Employment Insurance Regulations - Amendments

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Description

The purpose of section 77.6 is to put in place an Employment Insurance (EI) pilot project which will test the impact of increasing EI entitlement by providing five additional weeks of benefits to EI claimants, up to the maximum of 45 weeks of benefits. The pilot will build upon the design and results of EI Pilot Project No. 6 which ended on June 4, 2006.

One of the results of EI reform was to reduce the total number of weeks of EI benefits available to claimants with relatively low weekly hours of work. Evidence indicates that, in general, claimants have adapted well to the new hours-based system. However, for some workers the very nature of their work prevents them from obtaining sufficient hours of work to qualify for EI benefit durations long enough to cover the off-season year after year. This is particularly true for those employed in seasonal industries, where work is often sporadic and limited by weather and resource availability.

Seasonal industries are an important part of the Canadian economy. Although seasonal workers represent only about 3% of the labour market, their work forms an important part of our social and economic fabric. The economic importance of seasonal industries goes far beyond their direct impact on Gross Domestic Product (GDP) and employment figures.

Despite recent adjustments aimed at assisting workers in seasonal industries and other non-standard workers, experience suggests that there are anomalies in the way some clients and industries interact with the EI program. Seasonal gappers are frequent EI claimants whose combined weeks of seasonal work and EI benefits are not sufficient to provide income each week of the year. As a result, they experience an income "gap" when their EI claim runs out before they return to their seasonal job. This is the so-called "gappers" issue.

In addition, the labour market has changed significantly since the 1996 reform, with an increase in the proportion of those employed in part-time and other non-standard work, which often offer shorter employment spells. As a result, a significant number of workers face situations where their EI benefits end prior to finding new employment. While attempts have been made to strengthen work incentives for these claimants through provisions such as the small weeks provision, these incentives have focused on benefit rates and have not addressed issues related to benefit duration. This has led to questions regarding the adequacy of EI entitlement in some situations.

Over the past two years, issues relating to benefit durations were examined in the context of EI under Pilot Project No. 6, which increased EI entitlement in regions of high unemployment by providing five additional weeks of benefits to EI claimants, up to the maximum of 45 weeks of benefits. The assessment of the effects of Pilot Project No. 6 was met with analytical challenges since it was necessary to examine claims that were as "mature" as possible – that is, to ensure that sufficient time had passed to observe claims that receive extra weeks. For example, an individual with a claim beginning in December 2004 with 40 weeks entitlement would not benefit from extra weeks until October 2005, and there is an approximately 3-month lag before a claimant's information is available for analysis.

Evidence available on Pilot Project No. 6 indicates that while the Pilot Project was effective in temporarily reducing the number of seasonal gappers or the size of their gap in the pilot regions, observed changes in the duration of EI benefits used by claimants who are not seasonal gappers warrants further assessment.

More specifically, although Pilot Project No. 6 reduced or eliminated the annual income gap for the 13,000 seasonal gappers in pilot regions, data indicates the average claim duration of EI claimants that did not remain on claim long enough to use any of their additional 5 weeks of entitlement increased by approximately 1.5 weeks. This trend was observed despite the fact that pilot regions as a whole experienced a decline in unemployment, and during the same time period the average claim duration of similar claimants in non-pilot regions decreased by approximately 1 week.

The pilot project will further test the impact of increasing EI entitlement to EI claimants, to facilitate a more comprehensive assessment and understanding of any potential negative labour market impact of providing access to additional EI entitlement. Additional data will enable more concrete conclusions regarding any behavioural impact arising from the pilot, both among the seasonal gapper and non-seasonal gapper populations. The design of the pilot will build on the design of Pilot Project No. 6 and will continue to test whether providing additional weeks would:

• help address the annual income gap faced by a subset of EI claimants known as seasonal "gappers";
  
• maintain current incentives to work; and
  
• have any adverse labour market effects on other EI claimants.

