2003 Monitoring and Assessment Report
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Entire report (.93 Mb) and Annexes in PDF format:
- Annex 1 (.93 Mb)
- Annex 2 (2.0 Mb)
- Annex 3 (7.3 Mb)
- Annex 4 (1.3 Mb)
- Annex 5 (1.4 Mb)
- Annex 6 (.48 Mb)
- Annex 7 (.87 Mb)
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Executive Summary
The seventh annual Employment Insurance (EI) Monitoring and Assessment Report examines the impacts and effectiveness of EI from the perspective of the economy, communities, and individual workers. The report also examines the effectiveness of the program in terms of how the program is utilized, encouraging work force attachment, use of active re-employment measures, and employers’ management of their work force. The analysis focuses on the period from April 1, 2002 to March 31, 2003, which represents the sixth full fiscal year since the implementation of the reformed Employment Insurance program in 1996/97. Trends identified in previous reports, as they relate to the more recent findings, are also 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 and participation in active re‑employment measures, known as Employment Benefits and Support Measures (EBSMs), is discussed in Chapter 3. An overview of program administration, including the Modernizing Service for Canadians initiative, is presented in Chapter 4. Finally, Chapter 5 concludes with an analysis on the impact and effectiveness of the EI program from various perspectives and a review of the savings realized from the 1996/97 EI reform.
Labour Market Context
In 2002/03, Canada’s economy and labour market recovered from the slowdown experienced during the previous reporting period. Overall, job gains were relatively large and widespread, with employment growing by 416,100 jobs, or 2.8% over 2001/02. Of the 416,100 new jobs created during the reporting period, nearly 40% were in part-time employment. As a result, the proportion of the employed population working part-time increased to 18.8%, the highest proportion since 1998/99. The strength of the Canadian economy during the reporting period is also demonstrated by the fact that participation rates for men (73.5%) and women (61.0%) continued to increase. Despite the strength of the economy and labour market, a substantial number of Canadians heading a family lived on low incomes. This is significant because the Family Supplement is designed to enhance support for these individuals and their families.
In 2002/03 all provinces experienced positive employment growth, with two-thirds of the new jobs created in Quebec and Ontario. Employment growth was similar across paid employment (2.7%) and self-employment (2.8%). This is significant because paid employment is insured under EI and self‑employment is not covered under the program with the exception of self-employed fishers. The analysis also indicates that employment growth was balanced across sectors with the services sector growing by 2.7% and employment in the goods-producing sector increasing by 2.9%.
Despite a relatively high rate of employment growth, the unemployment rate increased slightly from 7.4% to 7.6% as the growth in the size of the labour force was greater than the growth in employment. The unemployment rate remained stable for prime-aged men (6.6%) but increased for all other categories. Education continues to be a critical factor in determining labour market outcomes as individuals with less than a high school education had an unemployment rate of 13.6% in comparison to 5.0% for those with a university degree.
EI and the Economy
In 2002/03, there were 1.87 million new claims for EI benefits, representing a slight decrease of 3.2% over the previous year. The decrease in new claims is consistent with the stronger labour market during the reporting period. Despite the decrease in total new claims, income benefits paid in 2002/03 totalled $12.3 billion, an increase of 6.9% over 2001/02. The increase in benefits paid reflects the payment of benefits for claims established in 2001/02 when the economy experienced a slowdown and enhanced parental benefits matured.
Overall, evidence indicates that the EI program has been effective in stabilizing the economy and promoting an efficient labour market. Results from two independent macro-simulation models indicated that the total stabilization effect was between 10% and 16%, meaning that in the absence of the EI program there would have been a further decline in output and employment of approximately 10% to 16% in 2001 and 2002. Further, analysis indicates that the EI program assisted in maintaining household consumption as only 12% of individuals separated from their job experienced a decline in their household spending one year following job loss. For those whose consumption decreased, the magnitude of the decline varied depending on the type of household with an average decline of 24% of total annual income. A recent study also determined that the EI program does not act as a barrier to labour mobility, as there is a high degree of mobility across communities.
EI and Communities
An analysis of 14 representative communities, monitored since EI reform indicated that the program continues to respond to changes in local labour markets, despite very different economic realities across the country, by automatically adjusting entitlement and eligibility. The analysis shows that the duration of EI benefits continues to be adequate as claimants used, on average, 64% of their maximum entitlement before returning to work. An additional analysis of urban and rural workers indicated that workers in rural communities were not affected by EI reform any differently than non-rural workers in terms of eligibility and entitlement.
EI and Individuals
As in past years, the issue of access to the EI program was examined using a variety of measures. The findings indicate that access remains high and is consistently high across the country. The analysis also indicates that there are variations in accessibility to the EI program by demographic groups and employment status. Women tend to have lower access to EI in comparison to men, reflecting different work patterns as women are more likely than men to work part time. Access for youth is lower because they are more likely to have insufficient insurable hours since they are more likely to be new entrants to the work force and, as a result, must meet higher entrance requirements. They also are more likely to work part time.
