The Employment Insurance system is in need of drastic reforms, according to a report by the Canadian Taxpayer Federation (CTF).
Under the current EI system, the government collected billions of dollars more than it paid out in benefits, found the report.
“Ottawa is using Employment Insurance as a cash cow,” said CTF Federal Director Gregory Thomas. “They collected $3.3 billion more in EI tax last year than they paid out in benefits, and their latest forecast says they expect to collect $4.2 billion more this year.”
The report calls for changes that would allow Canadian workers to keep the money they and their employers pay in EI taxes in a personal unemployment account. These personal accounts could be accessed if the worker became unemployed — and if there’s still money left over in the account upon retirement, it would be added on to the individual’s retirement savings.
“If you’re a frequent EI claimant, you’re going to have to make your EI savings go further, or you’re going to have to find work,” said Thomas. “And if you’re rarely without work, you would have a nice little nest egg once you retire.”
The report also claimed that EI is currently “widely abused” by frequent claimants and is unfair to workers in some regions, particularly in Ontario, British Columbia and Alberta.
“Workers in Ontario, Alberta and B.C. and their employers paid $103 billion more into EI than they collected in EI benefits between 1981 and 2009,” said Thomas. “Meanwhile workers in Newfoundland and Labrador collected $14 billion more than they put in.”
Eighty-nine per cent of working-age tax filers in rural Newfoundland and Labrador reported EI income between 2008 and 2010, the report said. And more than one-half (62 per cent) of those EI claimants made at least three claims in the past five years.
“Ottawa keeps telling Canadians to save more for retirement,” said Thomas. “If the government got its hands out of the pockets of working Canadians, a gainfully employed couple each earning $47,400 a year could save a $67,000 nest egg in ten years from keeping the EI contributions that are taxed away from them now.”
“Rather than hiking CPP taxes, as some premiers are suggesting, why not let Canadians keep the thousands in EI taxes they already pay and never see again.”
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