That’s odd. There’s no dancing in the streets today to celebrate the big break that Federal Finance Minister Jim Flaherty offered workers on Monday.
The country’s treasurer announced his government was freezing employment insurance premiums for the next three years.
He said planned increases in the EI rates are no longer necessary because the account is doing better than expected and will soon be balanced.
That account, through which the government manages the EI fund, was in a deficit following the economic downturn. But now, more people are working and paying into the account while fewer people are drawing from it.
Not mentioned however, is that fewer people are drawing from it because of the Conservative government’s changes to the eligibility criteria.
So today’s “savings,” as Flaherty calls them, to Canadian business, has cost struggling seasonal workers.
Finance Department staff estimated the freeze will save businesses and workers $660 million next year. Flaherty thinks that businesses will respond by hiring more staff.
It’s unlikely these nominal savings in premiums will result in a hiring frenzy. The savings are small in comparison to the 25 per cent jump in premiums since 2008.
Those EI premiums were rising over the last few years to pay for a deficit in the “new” EI fund, which accumulated during the recession.
This new EI fund was established about four years ago, when the federal government created an independent Crown corporation to manage a new EI bank account and set premiums.
But what happened to the money in the old EI fund? If the funds in the old account had been transferred to the new one, the EI fund would not have a deficit and premiums would not have gone up in the first place.
There was a $57-billion surplus in that old Employment Insurance fund when it was wrapped up in 2008.
The EI fund should have always been a separate entity.
Instead the old EI fund continued to accumulate a staggeringly high surplus, which was then used to pay down public debt.
While the money piled up, EI benefits were being slashed and premiums only slightly reduced.
Still, the rates did come down. Between 1994 and 2008, the federal government cut EI premiums 14 years in a row.
Now, after hiking EI rates three years in a row, this is where government decides to freeze them?
Thanks for the big break Mr. Flaherty.