1998 Employment Insurance Monitoring and Assessment Report
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Executive Summary
Finding Highlights
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Annexes (2,048,921 bytes)
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Executive Summary
This is the second in a series of five annual reports presented by the Canada Employment Insurance Commission on the impacts of the Employment Insurance (EI) reforms introduced in July 1996 and January 1997. The reforms continued a trend that began in the late 1980s to address disincentives to work and reduce program costs while better targeting support to the unemployed. Because the new legislation represented a fundamental restructuring of the system, the Government of Canada made a commitment to study community, individual, and the economy's adjustment to the changes over five years (1997 to 2001).
The monitoring and assessment reports focus on two key parts of the legislation: Part I, Income Benefits, which provides for temporary income support to Canadians between jobs; and Part II, Employment Benefits and Support Measures, which provides measures to help the unemployed return to work.
In our first report, tabled in February 1998, we could present only preliminary data. The current document is more detailed as it covers the first full fiscal year that the new system has been in place. However, our findings are still not complete, since some information will only be available for analysis after a time lag of months or years and some measures have not yet been fully implemented. With each subsequent report we expect to have a clearer picture of the impacts of reform, as the new system becomes more firmly established and as patterns of EI usage become more apparent.
The introduction of the reforms coincided with a period of considerable improvement in Canada's economy and labour market.
Between 1995/96 and 1997/98, the Canadian economy created 500,000 new jobs, many of them full-time. The employment growth drew more people into the labour market, where they found the opportunities to be greatest in high-skill occupations. The stronger economy and consequent increase in the number of people coming into the job market led to a change in the composition of the unemployed, a development that is common during an upward trend in the business cycle. More of today's jobless are people who have never been employed, have been out of work a long time, or are self- employed. Members of these groups are unlikely to be eligible for EI benefits. Both factors – job growth and the drop in eligible EI claimants – have contributed to a drop in the number of EI claims and in total benefits paid.
Finding Highlights
Income Benefits
In the period under review (1995/96 to 1997/98), new EI claims fell by 14%, while the amount of benefits paid out dropped from approximately $12 billion to $10 billion.
The average weekly benefit level for all claims remained virtually the same, while the duration of benefit entitlement (weeks of benefits allowed) increased slightly.
The drop in new claims was mainly due to the decrease in laid-off workers, those clients most likely to be eligible for regular benefits (the largest benefit category). Claims and total payments remained far more stable in the other two benefit categories – fishing benefits and special benefits (maternity, parental, and sickness).
The breakdown is as follows:
- regular claims fell by 18%, while total benefits in this category declined by 19%;
- fishing claims increased by 8%, and fishing benefits declined only slightly (-1.7%);
- special benefit claims dropped by 2.5%, while total special benefits declined 1%.
Among regular claimants, two groups – young people and women – were particularly affected. Claims by women dropped by 20% compared to a 16% decline among men. Young people below the age of 25 filed 27% fewer claims than they had before reform.
The drop in claims by both women and young people can be explained by the work patterns of the two groups. Among youth and women are many new entrants and re-entrants to the workforce – people less likely to be eligible for EI. In addition, young people tend to find part-time jobs of short duration and women tend to work fewer hours than men – factors that affect eligibility.
Women, however, did make significant gains through the new EI system as a result of certain features of the reform such as the Family Supplement and the Small Weeks Adjustment Projects. For example:
- two-thirds of claimants receiving the new Family Supplement are women;
- 15% of women claimants received the Family Supplement compared to 8% of men who made claims;
- over half of all claims involving small weeks were made by women;
- average weekly benefits for women receiving regular benefits increased by 2% while those for men fell slightly;
- and total income benefits paid to women dropped by 13.5% compared to 18% for men.
