the first place and so are less likely to be EI recipients.

In fact, the group the most likely to be EI recipients is the middle 20% of the income spectrum (prior to layoff). They are the most likely to have surmounted the almost six months of constant work required to qualify for EI.

The other disturbing implication of the above results is that any group that represents less than 20% of the beneficiaries is in essence subsidizing the system. The lowest income group only receives around 16% of the benefits depending on the year. The poor pay into EI while working, but they are less likely to collect benefits if they’re laid off.

While we may consider EI a strong social support system, its current construction makes it particularly regressive for Canada’s lowest income families.

The easiest way to redress this inequality is to reduce the number of hours required to qualify for EI thereby letting in those with precarious employment resulting in more frequent bouts of EI. While many have been advocating this change, there seems to be little traction federally.

It’s unfortunate that due to data constraint I can’t go back prior to 1997 as that would have illustrated the substantial restriction in EI hours implemented in 1995.

David Macdonald is a senior economist with the CCPA.

6 comments

  1. The average market income of the lowest quintile was $3,400 in 2011, so it’s not surprising that EI doesn’t contribute much to poverty reduction. (Especially since it only replaces 55% of your earned income after 420 – 910 hours of eligible hours.) Other programs, such as OAS / GIS, the Child Tax Credit, the Working Income Tax Benefit, and GST Credit, contribute much more to poverty reduction.

  2. Women who are on Maternity Leave and laid off when they go back to work dont quality for EI due to a lack of hours. In my opinion, it should not be called Maternity Leave…. it is Unemployment. Experience gained from first hand knowledge.

  3. I also wonder if a woman who has not worked for 10 years and whose husband abandons her would qualify for EI. I seriously doubt it.

  4. Individuals who have not worked for 10 years do not qualify for Social Assistance because they also have to prove they were financially independent for 2 years before applying for Social Assistance.

  5. When I graduated school I couldn’t find a job and I didn’t qualify for EI because I was about 20 hours short; despite working 40 hour work weeks in the previous summer and having a part-time job. Now that I am temporarily laid-off from a well-paying job, I can collect EI but honestly feel that I needed it more the first time I applied.

  6. Thank you for posting my comments and my apology for making a nasty comment. I didnt realize until after my last comment they were going to be moderated. 3 years ago my husband abandoned the children, me and the family business and took every single cent from every account we had and left for Iran. Our hydro was disconnected. I have been working my butt off to rebuild our lives without any assistance from any government entity because I dont qualify for one reason or another. Most legal support organizations are not sure how they can help me because I fall outside of their knowledge base. There is a lot more to our situation and my apologies once again. Thank you for helping me get the word out and change it because what we are going through is deplorable and shocking.

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