D E P E

While the public debate over reforms to Employment Insurance centres on regional fairness in eligibility requirements, it is critical that the EI program remain affordable in good times and bad. To avoid pro-cyclical EI premium decreases during booms and harmful premium increases during downturns, the challenge is to create a rate-setting mechanism that would balance the books over the ebbs and flows of economic cycles, and permit yearly EI account balances to vary. Ottawa also needs to introduce reforms that insulate the EI fund’s management from political interference – and protect that fund from governments that would dip into EI surpluses for general spending. One model is the Canada Pension Plan Investment Board. The authors would like to thank Finn Poschmann, Bill Robson, Michael Bédard, and David Gray for their comments. 1 The employee premium rate is the policy rate chosen each year. Employers pay 1.4 times the chosen employee amount. The employee rate for 2009 and 2010 is 1.73 percent of insurable earnings. Including employer contributions, the total premium rate is 4.15 percent, much higher than the employee rate alone