EI premium hikes coming: economist
Could take effect in 2011
Last Updated: Tuesday, October 6, 2009 | 2:00 PM ET
CBC News
Canadian workers and employers might see big increases in their employment insurance premiums, a new study suggests.
The study, released by Dale Orr Economic Insight on Tuesday, said that if the federal government is to meet its economic targets by 2014-15, employees would have to pay an extra $632 over four years. Employers' payments would increase more than $884 per worker in the same period.
NDP Leader Jack Layton has supported the minority Conservatives because of their promise to expand Employment Insurance benefits, but a new study suggests big premium increases are on the way. (CBC) Orr, a leading Canadian economist, looked at Ottawa's revised economic outlook issued on Sept 10. While the government has promised not to raise taxes or cut payment programs to individuals and the provinces, "what the government did not mention was that this pace of deficit reduction relies heavily on large increases in Employment Insurance (EI) revenues over the 2011-2014 period," Orr said.
Increasing premiums amounts to increasing taxes, Orr told CBC News.
"What myself and a lot of other economists object to when the government tries to raise revenue this way —obviously increased EI premiums, from the workers' point of view, it's a tax on their work … and from the employers' point of view, it's a tax on their hiring," he said.
"This is a most perverse way for the government to collect revenue," he added, because of its negative effects on economic growth. "It would hit the lowest-income workers the most.
'They have not been upfront at all with their plan to collect increased EI premiums.'— Dale Orr, economist
"The EI premiums fall disproportionately on lower-paid workers, so it's perverse in that equity sense as well."
Orr had harsh words for the government for not being open about its plans. "This is … buried within their document. They have not been upfront at all with their plan to collect increased EI premiums."
He also faulted the opposition for not pointing out the lack of disclosure.
The analysis concludes that the increases would total about $15.5 billion by the 2014-15 timetable laid out in last month's update for balancing the budget. Ottawa has acknowledged returning to surplus would likely require increases in premiums.
Premiums must rise from the current $1.73 per $100 of earnings — which will be frozen for another year— to $2.33 over the next five years, Orr said. That would mean an accumulated extra payment of $632 for every worker earning more than the bottom threshold of $42,300.
As well, employers will need to pay about $884 per worker during the period.
Rather than taxing employment and job creation, Orr suggested Ottawa should increase the GST by one point for two years to make up the difference.
With files from The Canadian Press
