Ottawa, provinces ready to battle over employment insurance surplus

Share

Ontario is leading a provincial charge against providing more job training without a boost in federal transfers, sparking an election-year debate over whether Ottawa should use an Employment Insurance surplus to lower payroll taxes – or use it to train the unemployed instead.

Ottawa and the provinces are negotiating toward "transforming" the management of a $2-billion annual transfer for job training that is paid from EI premiums. A similar federal-provincial negotiation over a smaller $500-million training transfer lasted more than a year and involved concessions on both sides that produced the Canada Job Grant in 2014.

The training money is in addition to traditional EI benefits that provide a source of income for out-of-work Canadians during a job hunt. However, the percentage of unemployed Canadians who qualify for EI has been on a steady decline and is now below 40 per cent. As a result, a majority of the roughly 1.3-million unemployed Canadians last year would not have qualified for traditional benefits or additional training.

Both Ottawa and the provinces agree that reforms should open up training to more unemployed Canadians who do not qualify for EI, but disagree over how to pay for this. The premiers have named Ontario, British Columbia and New Brunswick to negotiate with Ottawa on their behalf.

In a statement to The Globe and Mail, Ontario Minister of Training, Colleges and Universities Reza Moridi said premiers are concerned that Ottawa's proposal involves "increases to the number of clients served without providing additional funding." Similarly, New Brunswick said it wants a "real discussion" and doesn't want any one province left worse off.

Managing the new negotiations for Ottawa is now the responsibility of Pierre Poilievre, the former junior minister for democratic reform who received a major promotion to Employment and Social Development Minister in Monday's cabinet shuffle.

The Conservative government is collecting billions more in Employment Insurance premiums than it is paying out in benefits, which in the short term could help contribute to its goal of achieving a balanced budget in the fiscal year that begins April 1. But Ottawa insists the surplus in the EI account will be wound down over time to deliver significantly lower premiums starting in 2017.

Shortly before he was shuffled Monday to Defence, then-employment minister Jason Kenney sent a letter to provincial labour ministers criticizing their calls for more money, which he said would require higher EI premiums.

Mr. Kenney argued that provinces could receive more money for EI training only if they help Ottawa reduce the cost of traditional EI through a "pay-for-performance" model that moves unemployed Canadians off of EI and into training programs more quickly. The current minister, Mr. Poilievre, was not available for comment Tuesday.

Employer groups are eager to see lower premiums, but labour groups and the Official Opposition NDP argue the surplus in the EI account should go toward increased benefits.

"What's happening is the most vulnerable are the ones who are being abandoned," NDP MP Jinny Sims said. "Surely this is the time to use the money that is in the EI fund for the best purpose, which is to retrain people and get them to reintegrate into the work force, and also make sure you give people the support they need when they are out of work."

An independent federal report from the Office of the Superintendent of Financial Institutions Canada noted last year that about 38.6 per cent of unemployed Canadians likely qualified for EI in 2014, down from 46.9 per cent in 2006.

That same actuarial report said Ottawa would collect $4.6-billion more in premium revenue in 2015 than it will likely pay in benefits, which would erase the account's $1.1-billion deficit and create a $3.5-billion surplus.

A recent report on the topic by the House of Commons human resources committee called on the provinces to be more accountable as to how the $2-billion in transfers are spent. The Conservative-dominated committee also recommended the pay-for-performance model advocated by Mr. Kenney.

Ottawa made skills training a major part of the 2013 budget that surprised the provinces by announcing plans for the Canada Job Grant. Ottawa's push on how to spend federal transfers related to training has led Ontario to accuse Ottawa of stepping on provincial jurisdiction.