BUSINESS

EI Payments Down, Unemployment Up: What's Going On Here?

07/24/2014 04:23 EDT | Updated 07/24/2014 04:59 EDT
CP

Some taxpayers’ groups say Canada’s employment insurance system is turning into little more than a cash cow for the federal government, a tax disguised as an insurance premium.

The latest data on EI and unemployment likely won’t assuage their concerns.

The number of people receiving EI benefits in May dropped by 2.3 per cent from the month before, StatsCan reported Thursday. There were slightly more than 504,000 people collecting EI.

Now that should be good news, indicative of a strengthening job market. But StatsCan data shows that the number of unemployed people actually grew in May, by 1.1 per cent. There were 1.3 million Canadians listed as unemployed.

United Steelworkers economist Erin Weir says this likely has to do with the Harper government’s changes to the system, which have made the program less generous.

Under new EI rules that took effect this year, recipients’ job searches are more strictly monitored, and they are expected, in certain circumstances, to accept pay up to 30 per cent below what they had previously earned.

Cutbacks to Service Canada staffing and locations have increased wait times, with applicants typically waiting two months to receive benefits — a long time for households without income.

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“The federal government should instead improve the accessibility and duration of benefits for workers who paid into the program and are unemployed through no fault of their own,” Weir wrote at the Progressive Economics blog.

Weir calculates that little more than a third — 37.5 per cent — of unemployed Canadians actually receive EI payments after losing their job.

That’s part of the reason why anti-tax groups are also criticizing EI, arguing it has become a “cash cow” that does little more than fatten government coffers.

The Canadian Taxpayers Federation (CTF) says the government collected $3.3 billion more in revenue from EI in 2012, and that number grew to $4.2 billion in 2013.

Money collected from EI used to go into a fund separate from general government revenues. But in 2010, the Harper government raided the fund’s $57 billion surplus and added it to general government revenue.

That resulted in a lawsuit by a group of Quebec labour groups, who argued the government didn’t have the authority to raid the fund. The Supreme Court disagreed, ruling earlier this month that Ottawa has the constitutional authority to add EI payments to general revenue.