February 23, 2005
FOR IMMEDIATE RELEASE
05-13

Government of Canada announces enhancements to Employment Insurance

OTTAWA, ONTARIO—The Honourable Lucienne Robillard, President of the Queen’s Privy Council for Canada, Minister of Intergovernmental Affairs and Minister of Human Resources and Skills Development, today announced approximately 300 million dollars in new measures aimed at enhancing the Employment Insurance (EI) program that will benefit more than 220,000 Canadian workers annually.

“The Government of Canada had pledged to take action to address the most pressing challenges facing the Employment Insurance program. And that is what we have now done,” said Minister Robillard. “These improvements take account of the many proposals recently submitted to the Government aimed at making sure that Employment Insurance remains well-suited to the needs of Canada’s work force,” she added.

In setting the 2005 premium rate , which dropped the rate for workers to $1.95 and to $2.73 for employers, the Government took into account the expected $300 million cost of improvements to be made to the EI program. In announcing today’s EI program enhancements, the Government is demonstrating its ongoing commitment to the sound fiscal management of the EI program while ensuring that EI remains responsive to Canada’s labour market.

The new measures include three pilot projects in regions of high unemployment (10 percent or higher), that will test the labour market impact of:

• enabling individuals new to the labour market or returning after an extended absence to access EI benefits after 840 hours of work (rather than 910) when linked with EI employment programs;
• calculating EI benefits based on the “best 14 weeks” of earnings over the 52 weeks preceding a claim for benefits. This will mean that for individuals with sporadic work patterns, EI benefit levels will better reflect their full-time work patterns; and
• increasing the working-while-on-claim threshold to allow individuals to earn the greater of $75 or 40 percent of benefits in an effort to encourage people to take work without a reduction in their benefits.

In addition, the pilot project introduced last year providing workers with five additional weeks of EI regular benefits in regions of high unemployment (10 percent or more) will be continued for a second year. The pilot project is designed to help address the annual income gap faced by workers with limited work alternatives.

Finally, the EI “transitional boundaries” provisions in the EI economic regions of Madawaska-Charlotte, New Brunswick, and Lower St. Lawrence/North Shore, Quebec will be extended an additional year to October 2006. Meanwhile, a review of the EI economic regions will be conducted during this period.

“EI is part of the solution. Longer term solutions require coordinated action by governments, industry and communities. I am challenging our partners—the provinces, territories, communities and industry—to build upon Government of Canada initiatives by moving forward with their own strategies and investments,” concluded Minister Robillard.

See the attached backgrounder .

For more information:

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Backgrounder

EMPLOYMENT INSURANCE BENEFIT ENHANCEMENTS

In the October 5, 2004 Speech from the Throne, the Government of Canada made a commitment to “review the Employment Insurance program to ensure it remains well-suited to the needs of Canada 's workforce.” The Employment Insurance (EI) enhancements referred to in the 2005 Budget demonstrate the Government's commitment to ensuring the continued responsiveness of the EI program.

The Government of Canada recognizes that some regions and groups of workers face unique circumstances. For example, seasonal employment presents unique challenges for workers due to the nature of seasonal work, which is often located in rural or remote regions offering limited alternative employment options in the off-season. Although a number of seasonal workers rarely collect EI, some workers must regularly turn to EI for support to make ends meet between periods of seasonal employment.

For these reasons, a number of adjustments have been made to the EI program to accommodate difficulties faced by workers in seasonal industries. Since 1996, the Government of Canada has made investments now totalling $700 million per year on adjustments such as eliminating the intensity rule and eliminating the experience-related elements of the “clawback” provision. The EI enhancements announced today build on our efforts to ensure the responsiveness of EI to the unique circumstances faced by some regions and groups of workers.

However, EI can only ever be part of the solution in responding to issues faced by those in seasonal employment. There is a need to build community capacity and stimulate local economies to provide sustainable employment opportunities. To this end, the Government is working closely with regional development agencies, employers, community groups and labour representatives to explore new ways to address the issues of seasonal employment over the long term.

Reducing the eligibility threshold for new entrants and re-entrants to the labour market

Under current Employment Insurance (EI) rules, individuals who are new to the labour market or returning after an extended absence, require 910 hours of work in the last year to qualify for EI benefits.

