It’s hard to break the grip of EI

I have a long standing debate with a colleague on the role of EI and economic development in New Brunswick.  I am not going to get into the meat and potatoes of our debate.  Suffice it to say that I think seasonal EI, no matter how well intended, is having unintended consequences.

How can New Brunswick have a low employment rate, a relatively high unemployment rate and at the same time many employers around the province can’t find workers – particularly in the $9 – $11/hour range?

There are over 100,000 New Brunswick that reported EI income in 2009 – a number that has hardly budged in a decade.  As a percentage of persons reporting employment income, over one in four New Brunswickers collect EI each year – again rate that has only slightly dipped in a decade.   This is actually an understatement as there is a significant percentage of folks that are not eligible to collect EI that earn employment income (they don’t pay in or they earn too much) – 64 percent higher than the national level.  Take that group out and more than one out of three NBers collects EI during the year.

I think public policy should be geared to getting people off dependence on EI.  It is a significant cost to the rest of the taxpayers.   In New Brunswick, over $830 million was paid out in 2009 alone and over $6.7 billion from 200-2009.

I can’t tell you the breakdown between the amount of EI going to folks that lost their job and were in transition to a new job versus those that collect every year.  I am not even sure those statistics exist or are published.  But even if we assume that half the amount is what you might term ‘legitimate’ employment insurance (i.e. insurance when you lose your job), that still means over $400 million each year to supplement the salaries of season workers and over $3.3 billion over 10 years.

We need to encourage work.  It would be good for the productivity of the province.  It would free up hundreds of millions of tax dollars for use elsewhere and, it should, help foster a more positive business investment climate in the province.  If I had a nickel for every time a business owner told me a story about people quitting to go on ‘pogey’, I’d be a rich man.

Now, of course, we have the income conundrum I spoke about in a recent post.  For many people collecting seasonal EI, the economic incentive to work year round or to work two or more seasonal jobs instead of collecting EI is marginal.  So we have set up this trap where for 30k? 40k? 50k? of the population, it is more lucrative for them to work partially during the year and collect an EI cheque than to work year round.

And that is something I don’t have an answer for.

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3 Responses to It’s hard to break the grip of EI

  1. i agree with the intent of your blog and believe gearing programs, incentives towards getting more New Brunswickers working year round is one of the steps we require to improving the economy in NB. i do not believe it is going to be a windfall of money for the NB gov as ei premiums are payed into federal coffers. the NB gov would likely see an increase in taxes paid through consumption and income but i am not sure to what extent.

  2. mikel says:

    I agree, ANY federal money is at least money. It’s highly doubtful the feds will say “OK, we’ll stop paying X amount in EI and instead invest that money into….” actually, I can’t even think what that would be…a new research institute? Another school? In internet start ups? What?

    The other thing I’d dispute is the often claimed problem of “people quitting to collect EI”. It’s been YEARS since you could quit a job and collect EI. They got rid of that one time that I collected EI for a short time, and that was over a decade ago.

    Far more often is a problem of ‘collusion’, where employers make deals with employees, and sometimes its employers who make EI part of their hiring package, that way they don’t have to worry about finding work through the winter, or have employees who after a year will want a raise.

    As for the big question, I regularly scan the job ads in NB and they are usually the same old jobs. With student unemployment so high, I have difficulty believing that employers can’t find workers. I CAN believe that lousy employers can’t find desperate workers, but even that is something I’d have to see evidence for.

    But more believable would perhaps be the simple hypothesis that the jobs not being filled are in a different place than where the workers are. At this point there may be a tipping point, where those on EI are simply so far unwilling to move to where the jobs are (probably down south), particularly if the jobs are lousy and you end up paying more in rent, etc., than you would at home. In other words, the numbers just don’t add up, and the policy of FORCING people to move to find work may sound economically expedient, but whether its good long term policy I don’t know.

  3. Will says:

    People are gaming the system with seasonal work. Or they lay someone off after the required weeks of work and pay them under the table. Couple of things – don’t let people repeatedly collect EI each year and make them pay it back when they work.

    If you’re pissed about paying into EI, one solution that I use is I have a corporation that earns revenue (where I do IT work from home in Sackville, NB) then I pay myself dividends to cover the bills. So no EI or CPP payments. Imagine being self-sufficient!

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