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Thematic chapter

Unemployment in the days of Covid: will the Canadian unemployment insurance program survive the pandemic?

Lucie Lamarche
p. 144-157
Cet article est une traduction de :
Le chômage au temps de la Covid : le régime canadien d’assurance-chômage survivra-t-il à la pandémie ? [fr]

Résumés

Au fil des trois dernières décennies, le régime canadien de l’assurance-chômage, marqué par l’austérité, a démontré son incapacité à répondre au remplacement du revenu des chômeurs. Pour l’année 2018-2019, seulement 40% des personnes ayant accusé une perte d’emploi ont pu bénéficier de prestations. Les perdants sont ceux et celles qui occupent des emplois précaires et qui œuvrent dans les secteurs ayant contribué à la croissance récente du PIB canadien, dont celui des services. Les réponses à la Covid se sont donc déployées en marge du régime canadien d’assurance-chômage et ont fait preuve d’agilité et de générosité, notamment en offrant un revenu de remplacement aux ménages devant prendre soin de personnes touchées de diverses façons par la pandémie. Faudra-t-il poursuivre sur la voie des aides fiscalisées en remplacement du régime (encore) contributif de l’assurance-chômage?

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Texte intégral

1In Canada, the unemployment insurance program is a federal responsibility and is an artefact dating from the Second World War, which has undergone numerous reforms, including a major one in 1996. These reforms bear the mark of different political orientations, including austerity. They have in particular led to a de facto partial merging between the Unemployment Insurance Account and the general accounts of the Federal Public Treasury. Thus, at the beginning of the 2000s, the Employment Insurance Account was posting enormous surpluses whilst the unemployed, hit by the successive economic crises of the beginning of the 21st century, were on starvation rates. Here the aim is to take stock of the historical developments (I), draw up a picture of the current normative and statistical state of the unemployment insurance program in Canada (II), explain how and why, in 2019, the law now known as the “Unemployment Insurance Act” excluded Canada’s unemployed more than it included them at a time when the national unemployment rate was at a historic low (III) and, finally, illustrate how it is on fiscalised social payments that Canadians looking for work, but above all those in precarious employment situations, are now relying (IV) whilst also highlighting the Canada Child Benefit and the Canada Workers Benefit programmes, both created by the federal government.

2Furthermore, this study will describe the emergency measures introduced by the federal government in the context of the Covid pandemic crisis to make up for lost work earnings (V). Initially suspended to be replaced by a payment that was as generous as it was accessible, the Unemployment Insurance Act was then re-activated. What happened, however, was the introduction of benefits liable to respond in particular to the needs of households hit hard by the need to act as caregivers in the context of the pandemic, targeting those who had no cover. These benefits proved to be both necessary and popular. The pandemic therefore revealed not only the limits of the Unemployment Insurance Act but also the agility and the versatility of transfer payments strictly based on annual income and need, that is to say an assistance-based approach. It is considered that such payments are an extension of the movement towards the fiscalisation of social benefits.

3If the social protection system in Canada is moving closer to the model of a basic income based on negative tax, which has accelerated as a result of the Covid measures, the question arises as to what the future will be of this Canadian employment insurance scheme. New tensions are emerging between this contributory scheme and the trend towards the financing of social provision through taxation and the fiscalisation of social benefits. This article offers some areas for reflection, although it does not claim to settle all of the questions (VI). When reading this text, the reader is invited to bear in mind the fact that national budgets in the years to come will have to deal with the “Covid debt” in one way or another.

I - Some general points on the Canadian unemployment insurance regime

  • 1 Unemployment Insurance Act, L.C. 1940 c. 44. For a study of the construction and development of the (...)
  • 2 Unemployment Insurance Act, L.C. 1970-71-72, c 48. For a study of the development of this law over (...)

4The first Canadian law on unemployment insurance was passed in 1940.1 However, it is the reform of the Unemployment Insurance Act of 19712 that constitutes the milestone of modernity when we are assessing the development of this social protection program against the risk of unemployment. Even today, people speak of the exceptionally generous nature of the reformed 1971 Act which rendered universal the requirement for workers and employers in the private and public sectors to contribute to the scheme, in a context of low unemployment, thereby ensuring the financial health of the Employment Insurance Account. The 1971 Act provided for easy access to benefits. The 1971 scheme also stands out due to a few particularities that have survived the successive reforms of the Act. First of all, the 1971 Act created two types of unemployment benefits. Regular benefits were paid for a maximum period of one year at an income replacement rate laid down by the Act after ascertaining that the individual had lost their job through no fault of their own. Special benefits were benefits intended to replace lost earnings in cases such as maternity leave and illness, for a short period. In the context of the Canadian Federation, where responsibility for social matters lie firstly with the provinces, these special benefits were intended to fill the gap left by the lack of provincial income replacement mechanisms for such eventualities. Whether for the regular benefits or the special benefits, benefiting from them depended on the individual’s presence on the labour market, calculated in weeks, during the reference period, namely the year immediately preceding the application for the benefits. Furthermore, the Unemployment Insurance Act always set aside a part of the funds in the Employment Insurance Account for so-called employment activation and maintenance measures. Relatively modest at the outset, this assignment of funds has developed exponentially over the decades.

  • 3 For a historical analysis of the management of the Employment Insurance Account, see the judgment w (...)
  • 4 Employment Insurance Act, “L.C. 1996”, c 23. Like others in Canada, we hesitate to use the expressi (...)
  • 5 Confédération des syndicats nationaux v. Canada (Attorney General), op. cit.

