Should EI payments be voluntary?

A couple of my favorite blogs (our friend Scott over at the Sorry Centrist and NB Politics) have picked up on a post by the decidedly debonair Clinton P. Desveaux – a seemingly self-styled rightist in the tradition of Ludwig Von Mises but paradoxically residing in Nova Scotia.

Mr. Desveaux would like to open up the debate on Employment Insurance. While I agree with Savoie, the Sorry One, and undoubtedly Von Mises on this subject, I think this is more or less a non-starter.

Let me remind some of you young ‘uns about our recent history on this subject. When Doug Young and Jean Cretien tried to tweak the EI system back in the early 1990s there were literal riots. Roads were blocked. Protests were widespread and ultimately in the next election almost every Liberal was booted out of NB including Young even though he put more gravy into his Bathurst riding than any other politician in history (not to mention he was a heavyweight in Cabinet).

You see, EI is now considered an entitlement program. Not a temporary insurance program when you lose your job. It is income supplementation for hundreds of thousands of people all across Canada (with a disporportionate share in Atl. Canada).

The reality is that what we need is economic development in communities where there is a dependancy on EI – real, year round jobs. And those jobs should be at wages that provide an incentive to work year round. $8 bucks/hour to work year round or $20 bucks/hour for 15 weeks and then $8 bucks/hour on EI for the rest of the year – you do the math.

So the political realities are this:
-Even tinkering with the EI system is political suicide in most of Atlantic Canada.
-Any substantial change needs to be linked to long term economic development strategy.
-Making EI ‘voluntary’ would mean scrapping the system completely. Anyone who makes over $57,000 isn’t even eligible to collect EI but they are the ones that pay in the most. So be clear EI is not Employment Insurance. EI is an income support program paid for – mostly – by folks that can never access it.

But on this important subject, I happened to be in a meeting not that long ago where I was told that the de facto strategy for reducing EI dependancy is to slowly let most of these communities decline to the point that there is limited dependancy. I have also heard this from another couple of credible sources. Please note this is not a formal strategy. It is not written down anywhere.

But I think that this is also a flawed strategy as a deep reduction in rural population will lead to a whole host of other problems.

I still maintain there must be a better way. A way that includes girding up these regions with real, year round jobs.

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0 Responses to Should EI payments be voluntary?

  1. scott says:

    He’s even putting more gravy into NB today.

    A six pack of cold Keiths to the person who guesses who the major contributor to that firm is.

    Hint: it’s starts with an “I”.

  2. Anonymous says:

    I agree about the jobs, but how likely is that.

    The only thing I’d like to argue is the ‘idea’ that it is ‘an entitlement program’. There is no doubt that some locations benefit more than others, but thats like saying that because some liberals were involved in the sponsorship scandal, ergo ALL politicians are criminals.

    The same arguments are made about welfare (curiously there is never NEARLY as much talk about corporate welfare, subsidies, and illegal practices, in fact we ENCOURAGE the first two of those)

    For EI you can check the stats. Only 45% of EI claimants have collected more than once in successive years. Meaning that less than half of those are ‘seasonal’ workers who get money yearly. The rest collect it as it is intended, as a benefit when you are out of work.

    And consider this, that those numbers are from two years ago. THere WERE huge cuts in EI, it’s not like those protests ‘put a stop’ to changes in EI. THere’s a reason why it sits on a 60 billion dollar treasure chest. That’s because they cut people off.

    And as I’ve said before, I have no trouble with fisherman, foresters, roofers, construction people collecting each year. Certainly we can argue how much, but if you’ve worked these jobs then you know they are LIFE THREATENING. Oddly enough we never hear about labour mortality statistics either. That these people should have four months off at decreased pay when they get no holidays, work 12 hour days and collect at least partly the money they paid into it doesn’t seem unreasonable to me.

    I dated a girl who was a secretary at Deloitte and Touche and she often told me that the head accountants worked about three hours a week signing papers, then headed for the golf course. Funny how we don’t hear about THOSE deadbeats.

  3. David Campbell says:

    The only point I am trying to make here is that for some (i.e. the seasonal workers) the EI program is part of their annual wages – it is considered as such. Ask a seasonal worker if they think EI is just a temporary wage supplement for occassional use. That’s why I call it an ‘entitlement’. Governments can’t just set up a system (EI), subsidize industry growth that relies on that system (i.e. fisheries, et. al.) and then decide ooops we don’t want 500,000 people using EI to supplement their seasonal income each year after all. The program is there. Many people rely on it to put food on the table.

