Atlantic Canada’s dole rots the soul

May 19, 2004

Atlantic Canada’s dole rots the soul

Wednesday, May 19, 2004

National Post

By Brian Lee Crowley

HALIFAX – Ever wondered why there are so many bad handicrafts in Atlantic Canada?

Drive around the region in the summer and you see them — endless roadside displays and tiny shops stuffed with some of the most garish and embarrassingly primitive “art” you can imagine. Guilt by association with that stuff endangers the reputation of the region’s many fine artists.

I found out why there’s so much schlock out there when I became a partner in a Nova Scotia restaurant. Many job applicants said they were prepared to work over the summer on condition that we let them go once they had qualified for Employment Insurance. Each year they worked briefly in some “seasonal” job and then arranged to get laid off, drew EI, and spent the rest of the year doing their “crafts,” which they then sold (under the table for cash, of course!) at the Christmas craft shows and to unsuspecting tourists. So now you know: The excess of bad crafts is your tax dollars at work.

Think this is anomalous? Think again. We are only scratching the surface of the havoc created by an EI system that pays benefits for most of the year in return for few months’ work.

Recently, the Charlottetown Guardian printed two articles. The first told the story of workers demanding the provincial government keep their failed fish plant open because there was no other work available.

The other article reported a call centre with hundreds of jobs available was leaving the province because it couldn’t get workers. It was in the same part of the island as the closed fish plant.

Reconciling the two news items is simple: In communities used to the EI/seasonal work cycle, such as that of the now-closed fish plant, employers trying to hire workers to work full-time, full-year have to compete with months of taxpayer-funded leisure time.

Potential workers don’t look at the wages they would earn in a new year-round job, but rather at the difference between what they might earn in that new job and what they can earn with a short bout of seasonal work supplemented by months of EI. The difference is often pretty small, not least because the seasonal work cycle has already left these workers without job skills and education that might otherwise make them more valuable to employers.

There’s more. A cardinal rule of economics says if you subsidize something, you’ll get more of it. By heavily subsidizing seasonal work, EI causes more such work to be created.

Before seasonal workers were brought into the unemployment insurance scheme in the early 1970s, there were only 50 fish processing plants in Newfoundland and about 4,700 full-time equivalent employees.

By the late 1980s, the subsidization of seasonal work had driven the number of fish plant workers up to 11,000, and there were nearly 200 fish plants. The fishery became merely a government-encouraged gateway to EI’s thinly disguised workfare program.

In community after community, employers, employees and the provincial governments conspire to maximize the income from EI. Employers (with some honourable exceptions) cycle workers through the available jobs. This maximizes the community’s income. Workers have a strong moral code forbidding someone who is already “stamped up” from taking any further formal paid employment. That might prevent someone else from getting their full EI entitlement. The provincial governments lay on make-work projects where seasonal work isn’t plentiful enough because EI benefits generate provincial income and sales tax and seasonal workers on EI don’t end up on provincial welfare rolls.

If you have the standard prejudices about Atlantic Canada, your reaction might well be that this makes sense because, after all, there are no jobs down there.

Not. There are jobs. But virtually every major business organization in the region reports its members have tremendous difficulties finding workers with the skills they need willing to work at prevailing wages. Those same organizations are pressuring the provincial governments to come up with an aggressive strategy to recruit immigrants to fill some of these gaps. We’ll soon have 70-80,000 fewer workers due to retirements and out migration. Even the fishery is predicting a shortage of workers soon.

What we have is a desperate mismatch between the skills our workers have and the skills local employers need, plus an EI system that pays people not to work and penalizes people who try to get an education (because students don’t qualify for EI). Federal and provincial studies galore have repeatedly identified the perverse incentives in EI as the biggest obstacle to Atlantic Canada escaping its chronic underdevelopment.

To this poisonous mix, the election-bound federal government recently announced they were adding a further $300-million of your tax dollars.

Access to EI is to be made easier for seasonal workers, and the period of time during which they can collect benefits is to be extended.

The biggest scandal in Ottawa is not the sponsorship shenanigans, but that no one seems to have listened to one of Canada’s most acute social observers, singer-songwriter Stan Rogers. “The government dole, it’ll rot your soul, right there in your home town.”