The Globe and Mail, in a front page article entitled “Consider This” argued that the political “parties should commit to holding the line on EI premium increases”[1]  They argued that EI premium rates are going up by 15 cents per $100 of insurable earnings for every future year and that this is a significant hit on incomes and pocketbooks.  There are few errors/omissions in this article.

First, EI premium rates will not be going up by 15 cents per year in the future.  In the fall of 2010, the Government increased the employee premium rate by 5 cents per $100 of insurable earnings for 2011 and limited changes thereafter to a maximum of 10 cents per year (either up or down), depending on the status of the EI Account.

Second, the current financing arrangements governing the EI program require that previous years’ deficits be offset by surpluses in future years, subject to the 10 cent change in annual premium rates.  The March 2011 Budget assumed that premium rates would increase from $1.78 per $100 of insurable earnings (employee rate) in 2011, to $1.88 in 2012, $1.98 in 2013, $2.08 in 2014 before declining to $1.98 in 2015.  The EI Account would then show a slight surplus in 2015-16.  What is important about the rate increases is that they generate annual surpluses of about $2.5 billion in 2013-14 and about $4 billion in each of the next two fiscal years[2].  In other words, the Government could not claim a budgetary surplus in 2014-15 or 2015-16 without the annual surpluses in the EI Account.

In setting the rate for 2011, the Government announced that it will undertake consultations on how the rate-setting mechanism could be further improved to ensure more stable and predictable rates going forward, while ensuring that the EI account is balanced over time. To our knowledge, these consultations have not yet started.  The rate for 2012 has to be set by November 2011.  This does not leave a lot of time for public consultations.  We have argued in the past[3] that the rate should be held constant over a longer time period thereby providing stability in the rates. 

[1] Globe and Mail Monday, April 18, 2011, page 1.

[2] The status of the EI Account in the Government’s fiscal projections was not provided in the March 2011 Budget.  The calculations are based on the status of the Account at the end of 2009-10 as per the Public Accounts of Canada and extrapolated using the March 2011 Budget projections for EI premium and benefits.  Adjustments were made for EI administration costs which are charged to the Account and the Government of Canada’s costs as an employer. 

[3] “Time to Change the EI Rate-Setting Mechanism – Again” www.3dpolicy  October 13, 2010.