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CME demands lower EI premiums

Ottawa -- May 14, 2001 -- With Employment Insurance Act amendments set to take effect, Canadian Manufacturers & Exp...


Ottawa — May 14, 2001 — With Employment Insurance Act amendments set to take effect, Canadian Manufacturers & Exporters (CME) has again called on the federal government to lower EI premiums, which continue to be set much higher than necessary to fund the program.

“By keeping premiums excessively high, the government has moved EI beyond insurance principles,” noted Perrin Beatty, CME’s president and CEO. “Call them what you will, EI premiums have essentially become a tax on jobs that adds significantly to employment costs for Canada’s manufacturing and exporting companies. “Lowering EI premiums would generate job creation, encourage economic growth, and improve market confidence.”

Premiums have far outstripped payouts in recent years, resulting in a huge surplus in the government’s notional EI account — money which Ottawa actually used to balance its books. The cumulative total of that surplus was almost $36 billion as of the end of March 2001, an amount two to three times the $10-billion to $15-billion reserve that the EI actuary says is enough to cover benefit costs during a recession. The surplus is expected to reach $43 billion by March 2002, and could top $50 billion in the 2002-03 fiscal year. “Spending on benefits now accounts for less than two-thirds of premiums collected,” Beatty added.

“By the end of the current fiscal year, the government could give everybody a three-year premium holiday and still show a surplus in the EI account. There is absolutely no justification for keeping premium rates anywhere near as high as they are right now.”

The EI premium rate is currently $2.25 per $100 of insurable earnings for employees. Employers pay 1.4 times that amount, $3.15. Testifying in February 2001 before a House of Commons committee, Jayson Myers, chief economist for the CME, called for the rate to be lowered to $1.65 for employees ($2.31 for employers). He also called for the EI multiplier for employers to be reduced from 1.4 to 1.0 over the next four years, so employers and employees pay the same rate.

Another concern raised repeatedly by CME is the government’s move to suspend, for 2002 and 2003, the role of the Employment Insurance Commission in establishing EI premium rates. Under the proposed legislation, these will instead be set by Cabinet for the next two years, thus depriving business and labour of input into the rate-setting process.