2004 Monitoring and Assessment Report

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Entire report (689.4 KB) and Annexes in PDF format:   

• Annex 1 (33.6 KB)
• Annex 2 (103.8 KB)
• Annex 3 (79.4 KB)
• Annex 4 (109.6 KB)
• Annex 5 (151.6 KB)

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Executive Summary

This eighth Employment Insurance (EI) Monitoring and Assessment Report continues the annual examination of EI from the perspective of the economy, communities and individual workers. The report also examines the use of the program, its impacts and effectiveness, the use of active re-employment measures and employers' management of their work force. The analysis focuses on the fiscal year between April 1, 2003, and March 31, 2004. Trends identified in previous reports, as they relate to the more recent findings, are discussed.

Chapter 1 provides an overview of the Canadian labour market during the reporting period. The use of income benefits is described in Chapter 2 and participation in active re-employment measures, known as Employment Benefits and Support Measures (EBSMs), is discussed in Chapter 3. An overview of program administration, including initiatives to improve service delivery, is presented in Chapter 4. Finally, Chapter 5 provides analysis of the impact and effectiveness of the EI program from various perspectives.

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Labour Market Context

Fiscal 2003/04 was marked by a series of unanticipated temporary economic shocks, from the outbreak of severe acute respiratory syndrome (SARS) and the first case of bovine spongiform encephalopathy (BSE), to a widespread power outage in Ontario. There were forest fires in the West and a hurricane and major winter storms in the East. Over the same period, a softwood lumber dispute with the United States continued, and there was a strong appreciation in the Canadian dollar.

Despite these setbacks, Gross Domestic Product (GDP) grew by 1.7% over the fiscal year, Canada's labour force participation rate reached a new high of 67.6% and employment grew by 288,900 jobs (+1.9%). Most of the job gains for the year were in full-time employment and in the services-producing sector. Paid employment increased by 222,500, while self-employment accounted for the remainder of the overall increase (+66,400). The average number of hours worked per week declined in 2003. Seasonal employment declined in 2003/04.

Employment growth in 2003/04 was strongest in Alberta (+2.7%) and British Columbia (+2.4%), while Prince Edward Island (+2.2%) and Ontario (+2.2%) also experienced employment growth in excess of the national average. Ontario's employment increase of 135,200 jobs accounted for nearly half of the country's overall job growth.

Education continues to be a critical factor in determining labour market outcomes, as job growth was highest among those with post-secondary education, while employment among individuals with less than a high school diploma fell.

Though the national average unemployment rate for the fiscal year, at 7.6%, was unchanged from the previous fiscal year, the rate did fluctuate monthly over the period and reached 7.9% for August and September 2003. Employment growth in the third quarter brought the unemployment rate down later in the year. The unemployment rate for older workers remained stable, while the rate for youth increased by half a percentage point over the fiscal year.

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EI and the Economy

In 2003/04, there were 1.97 million new claims for EI benefits, an increase of 5.6% over the previous year. Income benefits paid increased by 7.0% in 2003/04, to reach $13.2 billion.

The program plays a moderate role in stabilizing the economy. In the context of three simulated economic shocks, three independent macro-simulation models estimate the stabilization effect of EI to be between 3.8% and 6.5% of jobs and between 2.7% and 6.2% of GDP. A recent study also determined that there is a high degree of labour mobility across communities—EI does not act as a barrier. Labour mobility is an important ingredient of an efficient and effective labour market.

The EI program also plays a redistributive role in the Canadian economy, resulting in a net redistribution of income from high earners to lower-earning individuals. Income tax data also reveal that EI plays a role in redistributing income towards regions with higher unemployment and towards industries in which employment tends to be more seasonal than others.

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EI and Communities

Ongoing monitoring of 14 representative communities across the country indicates the EI program continues to be responsive to changes in these local labour markets, despite differing economic conditions across the country, by automatically adjusting entitlement and eligibility.

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EI and Individuals

Access to Benefits

An expert review of EI coverage measures that have been reported in past editions of the Monitoring and Assessment Report was undertaken. This review recommended that EI coverage measures be strengthened and improved and that a range of measures would provide a more helpful assessment of accessibility.

The ratio of EI beneficiaries to the number of unemployed (the B/U ratio) was 43.9% for 2003. As documented in previous reports, there are important caveats associated with this measure, since it includes individuals not covered by the EI program (such as the self-employed and others who do not pay into the system). An alternative ratio, suggested by the expert review, comparing the number of EI beneficiaries to unemployed EI contributors (the B/UC ratio), was 61.6% in 2003.

Other measures of access from the Employment Insurance Coverage Survey indicate that, among unemployed individuals previously in paid employment who had a recent job separation that qualified under the EI program, 83.7% were eligible to receive EI benefits in 2003. There are variations in accessibility across demographic groups and employment status. The level of access for unemployed adult men (91.4%) was higher than for adult women (83.9%), while access was 91.9% for individuals who had previously worked full-time compared to 48.5% for those who had worked part-time. Lower access to EI among women reflects their different work patterns, as women are more likely than men to work part-time. Access for youth is also lower, as they are more likely to be new entrants to the work force, and thus face higher entrance requirements, and are also more likely to work part-time hours. In December 2002, 36.9% of youth who were new entrants or re-entrants would have had sufficient insurable hours to collect EI benefits (that is, they had more than 910 insurable hours) versus 83.4% of the youth who were not new entrants or re-entrants.

