While EI is indeed an abbreviation with the word insurance in it, it is not an insurance plan. Many people have different opinions of what EI is and what it should be. It appears that many if not most are wrong.
In trying to make EI appear as an insurance plan, payments made by workers into the plan are called “premiums”. Sorry folks, but payments made by workers for EI are taxes and nothing less. Revenues from EI were indeed once kept in a fund specifically for the purpose of payouts on claims. When workers paid more into the EI fund than they drew out, a surplus was generated. Surplus funds never escape the eyes of free spending politicians for long unfortunately and EI “premiums” now are directed into government hands thus turning them into taxes.
While serving as Canada’s finance minister some years ago; Paul Martin spotted billions of dollars languishing away from his greedy fingers in an EI surplus. Typically, when an insurance fund generates a surplus either the premiums are reduced or a larger dividend is paid out to the shareholders in the insurance company. As EI was a government program without formal shareholders, premium reduction was really the only option. Surplus funds could have been invested as well so that revenues could lead to further reduction in premiums and the funds could have been saved for increased payouts should there be a sustained economic downturn. What Paul Martin did though was utilize a majority Liberal government in order to change the very nature of the entire program and find a different way to use surplus EI funds. The Chretien Liberal government passed legislation allowing government to take surplus EI funds and direct them to general revenue.
As soon as government could take funds from EI payments and spend them elsewhere, the program ceased being an insurance plan in any manner. Premiums are now actually taxes and payouts are essentially a form of social service. EI is not an insurance plan at all, it is just a large social service program with different steps for qualification and limits on the terms of payout.
The Harper government has been no better than the Chretien government in this regard. Surplus EI funds (overcharged taxes to the employed) are still being directed to general revenue and there has been no indication of an appetite to change the program to an insurance plan. The Harper government is rightly trying to move people away from chronic utilization of EI payouts, but the government is failing in it’s refusal to separate EI as a program.
With EI being essentially a separate welfare program for the employed, it has unfortunately turned into what some people see as yet another entitlement from the government. Many people are using the program as a supplement to their incomes and they feel it is their right to do so. An insurance plan is not supposed to act as a savings plan, a retirement plan, an income supplemental plan, a regional income balancing plan or a supplemental vacation pay plan. Unfortunately EI is being used as all of the aforementioned things by many.
An insurance plan should be something that covers a circumstance that is unforeseen and can’t be properly planned for. Seasons are pretty predictible in their annual appearances for example so one really should not be insuring themselves for the changes of season. If you know that you will be laid off every year at the exact same time then you need either a savings plan or an alternative seasonal job. No real insurance plan would cover a person for something that happens as predictably as a sunrise.
With a real insurance plan, people’s premiums will rise and fall with their risk levels. Bad drivers pay huge automotive premiums while good ones see a reduction in premiums. A person’s reward for not needing insurance is reduced premiums, not a guaranteed payout. How often do you hear people say “I have paid in all my working life, it is my right to draw out!”. Damnit no! That is a savings plan then, not an insurance plan. If you don’t crash your car for years, do you get to file a claim and collect anyway? If your house does not burn down, does this mean you get your homeowners insurance premiums back?
I think it is important that workers have a fallback should they unexpectedly find themselves unemployed for awhile. The buffer of insurance benefits can allow workers to seek new employment, move to a different region or retrain for a new line of work. I can live with participation in an insurance plan being mandatory for workers too. Whether run at arms length by government or even privately, an insurance plan can and will work. We need a real insurance plan though!
A real insurance plan will charge higher premiums for people in fields of work that are of a high risk for unemployment and will charge individuals who make more claims than others a higher premium as well. Premiums and payouts would reflect regional needs as well. People who rarely or never claim will find their premiums to be exceedingly small over time. While a minimum participation would be required, people could opt-in for extra coverage (with an increased premium of course) should they wish to. This reduces incentive to be unemployed while still covers a person should they need it.
Let’s be clear, among businesses that I despise insurance companies top the list. Whether privately run or government run, an insurance plan will have to be closely regulated. Benefits must come close to matching premium revenues and surpluses must not go to unreasonable salaries for management or payouts to company owners. Funds must never go to general government revenue either!
Until we actually change EI into an insurance plan we are simply deluding ourselves in calling it one or trying to treat it like one. The current incarnation of “Employment Insurance” is a tax-revenue generating scheme that is used as a political tool for regional political play. It is past time that we re-examined the role of EI and it’s form. The entitlement and abuse due to the current EI (welfare) system is not beneficial to Canadians at large.
If we are going to have an “Employment Insurance” plan, let’s make it a real one.
