Wednesday, September 16, 2009


IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations
-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor
---------------------- Stuart Basefsky
New York, NY 10016
-------------------------------Director, IWS News Bureau

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Library of Parliament Research Publications

PRB 03-41E

Employment Insurance Premiums: In Search of a Genuine Rate-Setting Process
Kevin B. Kerr, Social Affairs Division
Revised 6 February 2009
[full-text, 16 pages]



Implemented in 1996, the Employment Insurance Act (EIA) enacted a number of fundamental changes to Canada's unemployment insurance system. One of these reforms was supposed to establish a new financing regime that would maintain relatively stable premium rates over the course of a business cycle. The 1996 premium rate-setting process was suspended in 2001, when an amendment to the EIA established that the Employment Insurance (EI) premium rate for 2002 and 2003 would be set by the Governor in Council on the recommendation of the ministers of Human Resources Development and Finance. During this period, a new premium rate-setting process was to be developed and implemented in order to address the concerns expressed by many about the growing so-called "reserve" in the Employment Insurance Account.(< > 1)

As the government was not prepared to implement a new premium rate-setting process by the end of 2003, it announced in the February 2003 budget that the premium rate for 2004 would be set at $1.98 per $100 of insurable earnings. The government also announced that it would accept submissions from the public on a new premium rate-setting process until 30 June 2003. In the event that the new rate-setting legislation was not in place to set the rate for 2005, the government extended by one year its rate-setting authority in the March 2004 budget.

On 23 February 2005, the government introduced legislation to establish a new framework for setting the EI premium rate. Under this rate-setting initiative, the Canada Employment Insurance Commission sets the EI premium rate on a one-year, forward-looking basis so as to ensure that premium revenues in the coming year are sufficient to cover the costs of EI. However, this rate-setting process continues to allow excess EI premium revenues to be used as general revenue. As a consequence, Budget 2008 proposed several additional modifications to the EI rate-setting process. These modifications were expected to take effect in 2009, but will now be delayed until 2010 as a consequence of provisions in Budget 2009.


    * Introduction
    * A Review of Recent Rate-Setting Practices
    * The Consultations
    * Principle 1: Premium rates should be set transparently
    * Principle 2: Premium rates should be set on the basis of expert advice
    * Principle 3: Expected premium revenues should correspond to program cost
    * Principle 4: Premium rate-setting should mitigate the impact on the business cycle
    * Principle 5: Premium rates should be relatively stable over time
    * A New Framework for Setting the EI Premium Rate
    * A. Bill C-43
    * B. Bill C-50
    * Conclusion
    * Endnotes

This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       

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