Canadians have traditionally been a socially-conscious society, and have taken great care to implement social programs to maintain a high standard of life for all. One of the most important of all the social initiatives taken has been unemployment insurance, which has assured continuous income to workers in the advent of layoffs and cutbacks. Although threatened at times by unsympathetic administrators and deficit-fighting governments, the basic elements of unemployment insurance can be attributed to the continuous lobbying and campaigning efforts of labour unions. Through the pressure put on governments, and the support of thousands of workers, unemployment insurance has been maintained and improved, and continues to provide income and peace of mind to thousands of hard-working Canadians.
When unemployment insurance was first introduced, it was a guarantee of income to those that lost their jobs due to seasonal layoffs or cutbacks, those that left their jobs to return to school or to raise their children, or those that have just entered the labour force after an extended leave (perhaps due to an injury that occurred in the workplace). Cyclical unemployment is one aspect of unemployment that required unemployment insurance to be a flexible fiscal policy. In cyclical unemployment, unemployment rises and falls with gross domestic product (GDP) (the value of all domestically produced goods and services in a year). When the GDP falls, the economy goes into a recession, unemployment rises, and so do the number of claims to unemployment insurance. This puts a lot of strain on a financially strapped national reserve, but in a period of expansion, unemployment goes down, and the amount of money saved in this period makes up for the extra amount demanded during a recession.
With a growing population, and an increase in the labour force in Canada, more and more working-age Canadians are claiming unemployment insurance benefits. This trend, as strange as it may seem, is actually a goal of government which wishes to maintain a labour surplus, and an unemployment rate of around eight to ten percent. With this moderate level of unemployment, governments can encourage expanding industries to set up in their province or country due to labour being available. Maintaining a high rate of unemployment requires governments to have policies in place to ease the burden and hardships created by this fiscal policy of high unemployment, such as employment insurance. However, the recent trend has been to keep this high level of unemployment while cutting transfer payments and the amount of benefits available to the unemployed.2 This trend has alarmed many, but little pressure has been put on governments to reverse this, besides the always vocal labour unions that have remained critical of government policy for decades.
The labour movement was instrumental in pressuring the government to institute unemployment insurance in the 1930’s when the depression caused a 20% to 25% unemployment rate throughout the decade. The labour movement saw unemployment insurance as a social tool, helping government to realize that society is responsible to those who faire less well in the economy, giving the workers who have lost their jobs dignity, income, and bargaining power despite the depressed state of the economy.3 Throughout the development of our country, the fundamentals of unemployment insurance protection have also developed and changed. One of those developments include cost-sharing, where employers and managerial workers pay the greatest percentage of the unemployment insurance system, which means less unemployment cost is the responsibility of employed workers (who make considerably less than owners and managers) .
Other economic functions of unemployment insurance that have helped governments and the public include a smoothing of the economy by allowing unemployed workers to have purchasing power, and actually preserving thousands of jobs.5 A strongly promoted benefit of unemployment insurance by labour unions is the bargaining power it gives employees against their employers. Employers can rely on unemployment insurance as a source of income if forced to quit their jobs due to poor working conditions or outrageous production quotas, or fired for standing up for their rights.6 Unemployment encourages workers to band together and not fear the reprisals of demanding employers, being able to bargain for better working conditions and a better quality of life for the workers and their families.
In 1971, unemployment insurance was reformed to its maximum benefit rate in Canadian history, at 75% of the claimant’s average annual salary, with eight weeks of work needed to qualify and almost universal coverage. After 1971, however, the benefits and qualifications to receive unemployment insurance gradually changed, being cut back to a 50% benefit rate, a maximum duration for benefits of 45 weeks, hours worked instead of weeks worked used to qualify, and higher entrance requirements for new workers and re-entrants (as well as being changed in name from unemployment insurance to employment insurance) . These cutbacks ($2.4 billion annually in 1994, and $1.9 billion annually in 1996) are a response of deficit and debt-fighting governments, both Conservative and Liberal, to cut government expenditures deemed unnecessary or over-funded. Unfortunately, most of the cutbacks came at the expense of social programs and transfer payments to the provinces.
In the past five years, the percentage of GDP spent by governments on social programs has decreased steadily, from a high of 29.4% in 1993, to a low of 26.9% in 1995.8 These cutbacks, blamed on the reduction of the debt, are more a response by governments to pressure being applied by business interests. Business does not enjoy paying unemployment insurance premiums, and, with the help of the government and the media, has made unemployment insurance and unemployment insurance collectors seem bad and unmotivated.
For business, however, UI is the most hated of all social programs - it pays workers’ 'incentive' (i.e., eases their desperation), and forces employers to "compete" with UI in their wage offers. Over the last 25 years, business has succeeded in changing the public’s view of unemployment and hence the rationale for UI: Unemployment is the fault of the individual, not of society, so we emphasize individual responsibility rather than social insurance. The jobs still aren’t there, but now it is seen as "efficient" and even "caring" to reduce income security for the unemployed.9
Despite the cutbacks in benefits received by the unemployed, the unemployment insurance program is three times as expensive as it was in the 1970’s.10 In fact, the shift from unemployment insurance to employment insurance does not insure a steady income as much as it does stead employment, even at a reduced usage. In Ontario, for example, one must work to receive employment insurance benefits, whether that be cleaning ditches, patching roads, or any number of small jobs that allow the government to save money while discouraging new and repeat users for filing for employment insurance. Although this seems well intended in principle, this work-for-your-cheque program has come at the expense of retraining and re-education programs that would improve workers’ skills and education, which would, as many governments and administrators fear, increase workers’ knowledge and bargaining positions.
