OFL Rejects Mowat Centre Pay Day Loan Scheme for Unemployed Workers

TORONTO, ONTARIO--(Marketwire - Nov. 22, 2011) - Ontario Federation of Labour President Sid Ryan has rejected the latest report from the Mowat Centre Employment Insurance (EI) Task Force. "I was dumb-founded to see that the report has focused on little more than a Pay Day Loan scheme for unemployed workers in precarious and non-standard work, instead of modernizing EI to meet their needs," said Sid Ryan.

Ryan was referring to a key Task Force recommendation that proposes a new temporary unemployment assistance (TUA) program funded by a "jobseeker's loan" with repayment contingent upon future income. According to the report, workers "could rely on TUA until other work is secured or use TUA to smooth income over periods of lower earnings."

"This is nothing short of a Pay Day Loan scheme for workers facing tough times," said Ryan. "It downloads the cost of unemployment supports to workers who can ill-afford additional debt payments." Currently, EI is funded by both worker and employer contributions; the Mowat Centre's TUA proposal would eliminate the employer contribution.

According to Ryan, the report falsely implies that less than half of those who contribute to EI are eligible for benefits. In fact, the low rates of benefits going to the unemployed include those who are not eligible and those who are eligible but who run out of benefits before finding work.

One in three eligible workers exhaust EI, a situation that worsened with the 2008-10 recession.

"Too many EI recipients exhaust their benefits before finding another job," said Ryan. "That's why the OFL calls for an extension of benefits to at least 50 weeks for workers in all regions. And this is a modest proposal; in the US workers can get up to 99 weeks of benefits."

"Yet the Mowat Centre rejects extending benefit duration as 'a disincentive to find work' and instead suggests those who have been supporting themselves on already modest EI benefits should turn to a Pay Day Loan scheme when they run out of EI—it's outrageous."

According to Ryan, workers who paid EI contributions but did not receive benefits tend to be those in part-time, irregular employment—the very jobs associated with low wages. "Putting such workers at risk of incurring additional 'jobseekers' debt will only undermine their economic circumstances—even if they get a decent job down the road."

The solution, says Ryan, is to reduce the entrance requirement to a single national rate of 360 hours to better reflect the reality of today's labour market, where non-standard workers comprise more than one-third of the workforce. At present, EI requires a range between 420 to 700 hours to qualify.

"The current threshold for EI is based on the equivalent of a full-year, 35-hour work week," said Ryan. "Even a child can see that someone working fewer than 35 hours, or who doesn't have full-year work, will take longer to qualify for EI."

Ryan notes that Statistics Canada data show that 70 percent of the hourly-paid workforce employed in services average about 30 hours a week. He also notes there has been a dramatic increase in the number of workers forced into part-time work as a result of the current economic climate.

"Still, the Task Force flatly rejects reducing the entrance requirement," said Ryan. "Clearly the Mowat Centre vision is quite consciously pushing part-time and precariously employed people into the private TUA debt scheme," said Ryan.

"In fact, there is nothing in the Mowat Centre vision that would result in more people accessing EI," said Ryan. "And a number of their own proposals would actually reduce already low EI recipient rates, from removing self-employed fishers to raising the qualifying hours and reducing benefits durations in many of the 58 EI regions. They suggest a 560 hour requirement would be 'cost neutral' in lieu of the current 420 to 700 hour range."

"Even when it comes to the self-employed, the Task Force wants to eliminate the one EI program that successfully covers a portion of them, in favour of their privatized Pay Day Loan scheme," said Ryan. "It is clear that this report has nothing to do with improving EI for workers, but it has everything to do with reducing costs to the benefit of employers—and at the expense of workers."

"Those people embracing this document should re-read it," said Ryan.

"Taken as a package, these recommendations would result in reduced EI eligibility, a greater reliance on a privatized temporary unemployment insurance (TUA) program, reduced EI premiums to the disproportionate benefit of employers, fewer financial resources for meeting the needs of unemployed people, compromised services, and balkanized, weakened national infrastructure for income maintenance and employment supports," said Ryan.

"This is a very dangerous set of recommendations for one of Canada's most important social insurance programs."

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