Employment insurance premiums, which are skimmed from all employed Canadians and their employers, will be frozen at the present level for the next three years, Finance Minister Jim Flaherty announced Monday. This will protect Canadians from the annoyance of premium increases at the time of the next federal election, probably two years hence.
The number of Canadians receiving Employment Insurance benefits has dropped sharply. Statistics Canada reported in July that 508,500 people were drawing EI in May this year, a drop of 7.4 per cent from the preceding year. But the Labour Force Survey published in June estimated the number of unemployed in Canada had dropped just 2.4 per cent from the preceding year. The improving job market, therefore, may explain about one-third of the decline in the number of EI claimants. The rest of the drop may result from the government's narrowing of EI eligibility.
Mr. Flaherty has ascertained that the current level of EI premiums will be sufficient to cover costs of the program for the next three years. Yet a year ago he announced premium increases, which he then thought were needed to cover the costs, and which he cancelled this week. Since he was wrong a year ago, it is odd that he now knows what the cost of the program will be two and three years hence. It seems more likely that he does not know what the program cost will be, but he has a pretty good idea when the election will happen.
Prime Minister Stephen Harper and his Conservative party arrived in power seven years ago determined to take the political calculation out of employment insurance premiums. The former Liberal government had sharply increased the premiums in the 1990s when it needed to balance the budget, leading to complaints that the premiums were financing the whole government, not just the unemployed. To put EI premiums on a more scientific footing, the Conservatives in 2008 set up an expert agency, the Canada Employment Insurance Financing Board, to estimate the continuing costs of the program and set a rate structure that would just cover the costs.
That expert agency was quietly dissolved last year in the Harper government's Budget Implementation Act. Canada has now returned to EI rates set by politicians for their own reasons. One result is that Mr. Flaherty claims the rates will be frozen because of his splendid work in putting Canadians back to work. The facts do not entirely support his claim, but at least he has no expert government agency to contradict him.