Canada / Employment Insurance : How to Adjust EI to the new world of work – Gunderson

Work is ‘changing nature’ with respect to Employment Insurance writes MORLEY GUNDERSON in EMPLOYMENT INSURANCE IN THE NEW WORLD OF WORK on mowateitaskforce.ca.

“The demand-side changes include: skill-biased technological change, especially associated with the computer revolution and the shift to a knowledge economy; trade liberalization; globalization and offshore outsourcing; industrial restructuring mainly from manufacturing to services; deregulation, privatisation and contracting out; unanticipated one-off shocks such as SARS; and shocks such as the dot.com bust and the recent financial crises.”

“Changes from the supply side of the labour market include: the ageing workforce with transitions to and from retirement; youths making the school-to-work transition; the dominance of the multiple-earner family with its needs for work-family balance; and recent cohorts of immigrants increasingly having diffi culty assimilating into the labour market. Important institutional changes include: declining unionization and union power; and increasing pressure on governments to reduce regulatory initiatives so as to compete with other jurisdictions for investment and the jobs associated with that investment.”

“These various pressures have also fostered an increase in non-standard employment as well as a decline in job stability especially for youths” adds Gunderson.

“… Other mechanisms that can be complements or possibly substitutes for government regulation through EI; they can also respond to the changing incentives created by EI. They include: compensating wage premiums for the risk of job loss; wage fl exibility to reduce the risk of layoffs; substitution across different programs (disability, workers’ compensation and social assistance); and the cost shifting of payroll taxes so they are largely borne by workers.”

“The design features of EI that are most likely to be affected by these changes are … : the benefit replacement rate; the benefit duration and regionally extended benefits; the coverage of self-employed fish harvesters and regional development issues; active adjustment assistance through the EBSM programs under Part II; the shift from weeks to hours worked to determine eligibility; experience rating on employers and employees; extending coverage to more forms of non-standard employment; personal unemployment-insurance lifetime savings accounts; EI modifications for job loss from one-off, temporary, unanticipated shocks; EI-assisted work-sharing; and wage insurance.”

According to the author: “the design and implementation features that generally adhere to basic insurance principles and that are consistent with the changes of the new world of work, and that should thereby be continued include:

• The modest income replacement rate
• The normal duration of benefits
• The emphasis on active adjustment assistance through the EBSMs
• Eligibility based on hours rather than weeks worked
• Activation requirements to engage in job search or training
• The use of modified EI to deal with unemployment from one-off, unanticipated, temporary shocks
• EI-assisted work-sharing to deal with such shocks as well other temporary bouts of unemployment.”

“Adhering to basic commercial insurance principles and adjusting to the changes associated with the new world of work, however, suggested a number of reforms in the design and implementation features that merit consideration. The most important are:

• Eliminate or reduce regionally extended benefits
• Apply experience rating to employers
• Apply experience rating to workers through restoring the “intensity rule” on repeat users”

“A number of potential reforms also merit more attention but more information is needed on them before being seriously considered. These include:

• Extending coverage to various forms of non-standard employment
• Personal unemployment insurance lifetime savings accounts
• Wage insurance”

As concluding remark, Gunderson adds : “The main suggested reforms of reducing regionally extended benefits and applying experience rating to both employers and employees, however, are ones that are likely to be subject to stringent political resistance, highlighting the challenge for reform.”

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