BILL C-12 EMPLOYMENT INSURANCE ACT: REDUCED BENEFITS AND DIMINISHED ENTITLEMENTS OF THE WORKFORCE IN NON-STANDARD FORMS OF EMPLOYMENT by Berhane Semere B.S.W., University of Manitoba, 1988 A PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SOCIAL WORK In the College of Arts, Social and Health Sciences University of Northern British Columbia July 1998 ABSTRACT On July 1,1996, the federal government introduced Biii-C12, the new Employment Insurance (EI) legislation claiming that one purpose is to extend coverage to those who were excluded from U/. This includes the labour force in non-standard forms of employment (those in part-time, temporary, seasonal and 'just-in-time' employment also referred to as the precariously employed).This project concludes that contrary to this proclamation, the newEl legislation is designed to exclude from benefits the very labour force the government contended to extend the coverage to. The El guidelines defeat the very purpose of extension of coverage to th is workforce by imposing strict eligibility criteria and increased entry requirements . It increases the qualifying period by 233% from what it was under Ul and it introduces a penalty for repeat-use of the program . The new fixed averaging formula used to determine the level of benefits as well as weeks of benefits and the new-re-entrant requirement of 910 hours end up either excluding many of the precariously employed from benefits or reducing their benefit levels and benefit weeks . The precariously employed are at a disadvantage relative to the full-year-full-time employed workers while employed. As a result of their position in the labour market, they lose or receive benefits at a reduced level ; they receive lower hourly rates of pay, work on average less hours and have less job security. They are also exposed to frequent unemployment spells. The disadvantage these workers face during employment puts them at a further disadvantage in the event of unemployment because of the reform of the program that uses hours of work (35 hour- week) to establish eligibility and entitlement to benefits as well as to determine the duration of benefits. Not only will the majority of the precariously employed have difficulties qualifying for benefits, but the new El program also excludes or disqualifies some part-time workers who were eligible under the old program. The government blamed workers' reliance on Ul as a 'bad form of dependence' and portrayed others as suffering from a 'lack of work effort'; and yet others as having 'minor ii workforce attachment' . It is argued in this study that these labels portray the unemployed as 'undeserving' and thereby justify their exclusion from benefits and/or the reduction of their levels of employment insurance. The full-time-full-year workers who are portrayed as having 'major workforce attachment' are also affected by some changes in the legislation. Arguing from a Structural Marxist point of view, this study concludes that the main purpose of the reform is to weaken the safety net for the jobless and thereby increase the vulnerability of the working class in general to the hazards of the market place at a time when unemployment is high . The relative accessibility of the old program, with its income replacement of 55% of insured earnings and the duration of benefits, was believed to loosen the cash/work nexus by way of de-commodifying labour power. The reform, therefore, is designed to rid the program of these perceived or actual effects and to strengthen the actuarial principle. As a result, the new El program curtails benefits and entitlements for workers; it forces the working class back into the wage-capital labour relations as soon as possible. It does this by diminishing the capacity of the program to immunize the working class from the forces of the market. This endeavor is consistent with the view of structural Marxism; this perspective postulates that state institutions and policies in capitalist societies operate to fulfill the general maintenance and reproduction of the fundamental relations of production in the work place and the relations of exchange and distribution of commodities, namely private property and market. iii Table of Contents Abstract ii Table of Contents iv List of Tables vi List of Charts vii Acknowledgments viii Introduction 1 Relevance to Social work 2 Analytical Framework 3 Section One Unemployment Insurance-Its Evolution and Functions: An Historical Overview 7 Section Two Bill C-12 , The Employment Insurance Act: The Principles or Motive Forces Behind the Change Neo-conservative Arguments Against Ul Non-standard Employment (i) Part-time Employment (ii) Non-permanent Employment 14 18 25 26 29 Wage and Labour Flexibility: the Advantage to Capital and the Disadvantage to Labour 30 Section Three Bill C-12: The Changes and Their Impact 33 Eligibility: The Shift from Weeks to Hours Worked New/ Re-entrants 33 38 The Fixed Averaging Period & the "Divisor" 39 Intensity Rule- Targeting the "Frequent Users" 41 The Victims of the Intensity Rule 47 Premiums 48 Maximum Insurable Earnings 49 The Family Income Support (FIS) 51 Conclusion 53 Future Research 56 iv 58 Bibliography Appendix 1 Labour Force, both Genders- Annual Averages Appendix 2 Welfare Benefits and Poverty line by Family 66 Characteristics: Provinces,1996 Appendix 3 Appendix 4 65 Average Earnings In Current (1995) Dollars For Women and Men and Female to Male Earning Ratio , 1967-1995 67 Table of Weeks of Benefits 68 v List of Tables Table 1 Summary of Positions of Selected Employer And Employee Groups Regarding the White Paper 'Unemployment Insurance in the 70s' 11 Table 2 Combinations of non-standard employment by age, sex and Industry 28 Table 3 The Newly Insured, Nominal Extension of Coverage 36 Table 4 Fixed Averaging Formula Under Eland the Shift from Weeks to Hours Worked : Comparison Between El & Ul 40 Table 5 Unemployment- Job-losers and Job-leavers, Canada and Provinces; December, 1996 44 Table 6 Low-Income Earners Eligible for Family Income Supplement 53 vi List of Charts Chart 1 Climbing Part-time Employment Rate , Canada-1977-96 27 Chart 2 The Declining Ratio of Regular Beneficiaries Canada, 1987 to 1996 (December of each year) 37 Chart 3 Unemployment Rate and Persons in Low Income: Canada, 1980-1995 55 vii Acknowledgments Specific acknowledgments are owed to Professor Gordon Ternowetsky not only for his patient guidance, support and encouragement throughout the study, but also for his insightful and thoughtful comments and suggestions. This study would not have been completed without his encouragement and consistent active support. This study benefited from his considerable expertise and wealth of knowledge in the area of social policy. My sincere thanks to Professor Kwong Leung Tang for providing detailed suggestions for the reorganization of the sections of the study to make it more useful to interested readers. The contents were also improved through his helpful and useful criticisms , suggestions and comments. Thanks is also owed to Professor Graham Riches . Although his involvement was brief, his critical comments and suggestions were incorporated into this study. And finally, special thanks to my family- to my sons Arkaan Semere and Shaam Semere for their patience and understanding of my time commitment, and to my spouse Tsighereda Ghebreigziabiher who supported me throughout the duration of the Masters of Social Work Program viii Introduction: The major purpose of this project is to examine the impact of Bill C-12 , the new Employment Insurance (EI) legislation on the labour force employed in non-standard forms of employment (part-timers, temporary workers as well as seasonal workers) . Particular attention will be paid to the curtailment of Ul benefits and entitlements. To address this, the analysis will focus on the extent to which and how the following changes on the legislation will affect the income replacement of the labour force employed in the non-standard forms of employment: - program eligibility: entitlement and duration of regular benefits based on hours worked rather than weeks; the entrance requirements for part-time workers and new/re-entrants; - the "extension" of coverage to all part-timers; - changes in benefit calculations ; - reduction in maximum length of benefits; - reduction or elimination of regular benefits depending on the regularity of claims (the 'Intensity rule" and benefit Clawback) ; - reduction of the Maximum Insurable Earnings (MIE); - premiums payable on all earnings up to the lowered MIE threshold; - the introduction of Family Income Support (FIS) based on family incomes and individual Ul contributions . The focus of this analysis is on the income benefit side of the program as this study is concerned with eligibility for income support for the unemployed. It excludes employment benefits that are designed to increase the skills and employability of the unemployed workers . Organization of the Paper: The paper is organized into three sections. The first section reviews the history and evolution of unemployment insurance in Canada. The arguments and debates for and against the social responsibility for the unemployed, the eventual recognition of some form of protection for the unemployed from the hazards of the market economy and the principles behind the support for or objection to the program are reviewed in this section. The discussion pertaining to the argument for and against the program are believed to shed some light on the functions of the program as perceived by the state and capital. Section two focuses on the new legislation , Bill C-12 . This section examines the ideological issues behind changes in the program . The assumptions and justifications made by the government in regards to the need for change, and the neo-conservative views embedded within these assumptions are examined in this section of the paper. As one of the reasons given by the government for the introduction of Employment Insurance is to respond to the 1 'inflexibility' of the labour market, this section also explores the labour market by way of identifying the groups most affected by this change- those in non-standard forms of employment. Section three will focus on the changes introduced with Bill C-12 and the impact of this Bill on the workforce in non-standard forms of employment. As the federal government has given reasons for introducing certain reforms in specific areas of the program, this section will include an examination of the reasons given in addition to the analysis of the impact of each key area on the working class. The following questions will be addressed in this section: What are the changes introduced? What reasons were given for introducing specific changes? What is the overarching objective of these changes? How do these changes affect the workers in the non-standard forms of employment? and; Which class of workers are affected the most by which changes in the program? Relevance to Social Work It is widely known that social work as a profession is confronted daily by the human misery that emanates from unemployment, econom ic deprivation and related poverty. Riches and Ternowetsky (1990) note that because of its unique position , social work "... has an unavoidable date with unemployment. Indeed , what social workers ... daily confront in their practice are the human consequences and social costs of an economy that is being restructured and reshaped" (p. 14). Unemployment and the correlate of poverty are characterized by hopelessness, helplessness, powerlessness, depression, low self-esteem , worthlessness and self-blame. Kirsh (1992) reminds us that "[i]t is (also) widely acknowledged that conditions of poverty create physical risks , and to the extent that poverty and unemployment are strongly related , unemployment is a health hazard" (p.56). Moreover, and as noted by the same author, the "evidence suggests that increases in the rate of unemployment are accompanied by increases in the rates of spousal abuse, divorce, sexual assault, child abuse, children 's problems in school, criminal acts, and racial tensions" (p. 52) (emphasis added) . Individuals experiencing these problems constitute the majority of the service population of social work. However, social work interventions, especially those related to unemployment counseling, as noble and necessary efforts as they are , are destined to ultimately fail if they are not adjunct to social welfare policies as well as political and economic initiatives (Kirsh , 1992; McKay, 1990).This implies that social workers should go beyond the provision of individual psychological/emotional support or services and be, as Riches and Ternowetsky 2 (1990) note, "among the first to subject a society' s economic and welfare policies to careful scrutiny, observe human consequences and social costs, and make proposals for change (p. 18). Accordingly, this project endeavours to scrutinize the restructuring of (Un)Employment Insurance and its implications on those marginalized by the labour market, namely, those in the non-standard forms of employment. It is hoped that this analysis will inform social work intervention with the unemployed and/or the economically deprived. Analytical Framework The overall approach taken to examine the implications of the reform on workers in non-standard forms of employment is that of 'structural Marxism'. The main goal of institutional and policy analyses informed by this approach is to analyze how the effects of state institutions and policies operate to fulfill the general maintenance , protection and reproduction of the fundamental relations of production between people in the work place and the relations of exchange and distribution of commodities (Barrow,1993, Gough ,1979;0ffe,1984;Gonick, 1987). This structural Marxist view postulates that social institutions fulfill specific functions necessary to maintain or sustain a particular mode of production . For example the economic structure of a capitalist system such as that of Canada is constituted primarily by relationships that organize the production, exchange and distribution of commod ities , namely, private property and the market. The most important institutions within this economic structure are the relations of production between people in the work place and the relations of exchange and distribution of commodities in the market place. The central aspect of this econom ic institution is that goods, services, minerals and land must be available only as commodities. The propertyless can acquire the goods and services they need by selling the only commodity they own, their labour power, to those who own and control productive assets (Pixley, 1993). In a capitalist system , labour power is considered as a commodity which is utilized to produce other commodities . It is, as Wright (1979) puts it, "the productive capacity sold in labour market for use in the production of other commodities" (p. 114). Accordingly , the labour market, an arena where the buyers and sellers of labour power meet, constitutes the most significant feature of a capitalist system . Any state intervention that may have a decommodification effect of labour power or other goods and services is, therefore, perceived as undermining the market mechanism or the relations of exchange and distribution of 3 commodities. Social wages or the provision of cash transfers , social services, and unemployment benefits, imply a de-commodification of labour power. Those who control the productive assets view the social provision of these services, including Unemployment Insurance, as a threat to labour market mechanisms as it interferes with the availability of labour power as a commodity (Esping-Andersen, 1990; Pixley, 1993). It is this threat, whether perceived or actual that the government is trying to address through the new El legislation . Structuralists view the welfare state as 'capitalist' to the extent that it creates, maintains and restores the conditions required for capital accumulation (Poulantzas, 1978). The methodological criterion for conceptualizing what makes the state 'capitalist', despite some of its activities on behalf of the working class, is to specify ways in which the state is functionally related to and dependent upon the accumulation process (Barrow, 1993). This perspective does not assume the state is benevolent. Neither does it view the state as a neutral arbiter between competing groups or classes. The structuralist thesis is that the functions of a state in any given mode of production are to protect , reproduce, maintain or sustain the fundamental relations of production upon which the economic system is based . As noted above, capitalist production relations are primarily organized around private ownership of productive forces and the market place. State policies and state institutions are, therefore , best understood within structural Marxism according to the role they play in maintaining this system of relations . Because the state does not command economic performance or have direct control over the means of production, it relies on those who have control over these phenomena for economic growth and the creation of employment. Actual decisions about investment, job creation and wages are dependent upon the decision of capitalists to invest. However, they do not invest unless they are convinced that there is reasonable guarantee for profit. This in turn implies that the state has to create fertile grounds or incentives for investment. Where state policies do not create such fertile grounds, capital withholds investment, disinvests or moves capital toward more favourable economies and societies. The implication here is that the state necessarily serves the interests of those who have control over the accumulation process for its own fiscal functioning and ultimately its own legitimacy. Its powers are limited by this dependency, and as a result its functions are ultimately oriented towards creating favourable conditions. Within this framework, state intervention, including those designed to accommodate workers' demands, are less likely to contradict or negate the functional requirements of the fundamental relations of production in the final analysis. 