2005 Monitoring and Assessment Report

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Executive Summary

This is the ninth Employment Insurance (EI) Monitoring and Assessment Report. It continues an annual examination of EI from the perspective of the economy, communities and individual workers. The report examines the use of the program, the program’s impacts and effectiveness, the use of active re-employment measures, and the interaction between EI and the workplace. The analysis focuses on the fiscal year between April 1, 2004 and March 31, 2005. Trends identified in previous reports, as they relate to more recent findings, are discussed.

Chapter 1 provides an overview of the Canadian labour market during the reporting period. The use of income benefits is described in Chapter 2. Participation in active re-employment measures, known as Employment Benefits and Support Measures (EBSMs), is discussed in Chapter 3, which provides information on EBSM use at the national, provincial and territorial levels. An overview of program administration, including initiatives to improve service delivery, is presented in Chapter 4. Finally, Chapter 5 analyzes the impact and effectiveness of the EI program from various perspectives.

Labour Market Context

In fiscal 2004/05, Canada's economic growth rebounded from the previous fiscal year, when growth was hampered by a strong appreciation in the dollar and a series of economic shocks. Gross domestic product (GDP) grew by 3.3% in 2004/05.

Employment growth of 273,300 (+1.7%) roughly matched the growth during the previous fiscal year, and the annual average unemployment rate fell to 7.1%, among the lowest rates in the last three decades. All of the employment growth over the fiscal year took place in full-time jobs, and most occurred in the services-producing sector, which accounted for more than 202,700 of the added jobs. Self-employment increased by 61,400 (+2.5%), outgrowing paid employment, though self-employment’s share of all jobs has declined since 1997/98.

For employees, 37.4% of the job growth in 2004/05 took place in establishments with 20 to 99 employees. These establishments accounted for about one third of total employment. Total hours worked in Canada rose by 3.0% in 2004/05, after a marginal increase the previous year.

Employment growth in 2004/05 was strongest in British Columbia(+2.7%), Nova Scotia(+2.5%), New Brunswick(+2.1%), Alberta(+2.1%) and Prince Edward Island(+2.0%), while growth in Québec was similar to the national average (+1.6%). In Ontario, employment grew by more than 91,000 jobs (+1.5%), accounting for a third of the national total growth.

In 2004/05, the educational attainment of Canadians continued to rise, as the proportion of the working-age population with at least a post-secondary certificate or diploma increased to 46.9% (up from 32.7% in 1990/91). Job growth in 2004/05 was strongest among Canadians with a university degree (+2.8%) and those with a post-secondary certificate or diploma (+2.6%). Employment fell among individuals with less than a high school diploma.

EI and the Economy

In 2004/05, there were 1.9 million new claims for EI benefits, a decrease of 5.6% from the previous year. Income benefits paid decreased by 3.4% in 2004/05, to $12.7 billion.

By facilitating improved matching of unemployed people and available jobs, an EI system can contribute to sustainable economic growth and higher productivity. In Canada, among the long-term unemployed population, receiving EI is associated with a higher probability of finding work, though the same cannot be said about those who have been unemployed for a short time. EI plays a modest role in stabilizing the economy, sparing between 3.8% and 6.5% of jobs in the event of economic shocks.

The EI program also plays a redistributive role in the Canadian economy, resulting in a net redistribution of income from high earners to lower earning individuals. Income tax data also reveal that EI plays a role in redistributing income towards regions with higher unemployment and towards industries in which employment tends to be more seasonal than others.

EI and Communities

Ongoing monitoring of 14 representative communities across the country indicates the EI program responds to changes in local labour markets, despite differing economic conditions across the country, by automatically adjusting entitlement and eligibility.

EI and Individuals

Access to benefits

Among unemployed individuals who had a recent job separation that qualified under the EI program, 80.4% were eligible to receive EI benefits in 2004, down from 84.0% in 2003. Eligibility for benefits varies across demographic groups and employment status. For instance, access among unemployed men was higher, at 89.6%, than among women, at 82.3%. Lower access to EI among women reflects their different work patterns, as women are more likely than men to work part time. Of unemployed people who had worked full time, 87.6% were eligible for EI, compared to 42.8% of those who had worked part time before becoming unemployed.

Statistics Canada’s Employment Insurance Coverage Survey (EICS) found that actual EI receipt among those with a recent job separation that qualified under the program was similar for men (60.8%) and women (60.1%), and both were higher than they had been a year earlier. The ratio of EI beneficiaries to the number of unemployed people (the B/U ratio) was 43.6% for 2004. As documented in previous reports, there are important caveats associated with this measure, since it includes individuals not covered by the EI program (such as self-employed people and others who do not pay into the system). An alternative ratio comparing the number of EI beneficiaries to unemployed EI contributors (the B/UC ratio) was 63.5% in 2004.