A study of unemployed older workers (aged 55 and over) found there was no difference between the percentage of older workers and workers aged 25 to 54 qualifying for or collecting EI between October 2000 and September 2002. Older workers tended to remain unemployed longer—33.6 weeks compared to 23.3 weeks for workers aged 25 to 54.

Among unemployed individuals previously in paid employment who had a recent job separation that qualified under the EI program, immigrants were less likely in 2003 (80.3%) to be eligible for EI than Canadian-born workers (84.7%). Analysis based on Statistics Canada's Longitudinal Immigration Database for the tax year 2001 indicates that few recent immigrants access the EI program. Access among immigrants tends to increase within two to three years of landing, and then decline as the number of years since landing increases. Overall, immigrants tend to access the program in a proportion similar to that of all tax filers in Canada (15.2% versus 15.0%).

Bill C-2 (October 2000) redefined the classification of a new entrant or re-entrant (NERE) to the labour market to ensure parents returning to the work force following an absence to raise young children would not face the higher NERE entrance requirements. If an individual has been paid one or more weeks of maternity or parental benefits in the five years preceding a claim, that individual is not considered a new entrant or re-entrant and is therefore subject only to the standard variable entrance requirement for the economic region. Findings of a recent study indicate this new definition of NEREs has not had a notable effect on the percentage of claimants who are considered NEREs.

Self-employed fishers qualify for EI based on the value of the catch. Harvest values in the fishing industry have increased considerably since 1996/97, while the earnings-based entrance requirements have not changed. In 2003/04, 96% of fishers qualified for benefits with insured earnings that exceeded the maximum entrance requirement of $5,500. The number of fishers qualifying for benefits is not declining in spite of the most recent cod moratorium. It should also be noted that, since there are two distinct seasons (summer and winter) for commercial fishing, fishers are able to claim twice in a single year. In 2003/04, the number of fishers establishing two claims grew by 14.6%.

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Adequacy of Benefits

In 2003/04, the average weekly benefit rate increased to $312, from $308 in the previous year (+1.3%). Nearly 33% of regular EI claimants received the maximum weekly benefit rate of $413 per week. Among claimants of special benefits, this proportion was about 29%, while for fishing claims, 68% received the maximum weekly benefit. A study found that fishers receive, on average, 28% of their average annual incomes of $31,100 from EI, an indicator of the importance of the program in fishing communities.

On average, regular beneficiaries collected benefits for only two-thirds of the maximum number of weeks to which they were entitled, a proportion that is little changed from previous reporting periods. In addition, 31% of regular EI beneficiaries exhausted their entitlement to EI benefits in 2002/03. Women tend to exhaust benefits in higher proportions than men. Since women are more likely to work part-time hours, women establishing claims are likely to do so with fewer hours of work than men, resulting in fewer weeks of benefits.

About 32% of sickness beneficiaries in 2003/04 used the entire 15 weeks of benefits to which they were entitled. This proportion has been relatively stable in recent years. An analysis tracked EI sickness claimants who used all 15 weeks of benefits to investigate the extent to which they later accessed Canada Pension Plan (CPP) disability benefits. It was found that only 10% of those who used all 15 weeks of EI sickness benefits received CPP disability benefits afterwards.

An analysis of maternity and parental benefits claims demonstrates that participating parents are using at least 91% of the full year of benefits available to them. The enhancements to parental benefits have provided families with increased flexibility to care for their newly born or adopted children for an extended period of time. In 2003/04, men's participation in parental benefits continued to grow, increasing by 10%. Findings from recent studies indicate the enhancements to parental benefits are resulting in mothers spending a longer period of time at home. Prior to 2001, approximately 64% of mothers who received EI returned to work within seven months following the birth of their child. Of mothers who gave birth in 2002 or 2003, just under 16% returned to work in this same time frame.

Adequacy of benefits was also assessed by examining the effectiveness of the Family Supplement in providing additional income support to low-income families with children. The proportion of EI beneficiaries eligible for the Family Supplement has been declining, as family incomes have been increasing while the Family Supplement threshold has remained fixed at $25,921. In 2003/04 the proportion of EI beneficiaries receiving the Family Supplement declined to 9.2%.

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Promoting Work Force Attachment

The EI program has certain features that are meant to strengthen the link between work effort and benefits, including the divisor, working while on claim and Small Weeks provisions.

When introduced in 1996/97, the divisor resulted in a considerable change in the characteristics of new claims being established, as individuals were encouraged to work two extra weeks beyond the minimum entrance requirement before establishing a claim. The proportion of regular claimants who did not work at least two weeks beyond their minimum entrance requirements dropped from 6.7% just prior to the introduction of the divisor to 3.6% in 1997/98. Since then, this proportion has remained relatively stable and was 3.2% in 2003/04. Higher proportions of claimants in the Atlantic Provinces and Quebec are affected by the divisor than in Ontario, the Prairies and the West.

