Incredible Shrinking EI Benefits

The number of Canadians receiving regular Employment Insurance (EI) benefits dropped by 47,700 in January, the largest monthly decline in years. As usual, the key unanswered question is whether these workers are no longer on EI because they found jobs or simply ran out of benefits.

The Labour Force Survey indicates that employment rose by 43,000 in January, so it is conceivable that most of those who left EI that month are now working. However, unemployment fell by only 24,100 in January (unemployment fell by less than employment rose because the total labour force expanded.)

In other words, the EI rolls shrank by twice as much as unemployment decreased. As a result, EI coverage has diminished. For some of 2009, just over half of unemployed Canadians received benefits. By January, that proportion was down to below 46% (i.e. 698,800 EI beneficiaries out of 1,531,700 unemployed workers).

The Bigger Picture

EI peaked in June 2009, when 819,200 Canadians received benefits. Through January of this year, 120,400 fewer Canadians were receiving EI benefits. Over the same seven–month period, employment rose by 99,600 and unemployment fell by only 60,200.

The same trend is apparent in both the latest month and the entire period since the economic recovery began. The EI program is shrinking appreciably more than employment is growing. The number of Canadians receiving EI benefits has declined by twice as much as the number who are unemployed.

Policy Implications

While the labour market is now getting better rather than worse, some 1.5 million Canadians remain officially unemployed. Today’s numbers indicate that the EI program is helping a decreasing percentage of them. The start of an economic recovery should not remove the continuing need to improve EI from the political agenda.

UPDATE (March 25): Quoted by CanWest and Globe and Mail Update