5It is necessary to look more closely at the nature and management of the Employment Insurance Account over the years. From 1971 to 1990, the Federal Treasury took care to keep said Account afloat, as, due to successive economic crises, it ended up running systemic deficits. Although it was not a trust, this Account was managed separately from other public accounts until 1986.3 The 1996 reform of the Unemployment Insurance Act, which would rename the system “employment insurance”, was subjected to austerity measures. A new Employment Insurance Act4 was then passed, described by all as a brutal reform of the unemployment protection measures. What the government was aiming to do was rebalance the Employment Insurance Account for the long term, by the contributions annually to this end. Successive amendments to the 1996 Act have given rise to some bungles. In certain tax years, the executive authority has found itself authorised to determine the rate of contributions without referring to the criteria laid down by the Act. In addition, it had become impossible to assess the financial health of the Employment Insurance Account as it had become so intertwined with the rest of the public accounts. In the end, it was discovered that a surpluses of the order of 40 billion dollars had accumulated from the contributions collected between 1996 and 2002. These surpluses were dissolved in the general accounting of the public accounts. Complaints were therefore made, in vain, that the funds of the Employment Insurance Account had been misappropriated.5

  • 6 Unemployment Insurance Act, op.cit., art. 66(1),
  • 7 For details of all successive amendments made since 1996 to the Unemployment Insurance Act, see Gov (...)

6In actual fact, there is still an Employment Insurance Commission, one of whose tasks consists of determining the employee and employer contribution rates on the basis of criteria fixed by the law.6 However, the numerous amendments made to the 1996 Act have, since 2002, been made via Budget Implementation Acts.7

7As a result, the federal government today has, with the Canadian employment insurance program, a tool whose economic and political functions go far beyond merely the replacement of earnings after the loss of a job. In keeping with other conditions (see below) this program contributes in particular to reducing household poverty. This is, for example, the aim of numerous short-duration pilot schemes which allow benefit periods to be extended in certain economic regions of Canada.

II - The unemployment insurance program before the COVID measures

  • 8 About €37,900. This threshold is slightly higher than the average wage, which was $CAD 52,600 (€35, (...)
  • 9 L.C. 1996, c. 23, Art. 7(2).
  • 10 Statistics Canada, Labour Force Survey, Table 14-10-0287-01: https://www150.statcan.gc.ca/n1/daily- (...)
  • 11 L.C. 1996, c. 23, Art. 7(2), op. cit., Annex 1.

8A worker pays into the Employment Insurance Account up to an earnings ceiling which on 1 January 2021 was 56,300 Canadian dollars ($CAD - hereinafter $).8 It is now the number of hours worked during the reference period preceding the application for benefits that determines entitlement to them. The entrance requirement varies according to the regional unemployment rate, between 420 and 700 hours.9 During the half-year preceding the Covid crisis, the national unemployment rate was below 6% in Canada.10 The period for which the benefits are paid can vary from 14 to 45 weeks, depending once again on the regional unemployment rate.11

  • 12 Ibid., Art. 12 to 23.3.

9Since the 1996 reform, several new special benefits have been introduced - today there are six different ones - but they all involve meeting an entrance requirement of 600 hours worked during the reference period. Maternity and sickness benefits and those for the family caregivers of critically ill adults, are paid for 15 weeks. Benefits for family caregivers of critically ill children are paid for a maximum of 35 weeks. Compassionate care benefits caregivers providing care or support to a person at the end of life are paid for a maximum of 26 weeks. Finally, parental benefits are paid for a maximum of 35 weeks, or 61 weeks if the parent chooses a lower income replacement rate. The period over which parental benefits are paid is increased slightly when they are shared between both parents.12

  • 13 L.C. 2009, c. 33, amending L.C. 1996, c. 23.

10Since 2009, the Act has provided for access to special benefits for self-employed workers, i.e. those who are not in salaried employment.13

  • 14 L.C. 1996, c. 23, Art. 145(1), op. cit.
  • 15 Ibid., Art. 16(1). See also Monitoring Report 2018-2019, Annex 2.23 for more recent data.

11Clearly, today the Unemployment Insurance Act provides a response to different needs, in particular those arising from the need to balance work and family life, which are not met by the provinces, which nevertheless are primarily responsible under the constitution. In addition, the benefit clawback and increase mechanisms are now participating in the fiscalisation of benefits. When the income in one tax year exceeds an amount corresponding to 1.25 times the maximum yearly insurable earnings, the taxpayer must repay part of the benefits received.14 Finally, a family supplement is added to the weekly benefit rate, fixed at 55% of the weekly insurable earnings. This supplement depends on the age and number of children, as well as the insurable earnings, and may not exceed 25% of the weekly insurable earnings.15

  • 16 Supra, note 7.

12All these income support measures depend, however, on the establishment of a prior period of contributions and, therefore, on the claimant’s ability to meet the requirements for his period depending on the conditions fixed for the reference period. In order to understand why the employment insurance programme proved to be incapable of meeting the urgent needs generated by the Covid public health crisis declared on 12 March 2020 in Canada, it is necessarily to look more closely at the pre-Covid assessment drawn up by the Employment Insurance Commission its monitoring report for 2018-2019.16

III - The inadequacies of the unemployment insurance program in Canada: a portrait 2018-2019

13Canadian GDP grew 1.8% in the period 2018-2019 and the national unemployment rate for the same period was found to be the lowest since 1977 (5.8%). However, real GDP per capita only grew 0.3% in this period; this increase therefore brought little benefit to Canadian households. Furthermore, the average period of unemployment was only 18.1 weeks.

  • 17 The labour force survey produced annually by Statistics Canada defines atypical work as work that i (...)
  • 18 On-call work includes work associated with short-term employment, with variable hours and pay and a (...)
  • 19 All the details taken from the Monitoring Report 2018-2019, Chapter 1, Labour market context. A dis (...)

