August 24, 2011
Morley Gunderson examines how Canada’s EI system interacts with the changing world of work.
The changing nature of work is outlined with respect to those changes that have the most important implications for Employment Insurance. 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 difficulty 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.
Particular attention is also paid to the role of 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 flexibility 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 then discussed, including: 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.View PDF
August 24, 2011