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In the previous section we analysed the effect of Bill C-17 on the amount of UI benefits workers know they can count on when they become unemployed — workers' UI entitlements. While this is certainly a quantity of direct interest to workers, it is also the case that most workers in Canada do not exhaust their full entitlement of UI weeks. For a number of reasons, including assessing the effects of C-17 on the government's actual expenditures, as well as the total dollar amount of the UI subsidy going to various provinces and industries, it is also interesting to know the effects Bill C-17 had on the actual number of weeks of UI received by workers. That is the goal of this section.

As we noted in Section 2, assessing the effect of C-17 on UI receipt is somewhat harder than assessing its effects on entitlements, because — in addition to the changes in qualifying weeks of unemployment analysed in the previous section — a second kind of behavioural change could play an important role in modifying the direct effects of the legislation. In particular, in addition to increasing the number of work weeks people accumulate before they become unemployed, the UI entitlement cuts in C-17 could also affect the amount of time people remain unemployed once they start collecting benefits. We term this latter effect an effect on unemployment durations, in contrast to the effect on employment durations already examined.

Theoretical considerations

Interestingly, if individuals respond to UI entitlement cuts by searching harder, or sooner, for jobs while they are unemployed, the effect — unlike the behavioural changes in employment durations already examined, which mitigate the effects of cuts on UI receipt — should be to accentuate, or reinforce, the direct decline in UI receipt caused by the legislative changes in Bill C-17.¹⁴ To see this, consider the situation in Figure 8, where we show two hypothetical distributions of unemployment durations, f₁(w) and f₂(w), before and after a cut in an individual's UI entitlement from w₁ to w₂ weeks respectively. As drawn, the cut in UI entitlements induces some workers, who would have found jobs in the interval [w₂, w₁], to search for work sooner and harder, so that they continue to find jobs before the (now earlier) expiry date of their UI benefits.

In terms of Figure 8, the mean number of weeks of UI received when the maximum entitlement was w₁ is given by:

where F₁ is the cumulative distribution function corresponding to the density f₁. Workers with longer unemployment durations than w₁ exhaust entitlement cut from w₁ to w₂ weeks does not induce any change in job search behaviour, then the new mean number of UI weeks received would be:

Clearly, this is lower than in (1), because all that has happened is that benefits are exhausted sooner, and more individuals exhaust their benefits. Finally, if individuals respond to the entitlement cuts by finding new jobs sooner, to avoid spending time without either UI benefits or employment income, mean weeks of UI receipt will be:

Not only is this lower than (1), it is also lower than (2) because the density function f₂ puts more weight on shorter durations. Thus, earlier job-finding induced by UI entitlement cuts should accentuate the decline in UI receipt that is directly caused by the cuts themselves.

No behavioural change

We begin our analysis of the effects of C-17 on UI receipt with Table 23 and Figure 9, which show how large an effect C-17 would be likely to have on UI receipt in the absence of any behavioural changes at all. In the top half of Figure 9 and in columns 1 and 3 of Table 23, we show the actual distribution of weeks of UI received by all individuals who claimed UI in our first window period, before the introduction of Bill C-17.

Interestingly, a substantial fraction of both men and women — indeed over 8 percent of women — received a full 50 weeks of benefits. A substantial fraction also received zero weeks, which in the current context means they initiated an application for benefits but either found re-employment during the two-week waiting `period, or were disqualified from benefits. In the bottom half of the Figure 9, and in columns 2 and 4 of Table 23, we present the distribution of "truncated" weeks of UI receipt for this same sample of individuals. "Truncated" benefit weeks, for each individual who claimed UI in our pre-C-17 window, are equal to actual UI benefit weeks received, if these are less than the number of weeks that person would be entitled to had the new, C-17 rules been in place. If actual (pre-C-17) weeks are greater than what the person would have received under the C-17 rules (given his or her local unemployment rate and employment history) then truncated weeks equal their C-17 entitlement: absent any behavioural changes, this person would exhaust their benefits under the new, C-17 rules and receive the maximum number of weeks of UI for which they are now eligible.

As the bottom panels of Figure 9 show, under the C-17 rules, many individuals who previously would have qualified for UI benefits would receive no benefits at all after C-17, because their short employment histories (of 10 or 11 weeks) now disqualify them from benefits. Also of interest, however, is the dramatic decline in the number of UI claims predicted to last a full 50 weeks, and the increase in the fraction lasting 20 to 35 weeks. It is much harder to qualify for a full 50 weeks of benefits under the C-17 rules than before; many individuals who would previously have qualified for a full 50 weeks, absent any behavioural change, would now find themselves exhausting their benefits at a lower limit. Overall, it is our impression that the C-17 system is designed, much more than the previous one, to "reserve" these "full year" benefits to workers with continuous employment histories, and this is apparent in the distribution of entitlements.

In Tables 24 we ask what would happen to mean weeks of UI actually received per claim if there were no behavioural changes at all; thus we simply apply the C-17 rules to the distribution of ROE weeks and of actual UI spells existing before C-17. (These are just means of the distributions in Table 23, overall and disaggregated by industry and province). Clearly, compared to the reductions in UI entitlements examined in the previous section, the mean losses shown in this Table, of a little over 4 weeks per UI claim, are smaller, because not all individuals exhaust their UI entitlements. Overall, however, the results show a very similar industrial pattern to those found in UI entitlements in the previous section: massive losses are predicted in fishing, and significantly larger than average losses are predicted in agriculture, forestry and construction, industries where unstable employment histories are common.

