Since the 2008-09 global recession, the Canadian labour market has been undergoing major changes, a process that will only become more pronounced as a result of the recent shock of lower oil prices. The uncertainty caused by these changes will be exacerbated even further by growing income inequality " an issue that is sure to weigh heavily on the minds of voters when they head to the polls later this year. A critical challenge for the parties, therefore " and a key opportunity " will be to make sense of the web of employment and income support mechanisms and articulate a new vision of how we should support individuals as they move through the labour market.
Currently, support is provided by any number of specific programs delivered by all three levels of government.
At the federal level, the employment insurance (EI) program provides benefits to those unemployed who have a valid job loss, made sufficient contributions (funded by them and their employers) and worked a sufficient number of hours. These criteria, seemingly simple and straightforward, are complicated by several factors.
First, in addition to income support, the federal EI program gives the unemployed access to resources for training, but these are administered by the provinces on behalf of the federal government. Second, regular income benefits constitute only 66 percent of all EI benefits, with the remainder taken up by a variety of special benefit programs to help individuals deal with major life events and health related needs. Third, there are systemic net transfers between provinces, regions, sectors and individuals, making coverage uneven. Finally, and perhaps most importantly, coverage is porous: in the most recent recession, for instance, 54 percent of the unemployed (62 percent in Ontario) did not receive any EI benefits at all.
In addition to EI, provincial and municipal governments provide social assistance (SA) to those who don’t qualify for EI but who do meet other complex income and asset tests. Because of the diversity in how SA is delivered in Canada, let us focus on Ontario as an example. The provincial government delivers the SA component for persons with disabilities (the Ontario Disabilities Support Program, or ODSP), while municipal governments look after those without disabilities (in a program called Ontario Works (OW), which is funded by the province and delivered by municipalities). The two programs have the same dual objectives as EI: to help people obtain employment and provide financial assistance while they are not working.
That said, the expectations and services delivered by OW and ODSP are very different. In OW, clients receive a small base benefit and are expected to work. They sign agreements to that effect with the local government and, in exchange, receive a number of different supports to help find work. In contrast, ODSP clients receive a much larger benefit but, even though many recipients want to work, there is no expectation of employment while on ODSP and very few receive any serious employment support services from the province.
Three levels of governments therefore deal in relative isolation with the same unemployed people. The complexity of the systems makes it difficult for clients to navigate them effectively, and many individuals fall through the cracks. For those who receive support, benefit levels are often insufficient, particularly within the basic income offered by EI and OW. The result is inconsistent and inefficient employment services.
Moreover, EI and SA now play a significant role in a number of areas beyond basic unemployment assistance. EI, for example, provides income support for a number of different needs, including parental leave, sickness, care-giving for terminally ill family members, and support to workers in the seasonal fishing industries. These benefits are about one-third of the cost of the EI program, and are paid for out of the payroll tax used to finance EI as a whole.
At the provincial level, OW and ODSP alone provide more than 30 specialized benefits that are not available to low-income workers who are not receiving social assistance. Some of these programs include disability benefits, extended health coverage (drugs, dental, vision and other health–related), a top-up to children’s benefits, a special diet allowance, and a host of other employment-related and discretionary benefits that are approved on a case-by-case basis.
Because of the high eligibility requirements for EI, those who require specialized benefits " sometimes also the most in need " might not receive assistance for the simple reason that they did not contribute enough to EI. One might also question why these forms of assistance are funded by employers through payroll taxes. And as for ODSP and OW, it is not clear why there are so many specialized benefits. Those managing the system likely spend more time figuring out the complexity, inefficiency and inequitable design of the system than helping beneficiaries.
There is a serious problem of logic in providing these benefits as part of three separate employment assistance programs. Canadians probably support the notion that individuals facing such situations should receive benefits, but whether those benefits should be provided through EI, ODSP or OW is a question worth examining.
Rather than tinker with the complex system we have, we should redesign these programs from the ground up.
The good news is decision-makers are approaching an ideal opportunity to address these deficiencies head on. With major changes underway in Canadian labour markets and the transition to a new financing mechanism for EI in 2017, the federal governments and the provinces could fix the major gaps between EI and social assistance. Rather than tinker with the complex system we have, we should redesign these programs from the ground up.
Ideally, the federal, provincial and municipal governments would come together and work as a team: delivering EI, OW and ODSP as three branches of one seamless, national program that is applied as uniformly as possible across the country, that considers the individual recipient as a whole person, and that responds to people’s specific needs in a comprehensive way. In reality, this is not likely to happen. Therefore, a second option is to replace EI, ODSP and OW with one unified employment support program, with all three governments playing a role in its delivery.
In this second option, the federal government would establish national standards and leave provinces and municipalities to design and deliver services, an approach similar to the one used in health care. The federal government would transfer to the provinces the power to determine the structure of benefits and contributions. As a result, the distinction between EI and social assistance would disappear, and national standards would apply to the combined programs. Thus, provinces would have significantly greater flexibility in designing the new system to reflect their particularities, but they would also be the primary funder and be responsible for collecting EI contributions. Provinces would also be responsible to determine the optimal length of time of eligibility, depending on the specific circumstances of their economy and the profile of the individual in need of assistance.
A key consideration is what to do with special benefit programs. Each of these programs should be carefully reviewed to determine whether and in what form they should be continued. A basic disability support program would most certainly be retained. The special benefits in the new model should be operated apart from unemployment assistance and be funded out of general revenues. Provinces would deliver these specialized benefits. By separating them from EI and social assistance, access will be significantly improved. No longer will eligibility depend on whether a person can work, is unemployed, or what their contribution history has been. People will get the support they need.
What I am proposing is program transformation. It is clear we are never going to get a perfect version of EI or social assistance, but we can move toward a more efficient and better coordinated system. If the provinces and the federal government start with that as an operating principle, there is much room for improvement.
Munir A. Sheikh is an executive fellow of the University of Calgary School of Public Policy and former chief statistician of Canada.