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Jan 19, 2011

The price of Canada’s fraying safety net

January 19, 2011

Citing Mowat research, Barrie McKenna from the Globe and Mail discusses the current inequalities of the EI system and the need for reform.

Many Canadians like to feel smug about the deficiencies of the American health-care system. Yet we shouldn’t feel so smug. There are large parts of Canada’s own social safety net that millions of Canadians slip through every day.

Our federal government delivers many social benefits through the Employment Insurance system. These include sickness, compassionate-care, maternity and parental leave. These “special benefits” account for a quarter of EI expenditures. Most of the federal government’s spending on job training also is delivered through the EI system.

Which is to say that qualifying for EI is a window to many of the other social benefits delivered by the federal government. And we know that many working Canadians don’t qualify for EI. The design and financing of these programs must be reformed in order to better serve Canadian families.

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These programs are not just about helping Canadians with income support. They increase our productivity. Maternity and parental leave ensure the presence of a parent during the crucial early period in a child’s life. They constitute an important investment in future generations.

Economists Michael Baker and Kevin Milligan have shown that women are more likely to remain in the labour force and return full-time to their pre-birth employer as a result of the extended parental-leave program. Compassionatecare benefits allow elderly Canadians to live their last moments in dignity surrounded by their loved ones. They also reduce stress on our health-care system.

Too many parents do not qualify for maternity or parental benefits. Some do not have insurable employment. Others do not manage to work the minimum of 600 hours required to obtain benefits. Too often, those who do not qualify for EI are low-income Canadians who need the most financial help during the first year of a child’s life.

Different aspects of the system are puzzling. In certain regions of the country, it is easier to qualify for “regular” (those for laid-off workers) than for “special” EI benefits. It is the opposite in other regions of the country. While in high-unemployment regions, workers must have worked 420 hours to qualify for benefits after being laid off, women in the same regions must have worked 600 hours to qualify for maternity benefits.

The maximum weekly allowance is not particularly generous. The current income-replacement rate is 55% of previous salary, with a maximum benefit of $467.50 per week. As a result, up to a quarter of women who qualify for benefits return to work before the end of their parental leave.

The lack of flexibility in the program limits the ability of a parent to work part-time to supplement the family income while obtaining benefits. The compassionate-care program allows an individual to obtain only a maximum of six weeks of benefits to support a gravely ill relative, too little time in many cases.

There are also problems on the contribution side of the EI program. Because workers contribute only a percentage of their income up to the first $44,200, premiums paid to finance these social programs benefits represent a greater burden for low-and middle-income workers. Individuals who make $44,200 contribute the same amount as individuals who make $250,000.

Considering the long-term benefits of these programs, a failure to act will have important consequences for our economy and for our ability to deal with the challenges associated with Canada’s ageing population.

This piece originally appeared in an edition of the National Post.

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National Post


Luc Turgeon

Release Date

January 19, 2011


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