A farewell to CERB and the future of EI

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By Doug Nesbitt

The Canada Recovery Benefit (CRB) ended, October 23, 2021. The CRB is the continuation of the Canada Emergency Recovery Benefit which was first implemented in April 2020, only weeks after the COVID-19 Pandemic was declared.

CERB proved a lifesaver for millions. Within four months, an estimated 8.5 million Canadians had accessed the $2000/month benefit.

CERB formally ended in September 2020, and was replaced by the CRB. Between September 2020 and July 2021, CRB paid out $1000 (minus taxes) every two weeks. The annual CRB cap was $6,000. This CRB payment was lowered in July 2021 to $600 over two weeks.

CRB was still popular and much needed. About 880,000 people drew on CRB during its last two-week pay bloc ending October 23 2021.

CERB and CRB were not universal programs. You had to earn at least $5,000 in the year before the pandemic to collect. You also couldn’t quit your job and collect – leaving millions of workers in low-wage, unsafe jobs during the worst Covid waves. Many workers still chose to leave their jobs so they could protect themselves and their families. Despite this common sense decision, they were banned form collecting CERB, CRB or Employment Insurance.

Despite these limits, CERB and CRB proved superior to traditional Employment Insurance. It allowed many thousands of falsely-classified “independent contractors” and gig workers to collect CERB/CRB, as well as many self-employed people struggling to make ends meet in the “job churn”.

The experience has rekindled people’s imaginations about what a real safety net would look like. A lot of this talk is framed around a Basic Income. If a Basic Income is one way to talk about a universal safety net, it’s worth looking at why the old safety net of Unemployment Insurance failed.

Employment Insurance and the Pandemic

At the outset of the pandemic, EI was quickly declared obsolete by many politicians, media punidts and even union leaders. EI, they said, was incapable of meeting the demands of the largest loss of jobs in Canadian history.

Three million jobs were lost in March and April 2020, and another 2.5 million workers saw hours cut. Why couldn’t EI work exactly when it was needed?

Early in the pandemic, I first spoke with a couple federal government workers who handle EI claims. I asked why the EI application couldn’t be streamlined and conditions for access waived. From their end, they say the system was really inflexible and could not be easily adapted to waive the kinds of conditions normally imposed on the unemployed.

The federal government workers also informed me about a major review of the EI system initiated by the Trudeau Liberals after their 2015 election victory against Stephen Harper’s Conservatives. The report made a series of promising recommendations to help unemployed workers, and those processing the claims. But nothing came of it. Trudeau’s Liberals did nothing to change an EI system inherited from Harper.

When the pandemic hit, the federal government was forced to create a parallel system to deliver CERB/CRB. The CERB/CRB application was pretty fast and easy to use and the money was distributed quickly. By comparison, EI requires you to submit pay information and check-in regularly. There are plenty of penalties that can delay payments or disqualify you.

But if EI is broken for working people, it’s working as intended for the business class.

Tearing up the post-war compromise

Originally called Unemployment Insurance, UI has always been an imperfect system. It reflects the compromise struck between the federal government, provincial governments, business interests, and organized labour. The unemployed workers’ movement of the Great Depression, backed up by early industrial unions, fought for a UI system funded entirely by employers. When UI came into effect in 1940, it was funded by worker contributions, employer contributions and federal government contributions.

In the early 1970s, UI reached its high point in coverage of the unemployed. This was also a time when Canadian labour militancy was the highest of any country in the world, save Italy. About 95 percent of unemployed workers were eligible for UI, and the wage replacement rate was 75 percent. This provided workers a lot of leverage in bargaining, and did a lot to halt a race to the bottom in wages. Low unemployment and almost universal UI meant the job market favoured workers, not employers.

Within a few years, these conditions ended around the world. A new era of global capitalist turmoil and competition erupted. Big business responded with a new counter-offensive.

Powerful new organizations like the Business Council on National Issues (now the Business Council of Canada) were established. They led the charge with a relentless propaganda war against labour through the mainstream media, universities, political parties, and new think tanks flush with corporate cash.

The business class was done with the shaky post-war “compromise”. They now demanded rollbacks in every sector, from public healthcare spending to corporate taxes to UI.

By 1979, Prime Minister Pierre Trudeau had cut the wage replacement rate from 75 to 60 percent. Penalties were lengthened for those who quit or were fired from their jobs, or those who “refused to accept suitable employment.” Still, by 1990, 83 percent of the unemployed could access UI.

The Critical Decade

With a new recession hammering Canada in 1990, Prime Minister Brian Mulroney rammed through changes that cut deep into the UI safety net. First, he ended federal funding contributions. This meant UI now had to be financed entirely by workers and employers.

Second, new changes in 1993 meant anyone who quit their job, was fired for “misconduct” or refused to “accept suitable employment” was banned altogether from collecting UI. The wage replacement rate was lowered further to 57 percent.

When the federal Liberals of Jean Chrétien swept away Mulroney’s corrupt government in 1993, they reduced wage replacement rates to 55 percent and soon renamed the system “Employment Insurance”. A whole host of new penalties and clawbacks were imposed.

Eligibility for EI plummeted to 49 percent of the unemployed. This figure bottomed out at 39 percent in 2012 under Stephen Harper, and was only 42 percent on the eve of the pandemic.

Having shredded the safety net, the working majority has been compelled to accept worse conditions and lower pay to make ends meet. This is called a “flexible labour market” by business, economists and politicians. It means workers are forced to bend to whatever jobs are available. When we break under this “flexible” labour market, the employing class has no obligation to help. These policies are by design.

What’s welfare got to do with it?