View Table 24

Allowing for behavioural changes

In Table 25 we ask what would happen to individuals' UI receipt if, in response to the legislation, individuals were able to adjust their qualifying weeks to the levels actually seen after C-17, but (conditional on qualifying weeks) they had the same length of unemployment spells as before. Thus behavioural change in employment durations is allowed, but not in unemployment durations. Because — like Table 15, and like Tables 26, 28 and 29 which follow — these tables are per UI claim and base their "after" calculations on the post-C-17 distribution of SV insured weeks, it is important to recall that the "after" estimates in this table are conditional on claiming UI. Like Table 15, they thus do not include UI losses due to a failure to qualify at all. In Section 3 we showed however that this feature of the SV-based data does not materially alter our estimates of the industrial or provincial pattern of C-17-induced losses when behavioural change in qualifying weeks is allowed. The main result of Table 25 is that, once behavioural adjustment in weeks of work is allowed, the pattern of losses is much more evenly distributed across industries than when it is not: Increases in qualifying weeks among workers in the high-UI-use industries (fishing, agriculture, forestry, and construction) played an important role in mitigating the effects of Bill C-17 on the number of weeks these workers weeks received UI benefits.

Table 26 finally incorporates the "new" behavioural response that might play a role in worker's UI receipt, but did not play a role in our calculations of initial eligibility: the possibility that the shorter UI entitlements under the new Bill may induce workers to find new jobs faster than they did before. It does this by using the actual post-C-17, rather than the truncated pre-C-17, distribution of UI spells to calculate mean weeks of receipt. Concerning the national totals, the most striking thing about Table 26 is the similarity of the numbers to those in Table 25: there is essentially no evidence that, on a national level, the eligibility cutbacks in C-17 caused any earlier job finding among UI recipients than before. Essentially, the truncated distribution of benefit weeks describes the actual very well, implying that instead of finding new jobs earlier, people simply exhausted their benefits earlier than they would have when entitlements were cut.¹⁵

View Table 25

View Table 26

Of some interest, also, is the pattern of losses in Table 26, relative to Table 25. In the two highest-UI-use industries, forestry and fishing, allowing for behavioural change in unemployment durations further mitigates, rather than accentuating as expected, the impact of C-17 on their receipt of UI. What this implies is that, at least in the period before benefits expiry, workers on UI in those industries actually became less likely to take a new job, rather than more likely. This may be because workers felt a greater need to "use up" every week of UI entitlement they still had, thus making even more "efficient" use of the system, at least in terms of extracting benefit weeks from any given employment history.

Tables 27 to 29 present parallel results to those in Tables 24 to 26 for provinces rather than industries, with very similar results. Focusing on Newfoundland as illustrative of a trend common to the Atlantic provinces, Bill C-17 reduced the number of weeks of UI actually received during an average UI claim by 4.2 weeks for men, and 5.1 weeks for women. These numbers are each about a week higher than their respective national averages, but would have been much higher had workers not made the significant changes in qualifying weeks of work they actually made. As before, changes in job finding rates among workers on claim play a negligible role in affecting the incidence of C-17-induced cuts in UI receipt.

Person based unit of analysis
(per worker and per capita)

As in the previous section, our final perspective on the effects of C-17 on UI receipt expresses these effects in per-worker or per-capita, rather than per UI-claim terms. Because some industries are much more prone to unstable employment histories than others, and thus are much more likely to lead to the initiation of UI claims, this can cast quite a different perspective on our results. Nationally, Table 30 shows that Bill C-17 caused the average working woman in Canada to receive half a week less of UI benefits per year; the cost to the average working man was .44 weeks of benefits. However the average Canadian worker only received 3 to 3.5 weeks of UI benefits per year to begin with, compared to an astounding 22 weeks per year received by women in the fishing industry, and almost 15 weeks per year received by men and women in forestry. Not surprisingly, because their initial reliance on the system was so extreme, workers in these industries also experienced the biggest average annual reductions in actual weeks of UI received; in the most extreme case (women in fishing) the loss was 5 weeks. Even after these disproportionate losses though, workers in those industries still receive many more weeks of UI benefits per year than workers in any other Canadian industry.

View Table 30

Nationally, Table 31 shows that the average woman aged 15 or over living in Canada (whether working or not) received 0.16 fewer weeks of UI benefits as a result of Bill C-17; the average man lost 0.22 weeks of benefits. Unsurprisingly perhaps, the largest per capita losses occurred in Newfoundland, with a maximum of 0.80 weeks per year for male Newfoundlanders. Even after the cuts, however, residents of the Atlantic provinces, and to a significant extent Quebec, still receive many more weeks of UI benefits than workers in the other provinces. While an "average" male in Ontario received one week of UI benefits per year after C-17, men in Quebec received twice as much — two weeks — those in Newfoundland more than four times as much, and those in PEI more than five times as much. Thus, while clearly having a disproportionate impact on those provinces and industries which were the highest users of the UI system, Bill C-17 has not, by any means, ended the massive cross-subsidization of provinces east of the Ottawa River, and of the agricultural, fishing, forestry, and construction industries, by the other provinces and industries in Canada.

Footnotes

14	According to standard economic intuition, they should however mitigate, the Bill's negative effects on workers' utility or well being, and probably on cash income too, as they substitute employment income for UI income. The intuition is the same as how consumers dampen the effects of price increases on their utility by substituting away from the more expensive products.
15	The absence of an increase in overall mean losses in Table 26, relative to Table 25, as would be predicted by relatively standard search models, is especially noteworthy because, given the modest improvement in macroeconomic conditions over the period, one might have expected unemployment durations to fall somewhat due to purely cyclical factors.