The following video Poor No More is a feature documentary about Canadians who are worrying about how to make ends meet:

The Caledon Institute of Social Policy just published an excellent paper Fixing the Hole in Employment Insurance: Temporary Income Assistance for the Unemployed (by Michael Mendelson and Ken Battle, December 2011), which presents a salving solution to the following problems:

  • Many unemployed Canadians are ineligible for Employment Insurance, so that welfare becomes their only alternative.
  • But welfare rates are low, especially for single employable recipients.
  • Further, applicants must exhaust their financial assets.
  • And the paternalistic requirements of welfare are stigmatizing.
  • As a consequence, it is difficult to bounce back from welfare into the economic mainstream.

“The solution most often proposed has been to loosen the rules for Employment Insurance; however”, Michael Mendelson and Ken Battle show in this paper that “many unemployed workers would still be left in the cold even if we did that.”

Something is needed between Employment Insurance, with its relatively higher benefits but limited reach, and welfare, to which anyone in need can apply but only for inadequate benefits. Michael Mendelson and Ken Battle propose a new temporary income measure to fill the gap between Employment Insurance and welfare – the Jobseeker’s Loan.

The Introduction of Fixing the Hole in Employment Insurance: Temporary Income Assistance for the Unemployed identifies a critical gap between two  main programs providing financial assistance to unemployed adults of working age in Canada – Employment Insurance and social assistance (a.k.a. welfare) – is depicted here:

  • “Many workers who have paid Employment Insurance premiums find themselves ineligible for benefits upon becoming unemployed.

    Many other workers are not even able to participate in and pay premiums to the Employment Insurance program in the first place.

    When unemployed Canadians who cannot collect Employment Insurance find themselves in dire financial straits, having used up all their savings and borrowed as much as they can from family and friends, welfare is their only alternative.

  • But welfare rates are low in every province and territory, especially for single employable recipients.

    Welfare is inadequate to maintain basic living standards during periods of unemployment for many of the jobless, even when all possible ‘extras’ are cut out.

    To become eligible for welfare, applicants must exhaust their financial assets, including RRSPs, as well as nonfinancial assets – excepting only an older car, a home and personal possessions, such as clothing.

    Further, the paternalistic requirements of welfare administration are inherently stigmatizing and draining of self-confidence and independence….

    All of this makes it difficult both psychologically and materially for those who have to rely on welfare to bounce back into the economic mainstream.

    Yet welfare remains the only alternative today for unemployed workers who do not participate in or are otherwise ineligible for Employment Insurance.”

“Something is needed between Employment Insurance, with its relatively higher benefits but limited reach, and welfare, to which anyone in need can apply but only for inadequate benefits if in fact they are deemed eligible.

While improved access to Employment Insurance would go some way to providing an alternative to welfare for some of the unemployed, Michael Mendelson and Ken Battle:

  • show in this paper that many other jobless Canadians would still be left in the cold
  • propose a new program to fill the gap that would remain between Employment Insurance and welfare, even were Employment Insurance to be somewhat enhanced”
Income Assistance for the Unemployed: Canada's Salving Solution

Income Assistance for the Unemployed: Canada's Salving Solution

Please visit to read this enlightening paper which is organized in the following two parts:

  • “The first part is a discussion of why simply enhancing or modifying Employment Insurance could not fill the gap…examining:
    • the existing Employment Insurance program – why was it set up as a social insurance; what can we reasonably expect it to do (and not do) in our income security system; and why do we need a social insurance? We then analyze who is not eligible for Employment Insurance and whether they could be covered
    • welfare and its relationship to unemployment
  • Part 2 sets out detailed designs for our proposed new program.”

The Jobseeker’s Loan model

As a salving solution to the dire situation of the unemployed in this broken economy, Michael Mendelson and Ken Battle present the Jobseeker’s Loan model as follows:

In this design, temporary unemployment assistance would be provided in the form of a forgivable loan whose repayment is contingent upon income reported through the income tax system. The program would be unlike any existing income security program. We have called this the ‘Jobseeker’s Loan’ (borrowing the name ‘Jobseeker’s’ from the UK, though our program design is nothing like theirs).

