Employment insurance is a confusing mess in need of urgent reform

Canada’s employment insurance program is undergoing its first major review in more than 25 years and changes are long overdue. To inform debate and discuss options for reform, the Institute for Research on Public Policy convened a small working group of researchers and experts in December. One message came through loud and clear: the current EI system, with its many layers of complexity and glaring gaps in coverage, has become increasingly ineffective, especially when facing economic shocks.

For many Canadians, EI is an extremely complex program to understand and navigate. The introduction and expansion of special benefits – such as maternity and parental benefits, sickness and caregiving leave – has created more than 200 ways in which all EI benefits can overlap with one another. This hodgepodge can confuse even the most informed citizens. And it’s one reason why simplicity should be an overarching principle to guide reforms.

Partly because of the program’s complexity and its reliance on older forms of information technology, its ability to deliver benefits in a timely manner and stabilize the economy during severe downturns has been compromised. Following the 2008-09 recession, the 2014 collapse of global commodities prices and the COVID-19 pandemic, EI wasn’t up to the task. The number of EI claims fell well short of the total jobs lost, and at the same time the program was not able to process the surge in claims in a timely manner.

Canada’s most vulnerable workers are bearing the brunt of the program’s shortcomings. Part-time and temporary workers – especially those in large urban centres who often face the most restrictive criteria to access benefits – are less likely to qualify for EI than other groups of workers.

Also, EI was not intended to cover unemployed workers who don’t pay premiums into the fund. This group – which consists of self-employed workers and those without insurable earnings in the previous 12 months – accounted for more than 35 per cent of unemployed workers before the pandemic, a large share of the countries’ unemployed. Labour market developments that have given rise to new forms of work arrangements, and the fact that new income support programs had to be created during the pandemic, underscore the need to reevaluate the program.

Finally, access to special benefits, such as maternity and parental benefits, is limited for those who need them most. Take-up of special benefits rises with income: more than 80 per cent of recent parents who earn more than $60,000 a year qualified for maternity and parental benefits in 2019, compared with 50 per cent of those who earned less than $20,000. And for those dealing with illness or caring for a critically ill family member, applying for special benefits requires overcoming onerous administrative hurdles at a time when they are least able to cope with them.

After EI was created in 1940, it underwent major reforms in 1971 and most recently in the mid-1990s. A lot has changed since then. The current program is overdue for an update to better meet the needs of today’s work force. The Prime Minister’s mandate letter to Carla Qualtrough, the Minister of Employment, Workforce Development and Disability Inclusion, acknowledges the need to modernize EI. However, the government should be open to considering a wider range of potential reforms than those mentioned.

Prior to the COVID-19 pandemic, the need to reform EI was widely acknowledged by experts and the vulnerable workers who were systematically excluded or underserved by the program. Now the program’s flaws have been exposed to all Canadians. Reforms are urgently needed to simplify the program, make it more responsive to economic shocks and ensure that more unemployed Canadians can access benefits.

Canada’s most vulnerable workers are bearing the brunt of the program’s shortcomings.