Friday, May 25, 2012

Conservative Government Misses Key Talking Points On EI Reform

 While we all knew it was a given the opposition and media would whine about whatever changes the government made to EI and the way it is paid out, I still feel somewhat frustrated by simple and obvious points the government could have and should have made. Here are a few:

1: Repeat EI users would be required to accept a job paying 70% of their previous employers wages. A 30% pay cut sounds pretty bad however you frame it. BUT, EI only pays 55% of previous earnings. A repeat user accepting a job at 70% of previous pay would actually be increasing their income by 15% over what they currently receive on EI.

2. No insurance company would ever issue insurance where they are going to pay out more than they take in on a yearly basis in payment. Even with the governments so-called draconian changes, the fact is a chronic repeat applicants numbers could look something like this. (using the 60 weeks of benefits over a 5 year period, max benefits, max deductions) Deductions (5 years X $839.97 = $4199.85) Benefits (60 weeks X $485= $29,100) $29,100 - $4199.85= $24,900.15 That's right. Over every 5 year period this repeat EI applicant would receive almost $25,000 more in benefits than what they paid into Employment Insurance. To make it easier to digest, the repeat user would in effect be receiving almost $5,000 more per year, on an ongoing basis, than they would pay in the EI fund.

3. The government could have made one substantive change to EI. Currently EI recipients working part-time can earn $75 or 40% of their weekly EI, whichever is higher, without affecting their benefits. Any amount higher than that comes off dollar for dollar. While this is a great way of helping those now working part-time who have lost their jobs supplement their EI benefits, those working full-time lose all their benefits. The government could change the full-time clause or amend it to make it more appealing. Take Ontario for example, and again using maximum EI benefits in the formula. Someone receiving EI benefits of $485 could have their weekly income increased to $679 adding in the $194 (40%)allowed for part-time workers. But someone accepting a full-time position loses all their benefits, making a lower paying job far less attractive. Given minimum wage in Ontario is $10.25 per hour, that would result in weekly income of $410. By applying the same allowable income rule for part-time workers to those accepting lower paying full-time positions, the weekly EI benefit paid would drop from $485 to  $269 ($485-$410+$194). The EI fund sees a huge savings, those collecting benefits see an increase of $776  monthly in income, and they can still apply for better paying jobs all the while taking home more income.

"Isabelle collects EI benefits. She receives the maximum amount allowed, which is $468 a week. During her benefit period, she finds part-time work for $10 an hour. She is entitled to earn $75 a week or 40% of her weekly benefits, which, in her case, amounts to $187.20 (this amount is rounded to the nearest dollar: $187). Since the higher amount is used, Isabelle is therefore entitled to earn $187 a week without having her benefits reduced. She works 20 hours a week, earning a total of $200. Her benefits will therefore be reduced by $13."

  It also should be pointed out that the government itself sees an increase in tax revenues using the scenario in #3 above. A savings in EI benefits paid out, an increase in tax revenues, and Canadians increasing their income by 40%. Surely that change in and of itself would be an easy and appealing sell. My guess is most Canadians would accept it, and the opposition and media would look like fools trying to play this plan as unfair or draconian.q

1 comment:

Platty said...

Better still, scrap the entire program! We already have programs in place for those who are truly in need and do not have the ability to provide for themselves.

The idea of government running an insurance program, and the cost for government to run this program is, quite simply, incredible.

Take away the bird feeder in your yard and that bird will still find a way to feed itself.

Take away EI and those jobs that the repeat users had been turning down in the past would soon be looking pretty damn good to them.