A new way to help the jobless: Create a temporary program for those hurt during an economic crisis

The federal Liberals want to help unemployed Canadians during this time of global economic crisis. The federal Conservatives want to help unemployed Canadians during this time of global economic crisis. Perfect, let’s make a deal.

The Liberals believe that the way to get money into the hands of Canadians is by making it easier to get employment-insurance benefits. It seems logical: Just change a regulation here or there and the money is flowing in no time. The problem is, as the Conservatives in their rather ham-fisted and confrontational style have pointed out, how do you turn the tap off once the crisis is over?

How about this? If what we want is to help those hurt (through no fault of their own) during an economic crisis, then let’s create a program to do that. Economist Robin Neill of the Atlantic Institute for Market Studies suggests calling it “compensatory income support” – CIS for short. (See Using a wrench as a hammer: Why EI is the wrong tool to respond to a loss of income in an economic downturn )

CIS is just a concept at this point, but basically it amounts to a truly counter-cyclical Keynesian response. Funded through federal debt, it would supply income replacement at an appropriate level for people who lose their job during an economic downturn.

CIS would not replace EI. EI would still be used in the up times to deal with “frictional” and “structural” unemployment – losing your job because your company goes under, for example, as opposed to the economy going under. More important, CIS would also make fundamental reform of the EI system possible.

As a starting point for negotiation, one possibility could be a CIS payout of 60 per cent of the average industrial wage or 60 per cent of the person’s actual wage, whichever is higher. CIS could be administered by the existing EI bureaucracy, so there would be little or no added cost. It could be triggered either by some positive action of Parliament (a vote declaring an economic crisis, for example) or by some outside measure (perhaps, as economists describe the onset of a recession, “two quarters of negative economic growth”), or both. I like both, so we don’t end up in a permanent “crisis” of our own labelling.

CIS could be cut off again by a parliamentary vote or some agreed-upon measure of economic recovery, or both, but with a time lag. Say people can collect CIS up to three months after the crisis is declared over.

CIS could easily be funded by redirecting just a couple billion dollars that we are set to waste building monuments to our own short-sightedness, and, unlike infrastructure stimulus, it is timely, targeted and temporary, the three “t’s” of sound stimulus (infrastructure needs to be operated and maintained over the long term and so cannot truly be considered temporary).

Why go to all this trouble?

First, because this is what we (and Keynes) intended in the first place – temporary deficit spending to counter a downturn. Spending that is then paid off during good times. Spending that is targeted at helping people pay their bills, feed their families and keep their homes, while the economy does what economies do: restructure.

Second, because in exchange for this the Conservatives could seek Liberal support for reforming EI.

Think about it: an EI program that is operated as a real insurance program. Where anyone can buy in. Where everyone who pays in can receive payouts when the time comes.

Where premiums and payouts are based on real actuarial tables. Where industries that operate on a seasonal basis pay extra to have their employees protected during the off season.

Where employees who have a history of or a higher likelihood of frequent periods of unemployment similarly pay extra (or get less).

That would be a big win for Canadians. But to achieve this level of reform, the government will probably need to offer a big carrot. CIS is that carrot – and better still, it is a carrot that, on a piecemeal basis, the government is already committed to handing out.