Rather than paying benefits adjusted for the previous month’s income, the Jobseeker’s Loan would make a loan available to all unemployed adults actively seeking employment.

The loan would be entirely forgiven if income in that year as reported through income tax was very low, but the loan would be partially or fully repaid if income were higher.

The loan would be advanced to the recipient in biweekly instalments, like a paycheque. A maximum amount of loan would be available only within a defined period of time, say five years, so that once the loan was taken up it would require another five years before the recipient once again became eligible for the full Jobseeker’s Loan. There would be rules to prevent ‘doubling up’ so that a loan would not be available to anyone collecting full Employment Insurance benefits, welfare benefits or other social program benefits (in particular, those that are not taxable). However, a loan could top up partial Employment Insurance or other benefits where the amount of those other program benefits is less than the maximum amount of the loan.

Costs of the Jobseeker’s Loan

Obviously, it is difficult to estimate the cost of the Jobseeker’s Loan. How many people would actually take it up is hard to predict, as voluntary programs of this kind have typically been significantly undersubscribed. We will not in this paper attempt to provide a detailed estimate – only a rough ballpark estimate to show the scale of program.

The size of the Jobseeker’s Loan program in any year will be dependent on the unemployment rate. By using 2010 as an example of a high unemployment year, we can estimate an approximate upper limit on the potential size of the program. According to the most recent results from the Employment Insurance Coverage Survey, there were about 700,000 unemployed Canadians in 2010 ineligible for Employment Insurance [Statistics Canada 2011]. This figure does not include about 84,000 students who left their employment to return to school, and so would not be eligible for the Jobseeker’s Loan as they were not actively engaged in looking for work and available for employment – at least as given the rules suggested in this paper.

The 700,000 unemployed are eligible for Jobseeker’s Loan only once every five years, so we can assume about one-fifth or 140,000 might take up the loan in an average single year (there are some additional phase-in costs which we do not consider here). Assuming all of these took up the full loan the gross federal cost would be about $1.26 billion. However, it is likely that at least some of the loans would have to be repaid, so assuming a modest average repayment of $2,000 each, the net cost to the federal government would be about $980 million.

Add to this the cost of the Jobseeker’s Loan retirement benefit. There were about 15,000 new partial or full Guaranteed Income Supplement beneficiaries in each year over the last five years [Service Canada 2010]. Here we assume 20,000 full or partial new Guaranteed Income Supplement recipients a year. These people represent the lowest-income seniors. Assuming all of them are entitled to the Jobseeker’s Loan retirement benefit, it would cost about $180 million annually.

Adding the cost of the unemployed and the retirement benefit brings the net federal cost back up to about $1.16 billion. But the new federal program would also result in some savings to provincial governments.

Michael Mendelson and Ken Battle made pertinent conclusions, including:

  • Jobseeker’s Loan could make reform of Employment Insurance itself more palatable, such as
    • raising benefits to provide better continuity of living standards,
    • increasing work sharing programs such as were implemented in Germany during the recession, and
    • reducing or eliminating the favoured treatment of some unemployment regions across Canada.
  • Overall, we would see the Employment Insurance program run more rigorously as a social insurance, including real stewardship by business and labour, rather than by government.
  • The Jobseeker’s Loan proposed in this paper would fill a large hole in Canada’s income security system, at a reasonable cost.”

Published by:
Caledon Institute of Social Policy
1354 Wellington Street West, 3rd Floor
Ottawa, ON K1Y 3C3
Tel./Fax: (613) 729-3340

To alleviate the sufferings of hundreds of thousands of impoverished Canadians, including children and seniors, in this broken economy would be priceless!
You may also want to know:
“Let’s Vote for a Poverty Free Ontario”: New Date for Election Sign Blitz is September 15, 2011

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