14In order to reconcile these data, it is necessary to understand the structure of employment in Canada. Atypical employment17 accounts for 36.9% of the active population’s jobs. Multiple job-holding rose - to 12% - and particularly concerns women, who hold - poorly paid - jobs in the services and are also over-represented in part-time working. The average duration of a job has fallen and earnings instability has risen, from 30% to 39%. The proportion of self-employed workers has increased from 12.2% to 17.2%. Statistics Canada also measured the share of on-call work and concluded that it has increased from 5.5% to 8.2%.18 Finally, the proportion of workers on fixed-term contracts has increased, whereas that of seasonal - temporary - workers has decreased.19 This last piece of data is important insofar as the employment insurance program in Canada has historically been intended to meet the needs of seasonal industries, in particular in the natural resources sector (fishing, forestry, etc.). Consequently, access to regular unemployment benefits is important for seasonal workers.

15These data reveal obvious consequences on access to unemployment insurance benefits insofar as both the entrance requirement (number of hours worked in the reference period) and the period of payment of the benefits (depending on the number of hours worked during the reference period and the regional unemployment rate) are sensitive to employment status.

  • 20 Monitoring Report 2018-2019, Chart 10. The breakdown of the non-eligible unemployed is as follows: (...)
  • 21 Ibid., Chart 13.
  • 22 About €31. Ibid., Graph 16.

16For the year 2018-2019, only 42.1% of people without jobs were eligible for benefits.20 A gap of 12.7 percentage points separates the eligibility rate for persons with a permanent job and those with a temporary job.21 The average rate of the benefits paid was $469,22 but there is a gap varying from $60 to $70 (€40 to €47) between men and women, which increases with the age of the beneficiaries. In the end, a drop of 0.6% in new benefit applications was recorded for women. Given the importance of the number of hours worked during the reference period, which determines the length of the benefit period, it goes without saying that seasonal and atypical workers receive benefits for shorter periods.

  • 23 Ibid., Annex 2.20.2- Family caregiver benefits for children: Average actual duration (number of wee (...)
  • 24 Ibid., Annex 2.19.1.
  • 25 Ibid., Annex 5.1, Employment Insurance operating account.

17The picture for the special benefits is especially interesting. Benefits paid to child caregivers were up 14.2% in women and 10.5% in men, for an average period of 14.4 weeks for men and 18.3 for women.23 Applications for benefits paid to adult caregivers saw a spectacular jump, going from 829 to 3,117 applications by men and from 1,842 to 6,989 for women.24 In total, while the payment of regular benefits fell 15.6% for the year 2018-2019, that of special benefits (caregivers) rose by 20.6%.25

  • 26 Which is, subject to exceptions, a matter for the provinces.

18This leads to the conclusion that, more and more, the employment insurance program is filling the gaps in the regulation of work.26 This gap-filling works better in terms of work-life balance and less well with regard to the effects of precarious employment. It is worth noting, finally, that these relative successes only benefit those who manage to justify their eligibility for benefits over a certain period.

  • 27 Unemployment benefits are taxable income.
  • 28 Refundable credits reduce the tax payable whereas non-refundable credits are paid independently of (...)
  • 29 For a historical analyse of the taxation of welfare in Canada, see L. Lamarche and C. Girard, «Évol (...)
  • 30 This analysis excludes the taking into account of the Canadian occupational accident and illness co (...)

19In order to illustrate the measures against precarious work and household poverty, it is necessary to take a detour into the Canadian move towards the “fiscalisation of welfare”. This expression refers to an increasingly common phenomenon which consists of supplementing27 households’ income type through taxation with tax deductions and/or credits (refundable and non-refundable).28 All these measures are determined (and often indexed) annually in the budget laws, at both provincial and federal level. They take on a more or less regressive aspect depending on the objective sought. Finally, they have no impact whatsoever on the quality or regulation of work and are sensitive only to the income declared in households’ annual income tax return. Very often referred to as poverty reduction measures, they inherently give a lot of importance to the link with work. Finally, they have established themselves progressively following the introduction of tax clawback measures relating to so-called universal benefits, such as basic old age pensions and their supplement.29 In other words, the classic distinctions made in social security matters in Canada (universal benefits or insurance-based benefits) have gradually faded since the 1970s. The status of the person or the nature of the social risk involved will be taken into account less and less; and tax-based social benefits will be more and more dependent on income.30

20As this was a health crisis situation, it is the federal government that has been taken charge of the responses to Covid, which is why only the fiscalised benefits offered at federal level are presented below. On this point, the federal government acts under its spending powers, but in consultation with the provinces and territories.

IV - Fiscalised social benefits and the Canadian federal government31

  • 31 For an analysis from the angle of the human right to social protection, see League of Rights and Fr (...)
  • 32 For an exhaustive annual inventory of social assistance available to private individuals, see the C (...)

21Since the 1990s, the social protection in Canada has been transformed into a complex system of various fiscal measures.32 These schemes are adopted or modified in the annual budget laws and integrated into the Tax Act. Some of these measures are explicitly intended to encourage those on low incomes to stay in work. This is, however, not always the case.

  • 33 Income Tax Act, R.S.C. (1985), c. 1 (5th supp.), Art. 122.6. For a description of the Canada Child (...)

22Thus, the main federal fiscal scheme benefits families with minor dependent children. Approximately 3.5 million households thus benefited from Canada Child Benefit (CCB)33 in 2018, for a total cost of about 24 billion Canadian dollars (16.1 billion euros). The CCB is not taxable. It is capped per household at a sum of about $7,400 (€4,700) per child. This credit regresses to an exit threshold of zero when the household’s net income reaches $225,000 (€151,000). The CCB is increased if a child is disabled. The 2021 budget provides for a Covid bonus of $1,200 (€800) per child (under 6 years) or $1,500 (€1000) per child (over 6 years). This tax break given to households is important insofar as it provides to households receiving last-resort assistance - a provincial programme - an income as large as that of the basic allowance. The importance of the CCB in the Canadian landscape does not mean, however, that its shortcomings should not be denounced, as in the case of households without children or single people. It is, moreover, a constant issue in the fiscalisation of welfare that single people (young and aged over 55) are in practice abandoned to their fate.

