Special Bulletin: Budget 2016

     Marco Navarro-Genie, Telegraph-Journal
     March 16, 2016

John Williamson, Globe & Mail
March 22, 2016

Budget 2016 makes a series of changes to Ottawa’s Employment Insurance (EI) program.EI premiums are currently $1.88 per $100 of earnings and will be lowered to $1.61 beginning in 2017.  While lowering the EI tax is positive, this cut stops well short of the legislated reduction to $1.52 set in an earlier budget by the previous government.  The Liberals say their higher EI tax rate is needed to pay for added benefits contained in Budget 2016 for unemployed workers in areas hit by the downturn in the energy sector along with looser national eligibility rules.

An extra five weeks of benefits will be provided to out-of-work recipients living in areas where unemployment has increased by more than two percentage points – northern Canada, Alberta, Saskatchewan and Newfoundland & Labrador.  As well, long-tenured workers in these areas will be eligible for an additional 20 weeks of EI coverage.  These extra weeks are reasonable given the temporary and focused nature of the extensions.  So is the plan to extend the working while on claim pilot project, which allows claimants to work and keep 50 cents of EI benefits for every dollar earned working.

AIMS questions the government’s decision to make it easier for young workers to qualify for and collect EI. Here’s why: starting in July 2016, the required number of hours a young person entering the workforce and those re-entering the workforce will drop from 910.  The lower threshold will vary across the country and range from 420 hours of insurable work to 700 hours in the 52 weeks prior to a claim.  It is a dramatic drop – particularly in Atlantic Canada where the qualifying period will be low for new EI claimants.  In parts of all four Atlantic provinces, young workers will qualify for EI in less than half the time that is currently required.  This change will tempt some workers to leave the workforce since they qualify for EI more easily.  This will be an added problem for many Atlantic Canadian businesses that cannot find workers because they are competing against a more generous EI system.

Lastly, the reforms the previous government made to require frequent and repeat EI claimants to accept work at slightly less pay and to consider marginally longer commutes to work have been eliminated.  Again, this will cause some unemployed workers to overlook some job openings.  This measure along with easier eligibility requirements will harden Atlantic Canada’s already rigid labour market where we find high unemployment and a labour shortage at the same time.  These two characteristics – job vacancies as well as an abundance of unemployed labour ­– should not exist together in a well functioning economy.  A more generous EI system will cause many businesses in Atlantic Canada to demand greater access to Ottawa’s Temporary Foreign Workers Program since it will soon be even harder to find enough local workers to fill available jobs.

Lastly, the waiting period to receive EI benefits will drop to one week, down from the current two week wait time.  This is a marginal concern on its own, but with the other changes losing the qualification requirements, it will further enhance the incentives to collect EI over finding work since benefits will flow to EI recipients slightly sooner.  It is another small step to make idleness for chronic EI users a little more rewarding, and does more harm than it does good to the region.

A link highlighting John Williamson’s comments in Bill Curry’s March 22, 2016 Globe and Mail article, entitled The Trudeau budget: What you should know, can be foundhere.