2. "Not Quite Insurance"
Theoretically, EI works like insurance. The features of an insurance system are:
- Wide pooling of risks
- Specific definition of the benefits provided
- Specific definition of eligibility rules and the amount of coverage provided
- Specific premium or contribution rates required to meet the expected costs of the system
EI is a social insurance scheme. While private insurance can be voluntary, social insurance is usually mandatory. While private insurance typically operates on a for-profit basis, social insurance is run by the government to achieve some social or economic objectives, usually on a break-even basis.
In the case of EI, the objective is to protect workers from unintended and unexpected losses of employment and income. The question for any social insurance program is whether it achieves its objectives in a principled manner that is widely seen as fair.
Under all insurance plans, contributors should pay only to support the delivery of benefits that they themselves could possibly need.
EI is like an insurance system because EI benefits are available only to people who have contributed to the system directly and recently.
But Canada’s EI system is different from “pure social insurance” in important ways. For example, some benefits that are offered through EI are funded by all contributors, but are available only to certain types of workers or under very specific circumstances. For example, training is funded by all EI contributors but only some EI recipients benefit from training funds. Another example is fishing benefits, which target a specific profession.
In 1940, when the EI system was established, the system was designed to provide income assistance for laid-off workers. Now, the EI system supports a range of programs that were not originally intended to be funded by EI dollars. These programs include: maternity and parental benefits, active employment measures (e.g. training), fishing benefits, sickness, and compassionate care benefits.
The benefits offered by EI beyond income support for the involuntarily unemployed are needed and valued by Canadians, but these programs may be burdening the EI system and its contributors. Some may belong outside the framework of EI.
For example, support for active employment measures is a broad government priority that could be operated as a non-insurance based social program funded by all taxpayers (not just EI contributors) and be available to more people.