  • 34 Income Tax Act, R.S.C. (1985), Art. 122.7, op. cit. For a description of the Canada Workers Benefit (...)

23A second federal fiscal was the subject of a Covid bonus for the 2021 tax year. The Canada Workers Benefit (CWT) is a refundable tax credit formally intended for low-income workers.34 8 billion Canadian dollars will be injected into this scheme (whose estimated cost in 2018 was 2 billion) to improve the reduction thresholds - thresholds from which the credit is reduced - and the exit thresholds - from which the credit is no longer available - in the measure.

  • 35 On this subject, see United Nations, Committee on Economic, Social and Cultural Rights, General Com (...)
  • 36 This subject is attracting a lot of attention in Canada. By way of example: Government of Quebec, E (...)

24Canadian social law is migrating permanently towards tax law. The budget and implementation laws determine not only the financial conditions and those relating to eligibility for the benefits, but also the amount of the benefits. This amount depends, furthermore, on a set of variables gleaned from the income tax return (number of dependents; net income; taxable income; other refundable and non-refundable credits available). This migration raises some difficulties when it is analysed from the angle of the human right to social to social protection.35 Foreseeability, durability and intelligibility of the measures are not guaranteed. It is often said that there is a democratic and participation deficit insofar as citizens are not involved in the process of drawing up the public budget. Finally, this change imposes the need for a new skill: fiscal literacy.36 Indeed, it has been shown that few Canadian households understand or take an interest in individual taxation.

  • 37 K. A. Ryan, “EITC as Income (In) Stability”, Florida Tax Review, 2014, p. 583.
  • 38 M. Brewer, R. Joyce, T. Waters, J. Woods, “A method for decomposing the impact of reforms on the lo (...)

25Furthermore, it can only be concluded that Canada has also initiated a turn towards a guaranteed basic income, by using the negative tax technique. This does not meet any of the criteria or aspirations of guaranteed universal income as a tool for individualised and unconditional economic autonomy. But it does fit in with a neo-liberal vision of American37 and British-style social protection.38 In the context of Covid, however, the virtues of fiscal-type social turn must be recognised. Its agility, intended to quickly mobilise fiscal spending, and its no less rapid capacity to alter a measure according to the objective sought were revealed by the Covid measure implemented by the federal government.

V - Unemployment and COVID measures in Canada

  • 39 See above §III, «The inadequacies of the unemployment insurance program in Canada: a portrait 2018- (...)

26In March 2020, the first wave of Covid hit sectors and workers who, over the previous years, had participated in the growth of Canadian GDP very hard. In light of the data reported above,39 the federal government knew that the employment insurance program could not meet the needs of the workers affected and abandoned by Covid, who could not pass the eligibility test for employment insurance benefits. And yet, the national unemployment rate was to double.

  • 40 In Quebec for example, this is the Individual and Family Assistance Act, SRQ c A-13.1.1.

27In addition, and in spite of the eternal debate on jurisdiction in social law in Canada, the provinces did not wish and were not able to absorb the cost of the Covid measures, and were particularly worried about an overload of new applications for last-resort assistance.40 The federal government therefore mobilised - once again - its general spending powers; an implicit area of federal jurisdiction. This deployment took place in two phases.

A - Phase I COVID measures I (March 2020 - September 2020)

  • 41 Canada Emergency Response Benefit Act S.C. 2020, c. 5.
  • 42 Ibid., art. 153.11.
  • 43 Ibid., art. 153.1.1.1.

28On 25 March 2020, the Canada Emergency Response Benefit Act (CERB) was passed.41 It gave the executive council of the federal government vast regulatory powers by introducing into the Employment Insurance Act a Part VIII.4 setting out the parameters of the CERB. In practice, this Part VIII.4 suspends the Employment Insurance Act , replacing it with a sui generis regime tailored to the scale of the emergency, for a period of 28 weeks42 (originally planned to be 18 weeks). The total cost of this operation has been estimated at approximately 80 billion Canadian dollars. Although the Canada Revenue Agency was designated as responsible for managing the CERB, the Employment Insurance Account bore the cost, to be subsequently credited by the Federal Treasury.43

  • 44 Ibid., art. 153.5.2.
  • 45 Ibid., art. 153.9.
  • 46 Canada Emergency Response Benefit Act S.C. 2020, c. 5, Art. 153.9(3).
  • 47 Ibid., art. 153.9. With the exclusion of income from the Quebec Parental Insurance Plan (QPIP). The (...)
  • 48 Canada Emergency Response Benefit Act, op. cit., art. 153.8.5 and 153.1.2.1.

29The CERB was available to anyone who had lost their job or chosen to leave their job due to Covid, or anyone receiving special benefits before 15 March 2020 but having, since then, lost their job for the same reason.44 It was simply for the person necessary to show that in the 2019 tax year they had earnings of at least $5,000.45 As a reminder: the CERB consists of a weekly benefit at a single rate, $500 (€336) and is taxable. During the CERB period, it was possible for the claimant to receive the benefit at the same time as monthly income from work of up to $1,000, without penalty.46 Faced with the urgency of the situation, it was deemed appropriate not to count the Covid-related benefits paid by the provinces.47 In order to facilitate the administrative management of the CERB, all current unemployment benefit periods were closed. Likewise, the special benefits scheme was suspended.48

  • 49 Which is $CAD 469 (€315) per week. Supra, note 23.
  • 50 Under the Employment Insurance Act, it is possible for the claimant to receive earnings from work d (...)

