« How Vancouver Escaped the Freeway Curse | Main | The Neo-Fisherian Counterfeiter »


Feed You can follow this conversation by subscribing to the comment feed for this post.

Hi Frances, wish I could be there to see you and DavidG present on this!

About the EI/UI contribution rates, before 1975 it was a 'tabular' system. I was just looking at this yesterday!

Here's 1962, from the National Finances:
Weekly earnings:
<$9 10cents
9-14.99$ 20 cents
15-20.99 30 cents
21-26.99 38 cents
63 - 68.99$ 86 cents
69$+ 94 cents

Employer and employee both paid the amounts above. Note that marginal tax rates at the threhsolds become infinite.

This system was in place until 1972, when they phased in the new (current) system. They mixed the two systems 40% in 1972, 60% in 1973, 80%in 1974 then 100% in 1975.

I put in a 'fudge' number in CTaCS that was an approximate average of that system in the 1960s. But maybe I shouldn't. Anyway, because of that, the part up to 1974 in CTaCS likely doesn't give a correct impression.

I am trying to get the 2016-1 version of CTaCS out the door, and so I don't have the time to do the schedular 1960s UI coding--do you think I should just zero that out in CTaCS for now so that people don't get confused? Thanks, Kevin

Kevin, thanks for this. May not have a chance to correct this for a little while - see how the morning goes tomorrow. It is clearly differentiated by being in red on the spreadsheet, but I didn't read the footnotes.

Sorry about that.

No problem--not trying to force last minute revisions on you. Just wanted to let you know for future reference :)

Just embarrassed by my carelessness....

Unless I'm mistaken there is a clawback of EI benefits if the recipient reports more than about 50k in earnings. Something like 30%. At least it's what I remember from preparing a tax return. That would mitigate dome of your concerns re: the construction industry.

Not trying to embarrass you! Just coincidental this was in my mind because I was looking at my 1960s National Finances yesterday looking up some CTaCS stuff.

Regarding behavioural nudges, claimants can opt-in to the Job Alert system which will send twice daily emails with ads from the Job Bank: http://www.jobbank.gc.ca/job_alert.do

Vladimir - was just looking that up today for the EI claimant in my household. Here's the clawback info: http://www.esdc.gc.ca/en/reports/ei/repayment.page. It starts at net income around $63,000, and people who haven't claimed in the past 10 years are exempt from the taxback.

Remember the regular benefit/contribution ratio for the construction industry is more than twice the Canadian average. The clawback will make a bit of a difference, but it's still way out of whack.

Angella - interesting. That doesn't look like it's specifically for EI claimants, though, and I don't know if there's anything that encourages people to sign up.

I'm thinking of things like this reporting calendar - http://www.esdc.gc.ca/en/reports/ei/calendar.page - wouldn't it be possible to make that a little bit sexier and also encourage people to use is to do thinks like keep track of networking, reaching out for contacts, etc? People must have turned their mind to this....

I find the maternity and parental leave benefits in the EI program to be particularly odd. Since most people on the whole have about two children, lumping this program in with insurance makes little sense. To the extent that these benefits are self-financed by the individual's EI premiums, parental leave benefits act more like an implicit loan paid back over the individual's working life.

Suppose that we eliminated the parental leave benefit component from EI. If we agree that maternity and parental leave benefits have positive impacts on well-being, and if we agree that borrowing constraints create some sort of market failure which prevents private self-funding of that benefit, then why not have the government create an explicit loan program? Lower the EI premiums, refocus on actual insurance (which is still a bit of an oxymoron given that unemployment is ultimately voluntary), and let people take advantage of the loan program for parental leave. Those who don't have children don't take the loan.

To me the word insurance should be reserved for providing protection against those events that don't happen with probability one. EI has little to do with actual insurance (and neither does our health care system). Once the government decides to be an insurance company with an army, we quickly find that insurance ends up being the last thought on the government's mind.