Access to EI among youth tends to be lower than among adults, as youth are more likely to be new entrants to the work force, thus facing higher entrance requirements, and are also more likely to work part time. In December 2003, 42.5% of youth who were new entrants or re-entrants to the labour market would have had sufficient insurable hours to collect EI benefits (that is, at least 910 hours), had they needed to do so. However, among youth who were not new entrants or re-entrants to the labour market, 83.9% would have had sufficient insurable hours to collect EI.

Among older workers, research shows that older workers tend to qualify for EI in roughly the same proportion as workers aged 25 to 54. Older workers, however, tend to remain unemployed longer and are more likely to use all their EI regular benefits than are other workers. In 2003/04, 37.4% of claimants aged 55 and over used all their regular EI benefits, higher than the rate for other age groups.

Among unemployed individuals previously in paid employment who had a recent job separation that qualified under the EI program, immigrants were somewhat less likely in 2004 to be eligible for EI (75.0%) than Canadian-born workers (82.5%). Due to a relatively small sample size, these data for immigrants have a high degree of variability from year to year.

Self-employed fishers qualify for EI based on the value of the catch. Research has shown that almost 90% of self-employed fishers in Canada receive EI benefits, the largest proportion among seasonal industries. The number of fishers qualifying for benefits has not been declining, in spite of the most recent cod moratorium. It should also be noted that, since there are two distinct seasons (summer and winter) for commercial fishing, fishers are able to claim twice in a single year. In 2004/05, the number of fishers establishing two claims grew by 3.3%.

Adequacy of benefits

In 2004/05, the average weekly benefit rate increased to $315, from $312 in the previous year (+1.0%). Just over 33% of regular EI claimants received the maximum weekly benefit of $413 per week. Among claimants of special benefits, this proportion was about 29%, while for fishing claimants almost 70% received the maximum weekly benefit.

On average, regular beneficiaries collected benefits for 19.3 weeks, representing 60.9% of average entitlement, down slightly from previous reporting periods. In addition, 30.4% of regular EI beneficiaries exhausted their entitlement to EI benefits in 2003/04, a decline from the previous fiscal year. Women tend to exhaust benefits in higher proportions than men do. Since women are more likely to work part-time hours, women establishing claims are likely to do so with fewer hours of work than men, resulting in fewer weeks of benefits.

About 32% of sickness beneficiaries in 2004/05 used the entire 15 weeks of benefits to which they were entitled. This proportion has been relatively stable in recent years, suggesting that for some types of claimants or illnesses, 15 weeks of EI benefits may not be sufficient.

An analysis of maternity and parental benefits claims demonstrates that participating parents are using at least 92% of the full year of benefits available to them. The enhancements to parental benefits have provided families with increased flexibility to care for their newly born or adopted children for an extended period of time. In 2004/05, men’s participation in parental benefits continued to grow, though more moderately than in past years. Findings from recent studies indicate the enhancements to parental benefits are resulting in mothers spending a longer period of time at home. Prior to 2001, approximately 64% of mothers who received EI returned to work within seven months following the birth of their child. Of mothers who gave birth in 2002 or 2003, fewer than 16% of those who received EI returned to work in the same timeframe.

Adequacy of benefits was also assessed by examining the effectiveness of the Family Supplement in providing additional income support to low-income families with children. The proportion of EI beneficiaries eligible for the Family Supplement has been declining, as family incomes have been increasing while the Family Supplement threshold has remained fixed at $25,921. In 2004/05, the proportion of EI beneficiaries receiving the Family Supplement declined to 9.0%.

Promoting Work Force Attachment

The EI program has certain features that are meant to strengthen the link between work effort and benefits, including the divisor, the Working While on Claim provision and the Small Weeks provision.

When introduced in 1996/97, the divisor resulted in a considerable change in the characteristics of new claims being established, as individuals were encouraged to work two extra weeks beyond the minimum entrance requirement before establishing a claim. The proportion of regular claimants who did not work at least two weeks beyond their minimum entrance requirements dropped from 6.7% just before the divisor was introduced to 3.6% in 1997/98. Since then, this proportion has remained relatively stable and was just over 3% in 2004/05. Higher proportions of claimants in the Atlantic provinces and Québec are affected by the divisor than in Ontario, the Prairies and the West.

In 2004/05, 14.3% of EI claims established excluded small weeks from the benefit calculation, an increase of nearly two percentage points from the previous reporting period. Growth in the proportion of claims affected by the Small Weeks provision (from 9.9% in 2002/03) is probably mostly due to the increased earnings threshold. The Small Weeks provision provided affected clients, on average, with a weekly benefit that was $11 higher in 2004/05 than it would have been had the provision not existed. Québec has a significantly larger proportion of claims affected by the Small Weeks provision than did other regions of the country.