30In the end, by creating the CERB, the federal government removed all the barriers to access to the employment insurance program: the eligibility conditions were reduced to the lowest common denominator, the variable entrance requirements - which made a distinction between regular and special benefits - were suspended; a single benefit was set at a weekly rate higher than the average amount of benefits paid;49 finally, no checks were made on whether claimants were seeking work during the CERB period whereas earnings from work higher than those provided for by the UIA during a benefit period were encouraged.50 Many people asserted that Canada had here the key to a potential guaranteed basic income scheme, with one reservation, however. The CERB required of claimants that they prove their attachment to the labour market for the 2019 tax year, by showing they had minimum earnings of $5,000. Others demanded an alignment, in the long term, of the employment insurance program with the temporary CERB program, seeing in it a solution to the obstacles existing in the current system, in particular regarding the entrance requirements. Finally, some came to realise what the expression “fiscalisation of welfare” means in concrete terms. For access to the CERB depended on submitting a tax return for 2019.

  • 51 Monitoring report 2018-2019, op. cit., Annex 5.1, Employment Insurance operating account.

31Let us be clear about this: in the emergency context that resulted from the first wave of Covid, the CERB made for a lot of winners, at a management cost that defied all competition. From a political point of view, there has nevertheless been a fierce debate, insofar as this expenditure of 80 billion on a scheme that only lasted 28 weeks, largely exceeded the overall cost (of 16 billion) of employment insurance benefits - all categories included - for the 2018-2019 fiscal year.51 How was the rest of the pandemic to be managed?

B - Phase II COVID measures I (October 2020 - September 2020)

  • 52 According to the Canadian Constitution, healthcare is within the jurisdiction of the provinces. How (...)

32In September 2020, the governments had to contend with phase II of Covid. Not only was the pandemic still very present, but a lot had been learned from phase I concerning the labour market and regulation. It was no surprise to find that the most vulnerable workers, both economically and physically, and psychologically, were precarious workers, and those working in the service sector and the public service, especially in healthcare and education. This vulnerability was exacerbated by the notorious deficiencies of provincial legislation concerning labour standards. Impossible to adapt a job to take account of a Covid-related illness - or take care of a child or a family member affected - and maintain one’s earnings, or even one’s link to employment. Once again, the federal government deemed it appropriate to step in, in the name of the emergency, and to use its spending powers. In September 2020, the provinces were particularly anxious as they were facing huge expenditure on healthcare.52 They therefore did not challenge the second federal intervention in any way.

  • 53 The Act respecting certain measures in response to Covid-19, SC 2020, c 12.

33The Act respecting certain measures in response to Covid-1953 was passed on 2 October 2020. Initially intended to end in June 2021, it was renewed until September of the same year. The expenditure incurred under this law is therefore spread over two fiscal years.

  • 54 Ibid., art. 3(g).

34To properly understand the effect of this law, it must be borne in mind that workers who did not stop or suspend their employment between March and September 2020 continued to pay into the employment insurance scheme, as did employers. The Employment Insurance Account therefore accumulated funds between March and September 2020. Consequently, the October 2021 Act makes the Employment Insurance Act the primary payer for workers who meet the usual conditions for establishing a benefit period, whether for regular or special benefits. This Act therefore marks the end of the suspension of the counting of the hours worked in the reference period, as well as that of the passage of benefit periods.54

  • 55 The statutory and case law definition of a suitable job has been the subject of substantial and con (...)
  • 56 The Act respecting certain measures in response to Covid-19, SC 2020, c 12, Art. 3(1) i) and j), op (...)
  • 57 Ibid., Art. 8(2).

35For other workers, the Act creates a new temporary benefit called the Canada Recovery Benefit (CRB). The CRB is a hybrid product, emanating from the CERB and the Unemployment Insurance Act. To benefit from it, workers must have earned at least $5,000 in 2019 or in 2020, and show that they are unable to return to their job or that they have seen their income fall by at least 50% due to the Covid-19 pandemic. The benefit, available for one year, is however subject to conditions similar to those of the employment insurance benefits. Indeed, the claimant has to prove that they are seeking work during their benefit period and accept a return to their previous or another job on an ad hoc basis.55 In addition, these CRB benefits, which are taxable, are subject to a clawback rule ($ 0,50 for each dollar of their annual income exceeding a threshold of $38,00056 during the calendar year, up to the maximum amount of the benefit received).57 Brought in as an economic recovery measure, this benefit operates the usual levers intended to maintain the link to the labour market, at a time when employers were denouncing the effect of the CERB, which is claimed to have kept its beneficiaries away from the jobs market. In addition, an objective of fairness is sought between claimants of employment insurance - particularly those who will have to exhaust their employment insurance benefits before benefiting from the CRB.

  • 58 Ibid., art. 10 and seq.

36The CRB is the first of three separate benefits introduced by the October 2020 Act. It also brought in the Canada Recovery Sickness Benefit (CRSB). Lasting two weeks, this benefit is provided to workers sick or isolating due to Covid, or suffering from a medical problem that would make them more vulnerable.58 The other conditions relating to the CRB apply, except, obviously, the condition of availability for work during the two weeks concerned. In addition, the benefit recovery rule does not apply.

  • 59 Ibid., art. 17 and seq.

37Finally, the October 2020 Act created the Canada Recovery Caregiving Benefit (CRCB). The CRCB is intended to respond to the following events: the need to look after a child under 12 years, or another member of the family aged 12 or over who cannot be left unattended, when the school, day-care or healthcare centre is closed due to Covid; the person who normally takes care of the child or family member is not available for Covid-related reasons; the child or family member has to stay at home because of the high risk of serious consequences on their health if they are infected by Covid.59 The CRCB lasts for a maximum of 26 weeks. Once again, benefit recovery rule does not apply and the benefit is taxable.