4 Gough (1997) notes that the state contradicts the basic and direct requirements of the economic system in its drive to accommodate workers' demands, for example for adequate social wage. The latter which is part of the legitimation function (O'Connor, 1973) of the state, is a response or concessions designed to ameliorate class strife and restlessness . The legitimation function, according to the structural perspective, is necessitated by the fact that the state must try to win the loyalty of the propertyless classes who are economically deprived and exploited by the capitalist accumulation process. Some policies such as education, health, unemployment insurance and public housing are necessary not only for ensuring loyalty of the propertyless to the system, but they are also necessary for the reproduction and maintenance of free labour power. However, herein lies the dilemma of the state in that the provision of these services, including that of unemployment insurance, as noted earlier, weaken capital-wage-labour relations. As Pixley (1993) notes," ... unemployment benefits do indeed de-commodify labour power or weaken the cash/work nexus (since the human attached to the labour power can survive without selling it to the lowest bidder)" (p. 20) .The state, therefore, in its efforts to preserve the accumulation process must protect it from legitimation strategies and their decommodifying effects. This is done by increasingly incorporating labour power into the capitalwage labour relation . It is within this context that unemployment insurance, which was established as a legitimating strategy in response to class based opposition, currently finds itself. As noted earlier, the survival of workers in a capitalist system is primarily dependent upon the sale of their labour power; their welfare is contingent upon the cash/work nexus as dictated by the labour market economy. However, as Pixley (1993) and Esping-Andersen (1990) observe, Ul enables them, albeit temporarily, to maintain a livelihood without reliance on the market, especially if the program is accessed with ease and levels of income replacement are adequate, thereby de-commodifying labour power. It is this effect of the program ( i.e. its unhinging of labour power from the market) that the government has addressed through the introduction of El. This reform screens out or rejects provisions of the old system which were viewed as incompatible with the conditions required for capital accumulation or labour market participation . The reduction of benefit levels and benefit weeks are designed to drive recipients or beneficiaries back to work as soon as possible. Failing this, there is always the means-or-income- tested benefits whose mainspring is the 'poor law' and 5 which builds entitlements, as Esping-Andersen (1990) notes, "around demonstrable and abject needs" (p.22). 6 Section One Unemployment Insurance-Its Evolution and Functions: An Historical Overview The first attempt for national unemployment insurance as a legitimation function to calm the class based opposition to unemployment in Canada was the ill-fated attempt by R.B Bennett (Bennett New Deal) in 1935. Canada had, by this time, experienced pre- and postFirst World War mass unemployment, the gradual displacement of labour by technology and the sudden economic crisis of the Great Depression. These social phenomena brought about demands by unemployed workers and trade unionists for the socialization of responsibilities for those out of work and the aged . It also forced a debate among politicians and capitalists on the question of social insurance as a means of preventing the militancy of the unemployed and the threat of revolt and/or industrial unrest (Finkel, 1977; Cuneo, 1980). It was in response to such militancy by unemployed workers supported by trade unionists that Sir Charles Gordon (President of Canada's leading bank in the 30's , the Bank of Montreal) urged unemployment insurance program on Bennett's government; he wrote , "[M]ay I suggest to you that for our general self-preservation some such arrangements will have to be worked out in Canada and that if it can be done soon so much the better'' (cited by Finkel,1977:351). Benett who agreed with this view wrote later that "A good deal of pruning is sometimes necessary to save a tree and it would be well for us in Canada to remember that there is considerable pruning to be done if we are to preserve the fabric of the capitalist system (Finkel, 1977:351) ." Of equal importance to the preservation of the capitalist system and pertinent to capital accumulation was the maintenance of an industrial reserve army. The sustenance of purchasing power at a time of unemployment was also believed to mitigate further depression, while the contributory nature of the program was seen as forced savings by workers for the time of unemployment (Finkel, 1977; Cuneo, 1980). In addition to these is the recognition that unemployment was, as Jacob Cohen (cited by Cuneo,1980) noted in the thirties, peculiarly 'organic' and not an accidental or temporary anomaly in a capitalist society. The dynamics of capitalism which involved the purchase of labour power for profit maximization, the introduction of technology as a labour saving mechanism , the subsequent and inevitable temporary and permanent unemployment and the expansion of the reserve army of labour, finally brought about the recognition , albeit a reluctant one, for collective responsibility for the unemployed and the subsequent introduction of 'the Bennett New Deal' in 7 parliament in 1935. However, the 'Bennett New Deal' did not materialize due to jurisdictional conflict with the provinces and was declared ultra vires by the Supreme Court of Canada. The first successful unemployment insurance leg islation was introduced by Mackenzie King shortly following a constitutional amendment in 1941 . Experience with massive unemployment , the Great Depression and widespread human suffering were not sufficient to convince capital and the state to introduce a safety net mechanism in the 30' s. As noted by Struthers (1983), the " war, not the depression, finally convinced King that unemployment insurance was an urgent necessity" (p 202). This sense of urgency was blatantly expressed by a member of parliament, Mr. Neill , in 1941. In his criticism of the opposition to the program by the Canadian Manufacturer's Association and the Chamber of Commerce, he said ... cheap , short sighted, ostrich-headed! Do they want a bloody revolution after the war? Think of all those idle men who will come back. They will not stand for situations that prevailed last time (cited by Cuneo, 1980:132). The 'last time' was the massive unemployment and the subsequent unrest after First World War where the reserve army of labour swelled due to demobilization of soldiers and those released from the munition factories. Unemployment Insurance Act, was , therefore , proclaimed in 1941 with a design not to redistribute income but to preserve the fabrics of capitalism and enforce work ethic. Guest (1980) notes that it was "generally held by those who formulated the plan that benefit schedules must be held well below the wage earner's normal take-home pay to maintain incentives to rejoin the labour force at the first opportunity" ( P 108) . The 1941 legislation which was based on insurance/contributory principles established seven categories of wage earners according to which benefits were graded . The Labour Department at the time, as quoted by Struthers (1983) contended that [t]he best that unemployment insurance can be expected to do ... is to relate benefits (and contributions) to actual earnings and therefore to the standard of living while employed' (p 201) . Accordingly, benefits increased as per the location of a worker within the seven categories. This grading system had far reaching effects on the working class . As Cuneo writes First, the state' s contributory principle enforced poverty on the lower.. .working class ... not only did workers contribute directly in subsidizing unemployment 8 caused structurally by the forces of capitalism , but indirectly as well through increased taxation and consumer prices. Second, the .. .Act reproduced the internal income stratification within the working class (by tying benefits to past contributions and wages) .. . Third , the structure of benefits regulated the flow of labour. Because workers received fewer benefits than ... past wages .. .they were forced through the experience of deprivation back into the employed labour force .. .Fourth , the income structure of the Act divided the working class politically against itself. (P. 138) (emphasis added) . The Act excluded important segments of the labour force and required insured workers to demonstrate that they were involuntarily unemployed and that they were capable of and available for employment in order to be eligible for benefits. Eligibility for benefits were dependent on the level of workforce attachment. Social insurance, according to these characteristics , was designed to reflect the market place and not to change its workings (Struthers, 1983; Cuneo, 1980). It should be noted here that capital objected to the program for it (the program) had a de-commodifying effect of labour power. Among submissions opposing the enactment of the 1941 unemployment insurance were all three sectors of capital , financial , commercial and industrial that were represented respectively by the Canadian Bankers Association of Canada, Canadian Life Insurance Officers Association , Canadian Chamber of Commerce, Canadian Transit Association and Canadian Manufacturers Association (Cuneo, 1980). As noted earlier, capitalists urged for unemployment insurance under the pressures of massive unemployment and the depression. However, as Michal Kalecki ( cited by Finkel , 1977) argued in 1943, capital which saw state intervention as a contradictory blessing was still largely opposed to Ul in general and to other measures which subsidized consumption in particular. Kalecki' s observation at the time was that even though mass pressures and the need to curb workers militancy shifted their position and views , they would soon once again oppose Ul. Unemployment Insurance -1971 The program grew in depth and width with the advent of Keynesianism and unprecedented economic growth between 1940 and 1970. However, the most notable 9 revision of the Act came about in 1971.The solution to massive unemployment proposed by Keynesianism gave governments in capitalist societies a greater role in the economic management and the provision of social security measures during these years (Pal ,1988; McBride,1992; Phillips, 1986).The major implication of the liberalization of the program in 1971 was that the state started to see unemployment insurance more within a social as opposed to an economic context (MacBride, 1992). The 1970 White Paper, Unemployment Insurance in the 70's, as noted by Pal (1988) explicitly identified Ul as a social policy and described the Ul Act as providing financial assistance to lower income workers during periods of temporary unemployment. ..[T]he White Paper maintained that modern social policy had to go beyond simple monetary assistance to 'being directed toward the more complete fulfillment of people' (p. 75) . The Act placed less emphasis on worker's attachment to labour force in determining accessibility and entitlement to benefits. Only eight weeks of workforce attachment in a 104 week period was required for eligibility for benefits under this Act. The level of benefits provided by this Act was considerably more generous than those provided by its predecessor; benefits were higher, near universality was introduced , sickness and pregnancy coverages were offered, and a regional calculation/eligibility formula was introduced (Phillips, 1986; Pal , 1988). When universal coverage commenced in 1972, the Act covered 96% of the labour force . Excluded were the self-employed , persons aged 70 years and older, and individuals earning less than one-fifth of the maximum weekly insurable earnings. Eligibility for sickness and maternity benefits required at least 20 weeks of insurable employment. The introduction of sickness and maternity leaves as well as the inclusion of dependants in the compensation (75% of insurable earnings for those with dependents) made the scheme more than just pure insurance. The 1971 Act, as McBride (1992) citing other studies notes, was a unique unemployment insurance programme that combined objectives from three different policy areas ...labour market and man power policy , social welfare policy and insurance principles twisted ... into a more efficient and socially useful package of unemployment insurance" (p 164). 10 Reject Reject NP Reject A A A A NP A Canadian Construction Association Ontario Mining Association Canadian Chamber of Commerce Mining Association of Canada Railway Association of Canada Quebec Employers Council A A A A A A United Auto Workers United Electrical, Radio and Machine workers Canadian Labour Congress Public Service Alliance of Canada Confederation of National Trade Unions A A A AI AI NP NP AR AR AR AR NP AR AR A Reject A A A A Reject Reject Reject Reject Reject Reject Reject Reject ··· ~~- Sickness benefits A AR A A A A Reject NP Reject Reject Reject Reject Reject Reject Maternity benefits NP Reject Reject Reject Reject NP NP A AR AR AR NP NP AR AR Reject Reject NP Reject AR Reject NP NP NP NP NP NP Reject ' A Reject Reject NP Reject AI Reject Reject A A A Reject Reject Reject NP Reject Reject Reject Reject NP NP NP NP NP NP NP NP NP 4% trigger Waiting for Gov' t Experience period ontribution ,~RtDg~~ ·.:.~·::::: : :: phased program structure Note: approve as is A AR approve , but reduce approve, but increase AI NP no position = = = = 11 s~;;;~·:·p=;r::·::r9aa~·=r~·br~V"s~·:Op7~"'».""«V::.:«o.-.:.:-:>X<«o!«:•:•»:O:«O:o»~:O:«o:..-.:o:o.-.:O:~..««:•:O..">Co."'.."!._"«»>!o»:.::•:•:o.."«•:•:O::.:>:«.-..o».-.:o»""~/_.:.:.:.~_..-.:o»:o:.:.:.»Y.o» A A A A NP A Reject Canadian Railway Labour Association Employees Reject A Retain Council of Canada Reject Reject A : : Increased benefit Universal rates & . ~9=ver'!g~«««< = ==8.we~-«. . . . levels Reduce qualifying period to Summary of Positions of Selected Employer and Employee Groups Regarding the White Paper Unemployment Insurance in the 70' s Canadian Manufacturers· Association Employers --- Table 1 As Table 1 (taken from Pal,1988:78) shows, there were objections to this legislation by employers. They rejected the minimum qualifying period of eight weeks of employment as insufficient workforce attachment. They also objected to sickness and maternity benefits because they perceived them to be contrary to the insurance principles and the prerequisites (capability and availability to work) of the program. Amendments since mid-1970s have seen the reversal of the trend between 1940 and 1971 (McBride, 1992; Pulkingham, 1996). Changes in the 1970s and the 1980s aimed at reducing benefits, discouraging workers from voluntarily leaving (quitting) their jobs or from being dismissed from their jobs because of misconduct. The focus was on strengthening the link between Ul and the needs of the market. Various bills passed during the mid and latter half of the 1970s were geared towards the reduction of benefits, increasing the qualifying periods and strengthening the 'active' as opposed to the 'passive' (the supportive or compensatory) aspects of the program. High income earners were to pay back 30% of all Ul benefits through taxes . As the benefit rates were perceived to be too generous they were reduced from time to time. The 1980s saw the intensification of the pressure on Ul by making benefits harder to get and to keep (McBride, 1992); this pressure culminated in the privatization of the program through the introduction of Bill C-21 in 1989-90. This Bill brought about the end of social responsibility for the unemployed by withdrawing government contributions to the fund initially introduced over 50 years ago. The privatization of the program which made the fund solely dependent on employees and employers was , as Overtone (1995) notes, "a dramatic move away from the original principle ... (p.5) . Not only has Bill C-21 set the stage for further unraveling of the program but it also went further by shifting resources away from 'passive' income support policies to 'active' labour market policies (work-fare, work sharing , jobcreation , training and developmental assistance). About $2 .21 billion in Ul funds were approved for 'active' adjustment assistance despite the failures of previous training 12 programs to reduce the unemployment rate (Lazars, 1994). The Technical and Vocational Training Assistance Act which had been in place for over thirty years , and the tens of bill ions of dollars spent by both levels of government on various types of training programs, as Lazars (1994) indicates, have not reduced the unemployment rate . As a matter of fact it is was in the last three decades that unemployment moved upwards (see Appendix 1 ). It has also been established by studies (Corak, 1993) that past training tied to 'active' unemployment insurance participation did not affect repeat Ul participation by those targeted . The main purpose of such measures, as Pulkingham (1998) observes is to incorporate more stringent mechanisms to ensure that recipients are required to look for and find employment and penalties if they fail to do so. These include measures such as work-fare/learn-fare , reducing benefit levels, requiring claimants to pick up cheques in person and/or report ... in person or more frequent attend job-training courses , job preparation sessions ... (forthcoming). Since the experience of thirty years of training and retraining did not have the effect of reducing unemployment or repeat participation in the program by the unemployed , active measures as those mentioned above could only be designed to curtail entitlements and benefits and subsequently the number of the beneficiaries. The new legislation ( Bill C-12) takes this approach further by introducing sweeping changes designed to increase "workincentives". 