Applied Research Bulletin - Volume 5, Number 1 (Summer 1999)

Who Receives Employment Insurance, Who Does Not and Why?

Over the past years, concerns have been raised about whether the Employment Insurance program provides adequate income protection to workers in Canada who lose their jobs. In order to better understand recent developments, the Applied Research Branch commissioned Statistics Canada to conduct a new survey—the Employment Insurance Coverage Survey—to assess how well Employment Insurance has supported individuals in their transition between jobs.

The Employment Insurance Coverage Survey (EICS) obtains anonymous information on who receives Employment Insurance benefits, who does not, and the reasons for not receiving benefits. In addition, the survey provides useful facts about the financial situation of respondents, details about the separation from their last job and their job-search intensity. (The EICS was first conducted in January 1997, and since then it has been conducted every three months.)

A working paper prepared by Applied Research Branch researchers in the fall of 1998, entitled An Analysis of Employment Insurance Benefit Coverage, uses data from the new survey. One finding of the study is that 78 percent of those who lost or quit their job with just cause in 1997 were eligible for EI benefits.

Since the publication of this study, 1998 data have become available and 1997 data have been updated. This Bulletin article is based on data for 1998.

EI Meets its Objective

The ARB study finds evidence that the EI program is, in fact, meeting its key objective of providing temporary income support to workers between jobs. An in-depth analysis of the aggregate EICS data reveals that 528,000 (80 percent) of the 660,000 unemployed who lost their job or quit with just cause in 1998 were eligible for EI benefits. The other 132,000 unemployed did not meet entrance requirements because they had not accumulated enough hours of work to become eligible for benefits.

Employment Insurance Benefit Coverage Among the Unemployed


Note:	The B/U ratio is shown only for comparative purposes. It is not a good measure of the extent of benefit coverage among the unemployed.

The researchers also discovered that a majority—about 67 percent—of the unemployed who contributed to the EI program in 1998 were eligible to receive EI benefits. The remaining 33 percent were not eligible either because they did not work enough hours, they quit their job with no just cause, or they left their job to go to school. This result is at odds with prevailing public perception that most of the unemployed who contribute to the program do not have access to EI benefits.

In addition, analysis of the EICS data reveals that legislative change to the EI program in the 1990s was not the major factor driving the increase in the number of unemployed not receiving benefits from the EI program. In fact, a significant number of these people—over 65 percent—would not have received EI benefits under the old laws and regulations. Among the 812,000 unemployed persons not receiving EI benefits for the year 1998, 528,000 either had no work in the last twelve months, were self-employed or had left their job to return to school. None of these groups of unemployed was ever covered by the EI program or its predecessor, the Unemployment Insurance program.

Who Is Not Covered by Employment Insurance Among the Unemployed? 1998


Note:	Exclusions in this graphic are sequential: the descending and left-right order matters. For instance, had the sequence been reversed with the "self-employed" excluded first and the unemployed with "no work in last 12 months" excluded second, there would still be the same total number of unemployed excluded, 471,000. But there would be more self-employed and fewer unemployed with "no work in last 12 months" since some would have already been excluded as self-employed or unpaid family workers.

Why Many Unemployed Are Not Covered

The study presents an extensive analysis of the population of unemployed not covered by Employment Insurance. The term “covered by Employment Insurance” is used here to describe unemployed who received or had established their right to Employment Insurance benefits during the survey reference week. The study identifies seven reasons for not being covered by EI benefits in 1998, in descending order of importance:

Not having worked in the last twelve months. This was the single most important reason for not being covered by EI benefits. 400,000 individuals were in this position in 1998, about 50 percent of the total unemployed population not covered.
Not meeting entrance requirements. Not having accumulated enough hours was the second most important reason for not being covered by EI benefits. Of those who had been laid off from their last job or quit with just cause, about 132,000 individuals did not meet entrance requirements in 1998 (i.e., the minimum number of hours worked). This represents more than 16 percent of the total unemployed population not covered. The study notes that those who do not meet the minimum EI entrance requirement tend to be more concentrated in the Atlantic provinces than in other regions in Canada.
Voluntarily leaving a job without just cause. Excluding returning students, about 74,000 unemployed quit their last job without just cause. The rule excluding voluntary quitters was introduced with the 1993 changes to the Unemployment Insurance program. Before then, those unemployed who voluntarily left their job without just cause had to wait longer to qualify and received less benefits than others covered by the program.
Being self-employed. The self-employed have never been covered by the Employment Insurance program or the Unemployment Insurance program. About 71,000 unemployed who worked in the last 12 months were self-employed prior to unemployment in 1998.
Quitting a job to return to school. About 57,000 unemployed had quit a job to return to school in 1998. Apart from exceptional cases, these people who became unemployed after returning to school have never been eligible for EI or Unemployment Insurance.
Not claiming EI benefits. About 30,000 unemployed who meet EI entrance requirements, or 4.0 percent of the unemployed not covered, were eligible to receive benefits but did not claim them.
Having exhausted benefits, or not receiving EI benefits for unknown reasons. While 39,000 individuals who had a paid job in 1998 exhausted their benefits, a further 9,000 did not receive benefits, for unknown reasons.

Unemployed With No Employment in the Last Twelve Months

This analysis provides mixed results on the coverage of EI benefits. On the one hand, conclusive evidence exists that a large majority of those who contributed to the EI program within 12 months prior to the survey week were eligible for EI benefits and that the Employment Insurance program is meeting its principal objective (providing temporary benefits to Canadians between jobs). On the other hand, the analysis reveals that an increasing share of the unemployed do not have access to EI benefits.

As already mentioned, not having worked in the last 12 months was the single most important reason identified for not being eligible. The study also reveals that the proportion of those unemployed at any point in time who have not worked in the previous 12 months has almost doubled as a proportion of total unemployment since 1989.

This finding suggests that for many Canadians it is difficult to get a first job or to regain employment after a long period.


The B/U Ratio: A Poor Indicator of Employment Insurance Coverage The Beneficiaries to Unemployed (B/U) ratio which compares the number of regular Employment Insurance (EI) beneficiaries to the number of unemployed as estimated by Statistics Canada is sometimes used as an indicator of EI benefit coverage. Its popularity stems principally from the ready availability of the data to calculate it. It has attracted a lot of attention in the 1990s, since the ratio has undergone a pronounced decline. Recently the Canadian Labour Congress (CLC) calculated a modified B/U ratio by subtracting EI beneficiaries with earnings from the numerator. The result was lower than the conventional B/U ratio. However, neither the conventional B/U ratio nor its variant used by the CLC is a good indicator of EI benefit coverage. There are several reasons for this. First, the ratio is constructed using two sources of data that are not compatible. Some beneficiaries are not considered unemployed by Statistics Canada, but are classified as “out of the labour force.” The term “regular beneficiaries” provides a partial picture of the EI program clientele since it excludes all non-regular beneficiaries—sickness, maternity, parental, adoption, fishing, training, work sharing, job creation and self-employment assistance beneficiaries. The main reason why the B/U ratio is a poor indicator of EI benefit coverage is that not all unemployed individuals are expected to receive EI at all times. For instance, EI income benefits are not designed for people who have weak labour force attachment, for people who have never contributed, or people who quit their job voluntarily without good cause. Income benefits are designed instead to provide temporary assistance to workers between jobs. A good indicator of EI coverage must look at how well the program is performing at providing temporary assistance to workers who become unemployed through no fault of their own. The B/U ratio cannot provide such an assessment. The working paper An Analysis of Employment Insurance Benefit Coverage fills that knowledge gap using new Statistics Canada survey data.

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