Redesigning Canada’s social safety net for the post-pandemic economy

The economic disruptions of the pandemic showed the shortcomings in Canada’s out-of-date social safety net. Issues like the inability of the Employment Insurance (EI) program to process a large number of claims in a short period of time, self-employed or gig-workers’ lack of EI eligibility and the absence of sufficient job-protected leave, sent federal and provincial policy-makers scrambling for solutions. .

is a research director at the Institute for Research on Public Policy (IRPP). Before joining the IRPP, he was the associate director of research at the C.D. Howe Institute. He has also worked at Industry Canada and the United Nations Industrial Development Organization

These flaws add to the longer-run challenges that are facing Canada’s workforce. Exposure to global competitive forces cause major price fluctuations in natural resource markets along with manufacturing plant shutdowns, and heighten the potential impact of artificial intelligence and robotics on jobs. Mounting concerns about these issues have led major international agencies such as the International Monetary Fund, the Organization for Economic Co-operation and Development and the World Bank to promote an “inclusive growth” agenda, aimed at keeping trade between countries open while also committing to protect and invest in the displaced and most vulnerable.

The Institute for Research on Public Policy’s research on the Social Safety Net for Working-Age Adults is motivated by these concerns. The program makes the case for broadening our definition of safety net beyond the traditional boundaries of income-support programs to include not only so-called active labour market measures that provide employment services to the unemployed and incentives to work, but also the broader set of rules and regulations that underpin labour institutions and frame labour relations. Examining how these three pillars of our safety net intersect and complement one another should help draw attention to what policy levers need to be pulled.

Income-support programs

The sudden effect of public health restrictions to fight the transmission of COVID on Canadians’ employment led to a dramatic redesign of income supports. With EI unable to process a wave of new claims, the federal government created the Canada Emergency Response Benefit (CERB) to provide financial support to employed and self-employed Canadians who stopped working because of the pandemic. Eligible recipients could receive $2,000 for a four-week period and could re-apply if still without work at the end of this period. CERB was recently transformed into the Canada Recovery Benefit (CRB), which is roughly similar in design as the CERB and has been extended to Oct. 23.

The universality of access to these new benefits kickstarted a serious debate in Canada about whether a basic income program (BI) should be adopted going forward. A few months ago, the IRPP held a webinar with a group of experts on this topic to explore what role a BI could play in a revised social safety net. This panel included Garima Talwar Kapoor of Maytree as well as Lindsay Tedds and David Green, both members of the British Columbia Expert Panel on Basic Income, which released its report Covering All the Basics: Reforms for a More Just Society in January 2021. The IRPP panel was cautious about the potential for a basic income program to fix most of the issues in Canada’s safety net, and suggested that alternative, targeted programs might be a more practical approach.

On this score, policy interventions have mostly targeted poverty reduction among certain groups – such as seniors, families with children and single parents. In fact, Canada’s First Poverty Reduction Strategy specifically targets reducing one measure of the poverty line, defined as the number of households that do not have enough money to buy a specific basket of goods and services that allows them to meet their basic needs. But this measure does not consider the depth of poverty that people experience. Targeted poverty reduction measures have left behind singles without children even though they are the largest group among those who live in deep poverty – those with incomes below 75 per cent of the poverty line. Considered by many to be “the forgotten poor,” their difficulties are often exacerbated by a complex set of issues related to mental health disorders, addictions, violence and abuse, homelessness and the overall traumatizing effects of entrenched poverty.

An IRPP report summarizes the findings of extensive research to better understand changes in the Ontario social assistance (Ontario Works) caseload for singles in Toronto. As part of this project, the IRPP invited three experts (Ron Kneebone, Alain Noël and Sherri Torjman) to propose policy responses for governments to consider. All three stressed the importance of targeting reduction in deep poverty measures in addition to the overall poverty rates and doing so in part by boosting the income support provided to working-age adults who live alone.

In response, Nick Falvo examined welfare income and the extent to which singles’ social assistance caseloads are influenced by the generosity of benefits as well as other factors. These include changes in eligibility rules, general economic conditions and the minimum wage. Although increasing social assistance benefits could result in a modestly higher number of singles on social assistance, there are ways to mitigate this impact. This could be done, for example, by directing benefit increases to singles who live in regions with relatively high costs of living and/or including singles on social assistance in the list of groups with priority access to federal-provincial housing benefits.