Section 77.6 – Pilot Project Number 10

For an 18-month period, the pilot project will continue to provide up to five additional weeks of EI benefits in 21 of the 24 EI economic regions included in Pilot Project No. 6. The pilot will not continue in 3 of the 24 regions where economic conditions have strengthened significantly over the last two years and EI unemployment rates have remained below 8% in the six months prior to the expiry of Pilot Project No. 6. The EI regions that will not continue in the pilot are:

• Southern Coastal British Columbia
  
• Southern Interior British Columbia
  
• Northern Alberta

Section 77.6 puts in place a new Pilot Project No. 10 that will include each claimant

(a) whose benefit period is established in the period beginning on June 11, 2006 and ending on December 9, 2007; and

(b) who, at the time the benefit period is established, is ordinarily resident in a region described in Schedule I that is set out in Schedule II.6.

As claims are only made effective on the Sunday of the week in which there is an interruption of earnings or the week in which the application is filed, claims starting on or after June 11, 2006, will fall under pilot project No. 10. Similarly, workers who have an interruption of earnings or apply for benefits from June 4, 2006 to June 10, 2006 inclusive will fall under Pilot Project No. 6.

Section 77.6 replaces the entitlement table referred to in subsection 12(2) of the Employment Insurance Act with a table in Schedule II.7 that sets out the number of weeks of benefits payable to claimants involved in the pilot project based on a combination of hours worked and the unemployment rate in the claimant's region. Under the pilot project, all EI claimants who normally reside in the EI economic regions set out in Schedule II.6, including seasonal workers who run out of EI benefits before returning to their job, as well as other exhaustees, would have access to five additional weeks of entitlement. The pilot will continue to apply to claims for regular benefits but not to benefit periods established under the Employment Insurance (Fishing) Regulations, nor to benefits periods in regard to maternity, parental, sickness or compassionate care benefits.

Example

The example set out below demonstrates the impact of the new pilot project on individual claimants.

A worker lives in a region where the unemployment rate is 14.5% and normally has a seasonal pattern of 16 weeks of work (i.e., 560 hours at 35 hours per week). Under the pre-pilot rules (subject to the normal entitlement conditions), the claimant would be entitled to up to 30 weeks of EI benefits when he is laid off. Under the new pilot project this claimant would receive up to 35 weeks of benefits.

Alternatives

Alternatives considered included ending the pilot and not continuing to test the labour market and behavioural impact of increasing EI entitlement to EI claimants or proceeding with a permanent change to the EI program based on results currently available from Pilot Project No. 6.

In light of the need for a more complete understanding of the observed increase in average claim duration of EI benefits among EI claimants who are not seasonal gappers, initiating a new pilot that would further examine the issue was considered to be the preferred approach.

Benefits and Costs

It is estimated that approximately 330,000 EI claimants per year in pilot regions will have access to up to five extra weeks. Of these, it is estimated that approximately 95,000 EI claimants will be paid extra weeks including 12,000 seasonal gappers.

The estimated cost of benefits for the pilot project is $90M per year. The total cost over the 18 month life of the pilot is estimated at $138.3M and $2.2M in administrative costs, which does not include any costs resulting from behavioural changes that are being tested by the pilot project.

It is estimated that discontinuing the pilot in three regions (where economic conditions have strengthened significantly over the last 2 years, and unemployment rates have been consistently below 8% in the six months prior to the end of Pilot Project No. 6) will decrease costs by approximately $15M per year and decrease the number of seasonal gappers covered by 910, as compared to the previous pilot project.

Consultation

In developing this proposal, the Government consulted with key representatives of the regions involved in Pilot Project No. 6, in particular, Members of Parliament, and took into account representations and correspondence from concerned individuals, stakeholder groups and businesses.

Compliance and Enforcement

An analysis of the pilot will be included as part of Human Resources and Social Development Canada's annual Monitoring and Assessment Report.

Contact

Judith Richardson
Senior Policy Advisor
Legislative and Regulatory Policy Design
Employment Programs, Policy and Design
Human Resources and Social Development Canada
140 Promenade du Portage, 3rd Floor
Gatineau, Quebec
K1A 0J9
Telephone: (819) 994-4455
FAX: (819) 934-6631