OTTAWA—A Liberal program to give extra employment insurance benefits to workers in regions hit hard by a drop in natural resource prices will end up costing almost $2 billion—more than double original estimates.
The government budgeted $827.4 million for the extra payments.
The latest department estimates show the measure will end up costing $1.92 billion, largely the result of changes that allowed more workers to receive extra payments and unemployment rates that stayed higher for longer than the government anticipated.
Further details will come out later this year when the government releases its annual report on the EI system.
The extended benefit program rolled out in 2016 for workers in 12 regions that had seen a sharp and sustained drop in employment as a result of a downturn in energy prices.
Most workers were given an extra five weeks of benefits, while long-tenured workers received an extra 20 weeks.
By July, weekly data revealed that payments had exceeded $1.3 billion and department officials warned Social Development Minister Jean-Yves Duclos in a preliminary assessment that costs were likely to top $1.9 billion.
The assessment obtained by The Canadian Press under the Access to Information Act says costs went up due to the addition of three regions to the program and making payments retroactive to January 2015, which gave workers who had already exhausted benefits an extra couple of weeks of payments.
This was particularly true for long-tenured workers. The department says these workers account for $1.7 billion in payments, despite being only 28 per cent of all recipients of the extra benefits.
The assessment noted about one-quarter of EI claimants usually use up benefits before going back to work, but almost half of workers exhausted their benefits under the Liberal program.
Employment and Social Development Canada said the unemployment rates in those regions also stayed higher for longer than officials expected, increasing “the number of claims and their likelihood of taking advantage of the EI extended benefits.”
The combined result of policy decisions and economic conditions was that 412,000 people qualified for extra benefits, instead of the 235,000 federal officials originally estimated would use the program.
“They failed to estimate just how hard it was going to be for people to get work,” said Frances Woolley, an economics professor at Carleton University in Ottawa.
“I’m kind of surprised that mistake was made.”
Parisa Mahboubi, a senior policy analyst from the C.D. Howe Institute, said extended high unemployment rates would have made it difficult for workers to find jobs, leaving them to stay on the program longer than anticipated.
She said the extended benefits could have also reduced incentives for workers to find new employment.
Woolley said the policy itself appears to have been helpful for workers in need, even though it went well over budget.