    My position on EI is clear. It drains overall productivity and tax generation potential to have 100,000 people collecting EI each year (out of a workforce of 350,000) because those people are not working – by definition – when they are on EI (I know that some people do actually work while on EI but that’s another story). The high seasonality and part time nature of the NB workforce does limit tax generation potential – and taxes are what pays for health care, education, social assistance, etc.

  4. Anonymous says:

    That IS true, but again, go to the numbers. Only half of all claimants use it as seasonal. And even there the numbers aren’t positive, for example, I could get a job, lose it, then get another job the next year, then lose that, then get another job and never collect EI again and it would still be part of the mix.

    Part of the point should certainly be that EI is a FEDERAL program, in other words, it ADDS money back. It IS an investment.

    And it’s also wrong about investment. How long has the forestry industry been around? Yet every ten years or so, yet another massive government bailout, not to mention the fact they are practically giving the resources away in the first place.

    Add into that another mix, namely different levels of tax. In other words, it’s faulty logic to assume that by ‘handing a cheque’ to an industry or company means that it is a one time investment. Out of the fortune 100 three years ago 20% were saved from bankruptcy with massive subsidies.

    Although frankly I’m starting to get tired of working. I fail to see the benefit of a society where part of the population works far more hours than they want to, where another group doesn’t work enough because of public policy. With technology there is simply no reason that infrastructure needs to be centred around cities, those are political choices. And I will admit to a bias when people talk about EI because the end result is usually a support of policy that simply cuts people off and forces them to relocate. Even worse is when it is described as ‘inevitable’.

    Corporations certainly arent’ going to locate to rural areas where hardly anybody has relevant skills. It’s up to our government to make that switch and so far they are doing a pretty shitty job. However, I tend to think that they know perfectly well what they are doing and what will happen-forced relocation. When New Brunswick is nothing but three cities with large populations of unemployed, and the rest is desert towns, clearcuts and tree farms for Irving and we are choking on the herbicide sprays, it’s be that much tougher to get foreign investment (the decent kind anyway)

  5. Clinton P. Desveaux says:

    According to the economic law of convergence, less state intrusion in an economy will create a “catch up” period, not in the short term, but mid and long term. Smart people should always ignore short term and concentrate on mid and long term expectations. Atlantic Canadians should be looking at the economic law of convergence in regards to voluntary choice payments into Employment Insurance.

    It seems to me anyways that from an economics perspective and individual compassion point of view, that choice and less state coercion which accepts voluntary consent is a good thing.

  6. Clinton P. Desveaux says:

    I will also being putting a link to your site from mine in the next few days.

  7. Anonymous says:

    There ARE no ‘economic laws’. That’s crap they teach in economics courses so that they are not teaching political science. The fact is, the closest example of ‘market forces’ running the game was in Britain during the industrial revolution which proved the exact opposite. That poor areas get even poorer.

    So the only way to make that ‘jive’ is to say that ‘the law’ only makes sense in the LONG term, meaning, well, that the experiment simply goes until until some other factor chips in and voila, there’s your proof.

    Like so much of economics its utter gibberish and so far from reality that these people would have been far more useful using their math in constructive ways like astronomy or physics.

    If somebody can point out to me a single example of ‘convergence’ in a setting WITHOUT public policy I’d love to see it. Canada is about as far from ‘market driven’ as …well, the US, or China, or India, or …etc.

    Thought I’d chip in though, and according to the IMF, their findings are exactly the OPPOSITE of what the Ontario Chamber of Commerce claims, which is that ‘equalization’ isn’t working. In other words, its far better off cutting poor provinces loose. However, the IMF study claims that in fact, it IS working, and that its BAD that it’s working. In other words, poor areas ARE ‘converging’ on national standards and that’s a BAD thing because it means people are far less likely to pack up and move.

    Beware the ‘law of convergence’, its about to become the next media buzzword for ‘screwing the poor provinces even more’.

  8. Clinton P. Desveaux says:

    Hong Kong pre-China unification is a very good example of how a free market can work.

