Unemployment Insurance

This paper highlights recent trends in employment insurance (formerly unemployment insurance). It also provides a review of the historic evolution of the employment insurance program. The following summarizes the main results. 1. The EI system has turned from large deficits prior to 1993, to nearly balancing the books in that year, and further to substantial surpluses ever since. This is attributable to many factors. Premium contributions collected from employees and employers have been stable at a historically high level since 1994 largely thanks to the recovery of the economy. On the other hand, benefit payouts have steadily declined since 1993 mainly due to a falling number of beneficiaries since 1993, benefit rate reduction from 60% to 57% in 1993 and further to 55% in 1994 except for low income claimants with dependents (back up 60%). 2. The declining number of beneficiaries is in turn attributable to many factors. Unemployment as well as the unemployment rate has been falling since 1993 (there was a slight increase in 1996). Characteristics of the unemployed may have changed. There has also been a series of significant changes in policy parameters regarding benefit eligibility since 1990. 3. Over the course of its nearly sixty years of existence, the EI system has undergone numerous changes. Most significantly, the 1971 UI Act which widely liberalized the pre-1971 system; a series of subsequent fine-tuning and tightening-up; and the abolishment of minimum hours/earnings coverage requirements (all employees are now covered), as well as the name change to "employment insurance" from "unemployment insurance".

Recent explanations of public policy have increasingly focused on "state-centred" theories which emphasize internal state dynamics, as opposed to "society-centred" theories which concentrate on external forces such as interest group pressure. State, Class, and Bureaucracy assesses the fruitfulness of these approaches by comparing neo-Marxist and neo-pluralist explanations (society-centred) with explanations that emphasize the effects of bureaucracy and federalism (state-centred). Unemployment insurance (UI) was chosen as a case study because of its importance to employer and employee groups; if any program or policy is susceptible to a society-centred explanation, UI should be.

The Unemployment Insurance (UI) system is a lasting piece of the Social Security Act which was enacted in 1935. But like most things that are over 80 years old, it occasionally needs maintenance to keep it operating smoothly while keeping up with the changing demands placed upon it. However, the UI system has been ignored by policymakers for decades and, say the authors, it is broken, out of date, and badly in need of repair. Stephen A. Wandner pulls together a group of UI researchers, each with decades of experience, who describe the weaknesses in the current system and propose policy reforms that they say would modernize the system and prepare us for the next recession.