The Canadian Imagination

What it means to be Canadian; examining and reworking Canada as a nation.

Friday, June 19, 2009

Regional EI

Regional differences between how eligibility for Canada's (un)employment insurance have been in place for a long time. The difference is based upon local unemployment rates, which are used as a measure of how easy it is to get a job in the area. In areas with very low unemployment, such as the urban areas of Vancouver and Victoria, 665 insurable hours of work are required, or about 17 weeks of standard full-time work. In contrast, in northern areas with high unemployment, only 420 insurable hours are required, translating to just over 10 weeks of standard full-time work.

Not only is the updating of employment statistics for this purpose molasses-slow, making it almost impossible to keep up with the rapid shedding of jobs in the Canadian west, but the inertia of the system has also made it reluctant to shift out of a relative unemployment rate (between regions) rather than an absolute unemployment rate.

However, what regional differences actually target is not how easy it is to gain a new job, but how much the local job market needs casual labour. Although these two sound similar, they are not at all the same thing. By way of illustration, consider the consequences of one possible alternate way of calculating regional EI: which would give workers in high unemployment areas longer-lasting benefits instead of reducing eligible hours -- in proportion, so the cost would be identical.

The problem runs even deeper than that. Many industries and large corporations have started calculating EI as a part of their total work packages, so that the pay they offer can include a government supplement. Fishing vessels and agricultural industries hire workers for two-thirds of the year, and count on EI to make up the difference. Even non-seasonal industries such as major manufacturers plan regular factory shutdowns and maintenance during which they don't pay their workers: because EI will. This has been standard practice for the Big Three auto industries for decades. It also artificially lowers the price of goods.

I can almost hear the Americans reading this screaming "Socialism! See?" But this is not limited to Canadian practice. The Big Three rely equally on government unemployment assistance during their shutdowns south of the border. Walmart has long made it standard practice to pay their workers at the limit which also makes them eligible for welfare, Medicare, and other government poverty programmes.

This corporate approach results in a healthier corporate bottom line, with healthier dividends for shareholders ... at the expense of the taxpayer.

The irony is that it is often the same people who support these practices, as want lower taxes. The two are inherently self-contradictory. Yet shareholders usually have more to gain than they lose through their individual taxes, not least because in most countries, shares themselves are given a tax break. Thus the greatest part of the burden rests entirely on those taxpayers who are not also shareholders to an equivalent monetary level.

Had we the will to rectify this, it would result in higher corporate cost of labour (as private enterprise makes up the slack currently taken up by government programmes), resulting in higher absolute cost of goods. Current economic theory states that, in time, the relative cost of goods would fall, due to efficiency measures and competition. It is entirely possible that some businesses which have been coasting on the current government programmes may collapse altogether. Have we the nerve to truly take the plunge?

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