One approach used to examine accessibility was to examine the proportion of Canadian workers who would be eligible for EI should they lose their job. A simulation using the Survey of Labour and Income Dynamics (SLID) indicates that overall access to EI remains high with 88% of employed workers being eligible for EI benefits if they lost their job in December 2001. Accessibility was the same for men and women working full time (96%) and was lower for part-time workers with men at 41% and women at 57%. An analysis of accessibility for employed youth indicated that 65% would have been eligible to receive EI had they lost their job in December 2001. Further, an analysis based on the SLID simulations indicates that over 91% of employed workers would have been able to access special benefits had they lost their job in December 2001.
A second method used to examine accessibility is the proportion of unemployed individuals, previously in paid employment, that are potentially eligible for EI. An analysis indicated that nearly 84% of those who had paid EI premiums and either lost their job or quit with just cause, were potentially eligible to receive EI benefits in 2002. The level of access for unemployed men (85%) was slightly higher than for women (82%), while access was 95% for individuals who had previously worked full time in comparison to 59% for part time and 79% for seasonal. An analysis also determined that among the unemployed target EI population, immigrants were more likely (87.8%) to be potentially eligible for EI than Canadian-born workers (83.1%). A further analysis will be undertaken to examine accessibility for recent immigrants and, in particular, the impact of the new entrant/ re‑entrant provision.
Finally, the broadest measure of accessibility to EI is the benefit to unemployment (B/U) ratio, which examines the proportion of all unemployed individuals that are in receipt of EI benefits. In 2002/03 the B/U ratio declined slightly from 47.0% to 45.4% in 2002/03, which is attributable to an increase in the proportion of the unemployed that have been out of the work force for an extended period of time.
An analysis continues to indicate that fishers are qualifying for benefits with relative ease as 96% of fishing claimants qualified for benefits with insured earnings in excess of the maximum entrance requirement of $5,500. The relative ease with which fishers are meeting the entrance requirement may be encouraging more individuals to enter the fishing industry than otherwise would be the case. For example, the growth in fishing claims by women has outpaced men for several years and increased by more than 20% in 2002/03. A more in-depth analysis of the utilization of EI fishing benefits along with an analysis regarding the impact of EI fishing benefits on the commercial fishery will be undertaken.
As part of an ongoing effort to ensure the transparency and efficacy of the coverage measures, a review of these measures will be conducted by internal and external experts in preparation for the 2004 Monitoring and Assessment Report.
Adequacy of Benefits
An analysis indicates that in 2002/03, the average weekly benefit rate increased by 1.5% to $308, demonstrating that EI benefits continue to adjust in relation to rising wages. Nearly 32% of EI claimants received the maximum benefit rate of $413 per week. The weekly benefit rate is based on the maximum insured earnings (MIE). An analysis of the MIE indicates that it remains 9.4% higher than the average industrial wage. The MIE will continue to be monitored and assessed. An analysis for 2002/03 determined that, on average, regular beneficiaries collected benefits for only two-thirds of the maximum number of weeks that they were entitled to, a proportion that is consistent with previous reporting periods. In addition, just over 30% of regular EI beneficiaries exhausted their entitlement to EI benefits, also consistent with previous reporting periods, and the number of frequent claimants who exhausted their benefits remained stable. An analysis indicated that one-third of sickness beneficiaries exhausted their entitlement. The circumstances of individuals that exhaust their entitlement to sickness benefits will be examined and reported in future Reports.
An analysis of maternity and parental benefits claims demonstrates that parents are using at least 85% of the full year available to them, indicating that the enhancements to parental benefits have provided families with the flexibility to care for their newly born or adopted children for an extended period of time. In 2002/03, men’s participation in parental benefits continued to grow, increasing by 26%. Findings from recent studies indicate that following the enhancements to parental benefits mothers are spending a longer period of time at home, with over 70% of mothers taking a minimum of 11 months. The findings also determined that women are now returning to work more gradually, demonstrating the increased flexibility in sharing the benefits. Moreover, the findings found that overall household income did not significantly affect the duration of time at home by parents and that a mother’s own wage was a more significant factor. A recent study examined mothers in receipt of Supplementary Unemployment Benefits and determined that mothers in receipt of a top-up were less likely to have short leave and were more likely to return to work within one year.
Adequacy of benefits was also assessed by examining the effectiveness of the Family Supplement in providing additional income support to low-income families. An analysis indicates that maternity/parental beneficiaries in receipt of the Family Supplement collected an additional 1.3 weeks of benefits, indicating the Family Supplement is helping to ensure that lower income claimants can fully access these benefits. Previous Reports have highlighted that the proportion of EI beneficiaries eligible for the Family Supplement has declined since 1998/99, which can be traced to family incomes increasing while the Family Supplement threshold remained fixed at $25,921. In 2002/03 the proportion of EI beneficiaries receiving the Family Supplement remained stable at 9.8%. Further monitoring andassessment of the Family Supplement provision is necessary.
