The Design of Employment Insurance in a Federation

Produced by the Mowat Centre at the School of Public Policy and Governance, University of Toronto.The challenges of designing Canada’s Employment Insurance system are explored in this paper. Special attention is paid to the balance between redistribution and insurance within the system. Avenues for reform are highlighted by analyzing the systems of similarly situated countries: OECD countries with some multi-level governance. Recommended reforms for Canada include funding the program from general taxation as opposed to contributions from workers; eliminating regionalization of benefits; improving the income tax system to deal with variability of earnings; and introducing a two-tiered system to attend to the differing needs of the short-term unemployed and the longer-term unemployed. The desire for co-ordination of efforts between federal and provincial levels of government centre on this two-tiered system to ease the transition from the federal EI program to the provincial social assistance programs, as well as harmonizing training, making this a provincial responsibility. In order to improve on the insurance function of EI, introducing a charge on firms that are repeat users is also recommended