2001 Monitoring and Assessment Report
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Canadian labour market
While the Canadian labour market continued to perform well for most of 2000/01, a downturn in the economy became evident in the fourth quarter of the reporting period. For example, during the first quarter, employment growth was 2.8%, while in the final quarter, it was only 1.6%. Overall, employment grew by 330,000 or 2.3% in this reporting period. Full-time employment growth was 2.5%, nearly double the rate of growth of part-time jobs and 90% of all new jobs created were full time. Further, employment growth was concentrated in paid employment, with 84% of all jobs falling into this category. This is significant because paid employment is insured under Employment Insurance (EI) whereas self-employment is generally not.
However, the pattern of employment growth during the 2000/01 reporting period should be noted. The number of people who were unemployed began to reflect the weaker economy in the last quarter of the reporting period. The unemployment rate in March 2001, the end of the reporting period, was 7.0%, up from 6.8% in April 2000, the beginning of the period. It is also important to note that the year-over-year change in the unemployment rate was different for women than for men. In March 2001, women's unemployment rate was 6.5%, down from 6.7% at the beginning of the period. Meanwhile, men's unemployment rate increased to 7.5% in March 2001, from 6.9% in April 2000. The increase in the unemployment rate for men can be traced to a significant slowdown in the manufacturing sector in the final quarter of 2000/01.
The weakening of the economy between December 2000 and March 2001 is significant, as the period since EI reform in 1996 has been characterized by uninterrupted growth and a declining reliance on EI. As the economy began to weaken, and unemployment rates increased towards the end of the reporting period, Canadians needed to turn to the program in greater numbers. It is within this context that the responsiveness of EI is particularly important.
The key features of the Canadian labour market in 2000/01 were as follows:
• Employment growth was higher for women (2.8%) than for men (1.8%) in 2000/01. This reflects significantly higher growth in the services-producing sector (2.6%), where women tend to be more highly represented, relative to the goods-producing sector (1.2%).
• The labour market situation continued to improve for women as their unemployment rate fell to its lowest level since 1976. Further, while women continued to be more likely than men to work part-time, employment growth for women in 2000/01 was almost entirely in full-time employment. Men experienced higher growth in part-time employment than in full-time work.
• Nearly two-thirds of new jobs created for youth in 2000/01 were full time. However, despite strong employment growth (3.6%) for youth during the reporting period overall, employment growth actually declined in the fourth quarter. Historically, youth have been one of the first groups to be adversely affected by an economic downturn.
• Older workers continued to experience higher than average employment growth at 3.8%. However, growth rates declined significantly during the reporting period. In the first quarter, employment growth for older workers was 5.7%, compared to just 1.7% in the fourth quarter.
• Self-employment appears to have reached a plateau. After increasing throughout the 1990s and reaching a peak of 16.7% in 1998, self-employment represented 16.0% of the Canadian labour force in 2000. The fact that the proportion of the labour force that is self-employed has remained high, despite strong employment growth in paid employment, could indicate that its rise throughout the 1990s was not just a cyclical response to the lack of job opportunities in paid employment.
• Education continued to be a critical factor in determining labour market success. While employment grew by 3.2% for post-secondary graduates and 3.3% for those with a high school education, employment declined in 2000/01 for those with less than a high school education. Those with the lowest skill levels become the most vulnerable to job loss when economic activity begins to slow.
Income benefits
Total new claims for EI benefits increased by 2.4% in 2000/01, while total benefits paid declined by 1.0%. This disparity can be explained by the fact that most of the increase in new claims occurred in the fourth quarter of 2000/01 (11.1%), when economic activity slowed. The matching benefits were, therefore, not paid until 2001/02, after the current reporting period ended. The breakdown of claims by type of benefit was as follows:
• regular benefits claims increased by 0.8% to 1.37 million;
• fishing benefits claims increased by 11.0% to 28,229; and
• special benefits claims increased by 6.0% to 425,550.
Benefits paid were broken down as follows:
• regular benefits declined 2.7% to $6.8 billion;
• fishing benefits increased 8.6% to $235.6 million; and
• special benefits increased 5.2% to $1.8 billion.
The fact that EI is there for Canadian workers when they need it became evident when the economic slowdown had a disproportional impact on those with strong labour force attachment; that is, those who had never or rarely used the program in the past. This is reflected by the fact that there was an increase in claims of 8.1% by those with long durations of insured employment prior to filing a claim. In contrast, claims for those with short and medium employment spells actually declined in 2000/01. Moreover, new claims increased for first-time and occasional claimants, yet decreased slightly for frequent claimants.