13 Section Two Bill C-12, The Employment Insurance Act: The Principles or Motive Forces Behind the Change On July 1,1996, Bill C-12, the new Employment Insurance Act came into effect replacing the Unemployment Insurance Act and the National Training Act. Although the new legislation, like its predecessor, provides individual, regular benefits and special (maternity, parental/adoption) benefits as well as employment assistance ("active reemployment benefits"), it has been substantially restructured . In addition , this legislation continues the incremental erosion of income replacement that followed the 1971 liberalization of the program. The character of change or reform can be identified by what social issues and problems have been addressed or resolved and what kind of social issues or programs have been established in their place. The principles or motive forces which guided these changes can also be identified by looking at the changes themselves and the reasons and justifications given to legitimize and/or bring about the changes to Ul. The discussion in this section of the paper will focus on the justifications and reasons first. Since among the government's reasons for the introduction of the reform are to extend coverage to those who were excluded from the Ul program (those in non-standard forms of employment) and to promote flexible work arrangement (HRDC, 1994), this section will also examine the labour market as it pertains to those employed in non-standard forms of employment. The current economic and social policies prevailing in Canada are congruent with those of the neo-conservative social and economic philosophy. These are informed by the classical doctrines of individualism and Adam Smith's laissez-faire economic theory that involves monetarism and the free play of market forces (Mishra ,1981 ,1984; Johnson & et al, 1994). Monetarism which has provided the policy platform for neo-conservatives in Canada in the last three decades (McBride, 1992) advocates for state withdrawal from the involvement 14 and/or intervention in the market economy in general and the labour market in particular. It holds the view that the market, with minimal or no regulation , is the best mechanism for the provision of human services. The government's role is seen as minimal and policy direction should focus on privatization , deregulation , 'user fees' , private insurance and inflation control (McBride, 1992; Warnock, 1986; Stanford , 1996). The latter, as the neo-conservatives argue, is partially caused by government overspending and uncontrolled money supply. Inflation , in turn causes social and economic problems part of which is unemployment. It is, therefore , held that if government reduces its intervention in the economy and restricts its activities to the control of inflation and the elimination of the deficit, the problems the welfare state face , including that of unemployment, would be resolved . What this implies is that the free market economy is superior to any other forms of economy. Vedder and Gallaway (1993) go as far as to argue that ... historical experience tells us that.. .interventionism is doomed to failure ... ; throughout the twentieth century, the invisible hand of the unfettered market mechanism has consistently outperformed efforts of the highly visible hand of the state in providing economic stability" (p. 296). This perspective, which is the embodiment of the neo-conservative view, blames unemployment on the welfare state which is seen to impede the process of capital accumulation. It is argued that the average or "natural" unemployment rate has been climbing upwards in the last two to three decades due to governmental policies of labour market regulations, including those of minimum wages , unemployment insurance, the growth of trade union collective bargaining and social security at large (Vedder & Gallaway,1993). In other wards , state intervention in labour and other markets through macroeconomic policies , the encouragement of collective bargaining , and social provision such as Ul which result in high taxation and social expenditures are seen as impediments to the functioning of the labour market, and, as driving unemployment above its "natural" levels. Tax provisions and market regulations are believed to constitute disincentive to investment or even barriers to job creation 15 (Macdonald , 1984). For example, Macdonald (1984) echoes the neo-conservative argument "that unemployment insurance provisions have contributed to unemployment over the last 12 years, and minimum wage limits affect employment prospects" (p. 33). These two factors interfere with the profit margins because they are perceived as preventing capital from driving down its labour costs; they also are contrary to the neo-conservative view of social policy which should be designed to give the neediest in the society the basic essentials necessary to survive, while allowing maximum scope for markets to determine distribution of income, goods and services with minimum intervention from government. The argument pertaining to limiting effect of minimum wage to employment finds its roots in the early neoclassical interpretation of the labour market. For example, Pigou (cited in Pal, 1988) in 1933 analyzed unemployment as the problem caused by the supply side of the market. As it was suggested by Pigou , unemployment was not an inevitable outcome of the unfettered free market economy but "an oversupply of labour in terms of a given price. If labourers would lower their price they could reduce or erase their unemployment" (p.18). One way to alleviate the limiting effects of minimum wage and unemployment insurance, according to the neo-conservatives, is "deregulation in general, or in specific sectors' (Macdonald , 1984:33). This will encourage greater investment by way of greater profitability. The end result is more employment and improved performance of the market. Based on their belief that the market economy is a superior means of production, distribution and exchange of goods and services, the neo-conservatives object and/or reject any social policy, including that of unemployment, that has a de-commodifying effect. Goods, resources such as land and minerals, as well as services should be available only as commodities according to the neo-conservatives . Universal programs which pay benefits to all citizens who meet certain criteria or the provision of health and public education are not favoured by neo-conservatives as they violate market mechanisms. Their preference is to target or selectively provide assistance to those whose needs are not met through the market 16 mechanism. Social policy, according to the neo-conservatives, should restrict itself to meanstested social assistance as a last resort for those who, due to personal or individual reasons cannot support themselves by selling their labour power. The means-or-income- tested social assistance which finds its roots in the poor-law tradition , as Esping-Andersen (1990) observes, " was conspicuously designed for purposes of stratification. By punishing and stigmatizing recipients, it promotes social dualism and has therefore been a chief target of labourmovement attacks" (p. 24). The neo-conservative rejection of the welfare state in general is expressed in various ways as discussed below. Resnick (1994) observes that the neo-conservatives criticism of the welfare state had various levels to it: first, the welfare state is said to have a "'built-in tendencies' to deficit financing, welfare expenditures were 'destroying work ethic', state spending was generally 'out of control', and government regulation was 'sapping the vitality of the market system'(p.26). Second is the assertion about 'government growth' as a result of excessive expectations and demands by citizens on governments, and, the electoral competition that encourages these demands. Included in their argument about government growth is their view about 'self serving' public sector employees whom they blame for the expansion of the welfare state or government growth . As noted by the same author, [c]entral government bureaucrats, social workers, and public housing officials, for example, (are seen) to be the real beneficiaries of an ever expanding state sector .. .whole sections of society had bought into the rhetoric of the welfare state, coming to believe in their entitlements to ever-greater benefits, regardless of social costs . Welfare recipient, tenants in public housing , single mothers, and members of racial minorities are some examples that the neo-conservatives ... cite. To these had been joined groups of unionized workers both in public and private sectors, insistently pressing on the political-economic system their demands for more (p.26) . The third criticism of the welfare state by the neo-conservatives is that explained by Mishra (1981) .This pertains to their assertion of 'government failure' in its policies to alleviate poverty. Rather than the intended goals, government policies (social safety net) gave rise to unforseen consequences not only of the poor peoples' reluctance to engage in low-wage 17 labour and undermining their view that" in order to succeed ... the poor need most of all the spur of their poverty", but also of family disorganization in the ghettos in the United States (p.32). The expression of the above noted view in our era, according to Mishra, is a return to the " 'less eligibility' principle of 1834' " where the "apologist of free-enterprise capitalism proudly proclaims the necessity of poverty in a capitalist society, a necessity which the welfare system fails to appreciate"(p.34) . Neo-conservative Arguments Against Ul. Neo-conservatives, therefore, based on these assumptions, oppose state intervention in the economy in general and unemployment insurance benefits and minimum wage legislation in particular; Unemployment Insurance in particular is targeted as capital and its neo-conservative advocates perceive the program as an improvement of labour's bargaining powers vis-a-vis capital. This increased bargaining power may translate into higher wages, which in turn, according to this perspective, leads to less employment; the axiom is that the higher the wages, the fewer workers capital employs. Workers receiving unemployment compensation are protected to an extent from the hazards of free market and can afford to reject work and wage rates they might otherwise have been forced to take (McBride, 1992).The president of the Canadian Federation of Independent Business (cited in ECEJ , 1993) lamented this view by saying In Canada we have workers who are not willing to make downward adjustment in their incomes in order to get a job. To a large extent that is the fault of the unemployment insurance system .... Many unemployed workers who comfortably live on (UI) for up to a year simply do not beat the pavement looking for jobs that pay less (p. 44) This protection provided by unemployment compensation which is perceived to make the experience of unemployment less costly to those covered, is blamed not only for preventing capital from driving down its labour costs but also for increasing unemployment and its duration. According to the Macdonald Commission (Minister of Supply and Services, 1985) "this protection can increase both employee turnover and the duration of unemployment job 18 search"(Vol. II p. 595). The Macdonald Commission criticized the "generosity" of the 1971 Act and attributed a 1-2 percentage point increase in unemployment to this generosity. The report blamed the Act for increasing the duration of unemployment, for reinforcing the concentration of temporary and unstable jobs in high-unemployment regions, for encouraging temporary lay-offs and for subsidizing some workers' income. It was noted by the Commission that Ul increases unemployment in the following ways First, by making unemployment relatively"cheaper" for individuals, it has, in some cases, a negative effect on the job search. Secondly by providing through its benefits, it encourages regular cyclical unemployment; again by providing extended benefits in some areas, but not others, it discourages labour force adjustment (Vol II , p. 815) . It is argued that "frictional" unemployment (part of which is bel ieved to be caused by the insured unemployed taking longer time to look for a job) depends partly on the amount of subsidy provided by unemployment insurance. The implication here is that the more generous the levels of income replacement, the longer the duration of unemployment. For example , the rise in the non-accelerating inflation rate of unemployment (NAIRU) in the 70' s was blamed on the 1971 revision of the unemployment insurance program which increased the coverage , entitlements and benefits of the insured unemployed. As noted above, the Commission argued that this revision had a significant effect on Canada's unemployment rate by increasing it by 1 to 2 percentage points. It was also said to have prolonged the duration of unemployment by 1.4 to 2 weeks. The reduction of benefits and entitlements as a result of the 1979 changes likewise is said to have translated into a reduction of the NAIRU (Vol. II , p. 604) . As Stanford (1996) observes, the NAIRU , according to this view is "actually disguised voluntary unemployment and results largely from individuals choosing to collect social benefits rather than effectively offering their labour services to the market" (p.139). In addition to this view, it is also held that unemployment benefits contribute to a greater labour force participation than might otherwise have been in their absence. The argument is that some workers join the labour force only with the prospect of collecting unemployment benefits and thereby inflate the 19 labour force participation rate (Nakamura, 1996; Macdonald Commission , 1985). The Commission whose views are now being echoed by the federal government stated that "...there are some workers in all industries and regions who prefer a lifestyle of intermittent work punctuated by the regular spells of unemployment subsid ized by Ul benefits" (Vol. II 6056) . The criticism of the program was followed by recommendations to reduce the benefit rates to 50% (reduction of ten percent) and increase the qualifying period by 166%.These recommendations were meant to impose stronger "workforce attachment" and promote market efficiency. The Commission' s report was shortly followed by the government's action of removing social responsibility for the unemployed in 1989-90 through Bill C-21 (the removal of government contributions to the Ul fund) . This is now followed by further assault on the scheme through yet another reform in 1996- the introduction of Bill C-12. In its introduction to the new legislation (Bill C-12) and in concert with the neoconservative view, the government (HRDC, 1995) stated that: the new program (EI) will be restructured to reinforce the value of work. It will replace (a) Ul system which discourages some people from working... and some employers from creating jobs... (EI) removes some of the barriers to work ... (it) will discourage claimants from relying on the system to supplement their incomes.... (workers) will be required to show longer attachment to the workforce before qualifying (emphasis added) (p. 2-3) . It is further noted in the same publications that the Ul system does seem to lengthen unemployment as some people are inclined to collect Ul rather than take work that is available. The government, echoing capital's arguments, states that "UI competes with business .. .for workers ... (and) ...people are better off collecting Ul than accepting (available) work (HRDC , 1995, Backgrounder, 4). This reflects capital's arguments that jobless workers receiving Ul benefits are not succumbing to the low-wage needs of capital. This view was reiterated by the Chrietien government which stated that "low-wage jobs cannot compete (with Ul ) and employers offering lower wage jobs cannot find employees they need to run their business. 