Claims patterns varied from province to province, generally reflecting regional job growth. The claims decline was greatest in Alberta where the labour market was strong and least in the Atlantic where unemployment remained high. The drop in claims and benefit payments also reflects employment patterns in different sectors of the economy. Benefits to manufacturing employees declined by 19%, and to construction workers by 21%, reflecting improvements in the labour market; benefits to government workers declined by 47%, as structural reform in this sector slowed.
Self-employed fishers saw only a slight drop in benefits because of more flexible rules that made it easier for them to establish claims and to file for more than one claim per year.
Again, there was little decline in the payment amounts of special benefits. As expected, maternity and parental benefits – which go primarily to women who make almost all claims in this category – remained relatively stable.
Claims by people who have a history of past claims dropped 13% in the two years since reform, but their benefit entitlement period increased from 31 to 34 weeks.
Our findings on some specific reform provisions are as follows:
The intensity rule, which reduces the benefit rate upon successive claims, has begun to take effect. The objective of the rule is to discourage the use of EI as a regular income supplement, but not to excessively penalize those who make long or frequent claims. The provision affected 21% of all regular and fishing claims. This did not translate into a significant drop in benefit levels among affected claimants. Their average weekly benefits were only about$6 lower as a result of the intensity rule.
The extra support provided by the Family Supplement has provided greater benefits to a smaller but better targeted group of claimants in low-income families. Under EI, only one spouse can receive the Family Supplement, and this has reduced the number of claimants receiving the top-up. However, the average top-up has more than doubled to $29 per week. Two-thirds of the claimants receiving the Family Supplement are women.
Preliminary results on the benefit repayment (clawback) provision show that repayments rose from $20 million in 1995 to $70 million in 1996. This provision affects higher income earners.
Promising data are emerging from the Small Weeks Adjustment Projects – pilot projects designed to encourage claimants to accept weeks of work that pay less than $150. Preliminary findings show that the projects have enabled significant numbers of workers to collect higher benefits – an average of $19 more per week – and to maintain a greater attachment to the workforce. On average, those who participated in the projects increased their total number of hours worked by about 7%. More than half the clients who filed small weeks claims were women. The projects expired in November 1998 and were replaced by a new project expected to run for three years.
Employment Benefits and Support Measures
The new EI system placed a greater emphasis on getting people back to work through provisions called Employment Benefits and Support Measures (EBSMs). The EBSMs address structural unemployment and emphasize effectiveness, results, accountability, and local decision-making. Through partnerships – called Labour Market Development Agreements (LMDAs) – with the provinces and territories, the EBSMs can be adjusted to meet the needs of local labour markets. The federal government has concluded LMDAs with all provinces and territories except for Ontario; negotiations for an Ontario agreement began in April 1998. Implementation of the agreements is well underway in some jurisdictions but has not yet begun in others. The federal government continues to deliver EBSMs in some jurisdictions.
The new measures call for phasing out Training Purchases by the federal government by June 30, 1999. Instead, the provinces/territories will provide comparable assistance for individuals through loans and grants for skills training. Implementation of the new client-centred approach is proceeding at different rates in different jurisdictions. Pilot projects using this approach have been implemented, are underway, or are being planned in a number of provinces and territories. The phase-out of training purchases should speed up once the pilot projects are complete.
Overall, the evidence shows that the EBSMs are effective, with more clients being served at a lower cost per client. During 1997/98, there were nearly 500,000 EBSM interventions, a 9% increase compared with similar measures under the pre-reform system. Each region offered a different mix of programs and services, responding to individual client needs and local labour market conditions. Total spending on EBSMs was $2 billion, and 78% of this amount went to long-term interventions (i.e., those, such as training, that are normally more than a few weeks in duration and involve financial assistance). Another 12% went to short-term measures (i.e., those, such as counselling, that normally last from half a day to a few weeks). The cost for long-term interventions went down by $1,300 per participant between 1995/96 and 1997/98, largely due to increased flexibility in tailoring interventions to local needs.