In 2003/04, 12.5% of EI claims established excluded Small Weeks from the benefit calculation. Growth in the proportion of claims affected by the Small Weeks provision (from 9.9% in 2002/03) is probably due mostly to the increased earnings threshold. The Small Weeks provision provided affected clients, on average, with a weekly benefit that was $12 higher in 2003/04 than it would have been had the provision not existed. Atlantic Canada and Quebec have a significantly larger proportion of claims affected by the Small Weeks provision than other regions of the country.

There has been a steady decline in the proportion of claimants reporting working while on claim. In 2003/04, 54.9% of regular claimants reported working while on claim, down from 56.8% the previous year. This long-term decline may be an indication that claimants are hesitant to accept work while collecting EI benefits. It may also be an indication of limited work opportunities.

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Employment Benefits and Support Measures (EBSMs)

During 2003/04, about 668,000 individuals took part in EBSMs funded through EI Part II, an increase of 4.7% over the previous reporting period. During the reference period there were 962,922 interventions, an increase of 67,000 from 2002/03. The overall use of longer duration employment programs declined slightly over the period, while shorter term employment service interventions (such as counselling and job finding clubs) accounted for the increase.

Based on results from summative evaluations, EBSMs appear to yield some modestly positive net impacts on the participants depending on the program, the client type and jurisdiction. Given the mixed nature of results, broad generalization of the results across interventions, client type and jurisdictions is not always possible. In addition, it is important to note that net impacts are based on findings from three jurisdictions only: British Columbia, Quebec, and Newfoundland and Labrador.

The summative evaluations are demonstrating how the specific socio-economic context affects the way EBSMs are implemented. Regional labour market needs tend to affect program planning, design and delivery, as well as program participation and selection. Further, client characteristics, such as educational levels, appear to have influenced participant selection and self-selection in ways that may have acted to limit ultimate program impacts. Additional analysis is underway to understand this dynamic better.

The socio-economic context may also affect the long-term effectiveness of particular interventions, and this is being looked at in the individual summative evaluations.

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Work Force

To support firms coping with the unanticipated shocks to the economy in 2003/04 (such as SARS, BSE and forest fires), HRSDC increased flexibilities in the administration of the Work Sharing program. Over the year, nearly 31,000 new claims were established, helping employers avert 8,300 temporary layoffs.

As of March 30, 2004, there were no signed Work Sharing While Learning (WSWL) agreements. To participate in WSWL, an employer had to be located in a region with an unemployment rate of 10% or greater, must have planned to undergo restructuring of the company, and must have been prepared to develop a significant restructuring and training plan to support its WSWL application. This program was piloted for a two-year period ending December 15, 2004.

In the 2001 budget, the Government of Canada announced that apprentices collecting EI while away from work for training would be subject to only one waiting period, though there may be multiple separate training segments of one course stretched over a number of years, to encourage ongoing skills development.f In 2003/04 there were 30,500 apprentice EI claims. Of these, 5,900 were not subject to a waiting period.

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Savings

The 2003 Monitoring and Assessment Report provided a detailed summary of the savings and reinvestment in active measures attributable to EI reform. It was reported that an estimated $1.2 billion in savings were realized by EI reform from 1996/97 to 2001/02. Readers should refer to the 2003 Monitoring and Assessment Report for more details.

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Effective January 1997, EI claimants who knowingly misuse EI receive a "violation", in addition to a financial penalty. Having received a violation, an individual must then have additional insured hours of work to qualify for benefits in future claims. In 2003/04, there were 7,700 instances in which a benefit period was not established due to the higher entrance requirements resulting from violations, resulting in cost avoidance for the program of $42.3 million.

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As previously mentioned, 2003/04 was notable for its series of unforeseen events, such as SARS, BSE, forest fires and Hurricane Juan. The responsiveness of the EI program was demonstrated in the way in which each of these separate challenges was addressed. At the same time, ongoing work towards transforming and aligning resources to improve and modernize service delivery and the quality of service to Canadians continued.

Clients have an array of choices for the most common services. There were 1.2 million claimants who elected to file their applications via Appli-Web, an Internet application service. Employers can also use a Web-based reporting system for filing Records of Employment (ROEs), called ROE Web. In 2003/04, 662 employers registered as ROE Web users, and 132,000 ROEs were produced using ROE Web.

Also in 2003/04, Appli-Sys (EI claims-taking) Kiosks were replaced with Citizen Access Web Stations (CAWS), so in-person clients will benefit from the same interactive applications as clients who file on-line. Roughly 80% of kiosks were transformed, which supported increased take-up of Appli-Web.

From March 2001 to March 2003, the accuracy rate of EI benefits improved from 93.5% to 95.5%. Over 2003/04, the accuracy rate was 94.5%, primarily due to an increase in claimant errors. Work will continue to better educate claimants on the necessity to report earnings accurately and to increase employers' awareness of the necessity to report accurate information on ROEs. The way in which errors are defined and reported is also being examined.