Freezing employment insurance premiums could damage employment in Canada, according to a report from the Office of the Parliamentary Budget Officer. The report, titled “Response on the financing of Employment Insurance and recent measures”, asserts that such a freeze could result in the loss of 10,000 jobs from 2015 to 2016.
“PBO estimates the premium rate freeze will reduce full-time equivalent employment by 2,000 jobs in 2015 and a further 8,000 jobs in 2016,” the report reads. “Over a longer outlook, any employment created or lost in 2015 and 2016 is mostly offset by equal and opposite changes to premium rates after 2016 as a result of the 7-year break-even rate-setting mechanism.”
The report comes in response to the Harper government’s proposed $550 million small-business job credit, which beginning next year will slash EI premiums for small businesses which have yearly contributions of less than $15,000.
“To date in 2014, 38 of unemployed workers have been eligible to collect EI,” the report reads. “The 3.0 billion annual surplus in the EI Operating Account could be used to extend access to an additional 10 percent of the unemployed (130,000 workers) either temporarily in 2015 and 2016, or permanently if the premium rate is not reduced in 2017.”
The report lays out considerations for Parliament, including:
- Transparency in fiscal impact costing
- Uncertainty and reporting requirements
- Pro-cyclicality of the 7-year break-even rate.
It was estimated that the job credit would create a paltry 200 jobs in 2015 and 600 additional jobs in 2016.
“There are few, if any, net employment effects from this measure, or any measure that reduces revenues or increases expenses of the EI Operating account under the 7-year break-even rate-setting mechanism,” the report reads. “Job creation in 2015 and 2016 will be offset by equal and opposite premium rate increases after 2016 to make up for the $550 million cost of the program.”
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