Employment Insurance for the future of work, right now

This posts offers my written statement for a presentation made on February 23rd to the Canadian House of Commons, Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities as a part of its Review of the Employment Insurance Program.

 

Employment Insurance has been found wanting.

It has been found wanting for decades.

It was slow to respond to the Great Recession of 2018, and left many Canadians, particularly in central Canada, with poor and inadequate income insurance.

It was slow to respond to the collapse of commodity prices in 2014 that devasted the jobs and livelihoods of many Canadians, particularly in Alberta, leaving them with poor and inadequate income insurance.

And of course, it was slow to respond, indeed stalled almost completely, to the COVID pandemic, leaving all working Canadians, almost without regard to their station in life, with poor and inadequate income insurance.

But many Canadians have long been shut out or at best under-served by this crucial pillar of our social insurance system, a program that is solely under federal responsibility.

Workers in the arts and culture industries; self-employed workers; lower paid workers with intermittent jobs; quitters, new labour market entrants, the young as well as those in mid or late careers.

Employment Insurance has been found wanting, many Canadians have experienced that for decades, and now is well beyond the time to do something about it.

The government can proceed immediately with a series of important changes that are well within its administrative capacity, but it also must proceed with an eye to more fundamental changes in the near term that may require more consultation.

But before I outline these immediate-term and near-term possibilities, let me tell you what Canadians don’t need more of.

They don’t need more platitudes about getting a better education, getting more training. The EI program already transfers almost $3 billion to the provinces for programs of this sort, some are effective, some less so.

But the government doesn’t need to spend more money on training through EI, and putting more responsibility on individuals to adjust to the storms of a turbulent job market.

Canadians, in the first instance, need better and more complete income insurance. My suggestions are directed to this need.

Continue reading “Employment Insurance for the future of work, right now”

An Employment Insurance system for the 21st century: Lesson 2, The future of work calls for better income insurance

The COVID pandemic has fast-forwarded many changes in the way employers manage, monitor, and motivate their employees. The future of work is here and will involve more insecurity for many workers. The Canadian federal government can offer better and more appropriate income insurance by responding with both quick and easy, and with more fundamental changes to the Employment Insurance program.

 

The 2020 Speech from the Throne boldly claims that “This pandemic has shown that Canada needs an [Employment Insurance] system for the 21st century, including for the self-employed and those in the gig economy.” That is a tall order, a major overhaul of a complicated program in the span of the next couple of months, with little or virtually no consultation of stakeholders or engagement of experts outside of the government.

Will Minister Qualtrough, her cabinet colleagues, and of course the Prime Minister, get it right?

After all the need for EI reform has long been recognized, with lessons learned well before the onset of COVID19, but always politically convenient to put off. What does the 21st century hold for us?

Well, we’ve seen a good deal during its first 20 years, and some big lessons are pretty clear.

I draw three lessons, and these should be used to judge what the government has in store. You can read about the first here: Big shocks matter and need a response in real time.  This post discusses the second and the reforms it calls for: Lesson 2 is “The future of work has arrived and needs better income insurance for all.”

 

Continue reading “An Employment Insurance system for the 21st century: Lesson 2, The future of work calls for better income insurance”

Employment Insurance reform that promotes agency

Benefits for employee initiated time away from work should be delivered through individual accounts, and a new program for maternity and parental benefits should be started outside of Employment Insurance.

 

More than one out of every three dollars distributed through the Employment Insurance program are for so-called Special Benefits, those parts of the program associated with maternity and parental leave, with caregiving, and with sickness.

The fact that the COVID19 pandemic is a health crisis with important job market consequences has sharply exposed and widened gaps not just in EI’s coverage and delivery of job loss benefits, but also with these Special Benefits.

Constructive reform will require rationalization of coverage for demographic and family risks and should proceed in a way that recognizes both their collective and individual nature, with a delivery design that gives citizens agency in an incentive compatible way.

This can be best accomplished by delivering Special Benefits through individual accounts, while at the same time devising a new program for maternity and parental benefits outside Employment Insurance.

Continue reading “Employment Insurance reform that promotes agency”

Social Policy, Now: Next steps for income support and income insurance in Canada

Three next steps for social policy involve: 1. Maximizing auto-enrollment and just-in-time program delivery; 2. Offering full income support with engagement; and 3. Offering broad income and earnings insurance with agency. In this post I introduce the detailed discussion of these proposals that you can also download.

 

On March 24th, 2020 the Government of Canada Tabled Bill C-13, “An Act respecting certain measures in response to COVID-19,” in the House of Commons, and the next day the Bill received Royal Assent, unleashing the most extensive and quickest change to Canadian social policy in living memory, if not in the history of the country.

