OTTAWA—Employers and workers will get a small break over the next three years as the Conservative government freezes employment insurance premiums at the current level.
Planned rate increases are no longer necessary because the separate account through which the government manages the fund is looking healthier than it did a few years ago, Finance Minister Jim Flaherty said Monday.
The account, which ran a deficit following the economic downturn, is on track to return to balance faster than expected.
“More people are working, so more people are paying into the operating account of the employment insurance plan and fewer people are claiming,” Flaherty said.
Finance Department staff estimated the freeze will save businesses and workers $660 million next year, something that Flaherty believes will give employers the flexibility to hire more staff.
The Conservatives promised that after 2017 the premium will be set every year and calibrated so the fund will have a seven year break-even rate, which finance officials say means more stability and affordable rates.
The premium rate at the 2013 level is $1.88 for every $100 of insurable earnings.
The Canadian Federation of Independent Business says it’s happy with the announcement, calling it “fantastic news” for the country’s entrepreneurs.
“This move will keep hundreds of millions of dollars in the pockets of employers and employees, which can only be a positive for the Canadian economy,” said Dan Kelly, president of the business lobby.
But Erin Weir, an economist with the United Steelworkers, was skeptical and noted that when Flaherty announced the initial policy in September 2010, the number of unemployed stood at 1.5 million.
“Since then, that figure has edged down to 1.4 million, hardly a breathtaking reduction in unemployment,” he said.
The government has been accused of making it harder to get EI and Weir says that is one of the unspoken truths of the government’s explanation for the healthier account balance.
“The falling number of EI recipients reflects not only the slight reduction in unemployment but also government policy changes that make benefits less accessible,” he said. “Freezing premiums effectively locks in those benefit cuts.”
Flaherty says the freeze will have no impact on his drive to balance the federal budget because EI is handled from a separate account.
“We are on track and we anticipate we’ll be able to balance the budget in 2015 without difficulty,” Flaherty said.
The Harper government has resisted outlining how and where it intends to cut, even fighting a court suit brought by the parliamentary budget officer.
Last spring, the Federal Court dismissed—on a technicality—a request to consider whether the watchdog has a legal right to demand the government turn over information on its cost-cutting program.
Most of the details of program cuts and federal workforce reductions have emerged after the fact.
Flaherty said Monday that the next budget, expected in the spring, will give the public a clearer idea of where the government is going.
“We’ll see in the budget, in the spring, we should be able to show quite clearly the track that we’re following to get to a balanced budget in 2015,” he said.