To make a comparison, when QC instituted the Régime d'Assurance Parentale (Parental leave) they used the Régie des Rentes machinery but the financing was different and there was no commingling of the two programs.
To mix the two, as Oscar would say , is more than a misfortune, it's mistake.

Jacques Rene - it would be really interesting to compare maternity/parental leave taken by self-employed women in Quebec/ROC. I wonder if anyone has done that.

Sick leave is also an issue - I have a friend who is self employed and having some health issues and it's totally brutal because no work=no income,


> Lower the EI premiums, refocus on actual insurance (which is still a bit of an oxymoron given that unemployment is ultimately voluntary), and let people take advantage of the loan program for parental leave. Those who don't have children don't take the loan.

This looks like a near-wash at best to me. The main effect is removing a minor subsidy to having kids while working that's arguably a legitimate policy goal anyway - and possibly re-introducing credit-failures, depending on the details of the newly-established loan program. Parental benefits are broadly sensible - IMHO, that's hardly the worst distortion in this Employment Insurance programme.


But it's not a near wash. It confuses what insurance is suppose to be. Let's use insurance for insurance – that is to protect against financially crippling random events. Parental leave benefits fails to qualify as insurance problem. As for the loan system, it just appears as a line item on your tax return every time you use the program until the loan is discharged. We do this for RRSP home-ownership loans, so it's not hard to do. Of course the size of the loan is a function of your earnings when you make use of the program, so delinquency need not be a serious problem.

If we decide that we would like parental leave benefits, fine, whatever, but then let's do that through a separate program – loans or otherwise. Write cheques to the people you would like to write cheques to. But for crying out loud don't call it insurance and certainly don't convolve it with an existing insurance program.

If Employment Insurance worked like insurance, people who were at greater risk of being laid off would pay higher premiums or receive lower benefits. There would be experience rating, so workers or employers who used the EI system repeatedly would see their premiums increased or benefits decreased.

Not all insurance is rated on an individual basis. Health insurance, for example, is done on a community-rated basis, which is why it is usually sold a group. Disability insurance is rated on a community basis after issue, and is sold as "guaranteed renewable", which means just that. Insurance always contains an element of redistribution from most policyholders to the claimants. Individual rating, which is the standard in property or auto insurance is on one end of the spectrum, community rating is in the middle and pure redistribution through taxation is the other end of the spectrum.

"Insurance always contains an element of redistribution from most policyholders to the claimants." ????

Not in expectation, otherwise it's charity.

I also find the whole system mystifying. I am about to go on parental leave benefits (for the second time) and another thing that is interesting about the parental leave benefits is that many workplaces tie their benefits to the EI benefits. I couldn't get the parental leave benefits through work if I didn't go on EI, but if my wife wanted to use all of the EI for her benefits, I couldn't take advantage of my workplace benefits. My understanding is that this is pretty common.

My wife doesn't get EI parental leave benefits because she doesn't pay into EI. She could, but we did the math and for self-employed people, it works out to what "Avon Barksdale" is suggesting above - a loan that is paid back over time. For us, that loan wouldn't make sense because then I wouldn't be able to access my parental leave benefits, so it would actually cost us either me not taking time off, or money to have her take the EI.

I do think it makes some sense to offer parental benefits, but not sure why it should come out of the EI system (ie taxing EI paying workers), and not the broader tax base.

I also don't think that community rating would be that different for EI than individual rating. Certain groups of workers (university professors, public servants etc...) have stable jobs. Community rating only helps for health insurance because, although correlated with job types, health is not as closely correlated with job types as unemployment.

http://www.dippam.ac.uk/eppi/documents/11292/page/152137(Appendices 6 and 7 of the Irish Fish Inquiry of, I think, 1833; digitised by the University of Southampton. The rest of the commission's report doesn't seem to be digitised, but I found a summary by an American member of this or another commission of inquiry, here. https://archive.org/stream/deepseafishingfi00hold/deepseafishingfi00hold_djvu.txt. The Irish section is pretty deeply buried, but it's there, and seems to cover the issues well enough.)

