'Job killing' EI premiums hurt workers, employers as manufacturing sector lags
Critics say the current EI program fails jobless workers, many of who don't qualify for EI benefits because they have not worked the required number of hours, as well as employers, who worry about having to pay what Liberal MP John McCallum, an economist, calls 'job killing' EI premiums.
On the employee side of the debate, the push is for more generous benefits.
Not surprisingly, one of the few things employer and employee representatives agree is the need to refrain from increasing the 2009 EI premiums for employees or employers. The chief actuary of the EI commission has already recommended a freeze for 2009, and the commission is expected to take the advice when it announces the 2009 rates this week.
Corinne Pohlmann, vice-president of national affairs for the Canadian Federation of Independent Business, said the commission should go further and cut employer premiums. Continuing surpluses in the EI fund, estimated at $600 million for the last year, should be used to reduce the rate from the current of $2.42 per $100 of insurable earnings, she said in an interview.
The federation also wants the formula rewritten so employers and employees share the cost of the EI plan 50/50, or so that the government picks up a share of the cost. Employer premiums are currently 1.4 times higher than the $1.73 paid by employees.
The business federation and the CLC have both advocated - unsuccessfully so far - to give employers a 'premium holiday' for a period of time if they use the money to train employees.
The Conservative government's plan to move to a new system for setting EI premiums, starting in 2010, is causing jitters in some circles too. A newly-created EI financing board will set the premium rate each year "to generate just enough premium revenue during that year to cover expected payments" and to ensure a $2-billion reserve is maintained, according to government documents. Legislation establishing the new system became law last June.
Diane Finley, named last week to her former post as human resources minister, declined requests to discuss the EI system on grounds she is still getting briefed on the portfolio.
But Georgetti and McCallum said the system means that if the country's jobless rate worsens, as is expected, the board will either have to raise premiums the following year or cut benefits to meet its mandate.
"It has to be one or the other," said Georgetti. "That's the only way I have ever learned to balance the books. And neither one, in this environment, is the way to go."
Once upon a time the labour movement opposed child labour now they decry unemployment of the youth sector of the economy. These are kids working at Wal-Mart, MacDonalds etc., all of course in the non unionized sector.
Canadian Labour Congress: Public Works!
Now That the Election is Over, it's Time to Invest in Jobs That Last
Young workers, many of whom work in accommodation and food services, took a big hit in October. In total, 34,400 workers aged 15 to 24 lost their jobs. At the same time 27,000 people who earned their livelihoods in the accommodation and food services sector were out of a job last month.
And in their recently released paper on the global meltdown they sound more like economic apologists for capitalism than the voice of the working class. There is no discussion of using public and workers pension funds to finance the creation of worker controlled take overs of manufacturing in Canada. Showing that Canada's labour movement has lost the vision of building a new world within the shell of the old. Instead true to its nature as business unions the CLC calls for the state to bail out its bosses.
The Meltdown, Seen from Below
What union leaders, labour experts and anti-poverty activists say needs to be done.
The CLC has just issued a paper on its response to the current crisis titled "Global Capitalism: On the edge of the abyss." The paper says the global economy is now "almost certainly headed for a deep and prolonged recession," and notes that global markets have already fallen as far as they did in the Great Crash of 1929.
The labour group blames deregulated global finance for the crisis, pointing to what it calls "the unregulated shadow banking system of investment banks, hedge funds and private equity funds," and decrying the creation of "fiendishly complex and sometimes outright fraudulent products." The face value of these highly abstract and uncertain financial instruments, the paper notes, was recently estimated at over $50 trillion.
The CLC paper quotes Nouriel Roubini, professor of economics and international business at the Stern School of Business at New York University: "The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity.... a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in he biggest real sector and financial sector deleveraging since the Great Depression."
The CLC paper calls on Canada to play a role in creating a co-ordinated international response to the crisis that features re-regulation of both local and cross-border transactions and the imposition of a small transaction tax on all securities trading, including commodity futures. This Tobin Tax, named for the Nobel Prize winner who first suggested it, is designed to discourage short term speculation and to raise the government revenues that will be necessary to fund appropriate investments in social services and infrastructure repair.
Bail out tied to regulation
While many critics of the official response so far are asking why so much money is going into the banks and finance houses that created the crisis, the CLC endorses some bail-out activity as necessary to avert a systemic collapse. The bail out money must come, it cautions, tied to effective regulatory rules.
The CLC wants Canada Mortgage and Housing to re-finance distressed Canadian home mortgages at lower rates, dismissing the view that Canada is not experiencing a housing bubble as a myth. The $10 billion a year in new infrastructure investment the CLC calls for, says the paper, would create 200,000 new Canadian jobs rebuilding roads and bridges, mass transit projects, water works and the like as well as replenishing the country's diminished stock of social housing. A public letter recently signed by 80 prominent Canadian economists has echoed this call for an active and interventionist response by government to the economic crisis.
Further corporate tax cuts should be cancelled, the paper argues, in favor of direct government support for new investments in machinery and equipment, research, development and training.
Even if all these reforms are put into place, says the CLC paper, Canada may well experience serious increases in unemployment, which will expose weaknesses of the Employment Insurance program. Far fewer workers are eligible for EI as it now exists than was true in years past, and maximum rates and time allowed for coverage are both inadequate, according to the paper, which calls for broadened eligibility, higher maximum payouts and longer terms of coverage for the unemployed. The EI system currently has a surplus of over $50 billion.
Call for new pension protection
The CLC paper predicts the current financial crisis will create a severe pensions crisis, and a follow-up paper issued on Oct. 29 calls for the creation of a new pension benefit insurance scheme (financed by the proposed tax on financial transactions) to insure annual pension and RRSP benefits for individual Canadians up to $60,000 a year.
Pensions are a concern for Bill Saunders, too. Saunders, the president of the Vancouver and District Labour Council, says that Canadian workers and their pensions are more exposed to risk during market trouble because of the successful campaign over the past decades to move from defined benefit pensions, which guarantee a certain monthly amount when you retire, to defined contribution plans, promoted by market enthusiasts.
Contribution plans shovel a defined amount every month into mutual funds and other stocks, creating pension payouts that can vary widely depending upon the health of the market, as many Canadians are discovering this year as their RRSP holdings have shrunk dramatically.
"Twenty years ago," said Saunders, "60 per cent of Canadian private pension plans were defined benefit. Now that share has been cut in half. Defined contribution plans just don't deliver the goods for workers the way defined benefit plans do, and the current crisis illustrates that."
The final irony is that despite calls by the CLC to meet with Harper government it appears that labours agenda was accepted by the Premiers and the PM at their first ministers te'te' today.
Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class that is to say the ultimate abolition of the wages system.Karl Marx, Value, Price and Profit, Addressed to Working Men, The First International Working Men's Association, 1865.
Concessions Don't Work
And Then There Was One
October Surprise Was The Market Crash
No Austrians In Foxholes
Pension Rip Off
unionization, labour, CLC, Ken Georgetti, economy, trade union, recession, EI, business unions,