Get to solutions

The Times and Transcript is running that editorial from the Fraser Institute that has been making the rounds arguing that the massive overuse of the employment insurance in New Brunswick is the reason why the EI programs should not be changed across Canada.  The warning is simple.  Change the EI system and turn Canada into New Brunswick.   That should have Calgarians shaking in their boots.

As I have said before, I don’t like the EI system the way it is currently configured.  I think the federal government has used it as a convenient way to avoid looking at any real economic development efforts in …this place.  As the economy weakens over time, crank up the EI benefits and forget about any real change.  I think businesses (and government) have used seasonal EI to keep their own wage rates low.  Someone sent me a letter to the editor from a Teacher Assistant claiming that he uses EI as an income supplement because his salary alone is not enough for him to survive.  EI has become a wage subsidy for specific industries and government activities. 

But my biggest frustration with Fraser and all the other eminent think tanks in Canada is that they are quick to crap on just about every government effort to deal with the structural economic problems in a place like the Maritimes (Equalization, Atlantic Accord, EI, transfer payments, etc) but never offer any solutions.  They never turn their enormous intellectual horsepower to economic development-based solutions for underperforming economies.

We get hundreds of pages of narrative and analysis on what is wrong with EI but a cursory “cut taxes and reduce regulation” as the solution.  Or, we get “encourage mobility out of places like New Brunswick” to “places like Alberta”. 

I realize this theme is well worn ground on this blog but I feel that it needs to be repeated until it sinks in.   The government should, over time, get away from these direct efforts to inject income into weak economies and use a portion of that money to build the infrastructure and value proposition on which a successful economy can grow and thrive. 

I don’t know that anyone has recently put an exact price tag on seasonl EI payments but conservatively I think it is in the $400 to $500 million per year in New Brunswick alone.  Think about the opportunity cost of that.  $500 million per year to pay 60,000 people or more not to work for a certain part of the year. 

It’s hugely unproductive and it is not an attractive likestyle choice for the majority of young people.  In fact, I would say that in the long term, EI is one of the major drivers of economic decline in a place like Northern New Brunswick.  On that point, I agree with Fraser.

by now we know the problems.  Let’s turn that intellectual horsepower toward solutions.

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4 Responses to Get to solutions

  1. Samonymous says:

    One has to wonder if federalism, as we have seen it since confederation, is the proper model for such a vast land mass with clusters of population density. Moreover, has it been effective, specifically, in preventing substantial modifications, which might be termed “mutations,” that have occurred over the years in provincial economies which were once prosperous regions. These economic changes oblige us to reassess the federalism model and the role that each of the provinces plays in the country’s economic, social, and political future, understood as it is within the framework of growing economic liberalization, both continentally and globally.

    The specific theme here is that the recent economic changes have produced numerous transformations in Canada’s territorial organization but that, in turn, such transformations have not led to serious consideration of the relationship between the central government and the provinces most affected by both global trade liberalization and inequitable domestic policies.

    In New Brunswick’s case, there was never a clear plan by the feds to counter the damages inflicted to the region by MacDonald’s national policy. Plus, other than the constant tweaking of regional development agencies and EI legislation, there has never been any serious discussion on what could re-balance federalism, particularly in our neck of the woods, so that “have not” provinces eventually “mutate” back to being self-sufficient entities. As it stands now, unless we’re sitting on a pile of natural resources (specifically oil), there is no possible way for provincial and territorial government’s to plan their way out of the mess that is the fiscal imbalance.

    Until then, NBers will have to continue to turn a blind eye when calls from the national press continue to ridicule us for a situation we aren’t 100 per cent responsible for.

  2. It’s not “paying people not to work”. It’s paying people insurance, for which they have paid premiums, to replace a loss they have incurred.

    And if you think that the payouts are too generous in this insurance scheme, why is it that it has historically run up such huge surpluses? “The EI fund surplus held by the Government of Canada was $57 billion ($56,952,606,000) as at March 31, 2008.” http://tinyurl.com/n8eoc8

    I think this is a good time to revisit the system, and convert it back into a system that supports unemployed workers, rather than simply collecting it from them.

  3. Samonymous says:

    Budget 08 addressed this issue already, Stephen. “The government is proposing a new Crown corporation to handle surpluses in the multi-billion dollar employment insurance fund and to ensure the money gets back to millions of employees and their employers.” Most of the changes have yet to be completely phased in “but the surplus, starting with a reserve of $2 billion, would be used to pay for any increase more than 15 cents in annual insurance premiums levied on workers and companies and would be used to reduce premium rates in the event of economic upturn. Rates would be set with the aim of “breaking even over time.”

  4. richard says:

    You are right, David. This article is a fine example of cherry-picking and confounding data in order to buttress a pre-conceived opinion. Of course reducing the number of weeks required will increase the number of applicants for EI – that is the whole point of the exercise. The authors are claiming a cause and effect relationship between EI recipient rates and unemployment rates, but they haven’t shown that.

    Let’s cherry pick some other data and see what we get. In 1990, Maine’s unemployment rate was about 5%, NB’s was about 12%. In June 2009, Maine’s unemployment rate had increased by a whopping 40%, whereas NB’s had dropped by 25%. Someone as deceptive as the Fraser Klowns (but with a different POV) could claim that this ‘trend’ shows that NB is on a roll, and that the Canadian EI system is largely responsible.

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