20 They can not compete with Ul. In this way Ul stifles job creation" (HRDC, 1995:9). Thus, the collective, albeit reluctant, provision of some protection from the hazards of the economy is seen as an obstacle to jobs that "pay less" or to employers "offering lower- wage jobs". The neo-conservative views pertaining to unemployment insurance and its effects on the working class and the economy have been challenged by various studies. The following is a brief discussion of the findings from these studies. Does UJ increase the rate of unemployment? Phillips (1986) summarizes studies conducted to estimate the impact of income replacement on unemployment. These studies estimate the increase in unemployment rate, especially that caused by the liberalization of the program in 1971 , to be in the range from 0% to 1.3%, depending on the different methodology and data sets used in the estimate. One of the studies quoted by Phillips concludes that Ul would contribute 1% to the unemployment rate only if it was assumed that there was no involuntary unemployment; since such an assumption is unrealistic, the estimate must be significantly lower than 1%. The study conducted by Corak and Stephen (1995) also rejects the assertion that extended benefits prolonged the unemployment duration by 1.4 weeks . The authors wrote, "... we argue that there is no evident direct mechanism from regional extended Ul benefits, as generated by the .. .legislation changes , that could account for the increased persistence of Canadian unemployment in the 1980s" (p. 566). Despite the ambiguity of the findings of some of the studies, and despite the conflicting conclusions, the ideologically driven neo-conservative analysis of unemployment portrays income replacement as driving unemployment upwards. This view or analysis is contrary to the dynamics of capitalism which requires a reserved army of labour. It also tends to ignore that income replacement has the stabilizing effect on the economy by providing continued consumption on demand. Phillips (1986) points to the inconsistency in the neo-conservative arguments that unemployment increases because workers remain voluntarily unemployed due to the availability and the 'generosity' of income replacement. As he explains, " voluntary 21 unemployment. .. result(s) in a rise in the rate of unemployment only if there are no other unemployed workers in the entire labour market willing or able to take the job".(p.18) (emphasis in origin) . Phillips also points out that the army of the unemployed includes new entrants to-the labour market, disqualified workers (disqualified from benefits), those who exhaust their benefits as well as those whose benefits are too low to remain unemployed. This implies that Ul cannot, with any certainty, be accountable to the increase as well as the duration of unemployment. It should also be noted that the majority of the unemployed are joblosers as opposed to job-leavers; the latter include those who depart from their jobs due to illness or family responsibilities. If these two categories of job-leavers are excluded from the voluntary component of the unemployed, the percentage of those forced out of employment due to various circumstances beyond their control increases (Sharpe et al. 1988). The view of this study concurs with this conclusion. Does the 'generosity' of income replacement levels act as disincentive to work, thereby causing voluntary unemployment? The government's (HRDC, 1995) carefully worded answer to this question is that [F]or some workers ... it (UI) has become an alternative to work .. . the Ul system itself discourages people from working for longer periods of time .. .Some people may be inclined to collect Ul rather than take work that is available. Ul benefits can discourage people from accepting available work .. .(p.3). The assumption underlying this view is that workers prefer leisure to work and that the only motive or incentive to work is the desire for income. Therefore , if there is any other source of income, the worker will stop working . As Corak (1993) observes, this implies that people are "utility or economic maximizers" who are willing to work only with the prospect of collecting Ul benefits soon after reaching the entry requirement of the program. This leads towards less employment and/or unemployment because some people choose to collect benefits upon meeting the entry requirement. However, this view remains silent about the fact that going from employment earnings to unemployment insurance means an automatic reduction of workers' 22 income by at least 45%; this reduction usually means a fall of income below the poverty level for many workers. In 1994 when average earnings were $567.00 per week, the average income replacement was $258.00 per week (Statistics Canada, catalogue# 73-202s various years). When this income replacement is divided by the standard full-time working hours of 40 per week, the hourly rate comes down to $6.50 an hour. This level of income translates into poverty level of income in many cities of Canada. For a single income family, it may mean a fall in income below that provided by social assistance in some jurisdictions (see Appendix 2) . Does the income replacement undermine small business efforts to create jobs? As it was pointed out in the preceding pages, the government's response to this question , as expressed during the introduction of the new legislation, was that low- paying jobs cannot compete with Ul and, therefore, they are deterred from creating jobs. What is not clear about this contention is the targeted workers and their wage level. Small business usually pays minimum wages ($7 .15 an hour in British Columbia). Those who find themselves unemployed from minimum wage jobs end up with income replacement of 55% of the minimum wage in the event of insured unemployment. For B.C. minimum wage earners, this means a fall in income to $3.93 an hour. The argument posed here does not seem to hold ground unless the relatively higher-paid workers are the targets or those sought for minimum wage jobs. Should this be the case, then Ul does become an obstacle or disincentive to minimum-wage jobs by providing some workers with income replacement above the minimum wage . The 'disincentive' hypothesis, that is the neo-conservative assertion that high taxation , social spending and unemployment compensation increase the unemployment rate , was refuted by Therborn (1986) . Therborn compared sixteen countries , one of which was Canada , to determine the causes of unemployment, and concluded that unemployment levels and unemployment increases are associated neither with the level nor growth rates of taxation, or social expenditure .. . there is also apparently no relationship between the income replacement rates of unemployment and unemployment (p. 66). 23 The reduction of deficits is another justification for making changes to the program although it (the program) is self-financed. It was noted in the preceding pages that the government has withdrawn its contributions to the fund in 1990. Therefore , U I, as a program entirely financed by premiums levied from workers and employers cannot contribute to the deficit. As Wiggins (1996) notes, " ... even when Ul accounts are in deficit, the legislation requires an increase in premiums to balance the account" (p.18); and if the government advances some benefits in the event of a shortfall in the fund , it is later recouped with interest. Furthermore, it is unrealistic to assume that curtailment of income replacement or restricting access to the program would help reduce the deficit. Those who are disentitled will only make a fast track transition to the social assistance which is wholly funded through tax revenue . That the welfare costs rise with the increase of unemployment and with the reduction and/or restriction of unemployment insurance was demonstrated in a study conducted in Manitoba in the 1980s (Phillips, 1986). Despite the above noted find ings, however, the federal government chose to focus on the supply side rather than the demand side of the labour market to supposedly reduce the unemployment rate. The strategy chosen is to deprive some of the workers from the temporary cushion provided by income replacement and to reduce the benefits of the insured unemployed. This strategy increases the vulnerability of the working class to the 'natural' forces of the market. Taken to the extreme, and as noted by Kerans (1990) , this strategy is based on the assumption that "only exposure to the full force of the market without any safety nets or cushion , will force people to take any job anywhere at any wage, and this will solve Canada' s unemployment problem" (p. 54). In addition to the above arguments and included among the government's reasons for the introduction of the Employment Insurance was to respond to the "inflexibility" of the labour market. The government's Green paper, Agenda: Jobs and Growth, Improving Social Security in Canada (HRDC, 1994,cited by Stanford 1996), refers to 'fostering labour mobility', finding 24 'ways to increase the flexibility of the system' and 'promoting flexible work arrangement' (p. 130). What is not clear about this argument pertaining to the labour market flexibility is that it is made at a time when it is precisely changing and has become, as Stanford (1996) observes "hyper f/exib/e"(p . 132). As the author notes, the degree of employment volatility has clearly increased, the security of job tenure has been almost universally weakened, and the expansion of nonstandard work arrangements has added on extra dimension of flexibility to the allocation of labour. In short, Canada has developed a 'just-in-time labour market; labour is increasingly hired precisely when and where it is needed and discarded immediately upon becoming redundant (p. 132). It is appropriate at this point to introduce the workforce most affected by the changes in the scheme, namely, those in non-standard forms of employment. Although the reform is designed to increase the vulnerability of the working class in general to the forces of the market place, it is the thesis of this paper that those employed in the non-standard forms of employment are the hardest hit by these changes . The following section of the paper identifies this workforce. Non-standard Employment Non-standard employment includes part-time employment (working under 30 hours a week), casual/on call, contract and temporary work as well as multiple job-holding, some of which are referred to as atypical, precarious, contingent or just-in-time employment (Schellenberg and Clark,1996), or the disposable and/or throwaway workers as Aronowitz and DiFazio (1994) call them. The rapid introduction of technology has enabled capital not only to reduce and/or eliminate labour but also to redefine the traditional employee-employer, full-time-full-year relationships in Canada and other industrialized societies. Millions of workers are now precariously employed (Gorz, 1994). These types of jobs have become a new way of doing business and organizing work that spells the end of secure, long term employment for 25 practically every worker of every collar (Schellenberg and Clark,1996). In 1995, the magazine , Management today, reflected this view by putting the following on its front page: No stability No security No career welcome to the new deal. .. The emerging work paradox is that in the post job world , the only viable long-term career is that of a temp ... (cited by Dunkerley, 1996:60) . The technological innovations in general and that of computer-aided design and production in particular, is causing displacement of skilled workers as well as reduction of hours of work; more is produced with less workers and less hours (Gorz,1994; Aronowitz and DiFazio, 1994). The result is a reduction and elimination of workers even as productivity rises . As private investment is for profit and not for employment, labour-saving or labour-cost containment is the primary goal of capital when it invests in new machinery and computers. This implies that part-time, temporary and 'just-in-time' employment replace full-time-full-year employment. These types of employment, in addition to the self employed now account for about one in three Canadian jobs (Statistics Canada , 1995; Schellenberg and Clark, 1996).When these workforce and the unemployed (9.6% in 1997) are taken together, we see that 42.6% of the labour force were or are at the margins of the productive labour market. (i) Part-time Employment Part-time employment in Canada has been on the rise since the 1950s. The trend in part-time work accelerated during the two recessions (1981-81 and 1991-92) alongside the shift from goods producing jobs to services producing jobs. As shown in chart 1, part-time rate rose from year to year throughout the twenty years from 1977 to 1996; the proportion of workers in these types of jobs climbed by 6.9% (from 13% in 1977 to 18.9% in 1996) during this time. However these rates do not capture the whole army of part-timers. Those who hold multiple jobs and work for thirty hours or more a week between two or more jobs are not included in these rates. Krahn (1995) notes that when all part-time labourers (including multiple jobholders) are considered , "the number of part-time jobs actually increased at an average rate of 6.9% annually, compared to 1.5% for full-time jobs" (p. 36) . Strictly looking at those 26 classified as part-timers by Statistics Canada (those who work under 30 hours a week), we Chart 1 Climbing Part-time Employment Rate, Canada-1977-96 20 191% 16.8% L.o-' lo' v 18 18 ~ 0 14 12 10 ..,. ~ ~ / 18.9'l .... ,.,. """ ~~~~ ~~~""~~~» Years -Rate "" Source: Statistics Canada , Catalogue# 71-201-XPB witness the acceleration of part-time in the early 1981-82 to about 16%; and in 1992-93 it climbed to 19%. Alongside this growth of non-standard form of employment was the decline of full-time employment. In 1982 full-time employment declined by 4.4% (424,000) from the year before. Between 1990 and 1991 full-time employment was reduced by 3.6% (355,000) while that of part-time grew by 4.5% ; the following year (1992) witnessed a decline of 451,000 of fulltime employment in comparison to four years earlier, while part-time grew by 206,000 during the same time (all figures taken from Statistics Canada, 1996; see also Appendix 1). In absolute terms the number of the partially unemployed doubled between 1977 and 1996 from 1.3 million to 2.6 million. In contrast, full-time jobs increased by about 28% in the last twenty years . The annual percentage growth of part-time exceeded that of full-time in all but six years out of the twenty. Throughout the growth years of the 1980s, part-time rate remained high indicating that economic expansion does not necessarily entail growth in full-time jobs. Neither did the growth reverse or arrest the perpetuation of the ongoing shift to these types of employment conditions. This movement away from the permanent full-time jobs to part-time or contingent 27 work suggests that the traditional mechanism through which Canadian workers have met their basic needs is being challenged (see table 2) . Table 2 Combinations of non-standard employment by age, sex and industry One or more of part-time work, (self employed, multiple jobholding counted only once) % of total employment Work only '(counted only once) Part-time and/or temporary (%) Year 1989 1994 1989 1994 Total 28 33 19 21 Women 15-24 25-34 35-44 45-54 55-65 35 49 30 35 31 35 40 64 33 37 35 41 29 46 24 26 24 28 29 54 22 25 23 30 Men 15-24 25-34 35-44 45-54 55-65 22 41 18 16 19 22 27 52 25 22 19 30 11 37 8 4 3 12 14 45 12 Industry Agriculture Natural resourc-based Manufacturing Construction Distributive services Business services Social services Public administration Retail trade Other consumer services 54 10 13 28 19 24 35 16 40 48 65 14 14 45 23 33 39 21 42 47 9 6 8 16 10 12 28 13 34 36 19 10 9 20 11 15 30 16 31 32 7 6 9 Source:statistics Canada, 75-001 E, Perspectives on Labour and Income. Self employed are excluded from the calculation under industries. Many among the part-timers are forced into such jobs because they could not find fulltime employment. The number of these involuntary part-time workers, like in all other nonstandard forms of employment, has been increasing . Twenty years ago, involuntary part-time 28 was 10% of all part-time jobs at 167,600. By 1997, there were 852 ,000 people holding parttime jobs involuntarily. In 1994 when the part-time employment stood at 2.25 million, 35 .2% of them nationwide, 59.6% in Newfoundland, 46% in Nova-Scotia and 45.8% in new-Brunswick reported that they were holding part-time jobs because they could not find full-time employment (Statistics Canada,1995). As shown in Table 2 the labour market flexibility advocated for by capital and sought for by the government has long been in the making as evinced by the perpetuation of part-time employment. Faced with this difficult labour market condition, high unemployment, cost cutting and employers' demand for 'worker flexibility' and 'wage flexibility', many Canadians are not only accepting part-time jobs but are supplementing one part-time job with another to make a near decent living . Multiple job-holding is now becoming common as a result. In 1996, one in twenty workers held a second job or business , as compared to one in fifty in 1976 (Statistics Canada, Catalogue #71-005-XPB) . Between 1976 and 1994, the number of multiple jobholders grew by 455% to 950,000. Seventy eight percent of all multiple jobholders , or 737,000 of them were those aged 25 years and above; 49% of this group were men and 51% women (Krahn, 1995). (ii) Non-permanent Employment As noted earlier and pointed out by Heisz (1996), "employers are tailoring job spells to respond to fluctuations in demand, with the result that offers of a long term employment are on a decline ... firms are increasingly using a core of full-time ... and hiring temporary workers when the need arises" (p.31) . In 1991 over half a million of paid employees worked in jobs whose duration was six months or less; and by 1994 the number of temporary workers climbed close to a million (970,000) . Those aged 15-24 years were over represented in this workforce (Krahn, 1995). Grenon and Chun (1997) bring this number of the non-permanent workers to 11% or 1.3 million in 1995. 