Regular claims for women fell by 2.5% while those of men increased by 3.1%. This follows a pattern noted in previous Monitoring and Assessment reports, and demonstrates the continued strength in the labour market for women. The increase in claims for men in 2000/01 reflects the downturn in the economy in the final quarter, which was tied to a decrease in demand for consumer goods in the United States. The economic slowdown had a considerable impact on manufacturing industries, where men tend to be more highly represented, and explains much of the increase in regular claims.
Regular claims for youth were unchanged in 2000/01, despite strong employment growth for the period. This was a direct result of the downturn in the economy in the fourth quarter when youth claims increased by 7.3%, highlighting the vulnerability of youth in times of economic uncertainty.
Regular claims by older workers increased by 4.7% in 2000/01. Moreover, claims by older workers with long durations of insured employment increased by 12.8% compared to an increase of 8.1% for all workers with long durations of insured employment. This is important because older workers tend to be unemployed for longer periods than other workers when they are between jobs, largely because they are less mobile.
In order to focus on the impact of EI at a more micro level, the 14 representative communities were examined. Analysis showed that those communities that rely upon seasonal employment continued to experience high unemployment rates and a proportion of frequent claimants, which was well above the national average. However, even in communities with the highest rates of unemployment, claimants used only about 70% of their EI entitlement, indicating that the program was responsive to local labour market conditions.
Coverage was analyzed using a number of different measures. Analysis of the employed population, using the Survey of Labour and Income Dynamics (SLID) demonstrated the responsiveness of the Variable Entrance Requirements to the labour market. EI eligibility was relatively the same in regions with high unemployment rates as in those with low unemployment rates, due to automatic adjustments to the entrance requirements. Evidence indicates that 88% of paid employees would have been eligible for EI had they lost their jobs in December 1998, with eligibility being almost the same for men (97%) and women (96%) working full time.
Alternatively, other measures of coverage focus on the unemployed population. The Employment Insurance Coverage Survey (EICS) indicated that 83.2% of the EI target population was eligible to receive EI benefits in 2000, up 2.8 percentage points from 1999. The EI target population consists of paid employees who lost or quit a job with just cause in the last 12 months. Additionally, although it is too broad of a measure to reliably reflect the effectiveness of the EI program because it includes individuals who the program was not intended to cover, the beneficiary to unemployed (B/U) ratio has remained stable at 45%.
Special benefits claims continued their upward trend in 2000/01, increasing by 6.0%. The number of new special benefits claims increased in the fourth quarter, that is, the first three months of 2001. It is believed that this increase was largely due to the reduction in the number of hours required to qualify for special benefits from 700 to 600, and the enhanced duration and flexibility of parental benefits, effective December 31, 2000. Increased participation by men in parental leave also became evident as men's claims for biological parental benefits increased by 44% over the entire reporting period, and by 62.6% in the first three months of 2001, when the extended duration and enhanced flexibility measures came into effect. However, it should be noted that because the new parental regime was only in effect for three months of the reporting period, it is too early to draw firm conclusions on its impacts.
Claims for sickness benefits increased for the third consecutive reporting period. In 2000/01, sickness claims rose by 8.4%, contributing to the increase in special claims. Following the commitment made in last year's Monitoring and Assessment report, further analysis of sickness benefits was undertaken. Results showed that most of the growth in sickness benefits since EI reform has been due to increases in claims for pure sickness benefits, that is, sickness benefits that are not combined with regular or other types of special benefits. The main factors driving the increase in pure sickness benefits were growth in paid employment, the aging of the EI-eligible population, and year-to-year claims volatility, which occurs as a result of different rates of economic growth across sectors of the economy. It is suspected that when growth occurs in the services-producing sector, where many workers are not covered by private benefit plans, claims for sickness benefits will increase. Sickness benefits will be examined further in subsequent reports.
The analysis of the Small Weeks pilot project in this year's report covered the period from the introduction of the pilot in November 1998 to March 2001. Results indicated that about 13% of claims established in participating regions included small weeks. Women benefited from the project more than men, filing 59% of all claims with small weeks. Youth filed 18% of small weeks claims. Evaluation results indicated that the Small Weeks project has worked as intended, with claimants increasing their total weeks of work by 2.1 weeks. The small weeks provisions have been made a permanent and national feature of the EI program, effective November 18, 2001.
Benefits paid to fishers increased by 8.6% in 2000/01. This was the result of an increase in the overall value of resources harvested and the elimination of the intensity rule during the reporting period. Analysis continues to indicate that fishers are qualifying for benefits with relative ease as 98% of fishing claimants qualified for benefits with more than the minimum required insured earnings.