    To the person not prepared to leave their real name behind, you really should make yourself aware of the Austrian School of economics which based on rational thought, logic, reason, and solid monetary policy.

    Furthermore your ignorance is shocking, we don’t have “poor” provinces; we have poor and wealthy people who live in provinces with governments that spend more money and promise to increase spending with zero guarentee that revenue will continue to outpace spending habits…

  9. David Campbell says:

    As I have said before, I am schooled in the Austrian model. I read Schumpeter, Hayek, Von Mises, Buchanan, Tullock, etc. I had professors living on private roads and advocating that individual banks should issue their own currency backed by the gold in their vaults. And I believe most of their underlying thinking on issues of politics and the economy.

    What I advocate in these pages is not theory. I have thrown out ceteris paribus in favour of all things are never constant. I am advocating our elected officials and community leaders clearly articulating the extent of the challenges and then putting forward workable, long term solutions. The workable, long term solution to EI dependant communities is to find ways to anchor (on a regional basis) those economies with a few good medium to large employers. I have to believe that over time people will gravitate to work over non-work if there is an economic incentive to do so. I think any radical cutting of the EI program will lead to chaos and I think the current de facto policy of letting 4/5 of NB’s communities slowly bleed to death is even worse as it will bleed out the wheat in favour of the chaff and then you will have small, rural ghettos where 60%-70% of the income is generated through government sources.

    I propose a more sane approach (I take it as a given that Hayek would roll over in his grave). I think, like the US south and many other regions, we should establish several growth poles around New Brunswick, encourage development in these poles (anchored by external business investment) and condition people from peripheral communities to drive 30-45 minutes for work.

    I further think that if Toronto, Boston, Detroit, Atlanta, Dublin, Dubai, Pune and Montreal can spend millions of taxpayer dollars on large economic development projects..

    ..than so should we.

    Mr. Desveaux, you may want to reconsider that link to this pinko communist site.

  10. Clinton P. Desveaux says:

    I have no dislike towards you at all Mr Campbell, my comments were being directed at the person who posted something without a name, and who basically dismissed economic laws and theory which you and I both know are correct. While also attempting to dismiss those of us, such as you and I, who actually understand economics and follow it very closely.

    Why would I think your site is a pinko communist one? I find your ideas very engaging unlike 95% of the stuff in this world.

  11. Anonymous says:

    Oh, Lord, save us all from “praxeology”. For any other readers out there still attuned we can dispense with the religion of economics here encountered with the simple reality that there IS no ‘austrian school’, at the VERY least we can say there are TWO austrian schools, but really as many as there are delusions.

    They’re as full of bunk as is possible, they are actually the WORST form of economics, being almost completely hypothetical and theoretical. If you talk to an economist and he tells you that he ignores observable effects of the individuals and the economy because they are ‘too complicated’, THERE you have the ‘austrian school’. In other words, ‘ignore all the evidence’. Mises was making projections about what ‘logical processes’ people had decades before psychology was even a science.

    At least Marxist is grounded in reality, this started as the virtual opposite of marxism, which of course only had one example-Great Britain. Which as mentioned, was such a disaster it led to Mises famous ‘ignore observable effects’ hypothesis.

    And excuse us ‘ignorant’ folk while we chuckle at the idea that there are no ‘poor provinces’. Gee, and here I thought we actually had an equalization program for provinces which couldn’t meet their financial obligations. We even called them ‘have not provinces’ but it turns out they don’t exist. In fact, I’m sure ‘provinces’ don’t exist at all-we just have a federal and municipal governments! Under that logic I suppose PEOPLE aren’t ‘poor’ either, just ‘parts of them’ are poor. After all, their legs may work, they have ‘potential assets’!

    As for Hong Kong, that’s as crazy as saying Great Britain was a ‘free market’ in the eighties. Not even close. Just because a market isn’t as restrictive as its neighbours doesn’t mean its ‘free’. Its got a Monetary policy and it regulated its currency the same as every other place.

    Hong Kong simply got started as Britains cheap source of product, much as China is now. Real estate rigging was epidemic, ironically, although a ‘free’ market was supposed to remain til 2047, currency speculation lead to establishing the Hong Kong Monetary Authority. When real estate speculation went ballistic this meant China now has a government authority designed to purchase property and maintain real estate prices.