Canadians and businesses will be paying a little more to the federal government in 2012 to cover increases in employment insurance premiums.
Starting Jan. 1, the government took more for Employment Insurance (EI) premiums from workers and employers. Employment Insurance premiums will rise by five cents for every $100 of insurable wages for workers. The increase will mean an additional $142 a year from the average worker. Meanwhile, increases to employer contributions will increase seven cents per $100 in wages per employee, or an average of $164 per year.
Macleod MP Ted Menzies said the move is necessary.
He said the EI is supposed to pay for itself. However, when the 2008 recession hit, Menzies said the EI fund was struggling to stay even without a major increase to premiums and the government has used general revenues to contribute to EI.
“As we saw the increase in unemployment during the recession, there wasn’t enough money in the rainy day fund to pay those all out,” he said. “But, that doesn’t mean we weren’t going to give people EI payments to help them through their difficult time, so we did.”
According to Menzies, the situation was made worse by a decision by the former Liberal government to raid the EI fund in the mid-1990s to help balance the federal budget, bringing the fund down in the process.
He said the fund is in a deficit and the increase will eventually bring it back to balance, but there is no timeframe for when this will be achieved.
Menzies said the increase is half of what was requested by the Employment Insurance Financing Board. He said it’s not the time for a larger increase.
“Lots of employees haven’t had an increase in their wages, so this is going to hurt the businesses and employees,” he said.
The increase isn’t concerning for one Okotoks business owner.
Okotoks Rentals owner Todd Reidlinger said it’s less of an issue in Alberta than in other parts of the country.
“I don’t really think the economy around here is hurting a whole lot,” he said.
Reidlinger said the increase will not add up to a large amount.
“It’s like taxes, as long as they don’t waste it, it is what it is,” he said.
The increase has raised concern among some who say this is not the time for an increase given the fragile state of the economy.
Scott Hennig, Canadian Taxpayers Federation spokesperson, said it will add up for businesses with more employees and it will discourage businesses from hiring.
“Here, we’re taxing jobs,” he said. “The result is going to be less jobs and it runs counter to what we’re trying to accomplish.”
Hennig said the current hike is tied with the largest increase to EI contributions the federation has seen since it began tracking the number 16 years ago.
He said the increase isn’t as much of an issue as the larger problems with the EI system.
“We’re going to continue to see increases and we’re going to continue to see a system being broken unless they fix it,” he said.
Hennig said there are too many differences across the country in how people are treated under the program. For example, he said Alberta has the highest number of hours a person must work before they can qualify to receive EI over other provinces, while it has the lowest payout and the shortest period a person can receive funds.
“Yet, frankly with more workers here we pay more on a per person basis than anyone else in the country and we get royally screwed over by it,” he said.
