Canada’s Employment Insurance Program: Design, Effects, and Efficiency Costs

Title: Canada’s Employment Insurance Program: Design, Effects, and Efficiency Costs
Authors: CAMERON, Thomas
Date: 2013
Abstract: Recent legislative changes to Canada’s EI program have once again focused public attention on the program and its impact on the lives of Canadians and the Canadian labour market. In this paper, I review the theoretical premises behind the supply of insurance and discuss why insurance against unemployment is publicly provided. I examine the history and design of Canada’s EI program and find that it does not perfectly reflect idealized insurance principles. Examining the effects of its design, I find that the program significantly redistributes funds from provinces West of the Ottawa River to those East of the Ottawa River, which affects the Canadian labour market. Examining these effects through a literature review, I find evidence that suggests EI has contributed to the persistence of unstable seasonal labour in Canada’s Eastern regions. I also find that contrary to popular criticisms, the program does not affect an individual’s decision to move to regions with greater economic prospects. Finally, I find that evidence suggests a significant portion of beneficiaries are repeat users of the program, but whether they repeatedly use EI in an attempt to game the system, or whether they repeatedly use the system because they lack employment alternatives is not clear. Discussing these effects in the broader context of program design, I discuss how the current EI program trades-off efficiency goals for equity gains. To contribute to the larger discussion of reform, I consider an alternative design: an experience rated EI program that seeks to maximize efficiency. Examining the costs and benefits of such a program I find estimates that suggest that the gains from moving towards an experience rated EI program would outweigh the efficiency losses, but that further research into this topic should be conducted. This paper is useful for those looking for a broad overview of the literature on the effects of Canada’s EI program.
CollectionAffaires publiques et internationales - Mémoires // Public and International Affairs - Research Papers