Wednesday, August 2, 2000
The Halifax Herald Limited

Why doesn’t N.S. government speak up on EI reforms?

By Brian Lee Crowley

The Nova Scotia government is asleep at the switch. In part because of this negligence, the employment insurance train is about to rush down the wrong track, bringing further despair, dislocation and dependency to many communities in this province, and throughout Atlantic Canada.

The federal government is well advanced in its plans to roll back most of the modest reforms to unemployment insurance (now called employment insurance) that it enacted in 1996, and has been looking for input from the provinces, particularly in the Atlantic region. Newfoundland and PEI have both let it be known that they favour making access to EI much easier again. New Brunswick has been fighting the reforms behind the scenes. Only Nova Scotia has not responded to the federal proposals.

For a government supposedly committed to growth as a solution to this province’s many social, fiscal and other challenges, this is an unbelievable abdication of responsibility. Why? Because EI is probably the single biggest obstacle to getting our unemployment rate down and putting our population to work, creating jobs, employment and opportunity for thousands who have been drawn into a passive dependence on dollops of federal money year after year.

The statistics about how damaging the old UI system was to seasonal workers, to rural communities, to the fishery and to young people are staggering, and well-known to people who work in the field. And in spite of some boisterous rhetoric from interest groups, there is little evidence that the reformed EI system is any different. Generous EI benefits available after only a few weeks’ work essentially pay people to withdraw from the labour market for the rest of the year. This causes significant labour shortages in areas that, paradoxically, have high rates of official “unemployment”. Incredibly, the system often makes people worse off by working that by staying on UI.

But the statistics mean nothing to most people. The real story is told on the ground, by people living with the perverse effects of this system. Take the case of a man I know who owns a construction firm in the Glace Bay – New Waterford area of industrial Cape Breton. These communities have one of the worst unemployment rates in the province, and unemployment in the construction trades is huge. And yet this man has incredible difficulties recruiting workers.

Once a worker gets “stamped up” by working the minimum number of weeks to qualify for EI, the incentive to work falls dramatically. People are no longer working for their wages, but only for the difference between what they can earn in wages and what they could get simply by staying home and claiming UI. Unless you’re willing to hire someone for a long enough period to get them stamped up for a new UI claim, they lose income by working in the official economy.

That doesn’t mean they’re not working, though. Again, people familiar with the system all know that the EI rules simply push a lot of work underground. If you want wood chopped or your lawn cut or a deck built or tables waited on, there’s no shortage of people willing to do it under the table. But if they do the work officially, they lose EI benefit.

That’s why one of the biggest headaches facing any employer in Atlantic Canada is to find enough qualified workers willing to work full-time, full-year. A woman I know just opened a restaurant in Dartmouth. When she advertised for wait staff, the majority of applicants indicated to her that they were only looking to work long enough to get stamped up, and then be laid off. As one woman said, in the autumn she likes to go on EI and do her crafts, which she then sells at the Christmas craft shows, and pockets that income tax free.

In the last survey I saw, over one half of employers in Atlantic Canada said they would hire if they could find good quality workers with the necessary skills. What’s the response of Ottawa? To worsen an EI system that rewards people for staying in dead-end seasonal work, but cuts them off if they go back to school. So university students doing what society needs most — acquiring the skills of the future — graduate with thousands of dollars of debt, but Ottawa can find millions of dollars to turn back the clock on EI reform. What kind of priorities are these?

At least we know where Ottawa stands: four square in favour of damaging this region’s economy for the short term gain of a few parliamentary seats. The Nova Scotia government, by contrast, doesn’t even think the matter worth commenting on. They should remember, though: silence implies consent.

Brian Lee Crowley is president of the Atlantic Institute for Market Studies, a public policy think-tank in Halifax.
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