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Under both the former Unemployment Insurance (UI) and current Employment Insurance (EI) systems, Canada has offered extra benefits for some claimants with dependent children. Under UI, the family-related “top-up” was called the “dependency rate” (DR), and under EI it is called the “family supplement” (FS). The introduction of the FS involved two major changes. The first change is in the eligibility criterion, from one based upon individual earnings to one based upon household income; this change is designed to increase the targeting of benefits to low-income households. The second change is that the value of the benefits has increased, a policy change designed to offer enhanced income protection to low-income households. Thus, this study attempts to evaluate 1) whether the FS is more targeted to family income than the DR and 2) whether the FS offers enhanced income protection to low-income households. We also examine who has increased FS benefits and who has decreased benefits from the policy changes. The study uses Human Resources Development Canada’s (HRDC) Canadian Out of Employment Panel (COEP) survey data, as well as some HRDC administrative files (e.g., claimant information) and a variety of bivariate and multivariate statistical techniques. In addition, the study reports the results of three focus groups with women affected by the changes.

The first conclusion is that the FS is more targeted to low-income households than the DR. This conclusion stems from the finding that low-income families were about equally likely to receive benefits under the FS as under the DR, but that higher-income families were less likely to get benefits. Consequently, a higher percentage of FS recipients than DR recipients were low-income households. For example, under UI, 23 percent of all DR recipients had household income less than $20,000, whereas under EI, 38 percent of all FS recipients had household income less than $20,000. In general, there is a reduced access to family-related benefits with the FS. A smaller percentage of job separators with children received the FS than received the DR because there has been 1) a decline in access to regular unemployment benefits (from 62 percent to 56 percent) and 2) a decline in access to family-related benefits for job separators with children and who receive the regular benefits (from 29 percent to 21 percent).

The second conclusion is that the FS does provide more income to those who receive family-related benefits. The value of family-related benefits under EI is approximately double that received under UI; on average, for individuals receiving the benefits, the DR benefits were approximately $13 per week compared with FS benefits of $28 per week. This is a statistically significant increase. The results on the value of the FS by household income indicate that, while the FS is more targeted than the DR in terms of receipt of benefits, it is not more targeted in terms of the value of benefit payments; that is, the level of the FS does not decline as household income increases.

Does the FS offer enhanced income protection for low-income households? It is important to note that the FS is a relatively small program that is not intended to lift families out of poverty. Its main function is to improve the standard of living for some low-income families (i.e., to reduce the depth of their poverty). Overall, we conclude that, while the anticipated increase in the level of FS benefits will help, currently the per-person benefit is still rather small. Thus, there is no statistically significant reduction in the depth of poverty for households receiving the FS.

Finally, men have in general experienced an increase in access to the program, as have single mothers, while married mothers have experienced a decrease in access. For women, approximately 34 percent received the DR and 14 percent received the FS. For men, approximately 8 percent received the DR and 9 percent received the FS. The decline in access to family-related benefits is particularly pronounced for married women, dropping from approximately 34 percent to 6 percent. This is a result of the change from an earnings-test to a family income-test, since women are more likely than men to be secondary earners.

Since the literature on inequality within the family indicates that personal incomes can influence the allocation of welfare within the household, the decline in women’s benefits may be detrimental to the well-being of women and children. The findings from our focus groups were particularly clear on this issue. Women were strongly opposed to having their entitlement to FS affected by their husband’s income, arguing that they did not necessarily have access to his income, that having their own income was important for their independence and control of spending, and that they should be entitled based on their own earnings and contributions. While the FS is currently a small program in terms of dollars received by any recipient, the direction of effect is important to note. The FS is better tied to household income and so links the increased family-related benefit to those “households” most in need. It does not necessarily, however, tie the increased benefit to those “individuals” most in need, due to potential intra-household inequities.

One of the most striking findings from the focus groups was the lack of knowledge of the program. Claimants do not understand how their eligibility, duration and benefit levels are determined (e.g., the FS is not itemized). Finally, another important issue is the relationship between the FS and the intensity rule, whereby FS recipients are exempted from the lower benefit rate for frequent users of EI. Any inequities inherent in the FS will be magnified as the interaction with the intensity rule is fully realized over the next few years. This needs to be monitored in future evaluations.