  • 60 Supra, note 23.

38The successive waves of Covid have revealed that the CRCB is the most indispensable emergency benefit of all, since labour regulation is so badly adapted to the requirements of care. This observation echoes the pre-Covid data available concerning the special employment insurance benefits. The benefits paid to caregivers of children and adults saw the most spectacular growth in 2018-2019.60

VI - Unemployment insurance after COVID: a choice between contributions and taxation?

39It is obviously risky to draw any lessons from an experiment that is still ongoing. But many observers feel that beyond the context of the pandemic, the CERB, the CRB, the CRSB and the CRCB are serving as a fiscal social experiment. We will try to outline here the main reflections in progress.

  • 61 Supra, note 20.

40The Covid benefits outside the employment insurance program depend on a minimum income proving a link to the labour market, with regard to the tax preceding the application, and not on contributions paid in. Insofar as the establishment criteria (the variable number of hours worked during the reference period) for a regular or special employment insurance benefit periods, exclude, more than they include,61 the Covid benefits therefore meet the needs of workers other than permanent workers better, and this applies to the sectors contributing most to GDP growth (the services). Furthermore, these benefits must be assessed taking account of the fiscal benefits, the Canada Child Benefit (CCB) - non-taxable - and the Canada Workers Benefit (CWT) - a non-refundable tax credit.

  • 62 The unionisation rate in Canada is slightly over 30% and has only varied slightly in the last decad (...)

41Does this mean that it is necessary to reform the classic contributory employment insurance scheme (relax the rules for establishing the benefit period and improve those relating to its length), or continue on the path of the fiscalisation of welfare? In the latter case, what would be the objective sought? To replace lost earnings or to combat poverty resulting from losing a job or the precariousness of that job? In this respect, the clawback mechanism that accompanies the CRB can perhaps provide a clue. Indeed, the benefit clawback threshold has been set at $38,000, while the maximum is nevertheless fixed at the total CRB received. This fiscal clawback threshold is lower than the average income in Canada ($52,600) and the maximum insurable earnings under the Unemployment Insurance Act ($56,300). In the Canadian context, such a debate cannot ignore the interests of various actors, including the unions62 and the provinces.

  • 63 See for Quebec the Act respecting Labour Standards, SRQ c N-1.1, amended in 2018, and the articles (...)
  • 64 See for Quebec the Individual and family Assistance Act, Supra note 40; for Ontario, see the Ontari (...)

42Provinces are obviously stakeholders in the debate. On the one hand, they are hesitating to adapt the legislation providing for minimum labour standards to the realities revealed by the Covid crisis. There are few responses to the precariousness and vulnerability of work in these laws, for example on paid holidays.63 On the other hand, they have to deal with those not covered by employment insurance and in periods of economic recession see an increased number of beneficiaries of the last-resort assistance laws, the social assistance laws.64

  • 65 For an eloquent illustration of this complexity, see British Columbia Expert Panel on Basic Income, (...)

43Now, it is around the theme of the indignity of these last-resort laws that the debate turns favouring the introduction, in Canada, of guaranteed minimum income, and not the subject of the Employment Insurance Act. As in all the OECD countries, all the cash and in-kind social protection measures represent a highly complex constellation that many are tempted to simplify, even flatten, by using fiscal income support measures.65 Poverty reduction measures are the first to be mentioned. Now, the Employment Insurance Act has never been described as this type of measure, but as a program for replacing lost earnings due to the loss of work, up to a certain percentage of the maximum insurable earnings. If it is failing to properly meet this need, as the latest available data show, it is because there is a mismatch between the world of work and the demanding requirements for establishing a benefit period, which is furthermore subject to variations in regional unemployment rates. The debate on the introduction of a guaranteed minimum income by means of fiscalised social benefits therefore disregards the labour market by giving all the importance to income, including all sources and taking account of all mishaps, but with the qualification of work.

44The federal Covid-related measures have undoubtedly provided proof that fiscal-type social expenditure - emanating from the federal spending powers - are more agile when what is required is urgent replacement of lost income. In addition, they were exceptionally generous. These observations do not mean, however, that we can elude the question of what the aim would be in a context other than the emergency of the pandemic. Will these measures, in the medium term, be the death of the Canadian employment insurance program? Nothing is less certain. Nevertheless, the future of this program will necessarily be influenced by the lessons learned from Covid. A scheme that only serves 40% of those who pay into it is, in any case, a scheme in disarray.

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Notes

1 Unemployment Insurance Act, L.C. 1940 c. 44. For a study of the construction and development of the Canadian social protection system in general, see D. Guest, The Emergence of Social Security in Canada, University of British Columbia Press, 2nd ed., Vancouver, 1985.

2 Unemployment Insurance Act, L.C. 1970-71-72, c 48. For a study of the development of this law over time, see G. Campeau, De l’assurance-chômage à l’assurance emploi, l’histoire du régime canadien et de son détournement, Montreal, Boréal, 2001.

3 For a historical analysis of the management of the Employment Insurance Account, see the judgment written by Justice LeBel of the Supreme Court of Canada in Confédération des syndicats nationaux v. Canada (Attorney General), [2008] 3 RCS 511. See also Reference re Employment Insurance Act 2005] 2 SCR 669.

4 Employment Insurance Act, “L.C. 1996”, c 23. Like others in Canada, we hesitate to use the expressions “employment insurance”, which in our opinion misrepresents the purpose of replacement income in the event of unemployment. In this text we will therefore alternate between the expressions “unemployment insurance and “employment insurance” in reference to the 1996 Act.