Promoting Work Force Attachment
While there are numerous provisions within the program designed to promote work force attachment, this report focused on three key provisions: the divisor, working while on claim, and the Small Weeks provision. Overall, the findings indicated that the divisor and Small Weeks provision are working as intended. However, as has been reported in previous years, the working-while-on-claim provision may not be encouraging clients to accept all available work.
The divisor has encouraged a significant behavioural change as individuals are working the extra two weeks before establishing a claim. An analysis indicates that individuals who did not work at least two weeks beyond their minimum entrance requirements remained relatively stable at 3.3%. In 2002/03, the proportion of EI claims established using the Small Weeks provision increased from 8.1% to 9.9%. An analysis indicated that the Small Weeks provision provided clients, on average, with a weekly benefit that was $12 higher in 2002/03 than it would have been had the provision not existed. Atlantic Canada and Quebec have a significantly larger proportion of claimants with small weeks compared to the national distribution.
While nearly 57% of claimants work while on claim, the proportion of claimants reporting working while on claim continued to decline. Findings continue to indicate that claimants may be hesitant to accept work while collecting EI benefits unless they can reduce their EI benefit for that week to $0, which allows them to keep the week of benefit for later use. A further analysis of the working-while-on-claim provision is necessary.
Employment Benefits and Support Measures (EBSMs)
During 2002/03 slightly fewer than 638,000 individuals took part in EBSMs funded through EI Part II, which is a slight increase over the previous reporting period. During the reference period there were 895,885 interventions, an increase of over 100,000 from 2001/02. This is a result of increased utilization of short-term support interventions such as counseling and job finding clubs that, during times of positive labour market conditions, are often the preferred option to facilitate re-entrance to the labour market.
Preliminary results of the summative evaluations for British Columbia and Quebec indicate that EBSMs are having varying impacts in different regions of the country. The summative evaluations are aimed at providing information on the impact of active measures in helping participants prepare for, find and keep jobs. With regards to the British Columbiasummative evaluation, preliminary findings indicate positive employment and earnings impacts for active clients (in receipt of income benefits), but no evidence of such improvements for former EI clients (no longer in receipt of income benefits). Further, EBSMs had a limited impact on reducing government income assistance. With respect to the Quebec summative evaluation, preliminary findings indicate some positive impacts with regards to former clients on employment, earnings and provincial income assistance, but there is insufficient evidence to conclude positive impacts on employment and earnings for active EI clients. The summative evaluation for Newfoundlandand Labrador is ongoing and it is too early to report on impacts. Given the preliminary nature of the results overall, further analysis will be conducted as the summative evaluation reports are finalized.
Employers’ Management of Their Work Force
Case studies and interviews with employers indicated that the key benefit of the Work Sharing program from the perspective of firms is that it allows them to retain their core work force during temporary slowdowns, thereby avoiding future hiring and retraining costs associated with employee turnover.
Findings from a survey of employers on the impact of enhanced parental benefits indicated that employers overall are very supportive of the expanded parental benefits and have not encountered any major difficulties when their employees take advantage of the enhanced leave. The only exception was small employers who had no experience with employees taking extended leave. Small employers who had experience with the longer leave provisions were supportive of the initiative.
Savings Attributable to EI Reform
Previous Monitoring and Assessment reports provided estimates of the incremental savings attributable to EI reform during each respective reporting period, as not all measures were mature. The 2003 report provides a detailed summary of the savings and reinvestment in active measures attributable to EI reform. It is estimated that a total of $1.2 billion in savings were realized, of which $800 million were reinvested into active measures to assist individuals in finding work. While savings from EI reform are lower than originally forecast, they are significant. The original savings forecast of $2 billion was based on the expectation of much higher EI expenditures than were actually needed given the strength of the economy and lower unemployment rates in the years following EI reform. In relative terms, the $1.2 billion in savings achieved represents about 10% of program expenditures, which is in line with the original estimate.
Program Administration – Service Delivery
In 2002/03 substantial progress was made towards modernizing the service delivery network. Clients now have an array of choices for the most common services. The content and navigation of the EI Internet site has been improved and the number of visitors has increased by over 200% in comparison to the previous year. With 17% of claims being submitted electronically and an overall satisfaction rating of 8.5 out of 10, the launch of EI Appli-Web, which allows claimants to apply for benefits via the Internet, has proven to be successful. In addition, over half of the kiosks in local offices have been transformed to Citizen Access Web Stations, allowing clients to access the Internet and on-line Government services. Enhancements were also made to the automated telephone reporting service contributing to an increase of 12 million bi-weekly reports completed by telephone, resulting in faster payments to claimants.
Over the past three years a number of quality management initiatives have been implemented to improve the accuracy of benefit payments as well as service to clients. As of March 2003, the accuracy of EI benefits has improved to 95.5%, representing a significant improvement from 93.5% in March 2001. Findings from a 2001 client satisfaction survey are also positive, with 77% of clients being satisfied or very satisfied with the overall quality of service they received.