Yet, instead of retraining and re-education receiving more funding, unemployment insurance and employment insurance premiums have increased, for a surplus of approximately $9.4 billion in 1997, most of which went to pay off Canada’s debt.1’ The increase in these premiums was a result of the Free Trade Agreement, which led to plant shutdowns and layoffs in many parts of Canada. However, the high profits made in the early 1990’s were too hard for the government to give up or reduce, so the premiums increased while employee benefits went down. If some restitution for this skimming of the unemployment insurance system will be made when the debt and interest payments are significantly paid remains to be seen.
The final battle over the unemployment insurance surplus has yet to be fought. Business groups want the savings from benefit cuts channelled back in the form of reduced unemployment insurance premiums - and they make all sorts of outlandish promises about massive job creation in return. Labour argues that surplus monies should be denoted to the restoration of unemployment insurance benefits and a cushion for the next recession. 12
One of the worst aspects of the new employment insurance system is the government’s hading of the job creation torch to the private sector. This is particularly disturbing when considering that the federal government is subsidizing employers to create jobs, most of which are low-wage occupations that significantly weaken the position of workers, especially when faced with the possibility of unemployment. Unions such as the Canadian Union of Public Employees (CUPE) and the Canadian Auto Workers (CAW), as influential as they are, are also being severely undermined by the practice of subsidizing undesirable, low-paying employers because workers are discouraged from attempting to organize and join a labour movement for fear they will be layed off and will fail to qualify for unemployment insurance benefits. Labour unions have not only been very vocal and critical of the current state of unemployment insurance, but have also been actively lobbying the government for improved working conditions and better unemployment insurance benefits with cheaper premiums for all working class Canadians.
As previously mentioned, labour unions have been extremely vocal with their displeasure of the unemployment insurance system and cutbacks within it, and have motivated the public to voice concern over changes in unemployment insurance, and take their local Member of Parliament and the government to task over ignoring the best interests of the workers and unemployed section of the Canadian labour force. Behind the leadership of well-respected union executives, such as Bob White (national president of CUPE) and Buzz Hargrove (president of CAW), and with smart, strategic campaigns against these changes, the public has already made many demands that have influenced government fiscal policy. The pressure on the Federal Liberals was evident during the 1997 election campaign, when the unemployment insurance cuts and high premiums were spotlighted in the media by unions, and billboard ads were taken out in every major city across the country by the Canadian Union of Postal Workers, voicing their displeasure with the Liberal fiscal record. Only in recent months, when the 1998 federal budget was revealed, did the efforts of unions and the Canadian public pay off in an increase in transfer payments to the provinces for health care and education. Still, little has been done about the unemployment insurance problem, but with balanced budgets and a strong call for reductions in taxes, the pressure is very high on the Chretien/Martin government to reduce premiums and increase benefits.
It is clear that without the interest and involvement of unions to speak up for and demand better rights for working class and underprivileged Canadians, the large businesses and business- influenced government would have a tighter grasp on the Canadian economy. With the investment of labour in policy decisions, the bargaining power of workers is enhanced, the livelihood of the many millions of unemployed in Canada is kept at a respectable level, and the usage of unemployment insurance surpluses by government is closely monitored. Without the involvement of unions in the unemployment insurance reform process, the benefits of unemployment insurance may have been completely lost, with right-wing political agendas gaining momentum and unemployment insurance users having the negative image of being lazy. With the help of labour interests, and the days of government deficits finally over, the situation for unemployment insurance and its users are sure to improve.
1. Bade & Parkin, 750.
2. Bade & Parkm, 883-884.
3. Economic & Social Action, 2(1), 6.
4. Economic & Social Action, 2(1), 6.
5. Economic & Social Action, 2(1), 7.
6. Economic & Social Action, 2(1), 7.
7. Economic & Social Action, 2(1), 4.
8. Annual Economic and Social Indicators, CUPE website.
9. Economic & Social Action, 2(1), 6.
10. Economic & Social Action, 21, 9.
11. Economic & Social Action, 2(1), 8.
12. Economic & Social Action, 21, 9.
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Corak, Miles. Unemployment Insurance, Work Disincentives, and the Canadian Labour Market: An Overview. Ottawa: Statistics Canada, 1994.
Maki, Dennis, Jane Friesen and Tom Siedule. The Influence of Legislative Changes to Unemployment Insurance on the Economy, 1971 -94: A Full-System Simulation Study. Ottawa: Human Resources Development Canada, 1996.
McGilly, Frank. Ideology and Public Assistance in Canada: Reflections on the Use and Abuse of a Slippery Concept. Ideology, Development, and Social Welfare. Bill Kirwin, ed. Toronto: Canadian Scholars’ Press Inc., 1996. 1-28.
Swartz, Donald. Capitalist Restructuring and the Canadian Labour Movement. The Challenge of Restructuring. Jane Jenson and Rianne Mahon, eds. Philadelphia: Temple University Press, 1993. 381-402.
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