5 Confédération des syndicats nationaux v. Canada (Attorney General), op. cit.

6 Unemployment Insurance Act, op.cit., art. 66(1),

7 For details of all successive amendments made since 1996 to the Unemployment Insurance Act, see Government of Canada, Employment Insurance Monitoring and Assessment Report for the fiscal year beginning April 1, 2018 and ending terminate March 31,, Annex 7: Legislative changes to the Employment Insurance program implemented and in force from April 1, 1996 to January 1, 2020 : https://www.canada.ca/fr/emploi-developpement-social/programmes/assurance-emploi/ae-liste/rapports/controle2019.html [Monitoring Report 2018-2019].

8 About €37,900. This threshold is slightly higher than the average wage, which was $CAD 52,600 (€35,000) in 2020.

9 L.C. 1996, c. 23, Art. 7(2).

10 Statistics Canada, Labour Force Survey, Table 14-10-0287-01: https://www150.statcan.gc.ca/n1/daily-quotidien/200904/g-a003-fra.htm

11 L.C. 1996, c. 23, Art. 7(2), op. cit., Annex 1.

12 Ibid., Art. 12 to 23.3.

13 L.C. 2009, c. 33, amending L.C. 1996, c. 23.

14 L.C. 1996, c. 23, Art. 145(1), op. cit.

15 Ibid., Art. 16(1). See also Monitoring Report 2018-2019, Annex 2.23 for more recent data.

16 Supra, note 7.

17 The labour force survey produced annually by Statistics Canada defines atypical work as work that is done part-time, on a self-employed or temporary basis.

18 On-call work includes work associated with short-term employment, with variable hours and pay and a lack of continuity of employment with the same employer. On-call work is the subject of individualised wage negotiations and is often associated with large-scale outsourcing contracts. Monitoring Report 2018-2019, Chapter 1, Labour market context, point 1.3.2.

19 All the details taken from the Monitoring Report 2018-2019, Chapter 1, Labour market context. A distinction must be made between the unemployment of those with short-term or fixed-term employment contracts and that of seasonal workers. In the latter case, the Canadian unemployment insurance program has long provided for special - reduced - entrance requirement for workers in seasonal industries (in particular fisheries and fish processing plants). As the unemployment rate is higher in so-called natural resources regions, today they benefit from a less demanding entrance requirement in terms of the number of hours worked. For the same reasons, this reduced requirement does not necessarily mean lower benefits paid. The current method of calculation is derived from earlier entrance requirement systems reserved for seasonal workers. For example, there was a time when the Act provided for a rule for converting fish catches into insurable weeks for the purposes of the entrance requirement.

20 Monitoring Report 2018-2019, Chart 10. The breakdown of the non-eligible unemployed is as follows: 31.1% had not worked; 4.9% were self-employed or family workers; 7.7% left their job without good reason; 8% were returning to full-time education; 6.1% did not have enough hours in the reference period.

21 Ibid., Chart 13.

22 About €31. Ibid., Graph 16.

23 Ibid., Annex 2.20.2- Family caregiver benefits for children: Average actual duration (number of weeks); Family caregiver benefits for children: New claims established.

24 Ibid., Annex 2.19.1.

25 Ibid., Annex 5.1, Employment Insurance operating account.

26 Which is, subject to exceptions, a matter for the provinces.

27 Unemployment benefits are taxable income.

28 Refundable credits reduce the tax payable whereas non-refundable credits are paid independently of the tax to be paid or not.

29 For a historical analyse of the taxation of welfare in Canada, see L. Lamarche and C. Girard, «Évolution de la sécurité sociale in Canada : la mise à l’écart progressive de l’État Providence canadien», Revue des lois et politiques sociales, no. 13, 1998, p. 95.

30 This analysis excludes the taking into account of the Canadian occupational accident and illness compensation system.

31 For an analysis from the angle of the human right to social protection, see League of Rights and Freedoms, Le droit à un niveau de vie suffisant. Faut-il s’inquiéter lorsque le rapport d’impôt s’en mêle?, 48 p., 2020 : https://liguedesdroits.ca/wp-content/fichiers/2020/06/ldl-protectsociale_couleur_200505.pdf

32 For an exhaustive annual inventory of social assistance available to private individuals, see the Chair in Taxation and Public Finance, Université de Sherbrooke, Guide des measures fiscales : https://cffp.recherche.usherbrooke.ca/outils-ressources/guide-masures-fiscales/

33 Income Tax Act, R.S.C. (1985), c. 1 (5th supp.), Art. 122.6. For a description of the Canada Child Benefit programme, see Canada Revenue Agency, “Canada Child Benefit and related provincial and territorial programs”, 2020, p. 9: https://www.canada.ca/fr/agence-revenu/services/formulaires-publications/publications/t4114.html. For a comparative analysis, see T. Penne, T. Hufkens, T. Goedemé and B. Storms, “To what extent do welfare states compensate for the cost of children? The joint impact of taxes, benefits and public goods and services”, Journal of European Social Policy, no. 30, vol. 1, 2020, p. 79.

34 Income Tax Act, R.S.C. (1985), Art. 122.7, op. cit. For a description of the Canada Workers Benefit programme, see Canada Revenue Agency: https://www.canada.ca/fr/agence-revenu/services/impot/osteoarticular/sujets/tout-votre-declaration-revenus/declaration-revenus/remplir-declaration-revenus/deductions-credits-depenses/ligne-45300-allocation-Canadianne-travailleurs-act.html

35 On this subject, see United Nations, Committee on Economic, Social and Cultural Rights, General Comment no. 19, The right to social security, NU/ E/C.12/GC/19, 4 February 2008.