That was a bit abrupt. I'm sorry to be a bit late to the party, but I'll compensate by being extra narcissistic and telling everyboy that I was a bit busy this week, being a night manager Wednesday night, and a category manager in the morning. Ten hours between shifts, no time to do either job properly. It looks like a labour shortage, but obviously it can't be, because we're not raising wages.

It being a bit late in the day for being arch and ironic, I will stress that this labour market dysfunction is my point, that it is already affecting the reader (unless the reader doesn't eat), and will have its effects on more vital sectors soon enough --if if hasn't already. Canada has an urgent need for new workers which cannot be met from immigration. An effective neo-natal policy is not going to address that problem in less than sixteen year plus nine-and-a-half months at a minimum, but if we move our policy horizon out to the day after "sixteen years plus nine and a half months," the labour market situation doesn't magically get any brighter!

If this doesn't motivate discussion of more effective maternal/parental leave funding schemes, it damn well should. (Although I tend to think of this as tinkering around the edges of the problem. The solution is a social guarantee that a potential parent is saved from all harm. And that goes way beyond a year, or even two years, of partially-paid leave.)

Now I'll return to the subject and make try to make some kind of historian's point. Although I won't be able to resist a bit more Chicken Littling. The case for subsidising fishing is that the business collapses without subsidies. Fisheries fail from year to year. This would be enough risk to gradually shut fishing communities down even if there were not other unpredictable downside risks such as major disasters. Faced with these risks, communities tend to take the windfalls of a good catch and use them to abandon the trade. If you want to have fish, you have to be prepeared to intervene. I am sure that we do not want to go down the road recommended by the Lords Commissioners. Bounties for landed fish are a subsidy for overfishing. The alternative is some kind of support during the off-season. The fact that we do it through UI may or may not be ideal, but it is the way we do it.

One can take a hardline libertarian position and decide that if the outports cannot make it by themselves, they should be abandoned. The problem with that, however, has been demonstrated off Somalia. And do not for a minute imagine that the rest of the world's abandoned, hardscrabble, seaside, boat-owning communities have never been tempted by the prospects of piracy before, or that our own Maritimes are somehow immune from ever feeling that temptation. Though I'm looking for modern piracy to appear in the First World in Greece, first. http://sputniknews.com/europe/20150814/1025748642.html

People always have a resort: crime and flight into substance abuse being the most common in our modern times. They both have victims, and once we get to the point where stealing stuff from other people is the most constructive resort, what kind of society do we have?

whitfit, thanks for those observations, that's a really interesting point.

Erik - you've made an argument for supporting the fisheries, but what I'm not hearing is the argument for supporting the fisheries through EI, especially given that there's a good body of opinion out there that EI premiums are somewhat recessive (though it really does depend upon assumptions about the incidence of employer premiums). Why EI and not general tax revenues?

Frances, I suppose my answer is the same one you've come up with. EI is what we have. Though it does protect the paid labour force. And it replaced subsidies, which tended to promote over-fishing. On the other hand, slacks in seasonal employment are in part predictable, but in part highly unpredictable. EI already takes that into account: you're only qualified when you're not working! A seasonal employment tax credit --doesn't something like that already exist?-- might be designed as the perfect wonkish alternative. Except, well...

I guess I'm being an old fogey here. I have some sense of how the argument has gone over the last six centuries or so, and the consequences of policy errors has often been quite serious. Ruined towns, lost fisheries, outbreaks of smuggling, wrecking and piracy. And while I'm not being entirely serious in suggesting that Newfie fishers are about to turn to piracy, I do have it in mind that as long as we've got illegal immigration and drugs, they don't need to do anything so crazy. And I'm not sure that we want to encourage drug dealing and people smuggling, either.

"Insurance always contains an element of redistribution from most policyholders to the claimants." ????

Not in expectation, otherwise it's charity.",

Redistribution is paying $150,000 to a claimant from a pool of $50 premiums from policyholders.

Furthermore, as I demonstrated, there is a large swath of insurance products that are not rated on an individual basis. Any employer-based group health plan which accepts all employees engages in redistribution to employees with pre-existing conditions.

