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July 1, 1941 – Unemployment Insurance Act: Providing Employment Income SecurityWhen the Great Depression threw millions of Canadians out of work, there were calls for government intervention to provide income security. (See 1929 - 1939 —Great Depression.) As early as 1934, the Government of Canada began creating an insurance scheme to guarantee Canadians a partial income if they ever found themselves without a job. The Employment and Social Insurance Act of 1935 paid minimum weekly wages, based on earnings, to certain unemployed people. But the Act was short-lived. Just months after it was passed, newly elected Prime Minister Mackenzie King referred the Act to the courts. He argued that it was unconstitutional, saying such a program was under provincial jurisdiction. Both the Supreme Court of Canada and the Privy Council in Britain agreed, and struck down the Act. The government amended the Constitution and in 1940 passed the Unemployment Insurance Act, which came into effect on July 1, 1941. By that time, income security was not as crucial: the Second World War had created more than one million jobs. (See 1941—Wage and Price Controls.) The Unemployment Insurance Act was intended to temporarily help people who were between jobs. This compulsory system applied mainly to blue-collar workers. The scheme was to operate just like any other kind of insurance, such as life or fire insurance. Premiums and benefits were to be carefully calculated. The Act created the National Employment Service to help the unemployed find work. Supporters of an unemployment insurance scheme believed it would give workers peace of mind and create a more efficient Canadian economy, as unemployed workers could take the time to find jobs more suitable to them. But the idea was not without its critics. Some economists felt that unemployment insurance was a disincentive to work. It could allow Canadians to quit for no good reason, they argued, and could even incite people who would otherwise have no intention of working to take on short-term work so they could collect benefits afterward. Employment insurance has become one of the major foundations of Canada’s social safety net. Over time, the system has undergone changes. The scheme received major overhauls in 1971 and 1996. The program became virtually universal in 1971, with all occupations covered for the first time. Maternity, sickness, and retirement benefits were added. Premiums were reduced, and benefits increased. Between 1975 and 1994, there were eight acts introduced, aimed at revising the unemployment insurance system. Questions about the impact of UI on the labour market and the impact of premiums on job creation have led to a series of attempts to control costs. Entrance requirements were raised. Benefit levels were restrained. Restrictions on people who quit or are fired went from minimal to total. The government shifted employment service and benefit costs from its Consolidated Revenue Fund expenditures to the UI Account. In 1996, the name of the program changed to Employment Insurance (EI) and there were major cutbacks, including an ‘intensity rule’ that reduced benefits for repeat claimants. In 2001 this rule was removed, retroactively to October 1, 2000. Today, EI places greater emphasis on job-skills training. Some provincial and territorial governments administer this training themselves. For the 2000–01 fiscal year, the Government of Canada received $18.8
billion in EI premiums from employers and workers, and paid out $11.4
billion in EI benefits.
Employment Insurance Act 1996 Employment Insurance Homepage Employment Insurance The History of Unemployment Insurance
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