36 This subject is attracting a lot of attention in Canada. By way of example: Government of Quebec, Expert Committee on Guaranteed Minimum Income, Rapport final, Guaranteed Minimum Income in Québec: A Utopia? An Inspiration for Québec, vol. 2 “Income support and the labour market”, 2017: https://www.mtess.gouv.qc.ca/publications/pdf/RMG_Rapportfinal_volume2_Accessible_FR.pdf

37 K. A. Ryan, “EITC as Income (In) Stability”, Florida Tax Review, 2014, p. 583.

38 M. Brewer, R. Joyce, T. Waters, J. Woods, “A method for decomposing the impact of reforms on the long-run income distribution, with an application to universal credit”, Economics Letters, no. 192, July 2020.

39 See above §III, «The inadequacies of the unemployment insurance program in Canada: a portrait 2018-2019».

40 In Quebec for example, this is the Individual and Family Assistance Act, SRQ c A-13.1.1.

41 Canada Emergency Response Benefit Act S.C. 2020, c. 5.

42 Ibid., art. 153.11.

43 Ibid., art. 153.1.1.1.

44 Ibid., art. 153.5.2.

45 Ibid., art. 153.9.

46 Canada Emergency Response Benefit Act S.C. 2020, c. 5, Art. 153.9(3).

47 Ibid., art. 153.9. With the exclusion of income from the Quebec Parental Insurance Plan (QPIP). The QPIP, exclusive to the province of Quebec and introduced in 2001, is a contributory parental leave scheme that is more advantageous than the special benefits available under the Employment Insurance Act. See Act respecting parental insurance, S.R.Q., c A-29.011.

48 Canada Emergency Response Benefit Act, op. cit., art. 153.8.5 and 153.1.2.1.

49 Which is $CAD 469 (€315) per week. Supra, note 23.

50 Under the Employment Insurance Act, it is possible for the claimant to receive earnings from work during their benefit period. However, 50% of the earnings up to 90% of the weekly insurable earnings used to establish the benefit period will be deducted from the benefits paid. Unemployment Insurance Act, S.C. 1996, c 23 Art. 19(2).

51 Monitoring report 2018-2019, op. cit., Annex 5.1, Employment Insurance operating account.

52 According to the Canadian Constitution, healthcare is within the jurisdiction of the provinces. However, shared funding agreements between the federal government and the provinces contribute to the deployment of the Canadian health system, which is universal.

53 The Act respecting certain measures in response to Covid-19, SC 2020, c 12.

54 Ibid., art. 3(g).

55 The statutory and case law definition of a suitable job has been the subject of substantial and constant disputes under the Employment Insurance Act. The refusal of a suitable job suspends the benefits for a variable, but nonetheless significant period, given the total period for which the benefits are payable.

56 The Act respecting certain measures in response to Covid-19, SC 2020, c 12, Art. 3(1) i) and j), op. cit. The threshold of $CAD38,000 (€25,550) is often used in connection with fiscal-type social benefits schemes as a reduction threshold, that is to say the income threshold from which a fiscal benefit is reduced progressively to zero.

57 Ibid., Art. 8(2).

58 Ibid., art. 10 and seq.

59 Ibid., art. 17 and seq.

60 Supra, note 23.

61 Supra, note 20.

62 The unionisation rate in Canada is slightly over 30% and has only varied slightly in the last decade. See Government of Quebec, Labour, Employment and Social Solidarity, La présence syndicale au Québec et in Canada en 2019, 2020, 30 p.: https://www.travail.gouv.qc.ca/fileadmin/fichiers/Documents/presence_syndicale/2019.pdf

63 See for Quebec the Act respecting Labour Standards, SRQ c N-1.1, amended in 2018, and the articles on holidays and non-working days and leave with pay; for Ontario, see the Employment Standards Act, S.O. 2000, c. 41.

64 See for Quebec the Individual and family Assistance Act, Supra note 40; for Ontario, see the Ontario Works Act, L.O. 1997, c. 25, Annex A.

65 For an eloquent illustration of this complexity, see British Columbia Expert Panel on Basic Income, Final Report, Executive Summary, Covering All the Basics: Reforms for a More Just Society, 2020, p. 21, Table 1-4 “Income and social support system in BC” This table is quite similar for all the Canadian provinces and territories: https://mpra.ub.uni-muenchen.de/105902/1/MPRA_paper_105902.pdf

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Référence papier

Lucie Lamarche, « Unemployment in the days of Covid: will the Canadian unemployment insurance program survive the pandemic? »Revue de droit comparé du travail et de la sécurité sociale, 4 | 2021, 144-157.

Référence électronique

Lucie Lamarche, « Unemployment in the days of Covid: will the Canadian unemployment insurance program survive the pandemic? »Revue de droit comparé du travail et de la sécurité sociale [En ligne], 4 | 2021, mis en ligne le 31 décembre 2022, consulté le 16 juin 2025. URL : http://journals.openedition.org/rdctss/2680 ; DOI : https://doi.org/10.4000/rdctss.2680

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Auteur

Lucie Lamarche

Professor, Faculty of Political Science and Law, Law Department, University of Quebec, Montreal.
Research topics : Economic and Social Laws, Human Rights, Women’s Rights, Labour Law, Social Security Law.

Publications :
~ L. Lamarche, « The Right to the Continuous Improvement of Living Conditions as a Meta Right and the Need to Reassess the Progressive Realisation of Social Rights and of the Right to Social Security: Canada as a case study », in J. Hohmann and B. Goldblatt (eds), The Right to the Continuous Improvement of Living Conditions: Responding to complex global challenges, Hart Publ., London, 2021.
~ L. Lamarche, « From a social protection Regime to an Income Security Agenda: Canada at the Crossroads », in M. Westerveld and M. Olivier (eds), Social Security outside the Realm of the Labour Contract, Informal work and employee-like workers, Edward Elgar Publ., London, 2019, p. 238.

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