On labour shortages in NB: Our EI problem has not gone away

As I have said on these pages many times, Dr. Herb Emery was a huge pickup when he agreed to come to UNB and take on the Vaughan Chair in Regional Economics.  He has churned out impressive research and insight since including in his weekly TJ column.   You will learn something every week – you may not always agree with him – but you will learn.

I was surprised that he didn’t mention Employment Insurance in his latest column on the labour shortage.  To me this is one of the most obvious drivers of our challenge in New Brunswick.

In 2016, there were 104,000 people who collected EI income at some point during the year or 27% of all wage and salary earners (this does include those taking paternity and maternity but that number is likely only 5-7% of the total).  There were actually more on EI in 2016 than back in 2008 and the share of wage earners has remained fairly consistent going back 20 years (between 27%-30%).  Of course not all of these people go on EI every year.  The structural users of EI – those that go on EI every year is closer to 40,000.

If you look on a regional basis, nearly 40% of every wage and salary earner in non CMA-CA areas (the population outside the urban centres) collected EI or nearly 56,000 people in 2016.  Studies from a few years ago found individual communities in New Brunswick with 70% to 80% EI usage.

How does this contribute to the labour shortage?   As the poet Elizabeth Barrett Browning says “let me count the ways”.

1. Moderate wage raises, advocated by economists, would not entice those earning EI every year as part of their annual income.   They have already made the choice to engage in seasonal work and take a large portion of the year off.  A couple of bucks an hour isn’t going to entice them back into year round work.

2. The areas that use EI the most benefit from a high unemployment rate – it’s actually a benefit. So there is a perverse incentive to accept and even embrace high unemployment – to the point that EI users elsewhere in New Brunswick grumble about the fact they have to work more each year – it’s not fair we are told – even as the Walmart down the street is struggling to find workers.

3. The ‘high’ unemployment rate has led to a tepid response from government when pushed to allow  more immigrants.  This seems to have changed somewhat but it is still very common to hear politicians and bureaucrats question the need for immigrants in New Brunswick because of our ‘high’ unemployment.  They will, like many economists, blame low wages and tell employers to raise them.  The problem?  See Point #1 above.  In fairness to the politicians and bureaucrats, it is a little strange to visit a small community in New Brunswick with unemployment ‘rates’ of 20% or more and see the entire Subway restaurant filled with immigrant workers.

What’s the solution?  There has been more written on this subject than just about any other subject in New Brunswick.  You will have 25-30% EI usage in this province – and in some communities 40-50% usage – in perpetuity until the federal government changes the program.  That’s it.

And government is incredibly loathe to do it because there are dozens and dozens of ridings in Atlantic Canada, Quebec and a few elsewhere – that are heavily reliant on EI.  Not just the ‘voter’, the voter’s spouse, kids, parents and neighbours.

I have called for grandfathering older workers and for phasing in changes over a 5 or even 10 year period.  But if we don’t change the program, nothing will change.  It will continue to depress local economies and create labour market distortions.

And in this case, we work around around it.  Flood immigrants into these communities to work the jobs and hope they don’t adopt the EI lifestyle.  We may be too late on this as I have already heard anecdotally of immigrants starting to use EI as an annual income supplement.

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3 Responses to On labour shortages in NB: Our EI problem has not gone away

  1. Brett Reidpath says:

    As I read your post today, I am reminded of a Chinese Proverb:
    The best time to plant a tree is 20 years ago, the next best time is today”
    The solution to this problem is not an quick or easy one. I grew and currently operate a business in a small community with a 30-40% unemployment rate and a labor shortage at the same time. Each morning at 6 am I drive through town and see groups of anywhere from 5 to 20 temporary foreign workers waiting to be picked up by the shop bus to go to work at one of the many lobster shops. I go to lunch at the local subway or A&W and am most often served by a Filipino, who has settled here after time in the TFWP. Thank goodness for them!

    It has taken New Brunswick years to develop a culture of dependence on EI in this communities and it will take us years to undo it, but it won’t ever get any easier to start to change. I have heard first hand of companies whose local employees have threatened to not return then upcoming season if they were not provided their layoff after the required weeks were achieve to qualify for EI. These people have accepted that this is the best they can do. There is enough blame to go around, employers have been more than happy to not have to deal with idle employees in the past, governments have been willing to bow to pressure and employees have settled for less than optimum income. We will all have a part to play in the correction. I start each interview with prospective employees by saying ” it is my responsibility to try keep you working as long as I can, and your responsibility to want too”. Our company will be starting in the Temporary Foreign Workers Program next year.

    Thanks for letting me rant

  2. Gary Selig says:

    Hi David I was on EI after we came home from overseas, not by choice but necessity as I tried to figure out what I was qualified for in a work climate and that had changed significantly in 17 years. Unfortunately EI and social support are geared for people finding full employment and not part time because as soon as you start to earn there is a claw back, hence less incentive to go to work. If you could start earning until you are earning a reasonable before you start loosing benefits it would be helpful. As I started a self employed business it took time for me to build the business to the point that it was a significant contributor to our income.

  3. James Risdon says:

    Bizarre as it might seem to outsiders, New Brunswick has both incredibly high unemployment AND jobs going begging and businesses downsizing and shutting down for a lack of workers.

    Serious employment insurance reform and a diversification of the economy, particularly in northern New Brunswick, is long overdue. But politicians don’t want to touch this with a 10-foot pole. After all, their corporate and union donors have gotten pretty used to the situation the way it is. Change is risky for a politician. Far better for their personal careers to play it safe.

    And so the situation persists.

    Things will stay exactly the same until there is a heavy hand from the top down that forces the change. People living with seasonal jobs will not clamour for less employment insurance – nor will their employers who count on it to ensure their employees will be back next year. Big business with its higher salaries doesn’t care because those workers get paid a lot more and so don’t find employment insurance as attractive. Unions are there to fight for the rights of workers. It would be counter-intuitive to expect them to back any proposal for less in the way of employee benefits to anyone, unionized or not.

    So, what’s left? Small business people. Economists. And those of us in the general population who realize that this situation is leading to economic stagnation. At some point, this constituency will have to band together and fight for political change.

    It’s the only way the needed change will ever happen.

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