Behind the spin: The real impact of Conservative EI reforms

| June 13, 2012
Illustration: Kelly Bastow

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Three questions are worth bearing in mind as we consider the proposal to reform EI.

First, what does public opinion reveal? Those with even a shred of respect for democracy will take into account what the priorities of the citizenry are.

Second, what are the justifications and rationalizations for the proposed reform? Editorial commentary in the elite media should provide us with some insight into the thinking behind EI reform.

Third, we need to ask ourselves what are the predictable consequences of EI reform. Rational policy will have an impact that reflects real priorities and real objectives. This final question, as we will see, is most illustrative.

Public opinion: No mandate for reducing EI

In regards to our first question, the following data from 2010 is instructive. When asked, 46 per cent of Canadians indicated they felt the level of income support provided by the EI program was adequate. Not a majority view here but a significant number. What is more revealing is that 39 per cent felt EI was insufficient and should be more generous. With 85 per cent indicating that EI was either sufficient or in need of expansion this hardly provides a mandate for reducing the program - an important fact if we care about a democratic process that enables the aspirations of the vast majority to guide policy formation.

Let us continue. Fifty-six percent felt the EI program worked well and only needed minor changes while 35 per cent felt major changes were needed. Did the 35 per cent want to see changes along the lines of proposed reform? No. The major change most hoped to see was an expansion of the benefit period. Again, we are not seeing overwhelming support for change. Rather Canadians prefer to see the program remain largely untouched or expanded not diminished.

The media's well worn script: Demonize seasonal workers in Atlantic Canada

Predictably, since public opinion and policy diverge, the editorial pages of the major media do not invoke public support as a justification for EI reform. Rather, the elite media follow a well worn script that demonizes the Atlantic Canadian seasonal worker. Maclean's magazine asserts that EI is "discriminatory" in that it "rewards seasonal unemployment and encourages a culture of grievance peddling." According to Maclean's, not only does EI erode the moral fiber of the hated Atlantic Canadian, EI "imposes a tremendous price on the Canadian economy as a whole."

Echoing this theme, Andrew Coyne writes in the National Post that because EI "raises costs to employers" in non-seasonal industries this results "in fewer people being employed." Coyne further asserts that removing the EI subsidy to PEI's potato and lobster industries would allow other, more stable industries to develop. This would supposedly free Islanders from their EI dependency trap.

Coyne is making an empirical prediction based on uncontroversial economic theory and we owe it him to test this theory. So let us ask the question, does employment increase as EI benefits are rolled back, and conversely does employment decrease as EI benefits become more generous? If we turn to analysis from the radicals at C.D. Howe Institute we read that, "[M]ajor changes to EI in 1990, 1994 and 1996 effectively increased the barriers and reduced the benefits available to recipients," but such changes had an "indeterminate effect."

In some instances individuals would turn to social assistance in order to make ends meet, and in other cases individuals would "search harder for an alternative job." Their conclusion is that, "macroeconomic conditions have an extremely strong impact" and declining unemployment (from 12 per cent in 1993 to 6-7 per cent by 2005) "was the single most important factor in reducing the incidence of [social assistance] benefits." We find similar radicalism echoed at the Centre for the Study of Living Standards, who state plainly that "[t]he basic problem in Atlantic Canada is one of a lack of employment opportunities, which leads to high unemployment."

These conclusions are the inversion of Coyne's assertion. Macroeconomic factors determine employment rates. As these conditions improve unemployment decreases. If history matters, there is no basis for asserting as fact the prediction that reducing EI benefits will stimulate job growth in any significant way. What if we ask the opposite question? When EI was introduced, did that increase unemployment? When federal employment insurance was introduced in the 1940s, Canada was entering into an economic boom, unprecedented in magnitude, which lasted 20 years. Again, EI was utterly insignificant; EI did not cause this boom, nor did it end it.

EI reform's real impact... on the 99% of unemployed

Lastly, what are the predictable consequences of EI reform? Here we need to pay close attention to the regional demographics of Canada. Let us assume EI reform achieves its maximal objectives and every single seasonally unemployed worker in Atlantic Canada is permanently removed from EI. This would mean approximately 20,000 workers - 1 per cent of EI recipients - would no longer receive benefits. A result such as this is statically insignificant and therefore can't be a motivating force behind EI reform.

What about the other 99 per cent receiving EI, 85 per cent of who live west of the New Brunswick border? How will EI reform affect these workers? The answer is obvious. EI recipients will be forced off of EI sooner, they will be forced to take jobs at a lower rate of pay, and families will suffer as commuting times increase and/or families have to relocate.

Workers at the lower end of the income ladder will be kicked off into the waiting hands of the most rotten employers around. These reforms are an attempt to depress wages for all Canadians and to give employers more power over workers. They are a gift to capital and a slap in the face for labour.

The major media have done an excellent job of shifting attention to the 1 per cent of seasonally unemployed EI recipients who are immaterial in the overall picture. Further, they have brilliantly inverted the relationship between general employment rates and EI claimants. Last, they have exercised their social role of blaming the victims superbly.

For those of us who privilege honest inquiry over ideology, the reflexive submission to authority displayed by the major media on this issue is abhorrent. We would do well to avoid their distracting shenanigans. Rather we should ask what effects these reforms will have on the vast majority of Canadians - you can be certain that those responsible for these reforms have given this question serious thought.

 

Chris Walker writes for the NB Media Coop, where this article first appeared. It is reprinted here with permission. 

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