29 Temporary employment is not restricted to the private sector; the public sector also contributes its share in this development. Schellenberg and Clark (1996) explain that this type of employment in the federal public services increased from about 13% of the total employment in the early 1980s to 17% in the early 1990s. These types of jobs are also found in all industries and occupations. Although the goods producing sector also employs part-time and temporary workers , the bulk of such employment is found in the service producing sector. For example, 33% of the temporary jobs and 80% of the multiple jobholders were employed in this sector; 500,000 or 83% of the multiple jobholders employed by the service sector worked for services and trades (Krahn, 1995). Occupations and other professions are not shielded from the vulnerability that comes with non-permanent jobs. The concept of 'human capital' and investment in education , useful as it might be, does not seem to provide immunity from the instability in employment and economic insecurity; Schellenberg and Clark (1996) point out that half of the adults holding temporary jobs have completed post secondary education. Government downsizing and corporate lean and mean strategies have created temporary employment in all occupations including professionals, managers, programmers, accountants, engineers, teachers and health care workers. The latter two and managers accounted for about 25% of the temporary workers in Canada accord ing to Schellenberg and Clark (1996). Wage and Labour Flexibility: the Advantage to Capital and the Disadvantage to Labour The temporary, part-time, casual , 'just-in-time' labourers compose a workforce that can be deployed , redeployed and disposed of accord ing to the shifting needs of capital. This composition of the workforce which makes up the nomadic army of the labour force can be utilized by the employers who need a quick response to short term changes in demand for their products or services. As DuRivage (1992) suggests, these strategies employed by capital 30 can be characterized as a "search for static flexibility in the pursuit of cheap labour, and , immediate adjustment to changing market conditions in destandardization of the terms of employment, making hours of work more flexible and unpredictable" (p. 8) . The short term assignments, the setting of terms and conditions of employment at the individual level (as opposed to groups/unions) provides employers with the flexibility that frees them from an obligation or commitment to an employee. It enables the employer to respond to fluctuations in demands for their products and cuts labour costs and wages accordingly. As a hand-book written for employers by Lewis and Molloy (1991) spells companies are striving to maintain the minimum workforce necessary to handle their daily workload ...[they] have discovered that using temporary help enables them to operate with greater efficiency, minimize their obligations, and maintain greater control over their costs (p. 4) .(emphasis added). Cutting back on staff and reorganizing or restructuring jobs mean not only a reduction of annual wage payments but also savings in non-wage personnel costs which include fringe benefits, payroll taxes, workers compensation, vacation pay, maternity leave, holiday pay and pension plans. It is also useful to capital for replacing an employee without long term obligations. Temporary employees can fill short term needs at low cost and little notice, even in specialized and professional fields (Lewis and Molloy, 1991). Employers who use non-standard employment are much less likely to come up against demands and/or resistance for higher wages. Part-time and 'just-in-time' employment are also useful in hiring new bottom tier in order to keep labour costs down. A large pool of 'flexible' and disposable labour force also helps depress wages of all workers (Noble, 1995; DuRivage,1992). Needless to say, counter to these advantages to capital are the disadvantages to labour; not only do the precariously employed lose benefits or receive them at a reduced rates when compared to the full-time workers, but they also receive lower hourly rates, work on average less hours and have less job security (DuRivage, 1992; Schellenberg and Clark, 1996; Eatwell, 1996; Krahn, 1995). Even within the lowpaying industries, part-timers and 31 temporary workers receive lower hourly earnings than full-time workers doing the same job (Eatwell, 1996). Similarly, Schellenberg and Clark (1996) note that "with reduced hours and lower wages , the weekly earnings among [the non-standard] workers in some occupations, such as sales and services, professional and managerial. .. are several hundred dollars below those of their counterparts" (p. 18). The spread of non-standard employment feeds greater income inequality not only between the 'core' workers (the ever shrinking full-time workers) and the contingent workers but also their families. These types of employment are associated with poverty among workers and their families (DuRivage, 1992). The disadvantage that these workforce faces during employment puts it at a further disadvantage in relationship to unemployment benefits in the event of transition from being partially- employed to being fully- unemployed. Not only are they more vulnerable to repeated spells of unemployment when compared to those in full-time employment, and, therefore , more likely to need unemployment benefits, but they are also penalized by the reform (EI) , for that very fact as will be shown in the following section. 32 Section 3 Bill C-12:The Changes and Their Impact The government introduced the El program reminding the working class that its main intent or the 'overarching objectives are to remove barriers to paid employment', 'to reinforce the value of work', 'to reduce ongoing reliance' on the program, 'to improve incentives for paid work' and to increase the 'flexibility' of the labour market" (HRDC, 1995; 1996). It has targeted the Ul program because it, like its neo-conservative advisors (Nakamura, 1995; 1996), perceives Ul as a structural obstacle to the achievement of the objectives described above. As the following discussion of the changes and their impact shows, Bill C-12 is designed to accomplish the desired 'flexibility' and 'work value' by limiting and restricting the unemployed workers· access to the program and benefits, and by increasing their vulnerability to the forces of the market. It does this by lowering benefit rates , by reducing the maximum weeks of benefits, by penalizing 'repeat users', by reducing the maximum insurable earnings, by increasing the entrance/re-entrance requirements and by reducing access to maternity and parental benefits of the new entrants. El introduces changes whereby benefits will be based directly on a worker's past employment history, hours of work, and earnings (HRDC, 1995). Eligibility: The Shift From Weeks to Hours Worked Bill C-12 bases eligibility for regular and special benefits on hours rather than weeks worked in the previous 52 weeks . The duration of benefits is also based on hours worked. Under this new eligibility criterion , hours of work from all places of work are included for the purposes of qualifying for income replacement in the event of unemployment. One of the reasons for the shift from weeks to hours, according to the government (HRDC, 1994) is to extend coverage to those who were excluded from the Ul program. These include workers in non-standard forms of employment holding multiple jobs and those whose weekly hours of work were less than 15 hours a week. As suggested by the government, the total number of jobs in Canada grew from 14.1 million in 1986 to 14.8 million in 1990, which amounted to a growth of five percent over a five year period .... Jobs covered by Ul experienced a modest growth of 2.4 percent (from 33 11.4 million to 11 .7 million) , but jobs excluded from Ul grew at a much faster pace of 16 percent (from 2.7 million to 3.1 million)" (cited in Nakamura, 1996, p.745) . The problem with basing eligibility to the program on weeks worked , according to the government, was that it did not consider the needs of the 3.1 million workers who are employed part-time, in temporary jobs and the moonlighters whose hours of work varied from week to week. The change is also intended to pre-empt employers' avoidance of paying premiums by hiring workers for under 15 hours a week. However, the inclusion of all employees in the non-standard forms of employment in the coverage is only an appearance rather than reality. The El guidelines defeat the very purpose of extension of coverage to this group of workers by imposing strict eligibility criterion and making the program less accessible to them . It does this by increasing the hours required to qualify by 233% from 12-20 weeks (only weeks of 15 hours or more or $163 earnings per week) or 180-300 hours under the previous Act, to hours ranging from 420-700 (12-20 weeks of 35 hours each) depending on the regional unemployment rate. As Pulkingham (1998, forthcoming) observes, "... the government has removed any progressivity by increasing dramatically the number of hours of work required to qualify for El and by opting for a 35 hour/week conversion" (forthcoming) . The increase of hours of work required to qualify as indicated above makes it difficult for part-time, temporary, seasonal workers to qualify for benefits. It restricts access to regular as well as special benefits of many workers while it disqualifies or excludes others . This is recognized by the government (HRDC, 1996) when it states that in the event of unemployment, "about 90,000 individuals will be potentially excluded from receiving insurance benefits under the reform unless they increase their hours of paid work" (p. 7) . Some of this workforce involves new/re-entrants who would be disentitled because they cannot meet this requirement. Among the disentitled , many will pay premiums if they earn above $2000 a year. 34 The hours-based eligibility criterion and the replacement of 15 hours-week by the new 35 hour/week conversion will affect all workers except those in a full-time-full-year jobs. Parttimers whose population was 2,773,000 in 1996 will find it more difficult to qualify for benefits at times of unemployment. It is estimated that 75% of this population will have difficulties accessing the program (CCSO, 1996). Women will be the hardest hit among this workforce for they comprise 78% of the part-timers who work less than 34 hours a week. This implies that maternity, parental and adoption benefits, most of which are claimed by women will also suffer. Workers in non-permanent jobs who comprised 11% of the workforce (or almost 1.3 million) in 1995 (Grenon & Chun , 1997) will find it difficult to qualify for benefits as well. Although, as pointed out in the preceding pages, premiums will be levied on all hours worked , those who work 15 hours a week or less will have difficulties meeting the variable entrance requirements. In 1995, 6.5% of the labour force or 877,890 worked less than 15 hours a week (Statistics Canada, cat# 71-005-XPB). More than 50% of this workforce were women . Among those employed in non-standard forms of jobs and who will have coverage for the first time are the multiple jobholders whose hours of work between two or more jobs add up to the standard hours of 35 - 40 a week. However, not all of the workforce in this category will gain; about one in ten of the multiple jobholders in 1996 worked less than 15 hours a week at their main jobs and their combined jobs averaged 17.3 hours a week in 1996 (Statistics Canada, cat# 71-005-XPB) . According to the government's own information and analysis (HRDC, 1996b), about 500,000 part-timers will be insured for the first time (see Table 3). Fifty four percent of this workforce or 270,000 are women and 230,000 (46%) are men . Ninety thousand workers , 47,000 of whom are women and 43,000 men will be excluded from receiving benefits as per the government's information unless they increase their hours of work. Of the 270,000 newly insured women paying premiums, 200,000 of them will not qualify for benefits and will have their premiums refunded through the tax system . Of the remaining 70,000, only 23,000 will 35 qualify for benefits. This brings the percentage of the newly insured women and who will qualify for benefits to 4.6% of the total (500,000) newly insured. The number for men who will qualify for benefits is similar to that of women as shown in Table 3. The information compiled from HRDC (1996) and Pulkigham's (1998) work shows 230,000 of the newly insured part-timers are men ; and 176,000 of this workforce do not qualify as their incomes are $2000 or under and will, therefore, have refunds . This implies that 54,000 will pay premiums and receive no refunds as their income is over $2,000/year. Since, as mentioned above, and as per the government's information, 43,000 men will be disqualified unless they increase their hours of work, only the remaining 11,000 or 2.2% of all the newly insured will qualify for benefits. In total only 6.8% part-timers will qualify for benefits in the event of unemployment. Having contended that the weeks-based qualification criterion under the old system was unfair to the part-timers and having identified the growth of this workforce excluded from Ul (the 3.1 million), the government not only sets out to restrict access to the Table 3. The Newly Insured, Nominal Extension of coverage Total Men Women Total Newly Insured 500,000 (100%) 230,000 (46%) 270,000 (54%) Disqualified -- with current hours of work 90,000 (100%) 43,000 (48%) 47,000 (52%) Newly Insured -- but not qualifying (premiums to be refunded) 376,000 (100%) 176,000 (76.5%) 200,000 (74%) Qualifying for Benefits 34,000 11,000 23,000 Percent Qualifying 6.8% 2.2% 4.6% (Source: Comp iled from HRDC, 1996 & Pulking ham , 1998 (forthcom ing) program but it also disentitles previously insured and qualified part-timers; 16% of Ul claimants who were qualified under Ul will be excluded from benefits under this new arrangement in El. (Pulkingham, 1998, forthcoming) . The "extension of coverage" to the non-standard forms of 36 employment, therefore, has an exclusionary effect on the workforce in this category in general, including those who were previously covered under the old system . The main purpose of this change (the shift from weeks-based to hours-based requirement), therefore, is to align the program with insurance principles by striping it of its safety-net provision. It is meant, as Nakamura (1996) who is an advocate of such change contends , to make the program a user-funded insurance program with stricter adherence to insurance principles. The effect of the conversion from weeks to hours-based requirements , in conjunction with the stringent requirements for new/ re-entrants (discussed below) accelerates the decline of beneficiaries, which according to Statistics Canada, has already fallen from 86.9% of the unemployed in January of 1989 to 38% in December of 1996 (see chart 1). As HRDC (1996) itself points out, "... the hours based system will disproportionately affect women by increasing the hours of work required to qualify and by lowering the number of weeks of benefits if they are unable to increase their hours of work" (p. 7). Chart 2 The Declining Ratio of Regular Beneficiaries Canada, 1987 to 1996 (December of each year) Year to Year Decline of Beneficiaries l !75 i 165 ;55 • j45 ~--~-------~-------~-------~------------------------------~----~----------------87 88 89 90 91 92 93 94 95 96 Years - Beneficiaries Source: Statistics Canada, Unemployment Insurance, monthly statistics (1977) Regular beneficiaries without earnings and unemployed. 