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Unemployment Insurance is designed to provide a buffer income to job losers in order to allow them to find a new job that is both of high quality and long lasting. Receipt of UI rendersthe need to find a new job less urgent and thus can have a positive social function although this must be set against the potential negative effect of weakening incentives to find a job quickly. There has been some concern that the pre-C-17 UI system may not have achieved the optimal balance between increasing job quality and removing incentives to have a high level of attachment to the labour force.

Measures introduced in Bill C-17 may respond to these concerns since workers with a relatively low attachment to the labour force have seen the unemployment insurance system become less generous in several dimensions. Qualifying periods for benefits have become longer, benefit entitlement periods have been shortened and the replacement rate has fallen. These effects were most pronounced for individuals with betwween 25 and 35 insurable week in regions with unemployment rates of 11 to 15 per cent. Persons with 10 or 11 weeks were disqualified entirely from receivingbenefits. Higher attachment workers, on the other hand, havebeen relatively unaffected by the first two changes but haveseen a fall in the rate of their benefits. For a person with 52 weeks of insurable earnings, the loss in terms of numbers of benefit weeks depends upon the regional unemployment rate but is zero for many categories. Maximally qualified workers lose no more than 5 weeks while for minimally qualified workers losses of 11 to 16 weeks of benefits were common.

This project measures the extent to which C-17 provisions have altered the balance struck by the UI system with regard to increasing long-run job quality versus reducing labour market attachment. The key question addressed here is the following: to what extent has the tighter eligibility and shorter benefit periods of C-17 reduced the quality of new jobs found? The primary measure of job quality is weekly income but other factors such as the presence of benefit packages are also examined. Weekly income is broken down into two components reflecting hourly wages and hours worked per week.

This study explicitly recognizes that UI could have different and perhaps conflicting impacts upon components of weekly income versus annual income. For exampple, it is possible that while changes introduced in C-17 encouraged a longer-term movementinto higher-attachment career paths (because previous "10/42"-type patterns were no longer available), hourly wages may have also fallen somewhat on average if the unemployed had less time in which to search for a high-paying job. Any such effect of UI changes on wages will need to be set against possible changes in weekly hours and weeks worked when evaluating C-17. Broadly speaking, this study addresses the general principals of income support adequacy and its effect upon work incentives and specifically investigates the potential tensions between them.

More specifically, the analysis of the effects of Bill C-17 upon job quality uses observable characteristics such as salaries, hours worked and unionisation status as measures of job quality. The analysis of degree of attachment to the labour force determines whether transitions from career profiles with few weeks worked per year to profiles with higher levels of attachment are more common under C-17 than the previous system. This is done by separating seasonal/temporary jobs from more permanent employment and associating the latter with high-attachment careers.

In this analysis, particular emphasis is placed on the case of transitions of persons exhausting their unemployment insurance benefits. One potential outcome of the C-17 reforms is that persons with low attachment might exhaust their benefits more often than they had previously. Such an outcome could occur if job searchers continued to use their pre-C-17 job-search strategies despite the fact that their duration of benefits may have been significantly reduced in the post-C-17 environment. This could lead to several reactions at the moment of exhaustion. First, individuals in this situation might be forced to accept a job at the moment of exhaustion even if it is still the "off-season" for their traditional employment. This could lead to a lower wage but also to a departure from a seasonal cycle. On the other hand, a low wage job might be accepted until it is possible to move back into the previous seasonal profile. In either case, there could be a strong wage effect for exhausters under the post-C-17 regime.

The remainder of this report is structured as follows. Two brief sections outline the economic theory and the statistical methods used in the study. This is followed by an explanation of how statistical results can be linked with economic policy questions. Next, the data used in the study are described and the statistical results are presented. The implications of the results are discussed and a concluding section provides a summary of the findings.