The LMDAs call for services and programs to be delivered in both official languages where there is sufficient demand. Evaluation of official language services has just begun; therefore very limited information on this issue was available for this report.
Significant progress has been made in implementing a framework to make EBSM programs more accountable and focused on results. The framework identified clear objectives – number of EI claimants returning to work, cost savings realized, and number of claimants served – and targets for each objective. Reporting data showed that the target was exceeded for claimants returning to work and close to the mark for cost savings. The targets for clients served were not fully in place for 1997/98, so we do not report results for this objective.
To facilitate adjustment to the new EI system in high unemployment areas of the country, the government set up a program called the Transitional Jobs Fund. A preliminary evaluation shows that this three-year, $300 million program is meeting its goals. The Fund is expected to create 29,500 new jobs by the end of March 1999 – 89% of these jobs will be sustained for 1.5 years and most jobs (66%) are for semi-skilled labourers.
Community Adjustment
To evaluate how communities are adjusting to EI reform, we have been tracking the impact of reform in 14 selected communities across Canada. Our analysis included interviews with community leaders and focus group sessions. Four rounds of assessments have occurred so far, with the first three reported on in the 1997 Monitoring and Assessment Report. Round IV, which occurred during July and August 1998, is the focus of the current report.
This latest phase of the assessment found that knowledge and understanding of the EI system is improving, particularly among seasonal workers and employers. Community members found the hours-based system fairer and supported the provision of employment services and other support measures. Our analysis also found evidence that workers have been adjusting to the EI system through such behavioural changes as working more hours (to qualify for EI) and using new technologies to access EI and job information. In addition, workers, employers, and HRDC staff all believed that fewer people are attempting to defraud the system.
Although some behavioural change is evident, the analysis identified a number of reasons why more changes were not occurring. These include: lack of a solid understanding among many workers of the complex features of EI Part I; and lack of awareness on the part of workers about the government and non-government resources they can access in their community to assist in their re-employment.
Program Administration
EI reform introduced measures to standardize and simplify program administration. Changes were made in the areas of the financing structure and administrative procedures for employers. In addition, an existing program called Group Information Sessions (GIS) became more widely used and emphasized. The program coaches claimants in job search skills and helps them understand their rights and responsibilities under EI.
Savings
One of the objectives of the new EI system was to reduce program costs. It was expected that EI reform would achieve its savings through changes to income benefit payments, increased investigation and control, and measures to help the unemployed return to work. These measures have indeed had an impact, but so have the marked improvements in the labour market and the economy.
We looked at three factors contributing to the $2 billion decline in overall benefit payments in the two years since EI was implemented: a decrease in the number of EI beneficiaries, a reduction in the average length of claims, and a drop in the average weekly benefit. Of these factors, the first had the most significant impact.
About two-thirds of the drop in the number of beneficiaries was due to a stronger economy. The remaining one-third drop in beneficiaries is due, in part, to program changes that reduced the number of individuals who qualified for EI.
When all factors are considered, we conclude that about half the decline in benefit payments is due to EI reforms, and the other half to labour market developments such as fewer laid off workers and a new mix of unemployed.
Detection and increased prevention of fraud and abuse, as well as more use of Group Information Sessions, resulted in total savings of over $577 million in 1997/98.
Conclusion
The new system is providing temporary income support to Canadians between jobs, while giving them the tools they need to get back to work and discouraging over-dependency on EI. Significant savings are being achieved in the process. About half of the decline in total claims and benefit payments can be attributed to a stronger economy that has enabled many Canadians to find jobs and reduce their need for EI. The other half of the decline is due to reform measures that encouraged greater labour force attachment and provided programs to help people get back to work. Certain support measures such as the Family Supplement are better targeted to those in need, while measures aimed at preventing abuse of the system are also achieving results.
All in all, most results from reform were anticipated, though for some we require more data to understand them fully. These data will become available for subsequent reports, enabling us to provide a more complete picture of the impacts of EI reform over the next three years.