Modernizing EI

The 2021 federal budget recognized the need to reform Canada’s EI system, committing to consultations with Canadians and employers on future, long-term reforms. These consultations will “examine systemic gaps exposed by COVID-19, such as the need for income support for self-employed and gig workers; how best to support Canadians through different life events such as adoption; and how to provide more consistent and reliable benefits to workers in seasonal industries.”

A commonly cited concern about EI is how the program provides only short-term support – between 14 and 45 weeks of benefits – to unemployed workers. When individuals’ EI benefits expire before they find a new job, they often have to draw down on their financial assets and/or rely on significantly less generous social assistance benefits. To pre-empt such outcomes, policy-makers have on seven occasions since 2004 temporarily increased the maximum number of weeks during which targeted claimants are entitled to EI benefits.

Utilizing administrative data on EI claims, David Gray and Philip Leonard examined EI benefit-duration spells to analyze patterns and incidence. They also examined the behavioural changes and program costs associated with benefit extensions. In most instances, the measures were either inappropriate or inadequate. However, they did find that benefit extensions during major recessions, such as the pandemic, are warranted. EI needs sweeping reforms to become more responsive to economic downturns and to better support unemployed workers’ adjustments to changes in the labour market over time. Gray and Leonard made a number of policy recommendations to address the problems that long-term workers on EI face in transitioning back to work.

Incentives to work and EI

EI not only provides financial support for workers who have lost their jobs, but also strives to help recently unemployed Canadians keep a foothold in the labour market. It does this through provisions that encourage claimants to take part-time or casual jobs while keeping a portion of their EI benefits, known as Working While on Claim (WWC). Stéphanie Lluis, Brian McCall and I examined the results of several pilot projects that tested changes in WWC parameters from 2005 to 2018, and reviewed the evidence for similar programs in other countries. The WWC provisions can help unemployed Canadians remain attached to the labour force and successfully transfer to permanent jobs, but these rules should be improved.

One change would see the federal government relax WWC rules during a recession, which would allow claimants to work more hours on claim while retaining more of their EI benefits. Plus, different measures could be introduced for displaced workers who have more difficulty finding new employment than other groups of unemployed workers. For instance, wage insurance, which tops up the income of those who take a job at a lower pay than they earned prior to the layoff, could be more effective in encouraging a return to work than current WWC rules.

Employment standards and labour laws

Although income-support programs get the most attention as a policy option to provide greater security to workers, there are limits to what these policies can achieve. The CRB is temporary. At the same time, EI rules can be twisted only so much to accommodate the range of income-support needs among Canadian workers. Finding ways to make self-employed workers eligible for regular benefits in case of job loss is one of the biggest, and likely insurmountable, challenges facing EI. The solution to the rapid growth in “gig” workers who are not entitled to regular EI benefits, however, might be found in labour legislation.

There is a debate raging in the courts over whether certain categories of workers in the new economy should be considered regular employees or independent contractors under labour laws. The legal status of these workers affects their ability to qualify for minimum employment standards protections (e.g., minimum wage, sick days and other unemployment benefits). In California, laws have been adopted (and subsequently reversed for app-based companies) to make certain companies treat workers as employees, not independent contractors. Further, courts in the U.K. are designating a new category of “worker” under labour laws so that gig workers are not considered independent contractors. What lessons should Canadian legislators draw from these experiences?

Other legal issues have important implications for modern workers. As a result of the immense hardship faced by some workers during the pandemic, the federal and provincial/territorial governments enacted emergency measures to expand job-protection rights for workplace leaves, and to provide income replacement for workers taking leave. But what should policy-makers do to sickness and caregiving leaves when these temporary programs end? And what should legislators do to modernize the current model for collective bargaining in Canada while getting buy-in from employers?

An agenda for change

Canadians will head to the polls in Ontario and Quebec next year. Nova Scotians are about to vote in an August election, while a federal election call looms this summer. The policy platforms put forth by the parties during these elections, and in the budgets that precede them, should give a sense as to whether profound changes to income-support programs and labour laws are on the horizon or if we will return to the status quo.

To stay informed of the big challenges ahead and to read bold ideas to reform our safety net for workers, follow the IRPP’s research.


This article first appeared on Policy Options and is republished here under a Creative Commons license.