In the early 1990s recession, the combined effects of all the cuts and restructuring to UI/EI was hundreds of thousands of working people being forced on to social assistance for the first time. Suddenly, many provinces faced ballooning numbers of people on welfare.

The business class was on a roll and they saw a new opportunity to destroy social assistance, the other major pillar of the safety net. Despite social assistance programs proving the best way people could get back into the workforce, the usual suspects bombarded the public with stories of laziness, entitlement, and a “culture of dependency”. A lot of nasty racism and sexism played into this attack. The business class and their politicians and had found new scapegoats for the final decade of the 20th Century.

Premiers like Mike Harris in Ontario, Ralph Klein in Alberta, Frank McKenna in New Brunswick, and Mike Harcourt in BC, all declared war on the unemployed and the poor. Big flashy announcement were made about crackdowns on the tiny number of welfare fraud cases. Workfare (aka: work-for-welfare) programs were introduced in New Brunswick and Ontario (both predictably failed). Welfare fraud snitch lines were set up, directing new “welfare cops” to harass and abuse those thrown out of work by employers. In many provinces, special benefits for single mothers were scrapped.

The same austerity cuts and restructuring hitting UI also hit social assistance. Welfare rates were slashed and frozen. Workers compensation also faced cuts, throwing more and more injured workers into even greater hardship.

Federal cuts led to deeper provincial cuts, too. Social assistance is provided by the provinces and paid for through provincial revenues and large federal transfers. Federal transfers for social assistance (and health and education) faced a major cut by Mulroney in 1990. Five years later, the Chretien-Martin Liberals implemented the largest cuts in Canadian history.

In the span of five years, the two main programs constituting the safety net – federal Unemployment Insurance and provincial social assistance – were turned into lean, mean programs designed to deny and dissuade applicants, not provide them the means of landing a good job.

The Great EI Robbery

By the late 1990s, EI eligibility had been pushed down so far, that more EI money was being collected than paid out to unemployed workers. The resulting EI surplus wasn’t banked for a rainy day like the 2020 Pandemic Crash. Where did the money go?

The EI surplus has been consistently cycled back into federal government revenues. The Chrétien/Martin Liberals used the surplus to finance tax cuts, which overwhelmingly helped rich people. They steadily reduced employer EI contributions (which employers and the business lobby love to misrepresent as a tax).

By 2010, the cumulative EI surplus had become a whopping $57 billion. The Quebec union federation CSN took the case to court. Unsurprisingly, the unelected Supreme Court sided unanimously with the federal government’s discretionary use of the surplus.

In 2015, Stephen Harper and his Finance Minister Joe Oliver infamously declared a phony budget surplus based entirely on $2.7 billion in unspent EI money. A year later, Harper was out of office, but Trudeau’s Liberals refused to stop plundering EI.

How much money has been stolen from workers? Through EI, it’s tens of billions since the mid-90s.

Return to normal?

And now with the end of CERB/CRB, we are almost back to where we were before the pandemic. That said, two important changes have to be noted.

First, the success of CERB/CRB has led to the inclusion of the self-employed and gig workers which constitute 15 percent of the workforce. But these changes come online in January 2023, and they do nothing to correct the deliberate union-busting misclassification of gig workers as independent contracts (this is provincial jurisdiction).

Second, there’s new and wide support for a stronger social safety net. This is shared by millions who experienced CERB/CRB. This support, however, will eventually disappear if it is not organized into something real. Sentiment alone cannot make change.

So where is organized labour on the Employment Insurance front? What is the safety net strategy?

The truth of the matter is there is no united labour strategy. Our unions have many well-meaning demands on paper, but there is no root-and-branch campaign that focuses on building power. Militants in the 1930s understood this and stuck at it for years. We are facing a similar fight.

Struggling for a new safety net

Even with an orientation on building power through labour’s grassroots (instead of another expensive PR campaign), the difficulties are significant, and the pandemic has introduced new challenges.

First, EI is a federal program. Union leaders and certainly the union membership are nowhere near the levers of federal power. A quarter century of lobbying campaigns focused on federal politicians has proven a failure. So has wasting millions in union dues on court cases (but labour’s law firms cashed in).

Second, building power requires a new conversation that includes Basic Income. The concept of a Basic Income is quite simple: a minimum safety net for all. Together, this is what Unemployment Insurance and social assistance was supposed to be. But have these programs failed and do they need to be replaced with a unified safety net?

Third, what are the dangers of demanding a Basic Income when labour has no power to dictate or bargain terms? Real change can’t just happen with a policy fix. It requires changing the balance of power. There are many hard-right anti-union advocates of a Basic Income. Their vision is cutting a cheque for all of us to spend on the gouging “free market” so they can justify destroying social services and public sector unions. What use is a cheque without universal healthcare, rent controls, public transit, public libraries, and free K-12 education? It would be a colossal tragedy if labour opens a door for the business class to walk through.

Fourth, and most important, a new social safety net is going to require a new movement. We are not a movement that has stalled or has been disoriented by the pandemic. We have to build from scratch. This will require action and protests, but it will crucially require study and education within union ranks and among the unorganized. Our collective power can be easily outmanoeuvred if we don’t have the collective knowledge and intelligence to wield it effectively.

Now is the time to build such a movement while sentiment hasn’t disappeared, inflation is rising, and there are signs of workers fighting back against deteriorating conditions.

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About the author
Doug Nesbitt is editor and co-founder of Rankandfile.ca, a union researcher, and former union organizer. He is also a labour historian and currently writing a history of Ontario’s Days of Action against the Common Sense Revolution of Premier Mike Harris.