37 The decline in beneficiaries as a result of disentitlements, the reduction of benefits and the duration thereof has already resulted in $15.7 billion surplus in El fund (Radio CBC, 1998). New/Re-entrants New-and-re-entrants to the labour market will be the hardest hit by the changes in the hours required to qualify for benefits. Under Ul, the requirement was 20 weeks of at least 15 hours each (300 hours) . It is now tripled to 910 hours (26 weeks of 35 hours each) of insurable hours under El. A new/re-entrant is a worker who 52 weeks preceding his or her qualifying period had less than 490 hours (14 weeks x 35 hours/week) of insurable hours . This workforce has to demonstrate labour-force attachment of 910 hours in a year to qualify for insurance benefits. According to this change, part-timers who work 15 hours a week would need close to 61 weeks (91 0/ 15=60.6) in the qualifying period defined as ".. .the 52 weeks period immediately before the beginning of a benefit period .. .. "(Bill C-111 section 8(1)(a)). The purpose of this change and the tripling of the entrance requirement is to reduce the reliance of the unemployed on the program and to force workers to rely on the labour market that does not secure jobs for all those who want and need it. Despite the growing unemployment rate, the government (HRDC, 1996) claims that the restriction of access to benefits will "remove disincentives and pre-empt a cycle of dependency on El" (p. 7) (emphasis added) . This reform measure has the effect of increasing the number of workers who will be excluded from qualification and/or entitlements. The exclusionary effect of this measure, as Pulkingham (1998) notes, "will be felt most acutely in the Atlantic provinces, especially Newfoundland, where unemployment rates regularly exceed 12 percent .. .and (where) seasonal claimants represented 58 percent of all claimants"(forthcoming). Seasonal and temporary workers whose work lasts less than six months a year (even at the 35 hours/week conversion) , and those with less than 35 hours a week would never qualify for benefits. For example, a study conducted in 1987 showed that 17% of temporary workers were between jobs (i.e. unemployed) for 52 weeks after termination of their temporary employment; 38 24% of them remained unemployed for 24 weeks and 31% of them for 12 weeks (Schellenberg & Clark, 1996). This workforce , therefore , would certainly have difficulties accumulating the necessary 910 hours to qualify for benefits even if their six month term jobs are at 35 hours a week. Women and "other disadvantaged groups" as Wiggins (1996) observes, "will be the primary losers ... As well access to maternity and parental leave may be reduced by the new entrance requirements" (p. 77) . The casual and the on-call workers who represented one in three (or 433,333) of nonpermanent jobholders in 1995 are not even considered for income replacement due to the nature of their jobs which are erratic and scattered and where lay-offs occur before they can bank enough time to qualify. The seasonal workers who during the same year represented one in seven (or 185,714) of the non-permanent workforce (Statistics Canada, 1996) as well as contract workers are exposed to more spells of unemployment and are the hardest hit by the change in the program. The Fixed Averaging Period and the "divisor" Under the Ul program , benefit levels were based on averaging weekly insurable earnings in the last 12 to 20 weeks of work over a 52 week period, depending on the regional unemployment rate. For example for a worker living in a high- unemployment region , the entry requirement was 12 weeks (20 weeks for low-unemployment areas) and the benefit was based on total earnings during the last twelve weeks of work (the last twenty weeks for lowunemployment regions) . This formula for calculating benefits was seen as a "disincentive" that discouraged workers from working more than just the basic entry requirements (HRDC, 1996a). The solution , according to the government, was to average earnings over a 'fixed period' of 26 consecutive weeks (the 26 weeks preceding term ination of employment) . It has also introduced the concept of the "divisor' which is two weeks more than the minimum entry requirement ( ranging from 14 weeks to 22 weeks , depending on the regional unemployment rate), expressed in 35 hour weeks (see table 4). 39 Table 4 Fixed Averaging Formula under El; and the Shift from Weeks to Hours Worked: Comparison between El & Ul Minimum entry requirement expressed in weeks entry requirement entry requireunder Ul expressed in weeks Excluded with these hours of Benefits fall below 55% if hrs of work of 35 hrs each-EI under El , in hours of15hrs each work Under El are less than 6% & under 20 700 300 699 770 22 over 6% to 7% over 7% to 8% 19 18 655 630 285 270 735 700 21 20 over 8% to 9% over 9% to 10% over 10% to 11 o/o over 11% to 12% over12% to 13% over 13% 17 16 15 14 13 12 595 560 525 490 455 420 255 240 225 210 195 180 654 629 594 559 525 480 454 419 655 630 595 560 525 490 19 18 17 16 15 14 Unemployment Rate Weeks of Benefits Divisor* 15 hr-week or Under El 40-hour counted for 1 week of benefit under Ul. .•:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:·:· Under El, #of hrs. of work determine # of benefit weeks ; Under El , less hrs mean less benefits & less benefit weeks .....•.•:•:•,•:•:•:•,•:•:•:•:•,•:•:•,•:•:•:•,•:•:•,•:•:•,•,•:•,•,•:•.•:•,•.•,•:•,•:•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•,•.•.•.•.·,•:•:·.....·.·.·.·.·:·.·.·.·.·.·.·.·:·.•.·,·.·.•.·.•.·.·.·.•.·.·.·.·.·.• .......·.·.•.·.•.•.•.•.·.·.·.·.·.·.·.·.·.•..·.·:·:•,·.·:·.•.·.•,·.·.·:·,·.·.....·.•.·.•,•,•,•,•,•.•,•,•,•,•,•.•:•,•,•.•,•:•.·,•:·.·.·:·:·.·.·:·.·.·.·.·.·:·:·:·.·.·.•:•. ·.•.•.•:•.•:·.•,·.·;•.·.·. •:•:•:•,•:•:•:•:•:•:•:•:•.•,•:•.• Source: compiled from El Act (1996), schedule I & II. *Under Ul the divisors equaled the number of weeks actually worked and insured upto a maximum of twenty weeks. According to this concept, a worker who lives in a region with 12% of unemployment rate will need 16 weeks (22 weeks for those in low-unemployment rate regions) in order to be able to receive the benefit level at 55% of his or her weekly earnings. Claimants who work simply the entrance requirements will see a reduction in their benefits below the 55% of the maximum benefit level. However, if their weeks of work are higher than the divisor, then the former would be used in calculating the benefit levels. Since all the weeks in the " fixed averaging period" (also referred to as the Rate Calculation Period) are taken into account in calculating benefit levels, this means a reduction of benefits for hundreds and thousands of workers who experience gaps in their employment. According to HRDC (1996a) 35% or 849,000 of the claimants have gaps in their earnings; 10% of all claimants or 250,000 workers experience gaps of four weeks or more. Forty one percent of claimants in Newfoundland, 40% in Alberta and 38% in New Brunswick experience gaps 40 falling within the national average of about four weeks . The gaps of weeks without work range from 2.9 weeks to 4.8 across the provinces; about 75% of Ul claimants with fewer than 20 weeks work are found in the Atlantic provinces and Quebec (Wiggins,1996). Similarly workers with gaps in their earnings are found in all sectors. Forty one percent of claimants in transportation , 31% in trade sectors, 30% in services and 31% of claimants in manufacturing sectors experience gaps in their earnings (all figures taken from HRDC , 1996a p. 6). It is estimated that about one million of Ul recipients experience interruptions in earnings (Wiggins, 1996) . The initial government proposal (Bill C-111 ) was to base the weekly rate of benefits on a 16 to 20 week fixed averaging formula as opposed to the revised 14 to 22 weeks shown in Table four. The Canadian Labour congress (cited in Wiggins, 1996), in its response to this initial proposal estimated that this formula would result in a reduction of 20% to 50% in benefit rates ; "on average, Ul recipients (would have lost) about $1 ,500 each as a result of the 20week fixed average. By 1999, when fully operational , benefit payments to the unemployed (would have been) reduced by $1 .5 to $2 billion by this measure alone" (p. 78) . The revision to 14 to 22 week averaging period may see a reduction comparable to what is stated above. The seasonal workers who do not have control over their work and most of whom are concentrated in the Atlantic provinces and Quebec, will suffer disproportionately by this formula (CCSD, 1996). The 55% maximum benefit level that appeared to remain unchanged under the new program, therefore , is not available to these workers unless they increase their work weeks to exceed the minimum entrance requirement by at least two weeks . Intensity Rule: Targeting "Frequent Users" The intent of the program (UI) , according to the proponents of the neo-conservative view, was to restrict coverage to workers with previous workforce attachment where the event of unemployment was unpredictable and not a situation where it was certain to occur; income replacement was meant for victims of unavoidable employment. It is, therefore , contended that the "original intent" of the Act was contravened by the inclusion of seasonal workers , 41 temporary and other non-permanent workers as beneficiaries, since these workers are involved in employment with a predictable or foreseeable termination of employment and subsequent joblessness. As a result of inclusion of such categories of workers in the coverage , it is argued that the unemployment insurance program has caused dependency whereby workers repeatedly cycle in and out of program participation (Nakamura,1995; Forget et al , 1986). Despite the seasonal nature of some of the industries, and , the intensification by capital of "just-in-time' staffing as well as the temporary and contract work, the workforce is blamed for involving itself in such employment which inevitably results in participation in the program . Nakamura (1995) , contends that workers who do not look for new employment immediately following termination of employment and go to collect Ul for the duration of the benefit period inevitably self-select into jobs that they know will not last (p. 7 41 ). Not only does this argument ignore the prevailing high rates of unemployment where there is a reserve army of labour more than 1.4 million looking for jobs before new ones join ranks, but it also implies that joblessness is self- imposed . The "self-selection" into temporary, seasonal and contract work and the subsequent cycle in and out of program participation is encouraged , according to the proponents of this view, by the generosity of the program , which is easily accessible and the duration of benefits which 'subsidize' the workers annual income. Both these issues (self selection and generosity) are blamed for causing a great deal of recidivism from a group of workers who are viewed as having little or no preference for employment and who are 'trapped' into what Forget et al (Minister of Supply and Service, 1986) called the "10-40 syndrome". This syndrome, according to the report, occurs when workers are employed for the minimum amount of weeks required to qualify (1 0 weeks at the time) and collecting benefits for up to 40 weeks, and then repeating the cycle. Thus, the availability and the 'generosity 'of income replacement leads to the trap of recidivism and/or repeat use of the program. This is further encouraged by lack of deterrence or penalty for 42 workers who rely on the scheme time and again as they experience episodes of unemployment. While the focus of the criticism regarding the repeat use of the program is generally directed towards the supply side of labour, some economists include the demand side. Corak (1995) notes, the program offers an implicit subsidy to employers who rely on temporary layoffs; these employers maintain their attachment to their experienced workers by planning their recall decisions according to the benefit entitlement of their temporarily laid off workers . Employers, according to this view participate in initiating separation in accordance to the qualifying periods and the duration of benefits. Corak· s (1993) study of the distribution of repeat-users and the firms that support their claim shows that 40% of those making five or more claims come from employment with three or less employers. In other words , these group of workers were cycling between insured unemployment and employment with the same firms . This is not surprising given that the repeat users are mostly seasonal and temporary workers who are in and out of the same or similar jobs. Beside the fact that some industries are characterized by seasonality, it is a well known that capital is shrinking its "core" workers and surrounding them with "just-in-time" and a temporary labour force resulting in intermittent (un)employment for many. Unlike the notion of "self-selection" and contrary to the neo-conservative argument that some workers quit their jobs to go and collect Ul , or choose intermittent employment subsidized by income replacement, the proportion of those who find themselves unemployed with no fault of their own is substantial. In 1986-87, 3,323,000 or 36% of those who separated from their jobs did so because of job loss. Close to 1.9 million of these workforce lost their jobs because their employment was seasonal or temporary. Even if those who departed from their jobs because of poor working conditions or low wages are to be blamed for doing so and are excluded from those who are forced into joblessness by other circumstances , the number of the job losers remains high (Statistics Canada,1991 ). A study done by Sharpe, et al (1986) 43 comparing job losers and job leavers (some of whom are forced into leaving their jobs for familial reasons or ill health) showed that the former's number rose significantly between the years 1975 and 1986. During this time period the number of job losers rose from 39.4% of the unemployed to 55% while the number of job-leavers feU from 27.8 percent to 18 percent. If, as argued by the neo-conservatives, the "generosity" and easy accessibility of the program was a cause for recidivism or increased unemployment and the duration therein, then it follows that the reduction in benefits and entitlements should discourage workers from leaving their jobs. However, despite the erosion of the program and tightening up of the entrance requirements and the benefit period over the last two decades, the proportion of job losers is growing and remains high when compared to the number of those who depart from their jobs voluntarily . The great majority of workers in 1996, as shown in Table 5, lost their jobs due to lay-offs. Those who are categorized as job leavers by comparison are a lot fewer than those forced into unemployment. Table 5 Unemployment- Job-losers and Job-leavers, Canada & Provinces December 1996 . ......·.·.·.·.·.·,·.·.............•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•,•,•,•,•,•.•,•,•,•,•,•,•.•.•,•.•.•.•.•.•,•.•.•.•,•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.•.·.•.•...........·.·.·· ·.·.•.·.·,·.·.·.·.·.·.....·.·.·.·.·.·.·.·.·.·.·.•. •.•.•.•.•.• .·. ·.·.·.·.·.·.·.....·.•.•.·.•.•.•.•.•.•.•.•.•.·.•.•.•.•.•.•...-.•.•.•.•.•. Province Canada Newfoundland P.E.I. Nova Scotia Newbrunswick Quebec Ontario Manitoba Saskatchewan Alberta BC Male Female Total Unemployed 1,412,000 826,000 586,000 43,000 12,000 52,000 44 ,000 445 ,000 489 ,000 41 ,000 28,000 88,000 170,000 . ·,·,·· ,···················· ,·· ••••.•.·.·.·. ·.·.·.·.·.·.·. % of unJob-leavers employed -=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=· =·=·:·=·=·=·=·=·=·=·=·=·=·=·=·=·=-=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·=·:-;.;.;.;.;.;.;.;. 