The Canada Emergency Response Benefit is the most notable part of the Bill, offering $2,000 of income support every four weeks to all working age Canadians who made at least $5,000 in the previous 12 months and lost their source of income due to the COVID-19 crisis.

Almost immediately the public policy discussion turned to “what’s next?” Certainly this was so in the short-term as the government and the public service became fully engaged in meeting the evolving needs of citizens and businesses in response to the most serious health and economic crises the country has experienced since World War II.

But increasingly, as the weeks and months passed, it was also so in the longer term: What’s next for the design of social policy in light of the needs and the gaps that the COVID-19 crisis has revealed?

This is the question I address in a detailed presentation that you can download.

In this post I introduce the issues and options for discussing the next steps for social policy, the word “Now” in the title having three meanings that guide this approach.

Continue reading “Social Policy, Now: Next steps for income support and income insurance in Canada”

The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based

We have learned from past experience that public policy proceeds through two phases during major crises: first, as one influential economist has said, “whatever it takes”; then, “Oh my God, what have we done!”

The Canada Emergency Response Benefit represents the best of whatever-it-takes policy. The speed, the depth, and the sheer uncertainty of the duration and aftermath of the COVID19 crisis called for maximum flexibility in the making of public policy, and full discretion for leaders to respond quickly. This is equally the “In it altogether” phase. It motivates significant, widely available, and easy to get income support intended to avert a liquidity crisis and ensure the survival of many asset-poor households.

The CERB is a generous payment, minimally targeted, with an on-off eligibility rule that would normally create a significant work disincentive, a program totally appropriate for times when the standard rules of economic policy are flipped upside down. The work disincentives of this program are a feature, not a bug. For many there is no work to be had, while for others work should be avoided to maximize the physical distancing necessary to reduce the reproduction rate of the virus, and flatten the curve. Survival, not stimulus, is the watchword for policy.

But re-opening the economy in stages, according to risks of re-infection and flare-ups, makes clear that we are in-it-together only until we are not. And yet uncertainty continues to prevail: will the recovery be V, U, W, or L-shaped? At what point do temporary layoffs morph into permanent layoffs that lengthen spells of unemployment, and further depress consumer confidence?

In the “OMG, what have we done” phase, giving maximum flexibility and discretion to government may even add to uncertainty.

Continue reading “The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based”

A letter to the Canadian Prime Minister, with two suggestions for next steps in dealing with #COVID19

Prime Minister,

I certainly hope you and yours are well.

I was in New York City up until last weekend. Earlier in the previous week the university where I work announced that it was moving all courses online, and closing the campus. There was really no further need for me to stay in the City, but my initial thought was to wait it out, and decide later on when to return to Canada.

I started to have second thoughts when a student emailed me for advice just after President Trump announced that travel from Europe to the United States would be banned. He’s from Mexico, and said that he trusted the Mexican health care system more than the American, and wanted my advice on whether he should return home.

If that wasn’t enough to give me pause, when I saw the twitter feed of the Minister of Foreign Affairs  on Saturday evening recommending “that Canadian travellers return to Canada via commercial means while they remain availableI immediately bought myself a ticket for a next day flight to Canada. I arrived last Sunday evening, and have been in self-isolation since. I’m glad to be home given the events of the last week.

It is certainly time for government to step up, and history will judge the fall out of this pandemic in terms of how well societies govern themselves: professionally and efficiently, scientifically and socially, and with a sense of reciprocity and trust that strengthens community. I hope you and your cabinet take to heart a message that one of my colleagues has written in an article called “The Real Pandemic Danger Is Social Collapse.”

… the main (perhaps even the sole) objective of economic policy today should be to prevent social breakdown. Advanced societies must not allow economics, particularly the fortunes of financial markets, to blind them to the fact that the most important role economic policy can play now is to keep social bonds strong under this extraordinary pressure.

Good governance, not just a good health care system, is one of the reasons I’m glad to be home. I have been watching your daily press briefings with a good deal of admiration. And I am also impressed with both the design and speed with which the government has been able to roll out the package of reforms earlier this week, an effort that has no doubt been supported by legions of professional public servants working around the clock.

You promised that these reforms are just the first step in a fast moving and dynamic situation. I can’t pretend to understand the complete situation, hardly have full information, and can’t offer wide-ranging suggestions on what the next steps might be. But here are two suggestions that come from my limited areas of expertise. Continue reading “A letter to the Canadian Prime Minister, with two suggestions for next steps in dealing with #COVID19”