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The 2001 federal budget does little to stimulate the economy, keep Canadians working and provide security for the unemployed. The number of jobless Canadians has increased in recent months and economists expect that more jobs will disappear as the current economic downturn results in yet more layoffs.

The national unemployment rate increased 0.2% to stand at 7.5% for November 2001, which is the highest jobless rate since mid-1999. Much of the recent job loss has affected full-time workers. The decrease in the numbers of full-time jobs is occurring as less secure part-time jobs are increasing. In fact, Canada has now recorded its second consecutive month of increasing part-time and less full-time work.

In real numbers, 45,500 fewer Canadians were working in November 2001 as compared to a month earlier. Security for the estimated 1,186,600 jobless Canadians would result in a major revamping of the Unemployment Insurance program to ensure that the unemployed are entitled to the benefits they have paid for through their UI premiums. Security for the unemployed would also take the form of a comprehensive training leave program. This federal budget does neither.

What We Needed

  • Increase Unemployment Insurance spending by $7 billion in 2001-03.

What We Got

  • Immediate $2.7 billion increase in UI spending followed by an additional $1.8 billion in 2002-03 (total: $4.5 billion).

What It Means

The immediate $2.7 billion increase in UI benefits is not all new money; rather, the funding hike is the result of 3 things: (1) measures announced in previous budgets; (2) an increase in the numbers of people receiving UI benefits due to rising unemployment; and (3) costs associated with changes to the UI Act announced under Bill C-2 in the spring of 2000 (estimated cost: $500 million). Changes announced in Bill C-2 include the following:

  • Elimination of the Intensity Rule:

The Intensity Rule penalized repeat users of UI (e.g., part-time and seasonal workers) by reducing their benefit rate. Now, ALL claimants receive 55% of their maximum insurable earnings.

  • Modification of the Benefit Repayment (Clawback Provision)

The intent of the clawback was to discourage high-income earners from repeatedly collecting UI. The clawback now takes effect when net incomes are above $48,750 (up from $39,000).

  • Changes to Special Benefits:

Claimants who receive maternity, parental and sickness benefits (i.e., Special Benefits) will no longer have to repay those benefits.

  • Re-entrants and New Entrants to the Workforce:

Re-entrants are those individuals who are re-entering the workforce after an absence of 12 or more months. New entrants are those individuals who are entering the workforce for the first time. Re-entrants and New Entrants require 910 hours of insurable employment to qualify for UI benefits. Parents who are out of the workforce raising a family for a year or more are considered re-entrants to the workforce and therefore need 910 hours of insurable employment to qualify for benefits. Under the new rules the eligibility criteria for parents re-entering the workforce have been relaxed. What this means is that, depending upon their particular circumstances, parents returning to the workforce could be considered not as a re-entrant but as a regular claimant. In order to qualify for UI benefits, a regular claimant is required to amass the minimum number of qualifying hours that is based on the regional rate of unemployment where they live. For parents re-entering the workforce this could mean having to amass far fewer hours of insurable employment (i.e., less than 910 hours) in order to qualify for UI benefits.

Finally, the federal budget also estimates that UI program spending will increase by $4.5 billion over 2 fiscal years. However, if past practice is any indication, it is quite likely that spending of this magnitude is overstated.

What We Needed

  • Introduce UI training leave program available to ALL workers. Key program elements:
  • 5 weeks of training per year in the labour force (to a maximum of 52 weeks).
  • 360 hours of work to qualify.
  • Benefit level equal to 2/3 of weekly pay based on best 12 weeks of earnings in previous 12 months.
  • No waiting period for benefits.

What We Got

  • Under the banner “Investing in Skills, Learning and Research” Ottawa has committed more than $1.1 billion over 3 years for a range of different programs to support skills, learning and research. A small portion of the funding will be used to (1) reduce the 2-week waiting period for the UI apprenticeship program (total cost: $45 million) and (2) allow a tax deduction to vehicle mechanic apprentices to help offset the high costs of tools (total cost: $30 million).