699,000 49.5 166,000 11.7 54.0 98,000 11.8 446 ,000 43 .1 68,000 11.6 253 ,000 Job-losers lost or laid-off %of unemployed 25,000 9,000 31 ,000 27,000 231 ,000 216 ,000 21,000 14,000 45 ,000 79 ,000 58.1 75.0 60.0 61 .3 52.0 44.1 51 .2 50.0 51 .0 46.4 5,000 5,000 38 ,000 58 ,000 7,000 4,000 16,000 30,000 9.6 11 .3 8.5 11 .8 17 14.2 18 17.6 Source: Statistics Canada , catalogue # 71-001-XPB , Various tables The fact that the majority of the unemployed are forced into joblessness has been established by a study done by Statistics Canada. This study, cited in Phillips 44 (1986),concluded that in the eighties, 40% to 60% percent of all unemployment resulted from lay-offs; the author notes, an improvement or deterioration in the unemployment picture manifests itself mainly through a decrease or an increase in the number of job losers among the unemployed. The ability of job leavers, re-entrants and entrants to find employment is clearly not without its effects on the unemployment level , but it is proportionally less significant. .. (it has been shown) that job losers play a predominant role in defining both the seasonally and the trend of unemployed Canadians (p. 22). The majority of the repeat-users or those categorized as trapped in the '1 0-40 syndrome' are those in seasonal employment who are mainly concentrated in the Atlantic provinces, Quebec and to an extent the prairie provinces. The major industrial contributors to seasonal unemployment in these regions are agriculture, fishing, forestry and the processing industries associated with them. Construction is also another contributor to the seasonal unemployment. The seasonality of these industries are determined by climate and government regulations (Phillips, 1986). This implies that employees, or even employers for that matter, do not have control over the seasonality of employment, and neither would restricting the UI benefits influence the unemployment spells caused by these natural and economic phenomena. Searching for or find ing another employment in between seasons in a labour market characterized by a persistently high unemployment rate and capital's trimming down of the workforce, and where the 'contingent' labour force is abundant is, therefore, not feasible . Despite these circumstances , and contrary to the dynamics of capitalism where unemployment is inherent, the government seeks to correct the behavior of the insured unemployed by imposing the "Intensity rule" . This mechanism , as discussed below, is designed to reduce income replacement of the insured unemployed . The basic 55% of the weekly earnings of income replacement is no longer available to all workers. As explained in the preceding pages, those who experience gaps in their earnings and those who claim for benefits after banking the basic entrance requirements of work-hours will suffer reductions in their benefits at a time of insured unemployment. Workers are also 45 subjected to further reduction of their benefits if they have prior claims of 20 weeks in the last five years. The government, under the advisement of the neo-conservative economists , introduced this additional mechanism referred to as the "intensity rule" to further reduce the benefit rates of the insured unemployed. The economists of the Right orientation (Nakamura, 1995) proposed that an "experience rating" be introduced as a way of bringing the program closer with insurance principles. A firm would be experience rated when and if its taxes vary according to the frequency of claims for benefits made by its workers; the higher the claims , the more the taxes an employer would be subjected to . On the workers side, experience rating is imposed by increasingly reducing benefits depending on prior weeks of Ul collected . The government has opted to impose penalties on the supply side despite its recognition that some employers plan their recall of temporarily laid-off workers according to the variable entrance requirements. It should be pointed out that the architect of this mechanism (Nakamura, 1995) has objected to the imposition of experience rating on capital. The intensity rule which reduces benefits based on past participation in the program is designed to discourage repeat users from relying on near- decent income replacement during unemployment spells. It is intended to do this by a reduction of one percent point in benefit rate for every 20 weeks of past claim to a maximum of five percentage points. The tracking of claimants past history of repeat users started in July 1, 1996 and it targets all but the full-yearfull-time employees. In addition to the intensity rule is the clawback provision which increases the tax back of income replacement on workers with incomes above the threshold of $39,000. While workers whose income is above $48,750 get their income replacement clawed back at 30% rate if they are first time claimants and have collected 2.0 or less weeks of benefits in the last five years, the repeat users (i.e. those with more than 20 weeks of benefits in five years) will have their benefits clawed back starting at an income of $39,000; the clawback rate ranges 46 from 50% to 100% of their benefits depending on the frequency of their claim in the last five years. According to the government's own analysis (HRDC, 1996a), the clawback provision will affect 193,000 claimants of which 167,900 (87%) are men and 25,900 (13%) are women . The Victims of the Intensity rule The current economic condition is such that the scheme will inevitably be characterized by repeat participation by a segment of the labour force. Not only the seasonality of certain industries but also the persistence of high unemployment rate, the current labour market economy characterized by a trimming-down of the labour force both in public and private sectors, the large scale temporary as well as permanent lay-offs whether the economy is expanding or contracting, the capital-induced intensification of temporary, contract and "just-intime" staffing, all imply that workers will be exposed to repeated unemployment spells. The layoffs and the down-sizing of the labour force are exacerbated by the rapid technological change which is replacing labour power and/or reducing the hours of work and where, as a result, capital is employing workers for short spells increasingly. These factors cumulatively intensify the incidence of unemployment and the subsequent participation in Ul. Late 1970s and 1980s saw as many as 80% percent of Ul beneficiaries cycling in and out of the program. Forty percent of these claimants were in their fifth or more claims . In 1989, 50% of all claims made by males and 30% by females were made by repeat users on their fifth or greater claim . During the same year, over 90% of the claims in Newfoundland and Prince Edward Island were made by repeat claimants . 65% of these claimants were experiencing their fifth or higher claims. While New Brunswick and Nova Scotia had similar figures to that of Newfoundland and Prince Edward Island, the rest of the provinces had about 28% to 35% of claimants in their fifth or greater claims in 1989 (all figures taken from Corak, 1993, 1996). In the years between 1990 and 1995, 40% percent of Ul beneficiaries were seasonal workers; and the proportion of repeat-users of these workers as compared to other 47 beneficiaries were higher. Sixty six percent of frequent claims during the first half of the ' 90s were made by seasonal workers of whom the majority were men (64%) . These claimants were in their third claim during this time (Pulkingham , 1998, forthcoming) . Specifically looking at 1993, we find that nearly one million Ul claimants or 40% of the total beneficiaries were into their third or more claims in five years. The Atlantic provinces had a higher proportion of repeat users than the rest of the provinces (Wiggins, 1996). This workforce will experience a reduction of benefits by three to five percent by the imposition of the intensity rule alone. The penalty will reduce income replacement by about $400 million in the next three to five years (Wiggins, 1996). Those in the low-wage employment will be the hardest hit by this reform measure as most of the unemployment spells are experienced by them (Ross and Shellington , 1991 ; Nakamura, 1995). Wiggins (1996) for example, shows that more of than 70% of the repeat claimants in the Atlantic provinces earned $15,000 or less in 1991 . Regions with high unemployment rates also have higher incidence of unemployment and thus high participation and/or repeat-use of the program. The intensity rule will , thus , disproportionately affect the low-wage , seasonal and temporary workers in regions with high rates of unemployment. Its effects also goes beyond these workers in these regions where the economic activity revolves around seasonal jobs. Ul benefits in such regions is key to maintaining the purchasing power between seasons and in keeping other economic activities that depend on the economy of the seasonal jobs to continue (Pulkingham , 1998, forthcoming) . Among the most affected are also the visible minorities because they are concentrated in the low-paying , temporary and seasonal jobs (Wiggins, 1996; Pulkingham , 1998 forthcoming) . Premiums Workers who earned less than 20% of the Maximum Insurable Earnings were not insured under the old program . Neither did they pay premiums on their earnings. However, the weekly minimums and maximums were eliminated with the conversion of entitlement for 48 benefits from weeks-based to hours-based work. Premiums are now levied on every dollar earned , up to the Maximum Insurable Earnings of $39,000. Those whose income is less than $2000 in a year will receive a refund through the tax system . Over one million and three hundred thousand, 700,000 of whom are women (HRDC, 1996a) will contribute to a program that does not provide coverage for them . This number does not include those who earn over $2000 but work less than the entry requirements. The latter do not receive refunds ; nor do they collect benefits in the event of unemployment. Many workers in non-standard forms of employment fall short of accumulating or banking sufficient hours to meet the variable entrance requirements ; and others, as new entrants and re-entrants to the market, lack 910 hours of workforce attachment to be eligible for benefits. These workers pay premiums but do not qualify for benefits. Neither will they be entitled for refund of premiums unless their earnings are $2000 or less. Herein lies the contrad iction to making the program user- funded insurance as some of the workers will not see income replacement at a time of unemployment. Small business with fewer than 25 employees and whose overall premium payments are less than $ 30,000 are now eligible for premium refunds. Maximum Insurable Earning (MIE) The Maximum Insurable Earnings which determines the size of income replacement has been reduced from its 1995 level of up to $815 of weekly earnings (or up to $42 ,380 per year) to $750 a week, or $39,000 per year in 1996. It will remain frozen at this level till year 2000 (HRDC, 1996a). One of the government's reason for the reduction of the MIE was in response to capital's demand that its cost of production (premiums) be reduced . As the government (HRDC, 1996a) indicated, "small business , in particular, have warned that continued premium increases are costing jobs" (p.12). The other reason as noted in the same publication is "... to narrow the difference between wages covered by Eland the average wage of Canadian workers" (p 5) . The Average industrial wage is estimated at $30,000 per year. 49 The reduction of MIE, therefore, will lower the cost of production for capital while at the same time it lowers the income replacement of the insured unemployed . A decrease in MIE affects the maximum weekly benefits and the clawback threshold ; where as it has been $448.25 ($815 x 55%) two years ago, it is now $413 ($750 x 55%) . Thus , although the replacement rate of 55% is not changed under the new system , the reduction of MIE reduces the income replacement levels for higher paid workers . The underlying assumption is that wellpaid workers do not deserve a good portion of their income to be replaced when they experience joblessness (Wiggins, 1996). One of the ways of achieving the government's overarching objectives of removing barriers to paid employment (HRDC, 1996a), thus, includes lowering income replacement of the relatively well-paid employees; as Wiggins (1996) observes, this is a clear indication that the government "has bought into low-wage strategy"; lowering the MIE, which in turn lowers the replacement income is "using Ul as a tool to induce unemployed workers into taking jobs which pay well below the rate of pay of their former jobs"(p 78).(emphasis added). The reduction in MIE also means lower premium payments for those with relatively higher income. However, the lower paid employees (workers earning up to $39,000/year) will pay premiums on the first dollar earned to their maximum income of $39,000. This in effect is regressive and shifts contributions to Ul from higher -to-lower-income earners. As women earn substantially less than men (see Appendix 3) on average, they will shoulder the burden ; only 18% of women workers have incomes over the MIE compared to 39% of men (Wiggins, 1996). The implication is that 82 % of women and 61% of men workers will proportionally pay higher premiums. The collection of premiums on every dollar of the low-income earners, the lowering of the insurable earnings and the adjustments in premiums levied from the high-income earners as well as the reduction of income replacement of the latter has the effect of making the program more of a user-funded insurance program (i. e. premiums are paid on every dollar of 50 the low-income earner and the compensation for the higher paid worker is brought to within the maximum of the lower-paid worker) . It has to be noted that lower paid workers are those who suffer more unemployment spells than the higher-paid workers and who rely more on the program for protection (Ross and Shellington , 1991 ). The reduction in MIE will affect maternity, parental and adoption benefits of women and men (18% and 39% respectively) whose earnings is above the MIE. Women will be affected by this change more as they are the majority (96%) of those who make use of the special benefits. The overall reduction in MIE in conjunction with the reduction in premiums (by five cents on every insurable $100 for workers and by seven cents for employers for every $1 00 of their worker's insurable earnings) will remove $1 .25 billion from the program of which $730 million is by way of savings to employers (HRDC, 1996a). The Family Income Supplement (FIS) The Employment Insurance program incorporates income top-up equal to the weekly amount of Child Tax Benefit (CTB) for those who qualify for CTB .The FIS targets the poor by making the supplement available to a claimant who "establishes (and) meets the prescribed low-income family eligibility criteria .. .similar to the criteria for receiving a Child Tax Benefit" (EI Act, section 16(1) & (2)). The top-up is for the first time based on total family incomes less than $25,921. The FIS replaces the benefit rate of 60% under the old system which was based on claimant's individual income. The top-up of 60% under the Ul was introduced with the revision of the program which reduced benefit rates of claimants . During this revision in 1993, the rate of benefits payable to a claimant for a week of unemployment was reduced from 60% of the average weekly insurable earnings to 57% ; and a year later, with the introduction of twotiered system, the rate was reduced further to 55% of average weekly insurable earnings. With the creation of the two-tierd system, claimants who have dependents and whose earnings were at or below half the MIE were eligible for 60% rate (Koskie and et al , 1995). The FIS which is restricted only to those who qualify for CTB increases with the number of children in 51 the family. The total benefit will be at 65% of average insured earnings and could reach up to 80% by the year 2000; however, the top-up stops at the maximum weekly benefit rate of $413. According to the government (HRDC,1996a), the FIS is expected to offset the reduction of benefits that occurs as a result of the fixed averaging period . As it was described in the preceding pages, the fixed averaging period and the 'divisor' where claimants are expected to have at least two weeks over the entry requirement in order to get the 55% of income replacement, and the gaps in earnings jointly conspire to reduce income replacement below the maximum replacement of 55% . Low-income earners with dependent children are also subjected to these measures whereby their income replacement could fall below the maximum weekly benefit rate. As mentioned earlier, it was established that low-wage earnings and unemployment levels are inversely related : the lower the income level the higher the unemployment rate (Ross and Schellington, 1991 ); this implies that the low-wage earners will be over-represented among the 'frequent-users' of the program. The government's (HRDC, 1996a) information indicates that 54% of low- wage workers with dependents are repeat-users. However, unlike their counterparts (low-wage earners without dependent children), they will not be subjected to the intensity rule. Table 6 shows that 14% of all claimants will be entitled to the top-up of benefits. Over forty-five percent of these workers are lone-parent women and 5.1% are loneparent men; 54.3% of the low-income claimants are two-parent families. Women comprise the majority (89%) of the lone parent families and 48.7% of the two parent families (Pulkingham ,1998, forthcoming). In total 234,500 of the 350,000 are women claimants . The fact that the FIS is based on total family earnings as opposed to the individual claimant's income means that those who were previously eligible for the 60% rate based on their individual earnings and those whose family income is in excess of the $25,921 ceiling will be disentitled . It is estimated that more than 33% of claimants previously entitled to the supplement will now be excluded from the top-up provisions (Pulkingham, 1998). The tying of 52 Table 6 Low-Income Earners Eligible For Family Income Supplement Total El Claimants 2,454,000 Total FIS Eligible 350,000 Percent of total Claimants 14% Total %of FIS %of loneeligible parent Lone-parent Women-headed Men-headed 160,000 142,000 18,000 45 .7% 40 .6% 5.1% 100% 89% 11.25% Two-parent 190,000 54 .3% N/A Source: Compiled from HRDC, 1996a, tables 1 & 2, p. 8 El benefits with family income is an introduction of income-test into the provision of income replacement in the event of unemployment. This is an inroad made towards further erosion of the scheme that temporarily cushioned the impact of temporary joblessness. The distinction between the non-means-tested entitlement of