BUSINESS

EI Job Credit Introduced By Tories Costs $550,000 Per Job Per Year: PBO

10/09/2014 09:29 EDT | Updated 12/09/2014 05:59 EST
CP

The Harper government's recently announced EI premium break for small businesses will create only 200 jobs next year and 600 jobs the year after that, the Parliamentary Budget Office says in a new report.

But the three-year EI premium freeze that then-Finance Minister put in place last year will actually cost 2,000 jobs in 2015, and will reduce full-time employment by the equivalent of 8,000 jobs in 2016, the report said.

That's because, by freezing EI premiums, the government is keeping them at higher levels than it would have had to under new rules that see premiums adjust so that the fund breaks even. Those rules won't come into force because of the rate freeze.

The PBO also estimated that the EI premium cut for small businesses, known as the small business job credit, will cost the government $550,000 per job, per year. This is the amount of EI revenue the government foregoes for every job created, per year.

The Canadian Press reports:

OTTAWA _ The Harper government's $550-million small-business job credit will create just 800 net new jobs in 2015-16, while a freeze in employment insurance premiums could cost the economy 10,000 jobs over the same period, Canada's parliamentary budget office says.

The latest report from the budget office says the credit will create a total of about 1,000 "person-years'' of work, at a cost of $555,000 for each person-year.

The report also says that because EI premiums are frozen at higher levels than necessary to offset the costs of the job credit, thousands of jobs could be lost as a result.

"PBO estimates the premium rate freeze will reduce full-time equivalent employment by 2,000 jobs in 2015 and a further 8,000 jobs in 2016,'' the report said.

Starting next year, the job credit will effectively lower EI premiums for small businesses with annual contributions of less than $15,000.

Critics of the measure have complained the government should have gone further with a direct cut in premiums that would provide an immediate benefit to all businesses and employees.

That broader slash to payroll taxes isn't happening until 2017, the government has indicated.

The Conservatives haven't said why they're waiting for two years to implement that cut; the PBO report says EI premiums are currently 13 cents above the break-even level and will be 28 cents above the break-even level in 2016.

In 2017, the report says, EI premiums will start to go down, eliminating the surplus in the EI operating account.

Finance Minister Joe Oliver said the small-business job credit would benefit about 780,000 Canadian businesses when he announced the measure last month, but he didn't provide a job creation estimate.

The Canadian Federation of Independent Business, on the other hand, praised the announcement, estimating it would create 25,000 person-years of work over the next two to three years.

CFIB head Dan Kelly said he was puzzled by the PBO report, saying it's out of line with estimates from the organization's chief economist.

"I think their numbers are off,'' he said in an interview.

"I mean, this is a half a billion dollars back into the economy through essentially a payroll tax reduction, the most harmful form of tax to small- and medium-sized firms .... this has got to have a lot more impact than that.''

Kelly adds small business owners are "incredibly positive'' about the small business tax credit.

The opposition, meantime, pounced on the report.

"This represents gross waste and mismanagement; it's a fiasco,'' said Scott Brison, the Liberal finance critic.

"At a time when growth has stalled and the job market is soft, the Conservatives' high job-killing payroll taxes are making things worse. They're keeping EI premiums high to pad their books before an election and to fund programs aimed at getting votes.''

Nathan Cullen, the NDP's finance critic, was equally scornful.

"Time and again, we've seen Liberals and Conservatives misuse EI funds that belong to workers and employers,'' he said in a statement.

"Now Conservatives are using these funds for a credit that won't even do what it's supposed to — create more jobs for Canadians.''

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