Can the Conservatives make EI reforms work?

The government’s changes to Employment Insurance are far from what many expected
Unemployment assurances
Lee Brown/CP

See also: Current EI reforms should be just the beginning

Human Resources Minister Diane Finley never stopped smiling during her news conference explaining the Conservative government’s Employment Insurance reforms—even though it’s among the most dangerous files any federal minister could ever be asked to handle. At every chance, Finley reassuringly said the changes weren’t about cutting benefits but about “connecting Canadians with available jobs.” Only once, when a reporter asked if a laid-off fish-plant worker might have to take a fast-food job, did she let slip the sort of comment that sets off alarm bells in high-unemployment regions. “Well, this is going to impact everyone,” Finley said, “because what we want to do is make sure that the McDonald’s of the world aren’t having to bring in temporary foreign workers to do jobs that Canadians who are on EI have the skills to do.”

That is exactly the sort of suggestion that many seasonal EI claimants, from fishermen to road pavers, tend to resent and fear. Despite Finley’s stray remark, though, the prospect of many repeat claimants being pressed to serve fries during their off seasons appears to be remote. The modest reforms she sketched last week won’t force EI recipients to take work that pays a great deal less than the last position they held. As well, the changes won’t typically ask them to commute more than an hour for a job, let alone move from a region with few opportunities to one where odds of finding work are much better. Instead, those drawing EI benefits will be asked to consider openings where they already live in occupations similar to what they’re used to. “It’s really hard,” said Colin Busby, a senior policy analyst at the C.D. Howe Institute, a Toronto-based think tank, “to conceptualize exactly who is going to be affected by these new reforms.”

In fact, officials in Finley’s department estimated that less than one per cent of the roughly 500,000 Canadians drawing EI benefits at any given time will be cut off. Although some opposition politicians and union leaders protested anyway, their reactions were by and large muted. In that respect, the pattern of the EI announcement—first anxious expectation, then a cautious policy move, prompting a subdued response—followed a familiar course. It’s what happened when the Tories changed Old Age Security. After setting the stage for something big, they finally announced that the eligibility age will rise gradually to 67 from 65, starting in 2023, a far-off move expected to trim $10.8 billion from what would otherwise have been a $108.7-billion OAS bill in 2030. A moderate saving from a huge program many years from now: no wonder there was little outcry. The same cautious approach arguably characterized Finance Minister Jim Flaherty’s entire spring budget, which avoided controversial austerity at every turn in favour of low-key measures.

This is not what many expected when Prime Minister Stephen Harper finally won his majority just over a year ago. Although Harper has wagered political capital on a few strategic files—notably his push to fast-track environmental assessments of oil pipelines and other resource projects—he has tread carefully around social policy. On health care, for instance, the Conservatives won’t slow the current pace of six per cent a year increases in transfers to provinces until 2017-18, and even then promise to keep boosting payments at the rate of economic growth. On public sector pensions, last year’s budget took the nearly painless steps of raising the normal age of retirement for employees who start working for the government after this year from 60 to 65, while slowly increasing employee contributions to the plan.

Still, Finley’s EI reforms can’t be dismissed as inconsequential. Under her new regulations, which are expected to be in place by early next year, EI claimants will be divided into three categories. Long-tenured workers, who almost never make claims, and occasional claimants won’t likely face much added pressure. But frequent claimants—anyone who has filed three or more EI claims for a total of more than 60 weeks in the past five years—will be expected to take any suitable work near where they live that pays at least 70 per cent of what they earned at their previous job. But Finley suggested the new code won’t be harshly applied. “These changes are not about forcing people to accept work outside their own area,” she said, “or taking jobs for which they are not suited.”

Her tone left lobbyists in industries that might have been most directly hit by a more aggressive reform package breathing easier. “It doesn’t seem like it’s draconian measures,” said Patrick McGuinness, president of the Fisheries Council of Canada. “The legislation doesn’t really change much,” agreed Bill Ferreira, director of government relations for the Canadian Construction Association.

Industry insiders with long memories contrasted Finley’s moves with the last truly daring reforms, imposed by the Liberals in 1996 when they were wrestling the federal deficit of the day into submission. Jean Chrétien’s government studied the issue for 18 tortuous months, then brought in a suite of cost-saving measures, including a controversial “intensity rule,” which reduced the benefits paid to repeat users with each claim, penalizing seasonal workers. They saved about $2 billion a year in benefit payouts. By way of payback, though, the Atlantic provinces punished the Liberals, who lost a raft of seats in the region in the 1997 election, before Chrétien largely reversed the EI reforms in 2000 and even apologized for them on the campaign trail in that year’s election.

Although the Conservatives hold few seats in the regions with the highest unemployment, especially on the East Coast and in Quebec, they chose not to risk alienating those voters. The C.D. Howe Institute’s Busby said the best reform would have been to level out the rules that now make it easier to qualify for EI, and draw benefits for longer, in areas with more joblessness—a key grievance of the Ontario government. But was he holding out genuine hope that the Tories would shift to a common national eligibility standard, encouraging more migration away from places where year-round jobs are scarce? “No,” Busby said. “Those elements are very politically controversial.”

While Finley avoided a major backlash, she still faces at least some regional resentment. Nova Scotia NDP Premier Darrell Dexter complained that she did no advance consultation on the changes. Dexter also pointed out that key aspects of what Finley outlined remain vague. He wants a precise explanation of what alternative jobs federal EI officials will deem as “suitable” for seasonal workers in rural communities, and he worries that EI claimants in small towns within an hour’s drive of Halifax will be required to commute to the city, which currently enjoys a low unemployment rate. “The implementation is the big issue,” he said. “The risk is stripping out of rural communities that seasonal workforce.”

Dexter fears the EI changes might turn out to be more ambitious than they seem. Other critics, however, worry the Conservatives are proving overly cautious. “We have some hugely difficult emerging problems to solve,” says Queen’s University economist Thomas Courchene, pointing particularly to the growing income imbalance between the oil-rich provinces and the rest. Is a government that has looked so risk-averse on EI and pensions ready to step up on those dawning challenges?

See also: Current EI reforms should be just the beginning