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• Purpose
• Background
• Methodology and Data Sources
• Key Findings
• Conclusions
• Biographical notes

Purpose

The objectives of this study are:

• to identify and characterize new and re-entrant workers (hereafter called NEREs); and
• to investigate the impact of the change from unemployment insurance (UI) to employment insurance (EI) on NEREs' access to employment insurance benefits.

The study focuses on two changes to the program that are particularly relevant for NEREs. These are:

• the increase in eligibility conditions, and
• the switch from a weeks-based system (UI) to an hours-based system (EI).

The study also examines whether young first-time job seekers and re-entrant mothers constitute significant NERE groups.

Background

In January 1997 the employment insurance system changed from a weeks-based system (UI) to an hours-based system (EI). Under both UI and EI, an individual is identified as a NERE if his or her weeks of insured employment plus weeks of employment benefits are less than 14 weeks (or 490 hours) in the 52 weeks preceding the qualifying period (the 52-week period immediately preceding the last Record of Employment [ROE] issued or the period since the last EI benefit claimed, whichever is shorter). Under UI, NEREs used to face eligibility criterion for insurance benefits that were tougher than those faced by regular workers. The switch to EI further increased the eligibility requirements for insurance benefits for these workers from 20 to 26 weeks as of July 1, 1996 with a conversion of the 26 weeks to 910 (35 x 26) hours as of January 1997. This tougher eligibility rule was designed to reduce the incentive to enter the labour force merely to establish eligibility for employment insurance benefits.

Under UI, if an individual worked less than 15 hours per week, the work did not count toward benefit entitlement. This has been reformed under EI with the idea that all hours worked should count toward determining eligibility. It is expected that many NEREs have part-time jobs, and this program change is likely to benefit them.

Methodology and Data Sources

This paper uses HRDC's Canadian Out of Employment Panel (COEP) survey data and UI/EI administrative information. Survey participants in the COEP are selected from the ROE. All individuals surveyed experienced a job separation or a break/change in employment between July 1995 and December 1997 inclusive. The COEP survey includes 10 cohorts. The authors used the data from all 10 cohorts to produce descriptive statistics and conduct a multivariate analysis.

Since NEREs are not explicitly identified in any database, the first step in this analysis was to identify and characterize the NEREs using the following procedure:

1. Based on the current and previous ROEs, determine the individual's weeks/hours of insurable employment in the qualifying period and the prequalifying period (the 52 weeks prior to the qualifying period).
2. Based on the claim information from the Status Vector, determine the person's number of benefit weeks during the prequalifying period.
3. An individual is identified as a NERE if their weeks of insured employment plus their weeks of benefits in the prequalifying period total less than 14 weeks (or equivalently, 35*14=490 hours after January 6, 1997).

Key Findings

Characterization of NEREs

In 1995-97, NEREs represented about 26 percent of all workers who had separated from a job. They constituted nearly 19 percent of all regular benefits claimants and about 16 percent of all EI benefit recipients. About 40 percent of all NEREs with a job separation were less than 25 years old, and around 65 percent of them were less than 35 years old. Roughly 65 percent were single, and about three-quarters of them had no children.

Re-entrant mothers may have had a relatively higher probability of being NEREs if they separated from their jobs. To identify parents who may have temporarily left the labour force to care for pre-school children, the authors compared all job separators who were parents with parents whose youngest child was aged 6-10 years. The probability of being a NERE who had a job separation was 31 percent for married mothers whose youngest child was between the age of 6 and 10, compared with only 22 percent for married mothers with dependent children. This number was 42 percent for single mothers whose youngest child was aged 6-10 years, versus 33 percent for single mothers with dependent children. In contrast, there was no difference between the proportion of fathers with dependent children and those whose youngest child was aged 6 to 10 years; both groups had a probability of being NEREs with job separation of 14 percent. Since about three-quarters of NEREs had no children, re-entrant mothers did not constitute a large proportion of the NERE population.

Job separators were more likely to be NEREs if they were relatively younger and had relatively lower hourly wages and family income. About 52 percent of job separators aged 15-24 years were NEREs, compared with 22 percent for the 25-34 age group and less than 20 percent for those over 34 years old.

Access to EI benefits for NEREs

NEREs were much less likely to receive benefits than non-NEREs, both under UI and EI. The proportion of NEREs who received benefits was generally one-half that of non-NEREs.

The increase in conditions for eligibility substantially reduced NERE workers' access to benefits, but the switch from a weeks-based system to an hours-based system significantly improved the situation. The net effect of the two policy changes was thus only a small decrease in NEREs' overall benefit recipiency rate. About 27 percent of NEREs who had a job separation before July 1996 received benefits; this number fell slightly to 24 percent in the period after January 1997. In general, this pattern of change in access to benefits could be observed for various socio-economic subgroups. The net change in the benefit recipiency rate remained stable and low for young NEREs, fell for female NEREs, and increased for male NEREs.

Duration and Level of Benefits for NEREs and non-NEREs

In the period after January 1997, the average number of weeks of entitlement for NEREs was 30.3, and that of non-NEREs was roughly 4 weeks more. EI recipients who were NEREs also received lower average weekly benefits than non-NEREs. During the same period, the average EI benefit of NEREs was $236, or about 82 percent of that of non-NEREs. The average weekly benefit of young NEREs was considerably lower at $176.

Conclusions

NEREs constituted about one-quarter of all job separators. This is a sizeable proportion, so it is important to understand this group. Young workers had the highest probability of being NEREs, followed by individuals with very low hourly wages and/or low family incomes. While potential re-entrant mothers had a relatively high probability of being NEREs if they separated from their jobs, there were very few of them. Young, single, and childless individuals made up the largest proportion of the NERE population.

The proportion of NEREs who received benefits was generally one-half of that of non-NEREs. They had about 4 fewer weeks of entitlement and their weekly benefits were about 80 percent of those received by non-NEREs. Only 15 percent of young NEREs experiencing a job separation reported receiving benefits.

On the one hand, the increase in the minimum number of weeks necessary for NERE workers to qualify for benefits significantly reduced their access to benefits. On the other hand, for most subcategories of NEREs, the switch to an hour-based system had the opposite effect. Thus, for many NEREs, the net reduction in access to benefits from UI to EI was minimal.

Biographical notes

Shelley Phipps is a Professor in the Department of Economics at Dalhousie University. She has published a variety of papers on the subject of UI/EI, including several studies conducted for HRDC ("Potential Access to Maternity and Parental Benefits," "Maternity and Parental Leaves and Allowances: An International Comparison," "The Role of UI in the Income Security Framework" [with L. Osberg], and "The Income Distributional and Redistributional Consequences of Unemployment Insurance" [with L. Osberg]). Her current research interests include the economic well being of children, international comparisons of social policy, poverty and inequality, and decision-making within families.

Fiona MacPhail is an Economics faculty member at the University of Northern British Columbia where she teaches courses in labour economics, poverty, inequality and development, and intermediate macroeconomics. Her recent publications include articles on earnings inequality in the Cambridge Journal of Economics, Applied Economics and the International Review of Applied Economics.