The Merits of Good Insurance

Remarks delivered at the Employment Insurance Commissioner for Workers Forum in Gatineau, Québec on November 6th, 2018 by Atkinson’s Executive Director Colette Murphy.

I’ve been thinking about the merits of good insurance ever since the tornado touched down in the Ottawa area in September. Those who paid higher premiums are in a dramatically different position than others today, but everyone benefited from the community rallying to support victims and to avert a disaster that could have been much worse.

Employment Insurance, like Medicare, continues to be valued by Canadians as a symbol of our commitment to each other in hard times. We dig each other out of ditches in snow storms. We show up for each other when a family member has died. We are there for each other when the rug of a job is pulled out from under us. Employment Insurance is how we deal with the risk of economic storms, and give and take according to our circumstances. I think we can all agree that it’s time to re-imagine how we do this.

I have five points that I’d like to make at the outset of this roundtable.

First, there is another big storm coming. The storm I am referring to the next recession which will come in the next two years, the next five years or the next 10 years. But it will come and we are not ready.  We are not recession-ready because EI is not recession-ready. Today, a majority are not insured against the possibility of being jobless in a time of mass joblessness.

Second, we pool risk for one and for all. Insurance was developed as a way of sharing risk, maximizing rebuilds after events that were no one’s fault, and minimizing the losses not only to individuals but to society as a whole. Insurance boosts the economy, provides resilience to households and communities, and speeds up the bounce-back after terrible events. We believe Canadians should have the best insurance possible, not the minimum necessary, to weather economic storms.

Third, let’s get our heads around the necessity of insurance. Insurance was first created to deal with loss by fire, the most common source of damage and loss to individuals. Today the most common source of damage and loss comes from water: flooding, sea surges, extreme weather events. The climate is changing. But so is the labour market. There are more contingent and short term jobs today than there were when the EI system was initially designed. Women account for 50% of employees, but not 50% of beneficiaries of regular benefits. Our private insurance schemes adapt to new realities. So why shouldn’t public schemes like this one?

Fourth, let’s look closely at who’s covered and who’s most exposed. In the private sector, low-income households are unlikely to take out private insurance because of the costs. Their losses are huge because they have no coverage. They have no coverage because they have never paid in.

Unlike private insurance schemes, every employee and employer pays into EI from their first hour of work. But many employees can’t make a claim, because they don’t have enough insurable hours of work. This is unfair and the federal government can do something about it.

Fifth, we can remake EI for a 21st century economy. Our task is to figure out how EI should be designed to guard against massive loss of purchasing power during major economic downturns. The Commission should review and revise the conditions of eligibility and the adequacy of benefits. For example, entry requirements in the form of eligible hours or weeks should be stackable between employers. Where available, this information should be automatically generated by access to e-payroll information, rather than records of employment. Income replacement rates could be designed to replace more income for lower-income workers, or for jobless workers with dependents and no other source of income in the household. This was the case in the 1940s and 1950s when the EI system had several tiers of replacement rates.

Reforms to EI regular benefits should not be the only mechanism to address the changing nature of work, and the future of workers goes beyond simply income replacement schema (and training opportunities). But EI must be part of that conversation because it plays a unique role in the economy — that of automatic stabilizer in the event of widespread economic downturn at the regional and national level. And the reality is that it’s simply not playing that role automatically.

EI is part of a larger conversation: how do we assure dignity and economic security in these increasingly precarious times? Canadians’ sense of economic insecurity is driving what sociologist Ron Inglehart has called an existential insecurity. People feel increasingly alone, angry, and distrustful of each other. Inequality grows with damaging consequences for society, the economy, democracy and for individual well being.

There is a need to figure out how to lever a discussion of a new income floor for workers into a long overdue discussion of how to share risk in an increasingly risky world.

As we re-build Canada’s social architecture including EI, it will be even more important to “weather-proof” this system to enable Canadians to be as resilient as they can be.

PHOTO CREDIT: Damage from a tornado is seen in Dunrobin, Ontario west of Ottawa on September 22, 2018. The Insurance Bureau of Canada says severe weather caused $1.9 billion in insured damage last year. An early-May windstorm that affected Ontario and parts of Quebec and topped $410 million — with $380 million of this damage being in Ontario. THE CANADIAN PRESS/Sean Kilpatrick