Income Support System

·          Employment Insurance (EI)

·          provides a level of income replacement to those workers who are temporarily out of work and meet strict eligibility conditions

·          Social Assistance (SA)

·          provides minimal income support to those who do not qualify for Employment Insurance

Key Concepts

·          Employment: any legal activity carried out for pay or profit

·          Unemployment: involuntary loss of wage income

·          Underemployment: when the education and training required for the job is less than the education and training of the worker who is doing the job

·          Self-Employment: providing services on contract, producing products, or sell someone else’s product on their own initiative

·          Part-Time Employment: refers to people who usually work fewer than 30 hours each week, can be voluntary or involuntary


·          Frictional unemployment: when workers move between jobs, or return to the workforce

·          Cyclical unemployment: when jobs are lost due to a temporary downturn in the market

·          Structural unemployment: when workers do not possess the required skills for the market, do not live where jobs are available, or are unwilling to work at the offered wage

Unemployment Rate

·          The percentage of the labour force that is unemployed

·          Canada usually has a higher level of unemployment than the U.S. and other countries

·          Many issues are not considered in the unemployment rate, such as levels of part-time employment

Labour Force

·          The number of people 15 years of age or over who are working or are looking for work

·          Excludes large segments of the population such reserve residents, students, people not looking for work, retired people, institutional residents (prisoners, mental patients)

Participation Rate

·          The ratio of the labour force to the working age population

·          Working age population includes those people excluded from the Labour Force

·          In 2006, the Labour Force Participation Rate in Canada was just over 67%

Costs of Unemployment

·          Loss of output to the economy

·          Loss of tax revenue

·          Decrease in government revenue

·          Loss of profits

Theories on Unemployment

·          Keynesian:

·          lack of demand for commodities because people have less money to spend—government should spend to maintain demand

·          Monetarist:

·          unemployment can keep inflation in check, which stimulates investment with low interest rates

·          Political economy:

·          system pursues interests of corporate elite, not that of the unemployed


·          The average rate of increase in prices

·          Measured as percentage increase in Consumer Price Index (CPI)

·          Bank of Canada aims to keep inflation at 1 to 3% a year

·          Inflation and unemployment have an inverse relationship: full-employment increases production costs, raising the price of goods; an abundance of labour keeps costs down

Minimum Wage

·          Lowest wage that an employer can legally pay someone

·          Set by the province

·          The purchasing power of minimum wage has decreased over the last two decades

·          In most parts of the country, individuals earning the minimum wage live below the Low Income Cut-off for their area

Factors Influencing Unemployment

·          Economic Factors:

·          Business cycles

·          Industrial adjustment

·          Cost of production and productivity

·          Changes in technology

·          Factors Influencing Unemployment

·          Structural Factors:

·          Labour surplus

·          Skill supply and demand

·          Movement between jobs

·          Seasonal lay-offs

·          Internal migration

·          Policy Factors

·          Interest rates

·          Exchange rates

·          Education and training

·          Monetary Policy

·          Fiscal Policy

Efficiency/Equity Debate

·          Efficiency: economic growth with a flexible and increasingly productive labour market

·          Equity: existence of adequate levels of health and security for all people, and a reasonably equal distribution of income and wealth

·          Can we have both?

Two Pillars of Income Security

·          Employment Insurance

·          Worker’s Compensation

·          Social insurance schemes

·          Provide income loss protection for those in labour force

Employment Insurance

·          Provides temporary financial help to eligible unemployed Canadians

·          While they look for work or retrain

·          While they care for newborns or newly adopted children

·          While they are sick

·          While they are caring for gravely ill family members

EI Eligibility

·          Contributed to EI through wages

·          Worked minimum number of hours

·          Hours depends on rate of unemployment in region

·          Claim period is the amount of time an individual can collect EI benefits, depending on weeks worked and unemployment rate

Types of EI Benefits

·          Regular Benefits

·          Maternity/Parental Benefits

·          Sickness Benefits

·          Compassionate Care Benefits

·          Family Supplement

·          Fishing Benefits

History of UI/EI

·          Created during World War II

·          Originally called Unemployment Insurance

·          Canada last Western country to implement UI

·          1970s saw an expansion of benefits to include sickness and maternity

·          Benefits were reduced and restricted during 1990s

Employment Insurance

·          Individuals who have paid into EI qualify

·          Regular benefits are 55% of average weekly insured earnings

·          Maximum benefit of $413 per week

·          Minimum numbers of hours worked required

·          Changes in policy have made eligibility requirements more difficult to meet

The New EI System (1995)

·          Name changed from UI to EI

·          Based on hours worked, not weeks

·          More closely tied to earnings level

·          Benefit rate declines according to number of weeks collected

·          More emphasis on helping individuals return to work

·          Enhanced protection for low-income families

EI Benefit Levels

·          Benefit levels have dropped since the changes in the 1990s

·          In 2003 $18.5 billion was paid in EI premiums

·          Less than $12 billion  was paid in benefits in the same year

·          This is a major concern among labour and business groups

Worker’s Compensation

·          Insurance for employers and workers

·          Replaces the courts in compensation for workplace injuries

·          No-fault compensation protects employers and employees, regardless of whether negligence was involved

Maternity and Parental

·          Adoptive parental benefits started in 1984

·          Paternity benefits started in 1987

·          Both were replaced by parental benefits in 1990

·          Parental extended to 35 weeks in 2000, taken by only one parent

·          15 weeks of maternity benefits for pregnant women only

Clawback Rule

·          Benefits must be repaid if net income is over $48,750

·          Intended to discourage higher-income workers from repeatedly collecting benefits

·          Maternity/Parental and Sickness benefits are exempt

·          Max repayment is 30% of income over $48,750

Worker’s Compensation

·          Early programs instituted due to employers concerns about lawsuits (late 1800s)

·          85% of workers covered under provincial WC programs

·          WC covers costs of rehabilitation, loss of income for worker, and loss of support for dependants in the event of worker’s death

·          Most programs are funded by employer contributions, and coverage varies by province

History of WC

·          Originated in UK and U.S. in late 1800s

·          Difficult for workers to sue employers

·          Employer’s defences called “Unholy Trinity”

·          Based on concept that if workers didn’t like the terms they could go elsewhere

·          Voluntary Assumption of Risk: worker knew the risks involved

·          Fellow Servant Rule: if fellow worker responsible, employer was not

·          Contributory Negligence: if workers own conduct contributed to injury, employ not responsible

·          Situation changed with rise of unions at end of 1800s

·          Employer’s defences were loosened

·          Increased number of lawsuits against employers

·          Workmen’s Compensation Act (1897) in England

·          World-wide problem

·          Royal Commission in Ontario led by William Meredith, 1913

·          Meredith Principle

·          Workers give up right to sue for work-related injuries, regardless of fault, in return for guaranteed compensation for accepted claims

·          Workmen’s Compensation Act, 1914

·          Other provinces soon followed

State of Labour Market

·          Less than 1/2 of Canadian workers have standard jobs

·          Increase in non-standard jobs (i.e. part-time, self-employment)

·          EI serves as economy stabilizer

·          Strong correlations between net EI spending and performance of the economy

author avatar
William Anderson (Schoolworkhelper Editorial Team)
William completed his Bachelor of Science and Master of Arts in 2013. He current serves as a lecturer, tutor and freelance writer. In his spare time, he enjoys reading, walking his dog and parasailing. Article last reviewed: 2022 | St. Rosemary Institution © 2010-2024 | Creative Commons 4.0

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