Chantal Hebert has a dy-no-mite column today explaining why Harper was so happy to punt the question of EI reform to the blue-ribbon panel. I thought the intervention by the western premiers was interesting, and halfway welcome. On the one hand, I agree entirely with Gordon Campbell’s assessment: we already have an equalization program, and EI should not be used to prop up economically stagnant parts of the country. But then he turned around and proposed a dual national standard for EI qualification: One for urban areas, another for rural areas that are dependent on declining resource industries.
Well hang on. What’s the difference between using EI to support, say, the maritimes and not Ontario, and using it to prop up forestry but not finance? Even when they don’t overlap (the regions tend to be poor because they have sagging rural economies) the error is the same in both cases: an insurance program is being used for a perverse form of economic engineering that gives people an incentive to stay in dying industries.
At the core of this is a category mistake: EI is supposed to insure individuals, but the federal government, and now, Gordon Campbell, want to use it to support collectives, in the form of either regions or industrial sectors. But how does it help an individual who loses his or her job what sector they happen to be in? Having a lower qualifying period for people who choose to work in crappy industries would be like the government charging a health-care deductible for people who exercise and don’t smoke, but waiving it for dopefiends and boozehounds.
Meanwhile, the other issue on the table is even thornier: How to insure the self-employed. On this case, Harper was being entirely genuous — this is not the sort of thing you can just hammer out in a few meetings, or even during an extended summer sitting of parliament. There’s a reason why the system doesn’t already insure the self-employed, and it isn’t simply because of a lack of money or political will. Stephen Gordon has a good post listing the various objections to the proposal, including the obvious problem of moral hazard to the more academic (but no less important) problem of how to distinguish labour income from capital income.
Like prof Gordon, I don’t think there is a non-lousy way of using EI to insure the self-employed. A better idea, in my opinion, which would have the advantage of being a decent social policy regardless, would be to implement a proper guaranteed basic income (or “negative income tax”, or whatever you want to call it). It would provide all the benefits of public insurance, without the hassles of having to root out moral hazard.
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Nice new avatar, by the way! Is the monkey sad because the zookeeper took away his knife?
There IS a way to handle the risks of setting (a movable?) national standard. Set it up so there's a performance-based regional floor and macro-economically influenced ceiling nationally. Tune as required.
and as far as EI interfering with economic Darwinism goes, there's nothing new about that at all.
Where did this notion of making EI available to the self-employed come from? It seems reasonable to assume that most of the self-employed would have a vested interest in their own self-reliance.
Yes, as a self-employed person for the last 15 years I have NO interest in contributing to an EI program – I have savings to cover me off during those times when there is little work (savings – what a concept!). The bureaucracy that would be associated with EI for the self-employed scares me to death – with the number one reason being that the civil servants administering it have NO IDEA what self-employment is or is not. They barely understand how to help people in salaried jobs – the one time that I applied for EI, their suggestions for work/training for me included taking an upcoming short-order cook training program at the local college – even through I had a master's degree and 20 years of solid work experience (and I got another job in three weeks, but I had to attend the mandatory job search session – I could have done a better job of helping unemployed find work!).
But on another issue that will bring all types of hate my way – I don't think there should be maternity/parental leave as part of the EI program – they are not looking for work, but rather are taking care of their child. I'm not against helping new parents, but that should be coming out of a social support program rather than EI.
That's pretty much what I thought, but the question remains, where did Harper get this idea in the first place? Given his neo-con agenda (now temporarily under wraps), it seems counter-intuitive to try to impose EI on the self-employed. What's he up to, I wonder.
Another side of the debate ……
http://www.progressive-economics.ca/2009/06/04/st...
Fair point Andrew but the PM's proposal reflects an important point: what constitutes self-employment has changed considerably over the past two decades. It wasn't so long ago that the "self-employed" were largely white-collar: entrepreneurs, freelance journalists, realtors, lawyers and consulting engineers; people who put out a shingle saying Services Offered. Blue-collar work, on the other hand, was the traditional employer/employee working for a paycheck model. That has changed.
Nowadays "contracting" is much more common in blue-collar industries. Drywall installers used to carry dozens of workers on their payrolls, paying salaries, withholding taxes and paying into EI. This changed after the recession of the early 1990s. Afterwards the same companies started employing "contractors", workers who were treated as "subcontractors", individual companies responsible for their own withholdings, pensions, EI, etc… It even took place in unionized environments. The work didn't change much; just the employment relationship.
(Part two below)
These days this type of arrangement is far more common among the Tim Horton's crowd than it ever was before. You know who I mean, one of the Harper Tories key constituency. It's hardly surprising that the government has taken notice that these floks no longer have the same access to EI that they had twenty years ago.
Like you I don't know how this will pan out but I don't find it surprising that a few academics can't get their heads around it either.
knick,
The idea came from Harper's last election platform. A fact that I haven't heard mentioned in any of the coverage I've read so far.
Just another one of Harper's 'brilliant' strategies to baffle the opposition, no doubt.
Andrew,
Agreed Hebert's column was very good. The highlight, or important point, to me was that you cannot get a national standard without
1) ReCreating the worst aspects of the 1971 reforms, expense and productivity sapping
or
2) Creating losers in the scheme. The bar set by the Liberal/NDP?Bloc proposal is too low so you get number 1) To improve it you end up making it harder in rural quebec and the maritimes. Who loses seats if that happens.
My prediction is that there will still be two reports issued. What the political implications are of that I don't know.
Nice. While I think that the case for moral hazard is overstated (as it has often been demonstrated to be in other places such as health and in many other forms of insuance, I am all for a guaranteed basic income as a solid foundational social policy.
Sorry that web got cut off on the debate .
These are just some examples. You can read the full debate at http://www2.parl.gc.ca/HousePublications/Publicat...