EI: Evidence of Exhaustion?

Today’s Employment Insurance (EI) figures indicate that, in August, 23,000 more Canadians filed EI claims but 19,000 fewer received EI benefits.

The most optimistic possibility is that all of the workers who stopped receiving benefits got jobs. Indeed, the Labour Force Survey indicates that total employment rose by 27,000 in August.

However, that is not the end of the story. The labour force also expanded by 49,000 that month. Adding the 19,000 people who stopped receiving EI benefits implies that some 68,000 additional workers were chasing only 27,000 additional jobs.

One cannot conclude that all, or even most, of those who came off benefits found work. Many probably ran out of benefits but remain unemployed.

Provincial Breakdown

Statistics Canada notes particularly sharp declines in the number of beneficiaries in Ontario, Manitoba and Saskatchewan. These provinces had low official unemployment rates, and hence short benefit durations, going into the economic crisis. Since an EI claim’s duration is set when it is first established, one would expect benefit exhaustion to hit these provinces first.

Indeed, total employment dropped in Saskatchewan during August. Therefore, its decrease in EI beneficiaries most likely reflects workers exhausting their claims rather than finding jobs.

Benefit Coverage

Today’s revelation that more EI claims were filed in August than in July confirms that workers are still being laid off. Since the labour force expanded more than employment in August, unemployment increased by 22,000 that month.

The combination of more unemployment and fewer EI beneficiaries pushed the proportion of unemployed Canadians receiving benefits further below 50%. Indeed, this fraction is below 40% in Ontario, Manitoba and Alberta.

Employment Insurance Coverage, August 2009 (seasonally-adjusted figures)