Watchdog | Canadians overpaying EI to pad federal surplus

Sean Kilpatrick/The Canadian Press. Finance Minister Joe Oliver answers a question in the House of Commons, Tuesday, Sept. 16, 2014 in Ottawa.

The federal government’s handling of Employment Insurance will reduce job creation by 9,000 jobs over the next two years and compel Canadians to pay $4.5 billion more in EI premiums than needed, the Parliamentary Budget Officer says.

In an analysis of Finance Minister Joe Oliver’s recent decision to freeze EI premiums at a rate higher than needed for the EI account to break even, the PBO says the move will contribute significant extra revenues to Ottawa’s plan to run budget surpluses in the next few years.

After years of budget deficits, Oliver will be in a position to record budget surpluses starting next year.

Instead of using extra EI revenues to balance the federal government’s books, Ottawa could use the funds to make EI payments available to a higher proportion of jobless Canadians, the PBO says. Because of the increase in part-time jobs that don’t qualify for EI and an increase the number of long-term unemployed, only 38 per cent of unemployed workers are receiving EI payments, the report notes.


The study also takes aim at Oliver’s recent decision to reduce EI premiums for small businesses, which will cost Ottawa $550 million over two years. The PBO estimates this move will add only 800 net new jobs in the economy between now and 2016, which means the jobs are being created at an average cost of $550,000 per person year.

This is a sharp contrast to Oliver’s prediction of the impact of the EI cuts for small business. He cited a report saying the move would produce thousands of new jobs during the next few years.

Also, the PBO says the new jobs resulting from the small business EI reduction will be more than offset by the impact of keeping overall EI premium rates higher than needed for the EI account to break even. This approach will reduce the ranks of the employed by 10,000 over the next two years, the analysis said.

The PBO said the impact on job-creation or job losses of current federal EI policies will even out over the long term because of the government’s commitment to adjust EI premium rates after 2016 so that the EI fund will operate on a break-even basis.

Torstar News Service