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On November 10, 1998, the Honorable Pierre S. Pettigrew, Minister of Human Resources Development Canada, announced the establishment of a Small Weeks Pilot Project in 31 high unemployment Employment Insurance (EI) economic regions. This Pilot Project replaced the Small Weeks Adjustment Projects that ended on November 14, 1998. The new Pilot Project started on November 15, 1998 and will terminate in November 2001 in 31 high unemployment regions (the original 29 regions plus Hull and Sudbury). It has been estimated to cost $225 million over the three-year period.

The intention of EI's hours-based system has been to encourage workers to take all available work to maximize their EI benefits eligibility and entitlement. However, the new benefit rate calculation formula of EI has inadvertently produced an unintended effect. Under the new EI system the weekly benefit rate is based on average weekly-insured earnings during the Rate Calculation Period (RCP), which is the twenty-six weeks, preceding the last day of employment.¹ Average weekly earnings are calculated by dividing total earnings during the RCP by the greater of the number of weeks worked or the minimum divisor. For individuals who have a combination of regular and small weeks of work, small weeks of work can lower their EI benefit levels. Both employers and workers recognize the disincentive effect of this formula. For workers in high unemployment regions who are highly dependent on EI benefits, this disincentive may lead to a significant reduction in the number of small weeks worked by an individual.

In 1997, in its search for ways and means to solve the small weeks problem, Human Resources Development Canada (HRDC) introduced the original 1997-1998 Small Weeks Adjustment Projects to help workers in 29 high unemployment regions take all available work without affecting their benefit levels. The Projects' definition of a small week is any week with earnings less than $150. Phase I of the Small Weeks Adjustment Projects was designed to handle claims filed after May 4, 1997 in selected high unemployment regions, Phase II was for claims filed after August 31, 1997 in the remaining high unemployment regions. Both Phases of the Projects used two alternate ways (excluding or bundling small weeks from the calculation of average weekly earnings) of calculating EI benefits to increase claimants' incentive to accept small weeks of work.² The start and end dates of both Phases were announced in the first week of March 1997. The 1997-1998 Small Weeks Projects was evaluated by Evaluation and Data Development (EDD) in 1999, and the interested reader may find the report in HRDC's EDD Web site.³

The objectives of the present evaluation are to evaluate the effectiveness of the current (1998-2001) Small Weeks Pilot Project. Specifically, the study has been designed:

• to investigate the effectiveness of the Project in encouraging program participants to accept small weeks of work during the RCP;
• to determine the Project's impact on program participants' weeks of work and earnings; and
• to assess the Project's impacts on male and female EI benefits claimants separately.

This report highlights the evaluation findings available to-date. The results presented here consist of observations from the “November 1998-August 2000” data,⁴ descriptive statistics, and calculations from our econometric evaluation model.

Footnotes

1	The RCP can be extended by the number of “prescribed weeks” within the usual 26-week period. “Prescribed weeks” include weeks for which EI benefits were paid or payable. For example, a repeat user of EI may have collected EI benefits in the 26-week period, and may have had an extension of his RCP beyond 26 weeks.
2	The bundling small weeks method allows a worker to use all the regular weeks and the best small weeks to bring the number of insurable weeks up to the minimum divisor. The remaining small weeks are bundled for benefit calculation purposes. The excluding small weeks method is similar: The regular weeks and the best small weeks are used to meet the minimum divisor, but the remaining small weeks are excluded from the benefit rate calculation.
3	See Jane Friesen, “An Evaluation of the Impact of the 1997-1998 Small Weeks Projects on EI Program and Labour Market Outcomes. http://www11.hrdc-drhc.gc.ca/edd/ISWP.shtml
4	The EI economic regions, and consequently Small Weeks regions, were changed on July 9, 2000. The July 2000 to August 2000 data are based on 34 Small Weeks regions. In this report, we use the term “31 Small Weeks regions” of the original Small Weeks design throughout to avoid confusion.