A sister paper of the Times & Transcript has run two editorials recently advocating a major re-structuring of Canada’s Employment Insurance (EI) program and calls on Prime Minister Harper to initiate the process.

The newspaper’s advocacy is based on the publication of a research project by an economics professor from the University of California, Peter Kuhn. Data used for Kuhn’s study is more than fifteen years old and deals with the years 1940 to 1991. Ironically, the research was funded by grants from the Canadian Studies, Faculty Research Program, delivered through the Canadian Embassy in Washington, D.C. Some might see Frank McKenna’s fingerprints on this project.

With all due respect to their editorialists, why should we care about the musings of another town’s newspaper?

I suggest we should care because Employment Insurance or (EI) as it is known today plays a significant role in the sustainability of our resource economy. By virtue of these editorials the program is under attack.

The Kuhn study offers a fifty year comparison of unemployment rates in the State of Maine and the Province of New Brunswick in relation to the value of unemployment insurance benefits. From his study, the Professor concludes that unemployment insurance benefits stimulate growth in unemployment. Kuhn postulates that when the value of insurance benefits increases, unemployment increases. He suggests that if unemployment insurance benefits could be reduced, more people would seek full time work and the economy would grow exponentially.

There is no consideration in the study for social and economic factors that influence the rise and fall of unemployment like literacy, education, language, plant closures, plant openings, business consolidations, business expansions, market demand, exchange rates, energy prices, etc.

In his introduction, Mr. Kuhn suggests that users of unemployment insurance do so voluntarily and with some purpose of lifestyle. To illustrate his point, he includes, among others the following quotation: “The point we were trying to make, Mr. Chairman, is that many people deliberately choose to have seasonal employment and don’t wish to work the rest of the year.” (Canadian Electrical Distributors Association)

Here’s the basis for Professor Kuhn’s conclusions. In 1940, Maine had a modest UI program while New Brunswick had none. By 1950, the two regions had similar UI programs. Prior to 1953, Maine had a higher rate of unemployment than New Brunswick. In the 1950s and 1970s, the Government of Canada increased the value of unemployment insurance benefits making them more generous in New Brunswick than in Maine. In the same period, New Brunswick’s unemployment rate was higher than Maine’s.

Kuhn suggests that increases in New Brunswick’s unemployment rate were directly related to increases in UI benefits. New Brunswick’s unemployment rate was consistently above 12 percent between 1982 and 1991 while Maine’s was consistently below 8 percent.

There is no mention in Kuhn’s Report or the two newspaper editorials that unemployment in New Brunswick today is about 8% while in Maine it’s about 4.4%. This near parallel downward movement suggests that unemployment rates more likely track the health of an economy than the value of insurance benefits.

That might explain why the newspaper editorials ignore the fact that data used for the Maine-New Brunswick comparison is more than fifteen years old and that subsequent changes in economic circumstance on both sides of the border might temper the professor’s conclusions. Witness the fact that unemployment rates in both Maine and New Brunswick appear to have dropped in tandem since 1991, even though Canada’s EI program has continued to deliver higher benefits to New Brunswick’s unemployed.

One of the editorials suggests that EI creates a “moral hazard” by making it easier for people to choose seasonal jobs and government subsidies than to look for full time work. It goes on to offer a three step program to remove the hazard:

• (i) make labour mobility more attractive and remove the barriers to inter-provincial mobility
• (ii) open our borders to temporary, low wage migrant workers from Latin America and the Caribbean so they can populate our seasonal work force and,
• (iii) reduce access to and/or benefits from Employment Insurance.

The paper calls on New Brunswickers to “lead the charge” for EI reform, using Kuhn’s Maine-New Brunswick comparison as the rationale. It wants EI to be an insurance against job interruption, not a subsidy for seasonal workers.

Nowhere in the editorials is there consideration for the possibility that economic circumstances might have changed in the last 15 years or that seasonal work subsidies may have some merit in a resource based economy. They simply conclude that EI reforms would increase full time employment in New Brunswick and create a stronger economy.

Umm…we cut employment insurance benefits, ship our seasonal workers to Alberta, open our borders to migrant workers and the net result will be increased year round employment. Simplistic at best!

In my view, it would make more sense to increase levels of literacy and education among seasonal workers so they could be more available for off-season work. Create the jobs that will employ them and they will stay in the Province and grow the economy.

I’m not suggesting there is no room for EI reform but significant reform should be phased in over a period of time. If we could grand-father everyone over the age of fifty under the current program and introduce reforms that would initially apply only to workers under fifty, we could buy time to educate and train many of the under-employed. In fifteen years we might have a revitalized employment insurances program that better meets the needs of workers, seasonal employers and the provincial economy.

The last thing we need to do is shrink our work force and supplement it with low skill, low wage migrant workers.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at bill.bellstrategic@nb.aibn.com