A new pilot project will test the labour market impacts of allowing individuals who are new to the labour market or returning after an extended absence to access EI benefits after 840 hours of insurable employment, when linked with EI employment programs. This pilot project will run for three years in regions of high unemployment (10 percent or over), and is expected to benefit more than 16,000 individuals each year.

Calculating benefits based on the best 14 weeks of earnings

Currently, EI benefits are calculated using an individual's average weekly earnings over the last 26 weeks of work.

A new three-year pilot project in regions of high unemployment (10 percent or more), will see EI benefits calculated based upon income earned in the best 14 weeks during the 52 weeks preceding a claim for benefits or since the beginning of the last claim, whichever is shorter.

For individuals with sporadic work patterns, this pilot project means that EI benefit levels will better reflect their weeks of full-time work. This initiative will test the labour market impacts of improving incentives for individuals to accept all available work, including weeks of work that are shorter than their normal full weeks. In addition, it will test whether employers facing labour shortages will have access to additional workers.

More than 200,000 individuals are expected to benefit from this measure each year.

Increasing the working-while-on-claim threshold

The working-while-on-claim provision allows individuals receiving EI benefits to earn from employment a certain amount without a deduction from their benefits. Currently, individuals receiving EI regular, fishing or parental benefits can earn the greater of $50 or 25 percent of their weekly benefits without a reduction in their benefits. Any earnings beyond this amount are deducted dollar for dollar from the benefits.

Evidence in the last three EI Monitoring and Assessment Reports has noted a steady decline in the proportion of individuals reporting work while on claim since 1996-1997. Overall, the proportion of individuals working while on claim has declined by 5.8 percent, the majority of which can be attributed to individuals with a frequent claim pattern.

To encourage individuals receiving EI benefits to maintain a greater attachment to the work force, the working-while-on-claim provision is being increased through a three-year pilot project. This pilot project will test the labour market effects of allowing claimants living in areas of high unemployment (10 percent or more) to earn from employment the greater of $75 or 40 percent of their weekly benefits before their benefits are reduced.

More than 220,000 claimants are expected to benefit from this measure each year.

Continuation of the pilot project to test the effects of increased weeks of EI regular benefits for a second year

In recent years there has been a significant increase in the proportion of workers employed in part-time and other non-standard work, which often provides shorter employment spells and, therefore, shorter benefit durations.

Last spring, the Government introduced a pilot project to test the labour market impacts of increasing the duration of EI regular benefits by five weeks in regions of high unemployment (10 percent or more). The pilot project applies only to regular benefits, and not to self-employed fishing, maternity, parental, sickness or compassionate care benefits. The maximum entitlement for regular benefits remains at 45 weeks.

T he Government of Canada will continue the “five-week” pilot project for a second year to help address the annual income gap faced by workers with limited work alternatives.

Continuing the pilot project for a second year will allow more than 100,000 individuals to receive up to $1,000 more per claim.

One year extension of the EI transitional boundary provision

Under the Employment Insurance (EI) program, the definition of economic regions determines eligibility for EI benefits. The EI Regulations require that EI boundaries be reviewed at least every five years. The review ensures that EI regions reflect changing labour market conditions and unemployment rates.

As a result of the last boundary review in 2000, new economic regions were created that reflected changes in the labour market and ensured that individuals living in areas with high unemployment rates receive the assistance they need from the EI program.

Shortly after these changes came into effect, it was noted that in two regions of the country, Madawaska–Charlotte, New Brunswick, and Lower St. Lawrence/North Shore, Quebec, some workers would need more time to adapt to the increase in the number of hours needed to qualify for EI benefits. The situation resulted in the Government of Canada introducing transitional measures that , with extensions, cover the five-year period up to October 2005. Under these transitional provisions, the unemployment rates are averaged and the higher of the average or the actual rate is used. This means that claimants in the two regions require fewer hours to qualify for EI and receive benefits for a longer period than they would without the transitional provision.

The transitional boundary provision is being extended for another year until October 2006, which will provide individuals still experiencing difficulties adapting to the 2000 boundary changes more time to adjust until the next review of the EI economic boundaries scheduled to occur in 2005-2006.