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The Employment Insurance (EI) Act, which came into force with the passage of Bill C-12 in June 1996, was the most fundamental restructuring of the Unemployment Insurance program in the past 25 years. Entrance requirements for new entrants and re-entrants, benefit levels, length of claims, repayment on benefits (“Clawback”), and maximum insurable earnings have all been substantially revised. In addition, an “intensity rule” that decreases the benefit rate in proportion to the number of weeks of regular benefits claimed since June 30th, 1996 has been introduced.

Such substantial changes are likely to affect individual behaviour. Previous legislative changes to the unemployment insurance system have been shown to have a substantial impact on workers’ behaviour.¹ Despite all the successive UI and EI reforms that have taken place during the 1990s, the Canadian EI system arguably provides workers with the greatest control over their expected benefits. The number of weeks worked, the wage rates, the time chosen to file, etc., all strongly affect the amount and length of benefits a worker can expect to claim if or when he becomes unemployed. It is therefore not surprising that the previous literature found Canadian workers to be sensitive to these parameters.

The main goal of this research is to study the effects of the new EI legislation on unemployment and recipiency durations. The changes brought by the new EI legislation have been phased in gradually. Some changes were implemented as of June 30th, 1996 (Phase I). A second series of changes to insurance parameters were phased in as of January 1997 (Phase II). The effects of the changes implemented in each phase can be estimated separately by using two separate Canadian Out of Employment Panel (COEP) surveys for the appropriate quarters. Phase I corresponds to the third quarter of 1996 (Q96/03) and Phase II to the first quarter of 1997 (Q97/01). Thus, the impact of Phase I can be assessed by using the Q96/04 and Q95/04 COEP surveys. Phase II can be similarly assessed with the Q96/04 and Q97/04 COEP surveys. In implementing such a quasi-experimental approach in evaluating the EI legislation, it must be noted that the design may poorly approximate a true experiment with random assignment to treatments. Consequently, it will be important to investigate whether other explanatory variables have to be accounted for to properly measure the impact of the EI legislation.

The total impact (Phase I + Phase II) of the EI legislation can be measured using two different sets of COEP surveys: Q97/04 and Q95/04 or Q97/02 and Q96/02. A priori the two sets should yield very similar results. Both sets will be used in assessing the impact of Bill C-12 and their respective results will be contrasted.

The main difference between the quasi-experiment studied here and a true experiment with random assignment lies in the possibility of “strategic filing,” in the terminology of Jones (1998). The term strategic filing usually refers to the possibility that workers may exert some control over the date at which they file a claim. The existence of such behaviour is normally assumed away when using quasi-experimental estimators. Here we will consider the date at which a claim is filed to be purely exogenous to the workers. On the other hand, we will investigate a different situation that is akin to strategic behaviour. We will look at the possibility that unemployed individuals may delay their exit as the implementation date of Bill C-12 nears in order to benefit as much as possible from the UI regime. As we will see later, the new EI legislation introduced provisions such as the “Clawback” and the “intensity rule” that impose penalties to claimants that are commensurate to the number of weeks of regular claim following June 30th, 1996. It is thus conceivable that spells in the previous quarter may be “strategically” increased somewhat. In fact, the closer the starting date of a claim is to June 30th, 1996, the more likely it will be affected by such “strategic” exit. Unless this possibility is explicitly taken into account, the quasi-experimental evaluation of Bill C-12 will be severely biased. Fortunately, quasi-experimental evaluations that rest on the quarters Q97/04 and Q95/04 will provide a check on estimates based on quarters Q97/02 and Q96/02.

Footnotes

1	See, for example, the series of evaluation studies of the 1994 UI reform published by Human Resources Development Canada.