The average weekly top-up paid under the Family Supplement increased by 1.6%. However, total benefits paid declined by 2.3%. The strong labour market of 2000 resulted in more family incomes rising above the $25,921 income cap and, in turn, has led to fewer individuals qualifying for the Family Supplement.
As was reported in previous Monitoring and Assessment reports, the proportion of claimants reporting work while on claim, a flexible provision designed to promote work attachment, has been declining. This trend continued in 2000/01. In order to determine whether the design of the provision is creating disincentives to work while on claim, analysis using the EI administrative data was undertaken. Preliminary analysis indicates that claimants may be hesitant to accept a week of work while on claim unless they can reduce their benefits to zero and keep that week of entitlement for later use. Moreover, it suggests that first-time and occasional users are much more willing to accept a partial week of work than frequent claimants. The provision will be further analyzed to better understand how its design affects the incentive to accept work while being on claim.
Some elements of EI reform were designed to reduce the costs of the program while still providing adequate support to claimants. Initially, the analysis of savings in the report was designed to focus on incremental savings to regular benefits from the 1996 reform measures that were intended to generate cost reduction. These included the maturing of the Maximum Insurable Earnings freeze, the intensity rule and the benefit repayment provisions, partly offset by the increased costs of the Family Supplement. However, the EI program has undergone a number of changes over the past two years, making it difficult to separate the relative impact on savings from the 1996 reforms, the more recent changes to special benefits in Bill C-2, and changes in the economy. Nevertheless, the analysis that could be done indicates that savings from these measures were in line with the expectations set in 1996.
In support of legislative changes and in response to increased claim loads, an administrative strategy is in place to ensure that the program remains responsive to clients' needs. To this end, HRDC is working with employers and workers to ensure that the highest quality service is provided. In line with HRDC's objective of providing quick, efficient service to its clients, a new initiative was introduced to permit more accurate and timely processing of EI claims, and efforts continued to enhance the balance between speed of service and accuracy and quality of payments. Further, EI claims were received on a pilot basis over the Internet, expanding the choices available to Canadians. Additionally, EI appeals continue to be heard in a timely fashion by independent boards in 83 appeals centres across Canada.
Employment benefits and support measures
The 1996 reform emphasized the use of active re-employment measures, known as Employment Benefit and Support Measures (EBSMs). Partnerships with the provinces and territories established through Labour Market Development Agreements (LMDAs) allow provinces/territories to use EBSMs to meet the needs of local labour markets. Both the number of clients served and the number of EBSM interventions remained stable in 2000/01, despite the increase in the number of new EI claims. This was due to the fact that most of the increase in claims occurred in the final quarter of 2000/01 and there is a lag between the time that an individual becomes unemployed and the time when that individual seeks re-employment assistance. Further, not all new EI claimants will seek assistance through EBSMs.
As was the case in previous reporting periods, short-term interventions accounted for the majority of new interventions in 2000/01. At over two-thirds, this is reflective of a strong economy and labour market where short-term interventions are often determined to be the best option to meet clients’ needs.
Women's participation rate in both long- and short-term interventions remained relatively stable in 2000/01. While women participated in nearly half of all interventions, overall, they were more likely than men to participate in short-term rather than long-term interventions because fewer women participate in apprenticeship training programs. Long-term interventions increased for persons with disabilities, decreased for Aboriginal peoples, and remained stable for members of visible minorities.
Finally, the key EBSM success indicators of returns to work and unpaid benefits remained relatively stable in real terms in 2000/01, reflecting the overall strength of the labour market.
Summing up
The responsiveness of the EI program to the economy was confirmed in 2000/01. As growth slowed at the end of the reporting period, Canadians accessed the program in greater numbers. Increases in claims for EI benefits occurred among Canadian workers who do not often use the program. That is, those with long durations of insured employment and first-time and occasional claimants. Moreover, the Variable Entrance Requirements ensured comparable access across all regions. Variable Entrance Requirements are designed to respond quickly to changing labour market conditions by extending the entrance requirements and the duration of benefits as unemployment increases.
While the elements of EI reform continue to meet their primary objectives of providing temporary income support to people who lose their jobs and helping them return to work, the program was modified in 2000/01 to address some provisions that were not functioning as well as expected. As a result, the intensity rule was eliminated, the clawback threshold was raised, and first-time claimants and special benefits claimants were exempted from the clawback provisions. Furthermore, the re-entrant rules were adjusted so that parents re-entering the labour force after taking an extended leave to care for young children faced the same entrance requirements as other claimants in their region.
In 2000/01, adjustments were also made that extended the duration of parental benefits and improved its accessibility and flexibility. However, it is too early to draw firm conclusions regarding the impact of these provisions.