What It Means

The vast majority of workers in Canada will still not be entitled to UI benefits if they take time off work to upgrade their skills. This benefit extends to apprentices only. Improvements to the apprenticeship program, while laudable, represent a nickel and dime approach to UI reform and will primarily benefit the construction and trades industry. True UI reform would extend UI training leave benefits to all workers in Canada thereby ensuring a more skilled and trained workforce.

What We Needed

  • The federal government must separate the UI fund from general revenues. Monies contained in the fund must not be used for non-UI program spending or to pay down the deficit.

What We Got

  • Nothing

What It Means

It is anticipated that the surplus in the UI account will reach $42.8 billion by March 2002. The UI surplus consists of funds collected from workers and employers – the federal government makes no financial contribution to the UI account. And yet, Ottawa has used monies from the UI account for non-UI program spending and to pay down the deficit. Because of this practice some observers have characterized the payment of UI premiums as just another tax grab on the part of the federal government.

For the third consecutive year the federal Auditor General has criticized Ottawa over its handling of the UI surplus. Auditor General Sheila Fraser is pressing the federal government to explain to Canadians the size and growth of the UI surplus and to disclose how UI premiums are established. However, repeated calls for a more transparent process with respect to the UI account has so far gone unheeded by the federal government.

What We Needed

  • Implement a universal eligibility requirement of 360 hours thereby enabling increasing numbers of unemployed workers (especially part-time workers) to qualify for benefits. New eligibility requirements would apply to regular, maternity, parental and sickness benefits.
  • Increase entitlement period for regular (layoff) benefits to 1 week for every 30 hours of work up to a maximum of 1 year.
  • Increase UI benefits to at least 2/3 of weekly pay based on best 12 weeks of earnings over previous 12 months. New benefit increase would apply to regular, maternity, parental and sickness benefits.
  • Increase maternity benefits to 17 weeks and parental benefits to 35 weeks for a combined benefit period of 52 weeks.
  • Extend sickness benefits up to one year.
  • Address the needs of CUPE 10-month school board workers, many of whom are women. Many of these workers fail to qualify for UI benefits because HRDC considers them year-round employees and therefore not actually laid off over the summer months.
  • Address the needs of CUPE instructors, many of whom are women. Many of these workers fail to qualify for UI benefits because HRDC considers them “teachers.” UI policy typically disqualifies teachers from benefit entitlement because they are considered year-round employees and therefore not actually laid off over the summer months.

What We Got

  • Nothing

What It Means

At a time when the national unemployment rate is at a two-year high and the recession deepens, two-thirds of all Canadian workers who lose their jobs will not be eligible for UI benefits. Moreover, the federal government’s own data indicate that the national jobless rate will average 7.6% in 2002. Many more Canadian workers will require UI income support in the coming months but the reality is that many may not be able to qualify for benefits. With such a huge surplus in the UI account real improvements could be made to the program; for example, by extending coverage to more people (especially part-time workers, many of whom are women), increasing and extending the benefit level, and addressing the needs of CUPE 10-month school board workers and instructors. Such measures would also go a long way towards mitigating the recession by injecting billions of dollars into the economy.

The federal government could address rising unemployment through an economic stimulus package, job creation and improving benefits to the unemployed. By failing to do so, Ottawa is contributing to poverty in all its forms. The result will be a poor standard of living for many Canadian families and communities. Ottawa’s inaction also puts increased pressures on underfunded social services and social assistance programs. Unfortunately for the jobless and those living in poverty the social supports they desperately need, will remain simply inadequate or non-existent. A real economic stimulus package would result in security for the unemployed and poverty-stricken – something the federal government has again failed to do.

See other CUPE Facts on the 2001 Federal Budget for more detailed information about particular sectors. They are available from the National Research Branch or at www.cupe.ca

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