I also don't think that community rating would be that different for EI than individual rating. Certain groups of workers (university professors, public servants etc...) have stable jobs. Community rating only helps for health insurance because, although correlated with job types, health is not as closely correlated with job types as unemployment.

Depends on how you define the community. You want a community with diverse risks. Occupations may be uniform, but for instance municipalities, provinces or countries are much more diverse.

In insurance, not everything is about the individual, and often too much individualism is bad business, both for the insured and the insurer.

Erik - "and it replaced subsidies, which tended to promote over-fishing." o.k., I missed that point, which is an important one. But wouldn't you figure EI promotes over-fishing too by encouraging entry into the fishery, also makes the entire enterprise more lucrative therefore facilitates capital investment etc?


Any scheme that is intended to keep people in the fishery carries a risk of promoting over-fishing. We've seen two solutions for that: the oldest is licenses, but these trust too much in the licensee's interest in preserving, and breaks down entirely when poaching becomes a problem. (Plus, fish swim around.) More recently, and requiring more social control, we have quotas, which are pretty hard to reconcile with bounties. Everyone wants to be the admiral/highliner! On their face, quotas are ideal for combination with employment insurance, because the boat crews won't mutiny when told that they have to go in. Their incomes will be made good by society, the same society that says that, in the interest of the common good, they must stop fishing when they hit their quotas.

The issue here is that it is "intended to keep people in the fishery." This tends to be what sticks in the craw here in the economic core regions. Why are we paying these people subsidies? They should just move to the oilfields! (Intentional irony is intentional.) In highlighting the Nineteenth, and even Eighteenth Century experience, I want to make it clear that we've had a pretty extended run at exactly this kind of sink-or-swim approach to the fishery, and the result has been perverse. There is a resource (fish), and willing buyers for the fish, and somehow the market cannot coordinate the two.

I guess that's leading with the conclusion. What turned my opinion was a very simple argument from one of those many, forgotten parliamentary inquiries, framed in Napoleonic-era logic. The fisher goes out, and does well in a good year, but badly in a bad year. In a good year, the fishing family eats from the catch. What does it eat in a bad year? Well, the Commissioner says, that's a problem, and the solution inherited by the community we looked at was cottager plots. The family has a garden plot, where it grows potatoes, muesli, truck vegetables. . Whatever.

Unfortunately, this placed the family in a bind. On the one hand, Dad can go to sea with the fleet. He does not know if this will be a good year or a bad year. Eventually, he knows that there is a chance that it will be a very bad year, and that he will die at sea. In a bad year, the cottage plot will provide for the family. In a good year, it quite possibly will not, because he won't be there to dig it. In a very bad year, he will impoverish the family by depriving it of his labour for ever thereafter. So the only reason that he will go out to the fleet is if the plot's income is meagre to the point of subsistence.

But! In a good year, he makes a profit. Now, on the one hand, his boat needs a refit. On the other, his neighbour's plot is up for sale. Should the profit be invested in the fishing boat, or the plot? The question, I think, answers itself. There are fish, and there are willing buyers, but the fishing family declines to be the intermediate. I'm not sure I see a non-social, old-timey "liberal economics" solution to this problem.

Also, some people who cannot qualify for benefits are still required to pay EI. For example, students must pay EI but if your status is as a student you don't quality for EI. Also, single people are required to pay into a system that subsidizes parental leave, regardless of whether they will ever be in a position to take advantage of it.

Even worse, people who work in temporary jobs and occasional work who desperately need additional benefits but cannot get sufficient hours to qualify, still have to pay into a system that will never benefit them.

The matching of who pays and who stands to benefit could be done much better. I don't know how many thousands I've paid into EI over the years, but between various alternating situations, I've been ineligible for benefits any time I've been unemployed. Now I'm self employed, so my social contributions are more in line of the basic tax and redistribution system, without the additional EI tax that I will never benefit from.

The comments to this entry are closed.

Search this site

  • Google

Blog powered by Typepad