John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.
Prime Minister Mark Carney’s government continues to push pages from the Liberal Party’s governing playbook through the shredder. Last week, Energy Minister Tim Hodgson had his turn at the powershred.
While in Germany to drum up business, Mr. Hodgson made a jab at former prime minister Justin Trudeau’s opposition to exporting liquefied natural gas to Europe, saying “Unlike the previous Canadian government, which closed the door to LNG exports, Prime Minister Carney’s government has opened it.” Mr. Carney’s Liberal government has also killed much maligned Trudeau-era policies such as the consumer carbon tax and the proposed capital gains tax hike.
While Mr. Carney and his Liberal ministers continue down the road to Damascus, having seen the light that Canada’s economic fortunes are in peril, there is one more Liberal policy they should run through the shredder: Our woefully inadequate employment insurance program that, at the hands of past Liberal governments, has become a shell of its former self.
Employment insurance did not come easily to Canada. The collectivist impulse that many Canadians tout as distinguishing us from Americans is a relatively young phenomenon in the country’s long history. The rugged individualism some Canadians today deride as a lamentable feature of American culture is very much a Canadian characteristic as well – one that was weakened during the 1930s Depression after a decade-long debate on the merits of a national employment insurance program.
Economists call on Ottawa to reform employment insurance as trade war begins
The Conservative government of R.B. Bennett attempted to institute such a program in 1935, only to have it declared unconstitutional by the Supreme Court of Canada in 1936.
Four years later, the Liberal government under William Lyon Mackenzie King worked with the provinces to secure a constitutional amendment that addressed the Supreme Court’s objections. Canada soon had an Unemployment Insurance Act, the first program of its kind to deliver support to private-sector workers. Employees and employers each paid 1.8 per cent of insured earnings, capped at the average industrial worker’s income at the time, and Ottawa contributed a sum of 20 per cent of those combined premiums while paying administration expenses.
Today’s employment insurance program is a shadow of what those who created it in the 1930s thought it could one day be. As Policy Options pointed out in a detailed report this spring: “The number of unemployed Canadians who receive EI benefits now is less than 40 per cent, down from more than 80 per cent in the 1990s.”
Those 40 per cent must navigate an overly complex system to secure the support they paid for and what they receive amounts to 55 per cent of their typical earnings, to a maximum of $695 per week for 45 weeks, before federal and provincial taxes.
Colin Busby said in 2022: Employment Insurance is a confusing mess in need of urgent reform
What Canada’s employment insurance program actually delivers is 45 weeks of poverty for recipients that lack an emergency fund. The experience involves visits to food banks, accumulating debt, and counting down the weeks till their EI runs out and they can no longer pay their rent or mortgage. For most unemployed workers, it delivers nothing. This is the rugged individualism of Liberal governments in action.
Is it any wonder that Abacus Data’s recent polling indicates that “precarity emerged as the defining mindset across Canada” in part, because of job insecurity?
Ottawa does not help underwrite Canada’s employment insurance program as it was originally envisioned. Instead, the federal government prefers a program that pits regions against each other, and turns the unemployed into a constituency to be bought with special one-offs financed by Ottawa in times of stress, such as a pandemic or a sectoral tariff battle with the United States.
The precarity mindset of many Canadians should concern Mr. Carney’s Liberal government.
Similar anxieties helped elect U.S. President Donald Trump to a second term. The New York Times detailed them in a recent article, asserting that working class support for Mr. Trump comes down to “a deep economic anxiety that a meager social safety net has caused in the United States.” When Americans lose their jobs, they lose almost all their income and their health insurance, too. Mr. Trump’s tariffs are, to working Americans, a social safety net.
Unemployment continues to rise in Canada, and the affordability crisis rolls on. The adoption of artificial intelligence promises to transform Canada’s workforce, and in the short- to medium-term that is likely to cause higher unemployment amongst younger workers. The stock market boom lifting bank shares and portfolios will eventually burst and usher in a recession.
On Mr. Carney’s first Labour Day as Prime Minister, parades won’t be enough. Fixing Canada’s employment insurance program would distinguish the Prime Minister from his predecessors. For three decades, Liberal government playbooks have tried to break it.