benefits and the stigmatized and victim-blaming income support such as social assistance is now blurred as a result of the introduction of family income test for the entitlement of the top-up . Conclusion: Although Ul was designed not to undermine the workings of the labour market economy from the outset, it was still criticized by neo-conservatives as an obstacle to labour market "flexibility". Not only is El, therefore, designed to rid the program of its perceived 'hindering function' but also to reflect labour market patterns and inequalities between workers. The selectivity introduced to the program lie in the following : (1) the emphasis on workforce attachment and the distinction between "minor'' (those in non-standard forms of employment with less than 700 hours in the qualifying period) and "major'' workforce attachment; (2) the penalties for the former and frequent-users; (3) the new/re-entrant requirement of 910 hours; and (4) the reduction and/or elimination of benefits for those categorized as workers with minor attachment. All these factors cumulatively penalize those in non-standard forms of employment for not confirming to the full-time-full-year-work (a work arrangement which is increasingly 53 being redefined by capital) . These workers are blamed , as Pulkingham (1998, forthcoming) notes, "for their purported lack of 'work effort', 'individual initiative' and 'insufficient workforce attachment". Those involved in seasonal work and others cornered into part-time employment are portrayed as engaged in these forms of employment by choice rather than by necessity. Despite their already proportionally lower benefits due to lower earnings when compared to the full-time workers, they are targeted and penalized further in order to instill a greater workvalue. El, for the first time in the history of unemployment insurance, links entitlements explicitly with "bad forms of dependence (and) lack of work effort", (Pulkingham, 1998, forthcoming), workers with major and minor workforce attachments, the repeat-users and the "trapped". The compartmentalization of workers into these categories and "UI cheater stories" help to justify the following : the selectivity introduced into the program ; the incremental but significant erosion of the program; the creation of a fertile soil for low-wage jobs; fast track incorporation of the unemployed into capital-wage labour for the few who will land jobs; and fast track exit from Ul into highly stigmatized social assistance programs. Entrance into the latter program whose means-testing is based on abject needs (and whose provision falls far below that of low income cut-off) has a devastating effect on those who previously were protected by the jobless security net. Kirsh (1992) notes that poverty is related to chronic stress, and this in turn can lead to mental and physical illness. Among "the factors that affect the degree to which individuals suffer during unemployment", according to the same author, is the "relative amount of economic deprivation as a consequence of job loss" (p. 52) . Herein lies the impact of the changes introduced in El on the precariously employed . While unemployment insurance was intended to protect 'employable' people from the welfare cheques meant for the unemployable, the distinction is now blurred as many former workers will have to rely on welfare in the event of unemployment. 54 Common sense dictates that with a high unemployment rate and reduced or eliminated income replacement, more people will sink into economic hardship and poverty. The tandem movement of unemployment and the incidence of poverty shown in Chart 3 points to a direct link between the two: the higher the level of unemployment, the higher the incidence of poverty. This situation can only be exacerbated by the current change in (Un)Employment Insurance which , as shown in the preceding pages, is designed to disentitle some and reduce the income replacement and duration of benefits for others. Since about 42% (33% in nonstandard forms of employment and about 9% unemployed) of the labour force are at the margins of the labour market, very many of those disentitled or those who exit from the scheme fast, as well as those whose income replacement is reduced , will fall into welfare. As noted by National Council of Welfare(NCW) (1997) , "Canadians wind up on welfare for a number of reasons , but one of the main reasons is unemployment. Welfare statistics dating back to the beginning of the Canada Assistance Plan in 1966 show a strong link between the number of people on welfare and the number of people unemployed" (p.1). Chart 3 Unemployment Rate and Persons in Low Income: Canada, 1980-1995 Unet11ploymeftl rWI I. L- Income e e. ~o- - 22 20 18 -c: 16 ~ 14 ~ 12 .a. 10 8 6 4 ...., ......, ,..- 80 82 84 --- Unemployment rate 86 88 year 90 92 94 -Incidence of low income Note: Estimates of Low Income based on LICO , 1992 base Source: Statistics Canada , Catalogue #71-201 , 13-207 55 Many of the disentitled workers and those whose benefit levels and weeks are reduced due to the loss of their precarious employment will join ranks of the welfare pool (2.8 million Canadians in 1997 as reported by NCW, 1977). This population's income falls well below the low income cut-off in every province (see Appendix 2). In 1995, the number of persons with incomes below the low income cut-off was 5.2 million (Statistics Canada, 13-207-XPB) and 2.5 million people had to rely on food banks as a result of inadequate income or low-wage jobs. This number can only grow with the weakening of the jobless security net. Future Research This study focused on changes in key areas of the El Act. It showed how these changes restrict access to and/or reduce benefit levels of those in non-standard forms of employment in the move from partial unemployment to full-time unemployment. Although the reduction of Ul beneficiaries to about 33% of the unemployed , and the resulting surplus in El fund of about $16 billion attests to the fact that the jobless security net has lost its catching power, the study has not quantified those who will fall onto welfare or those who will be forced to take any job anywhere at any wage rate. It is therefore recommended that future research examine the impact of the changes in (Un)Employment Insurance on welfare caseload . It is also suggested that the employment programs, or as the government (HRDC , 1996) calls them , 'active re-employment benefits' be subjected to scrutiny in terms of their support for the unemployed and how they aid and/or relate to the accumulation process. This is important because the government's contentions are that while income replacement discourages some workers from seeking employment, the training and retraining, job sharing, job subsidy and other related 'active re-employment benefits' will help workers find jobs and employers to create employment. And finally, as the issue of social insurance is related to (un)employment, it is also suggested that the redefinition of standard hours of work be considered for further research . It is my view that proposals for increased benefit levels or benefit weeks , or advocacy for easier 56 access to the program is too problematic given that 42% of the labour force in Canada is at the margins of the productive labour force . Capital, supported by technology and driven by its ideology, has demonstrated that it, and society at large, can maintain production with a declining portion of the labour force employed full-time, more than a third (33%) precariously employed and a section of the population unemployed. The labour market which is intensifying casual , temporary, part-time and 'just-in-time' employment points out that society can afford to produce more with fewer hours of work and less labour. This also implies that society can redefine the standard hours of work to reintegrate the unemployed into the labour market. Technological innovations have enabled capital to produce more with less labour. That is, the total economic production now requires less labour. What is lagging behind these developments is the use of working time as a measure of income, or as the basis for the distribution of social wealth (Gorz, 1994). Gorz (1994) observes that the use of working time as a measure of income or the distribution of social production is "clung to solely for reasons of ideology and political domination .. .[and] ...untenable work ethics" (p.75). The same author reminds us that the technological innovations have made possible the uncoupling of income from work time but not income from work. Accordingly, trade unions in Europe in general and those in Germany in particular are aiming for and working towards 30 hours a week of work without loss of income. There is no reason why this should not be considered in Canada. 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London: New Left Books 64 ; .w;o;~~~ ~~~~~~~~~~~~~R ! ~9..~! 9~~r~ ~~~9~~~.e br~~~ .«~·;·;·;~~;·:·:·:·:·:~~-;~.-; .... Year 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Popultion 15 years+ 8779 9007 9141 9268 9615 9732 9956 10164 10391 10597 10807 11123 11388 11605 11831 12053 12280 12536 12817 13128 13083 13444 13805 14162 14528 14872 15186 15526 15924 16323 17124 17493 17839 18183 18550 18883 19177 19433 19681 19929 20182 20432 20690 20968 21277 21613 21986 22371 22717 23027 4829 4942 4988 5055 5163 5223 5324 5397 5493 5610 5782 6008 6137 6242 6411 6521 6615 6748 6933 7141 7493 7747 7951 8194 8395 8639 8897 9276 9639 9974 10530 10860 11265 11630 11983 12332 12398 12610 12853 13123 13378 13631 13900 14151 14329 14408 14482 14663 14832 14928 15145.4 ~-;.;·;·:·:~·;·;~·:·~·:·;.;.;.;.;.;.; ;.o~;.;~.-;o;o;o;o;o;o;o;o;o;•;«~~.-;o;·;o;~~~.....-~.-;o;~.-;·;·;·;o;•;o Part-time Rate .............:.:..:.: % 4832 4875 4913 4976 5097 5169 5235 5243 5364 5585 5731 5706 5870 5965 6055 6225 6375 6609 6862 7242 7451 7593 7832 7919 8104 8344 8761 9125 9284 9776 9978 10320 10761 11082 11398 11035 11106 11402 11742 12095 12422 12819 13086 13165 12916 12842 13015 13292 13506 .. 13676.2 8,677.3 8947.7 9247.8 9491 .8 9699.9 9276.3 9242.2 9490.7 9745.3 10045.1 10354.3 10666.9 1300.9 1372.7 1485.9 1590.7 1698.2 1758.8 1863.5 1911 .8 1996.7 2049.4 2068.2 2152.0 13.0 13.3 13.8 14.4 14.9 15.9 16.8 16.8 17.0 16.9 16.6 16.8 10929 10573.6 2236.2 2342.5 17.0 18.1 10534.4 10798.4 10996.8 11087.2 2480.3 2493.3 2508.8 2589.0 19.1 18.8 18.6 18.9 : ! . t ::::: :::::::::gt . ~:~~:::t:~:~~~~:: :t ~t: ::: : ::::~:~ : w :::~::::::::::::::::::oo.t ~:::::::: :::::::::::: :~; : ::::::::: I Canada, Winter 1996 Perspectives, Cat# 75-001-XPE Labour Force Survey, 1996 65 Unem- 110 114 141 186 126 155 162 250 245 197 278 432 372 446 466 390 374 324 280 251 296 358 362 476 535 553 515 514 690 754 882 945 870 900 934 1363 1504 1450 1381 1283 1208 1082 1065 1164 1492 1640 1649 1541 1422 Partiepation Rate Unemployment Rate 54.9 54.6 54.5 53.7 53.7 53.5 53.1 52.9 52.9 53.5 54.0 53.9 53.8 54.1 54.4 57.3 57.6 57.6 57.9 57.8 58.1 58.6 59.7 60.5 61 .1 61 .5 62.1 63.1 64.0 64.6 65.3 64.7 64.9 65.3 65.8 66.3 66.7 67.2 67.5 67.3 66.7 67.2 67.5 67.3 66.7 65.9 65.5 65.3 64.8 2.2 2.3 2.8 3.6 2.4 2.9 3.0 4.6 4.4 3.4 4.6 7.0 6.0 7.0 7.1 5.9 5.5 4.7 3.9 3.4 3.8 4.5 4.4 5.7 6.2 6.2 5.5 5.3 6.9 7.2 8.1 8.4 7.5 7.5 7.6 11.0 11 .9 11 .3 10.5 9.6 8.9 7.8 7.5 8.1 10.4 11 .3 11 .2 10.4 9.5 Emp./ pop. Ratio 53.1 53.6 53.3 53.0 51 .8 52.4 51 .9 51 .5 50.5 50.6 51.7 51 .5 50.1 50.6 50.4 50.2 50.7 50.9 51 .6 52.3 55.4 55.4 55.0 55.3 54.5 54.5 54.9 56.4 57.3 56.9 57.1 57.0 57.9 59.2 59 .7 60.4 57.5 57.1 57 .9 58.9 59.9 60.8 62.0 62.4 61 .9 59.8 58.4 58.2 58.5 58.6 $ ; :;;; :;: Poverty . line,...,.. ~~: ~~ Total Welfare income :::~:;..; ......~.... :et~ ~ ;z:o;:;. Total welfare income as %of Poverty ",agp=====- poverty Iine % ::::::: « : '= : :::z:o-:........~ total welfare income as % of poverty line only for :::::::=:~:::.-: ==~_ -~.... :p p~~~ ::: :: Welfare benefits and poverty line by characterstics: Provinces, 1996 66 PEl Saskatchewan Newfoundland 42% 19% 40% 14,107 -11 ,406 Single Employable 2,701 single parent with 63% 64% 61% 12,989 19,123 -6 ,134 one child Couple with 62% 64% 53% 27 ,982 13,148 two children 14,834 Nova Scotia Ontario 43% 42% Sinle Employable 16,061 -9,252 6,809 Single parent with 64% 63% -8,093 13,676 21 ,769 one child Couple with 58% -13,786 75% 18,076 31 ,862 two children Manitoba Alberta NB 39% 24% 31% 16,061 Single Employable 4,927 -11 '134 Single parent 52% 59% 21 ,769 -10 ,976 50% with one child 10,793 Couple with 56% 48% 31 ,862 -1 4,495 55% two children 17,367 Quebec British Columbia 39% 16,061 -9 ,729 39% Single Employable 6,332 Single parent with 60% 63% -8,069 13,700 21 ,769 one child Couple with two children 17 906 31 862 -13 956 56% 51% :=!::;.:::::- ::~..~::;.::: ._..;:;.::::: ...;::.-::::::v... ~«w».:~~w~...~»"!=:=!:~::::::!"-=--==:=:: ::=:::::::::::::::~~,.:::: :: :;:;:; :; ::::::::.o::::::::.-:: :."!:!::~~. :-==::::=-.::::::::.~:::;.:::::w.:~-====~.::.........._............_._::::: :::::::: :..' :~~»- .:::::~:::::::-; .:::." '!::: -...-::~ :.~ ::-..:::::::.-::::::::::::::::-;:::-.:::::-.::::::::::::::::::! Source : compiled from National Council of Welfare, 1996, table 3 ~~~== Appendix2 67 69 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 Women 3747 4465 5232 5689 6184 7168 8231 9309 9790 11006 11749 13357 14604 16067 17584 18098 18723 19821 21034 21971 23120 24951 26897 28461 28530 28423 29700 ($) . .Y,~~ Men 6415 7611 8770 9510 10434 12034 13637 15741 15777 17471 18511 20756 22913 25105 27132 27593 28772 30122 31800 33576 33041 36850 38628 39589 39503 40717 40610 Earning Ratio 58.4 58.7 59.7 59.8 59.3 59.6 60.2 59.1 62.1 63.0 63.5 64.4 63.7 64.0 64.8 65.6 65.1 65.8 66.1 65.4 66.0 67.7 69.6 71 .9 72.2 69.8 73.1 ~, Y«' ~~r -- Other Workers ... Earning Men Ratio 2662 50.6 3783 46.0 3463 50.4 51 .7 3634 52.2 3959 4696 53.4 5431 50.6 6195 52.4 5868 60.8 58.7 6310 7253 57.9 7428 61 .4 62.3 8579 8763 63.0 62.3 8828 70.1 9152 70.1 9198 74.0 9897 10238 76.2 74.2 10813 11955 73.3 70.7 12615 12681 70.2 12260 75.9 12402 74.6 78.1 12449 77.0 12980 Women 1346 1739 1746 1878 2067 2506 2749 3249 3566 3702 4203 4561 5344 5523 5499 6412 6444 7328 7806 8018 8811 8922 8906 9306 9250 9725 9990 ~:~:;:: :::>.:=: =~~~:.~ ~~::-~:=::.~~~.: ..;..;::=:~::::::~.t-:~~ 67 Source:Statistics Canada, 13-217-XPB, Table 1 Full Year:50-52 Weeks for data prior to 1981 and 49-52 weeks for recent data . Year Appendix 3 Average Earnings In Current (1995) Dollars for Women and Men and Female To Male Earning Ratio, 1967-1995: ~:.« Women 2454 2862 3307 3533 3887 4521 5200 5785 6442 6987 7710 8522 9711 10525 11235 11989 12498 13470 14261 15128 16358 17150 18114 19023 19112 19359 20219 ~~'« " .t~=:-.t.t-=::::: -=::~==~~-=~- All Earners Earning Men Ratio 5323 46.1 6184 45.7 7056 46.9 7662 46.1 8402 46.3 9535 47.4 10815 48.1 12390 46.7 50.8 12690 13753 50.8 14952 51.6 16492 51.7 18106 53.6 55.1 19116 20345 55.2 20836 57.5 22188 57.8 23434 57.5 24666 57.8 26310 57.5 27687 59.1 28658 59.8 61 .5 29435 29778 63.9 29702 64.3 31087 62.3 31053 65.1 ~~~ s-;;~~;~:;~C~~ 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Number of Weeks of Insurable Earnings ~· , ', ~ o' .w. t.' r;;~:'" t 700-734 735-769 770-804 805-839 840-874 875-909 910-944 945-979 980-1014 1015-1049 1050-1084 1085-1119 1120-1 154 1155-1189 1190-1224 1225-1 259 1260-1294 1295-1329 1330-1364 1365-1399 1400-1434 1435-1469 1470-1504 1505-1539 1540-1574 1575-1609 1610-1644 1645-1679 1680-1714 1715-1749 1750-1784 1785-1819 1820- , ,.......'h"No"o'o'h..W ~ ;99· --~;o' 7 ;~r~-; · : 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 27 28 29 30 31 32 33 34 35 36 37 38 17 17 16 Table of Weeks of Benefit 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 33 34 35 36 37 38 39 40 41 42 43 44 More than 9% but not more than 10% 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 35 36 37 38 39 40 41 42 More than 10% but not more than 11 % 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 37 38 39 40 41 42 More than 11% but not more than 12% 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 39 40 41 42 More than 12% but not more than 13% 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 41 More than 13% but not more than 14% 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 More than 14% but not more than 15% 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 43 44 More than 15% but not more than More than 16% 16% 68 ~:-:...;-:-:·;o;:o;~...;..v.v.o;o;o;o;o;«o;o;-.......x.;o;o;.;o;<-... ·»:OX".-:-:· .;~..-.- .o;« ;~....v.......-..:....;.-....-..;...-, .y;...;.-..;o,;.-,....;o;o;o;o.;o;o;~..-. .....«...;........-;.;o;«v;.o:o;o;o;~....~.....;;q-,.y;o;.-,.o;o;·;o;o;-:...-;-;o;--~.-..;v.·;.«o:«Y.>o:,o;~o;o ~«..-:.-:·:«o;o;o;o;o;o;v.·;o;·:·:·:--..:v x-x-:.o;v.·:......:. 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 31 32 33 34 35 36 37 38 39 40 41 42 More than 8% nut not more than 9% Regional Rate of Unemployment . .30. .&.1.40v.o;·N-:.·X««. 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 29 30 31 32 33 34 35 36 37 38 39 40 More than 7% but not more than 8% oY o' .'hWNN.NVV'.Vtllh"JV'NNIt. ag;~ More than 6% but not more than 7% V . '.V . ' 'o' 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 25 26 27 28 29 30 31 32 33 34 35 36 #of Hours Of insurable employment in qualifyin 6% & period Under 'o 'ow. Y'o" '>' ' '.' o"""""""'.........,.,..'""""•Y o'~.Yt/' ', t Appendix 4