The proportion of claimants reporting work while on claim has steadily declined. In 2003/04, 54.9% of regular claimants reported working while on claim, down from 56.8% the previous year. This long-term decline may indicate that some claimants are hesitant to accept work while collecting EI benefits. Of those who reported working while on claim, the largest proportion (43.2%) worked fewer than five weeks. Nearly one in five claimants reported working 21 weeks or more while on claim for EI benefits.

Employment Benefits and Support Measures (EBSMs)

During 2004/05, about 636,000 individuals took part in EBSMs funded through EI Part II. There were 978,000 new interventions, with each person, on average, taking part in 1.5 new interventions. The overall use of longer employment programs declined by 3.3% over the period, while use of shorter term employment service interventions (such as counselling and job-finding clubs) increased by 3.5%.

Based on the results of summative evaluations, EBSMs appear to yield some modestly positive net impacts for participants, depending on the program, client type and jurisdiction. Given the mixed nature of results and differences in local labour market conditions across the country, broad generalization of the results across intervention, client type and jurisdiction is difficult. Net impacts are based on findings from evaluations in British Columbia, Québec, Alberta, Ontario, Newfoundland and Labrador, and Nunavut.

With an overall pattern of mixed net impacts on clients, the findings from the latest EBSM evaluations are not out of line with much of the international literature, though it must be noted that programming and methodologies to evaluate programming vary considerably across countries. EBSM summative evaluations confirm the importance of a combination of work experience and training, something that has been noted in much of the international literature on the topic. Evaluation results also underscore the important effect of local labour market conditions and client characteristics on the range of programming offered and on program outcomes. Tailoring programs to local needs is important.

EI and the Workplace

The Work Sharing program was evaluated during 2003/04. The program performs largely as intended and does avert a considerable number of temporary layoffs. The program has proven particularly useful in supporting the labour market through times of unexpected labour market interruptions. Firms that participated in the Work Sharing program were generally very supportive of the program, and evidence suggests firms believe the program fosters employee morale and helps firms retain skilled employees through temporary business slowdowns.

During 2004/05, clients established 11,521 new Work Sharing claims and Work Sharing agreements averted an estimated 3,282 temporary layoffs, although some layoffs averted by the program may occur after the agreement expires.

In most industries, the pace of research and development evolves rapidly, making ongoing skills training a condition of staying competitive. Apprentices acquire new skills, during short but frequent training sessions, which are immediately applicable in the workplace. In support of apprentices and to encourage ongoing skills development, the Government of Canada announced in the 2001 budget that apprentices collecting EI while away from work for training would be subject to only one waiting period, though there may be multiple separate training segments of one course stretched over a number of years. In 2004/05, there were 31,620 apprentice EI claims. Of these, 11,300 were not subject to a waiting period.

Trends in Contributions and Expenditures

Since 1996, there have been considerable annual changes in EI contributions and expenditures, due to a combination of decreasing EI premiums, increased expenditures from program enhancements and major shifts in the Canadian labour market. A summative evaluation study has tracked the evolution of EI Part I expenditures as they relate to total contributions to the program through premiums. In 1993, total expenditures were higher than total contributions. As a proportion of total contributions, expenditures began a downward trend in 1994/95 and reached a low in 2000/01, when total expenditures represented about 60% of revenues. The downward trend was reversed with enhancements to maternity and parental benefits, increased expenditures on Skills Development interventions, and other increased spending.

Violations

As of January 1997, EI claimants who knowingly misuse EI receive a “violation,” in addition to a financial penalty. Having received a violation, an individual must then have additional insured hours of work to qualify for benefits in future claims. In 2004/05, there were 7,730 instances in which a benefit period was not established due to the higher entrance requirements resulting from violations. As a result, the program avoided costs of just over $40 million.

Program Administration: Service Delivery

In 2004/05, the government continued to focus on improving the quality of service to Canadians to better meet their needs and expectations by making programs and services client-centered, seamless, timely, integrated and accessible through multiple channels. This process included modernizing and transforming the way benefits and services are delivered, by expanding and enhancing electronic service offerings that are easy to access and simple to use, and developing new service standards while improving the quality of claims processing.

In 2004/05, two million claimants filed their applications via Application for Employment Insurance Benefits on the Internet, with 51% of these people using a Citizen Access Workstation in a Human Resources and Social Development Canada office. Over 98% of claimants used electronic reporting services—the Automated Telephone Reporting System and the Internet Reporting Service—to complete more than 18 million reports.

Employers can also use a Web-based reporting system called ROE Web to file Records of Employment (ROEs). In 2004/05, employers produced 562,000 ROEs using ROE Web and 9,526 employers registered as ROE Web users.

The accuracy rate of EI claim payments was 95.5% in 2004/05, exceeding objectives. This achievement was largely due to the stabilization of program changes, a focus on measures to improve the effectiveness of program delivery, and a commitment to examining the way errors are defined and reported for improvement. Quality results are expected to continue to improve with the implementation of a national quality management action plan and a three-year quality assurance plan aimed at assessing performance.