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2012 federal budget: How will it affect employment in Canada?

The government recently released its 2012 federal budget, which sets out a comprehensive agenda to bolster Canada’s fundamental strengths and address the important challenges confronting the economy over the long term. How will this affect employment in Canada?

In terms of the investment in training, infrastructure and opportunity, the budget is quite extensive. The stated goals are to:

  • Support job creation, small business and skills training: extending the hiring credit for small business, enhancing the youth employment strategy, helping older workers find employment, improving labour market opportunities for Canadians with disabilities, increasing opportunities for women to serve on corporate boards and promoting widespread opportunities from federal shipbuilding
  • Improve the Employment Insurance program: ensuring stable, predictable EI premium rates, connecting Canadians with available jobs and removing disincentives to work
  • Expand opportunities for Aboriginal peoples to fully participate in the economy: making investments to improve First Nations education, helping First Nations on reserves access the labour force, supporting First Nations fishing enterprises and renewing the Urban Aboriginal Strategy
  • Build a fast and flexible economic immigration system: strengthening Canada’s immigration system by making it faster and more flexible, better aligning the Temporary Foreign Worker Program with labour market demands, ensuring that foreign credentials are quickly and fairly assessed in Canada to help highly skilled newcomers find work related to their training and dealing with the large backlog of applications that has accumulated under the Federal Skilled Worker Program
  • Strengthen Canada’s public infrastructure: supporting infrastructure at the various levels (provincial, territorial and municipal), providing clear rules regarding how territorial governments may borrow to undertake investments in their future and making important investments in strategic public infrastructure (rail services, Canada’s port system, Canadian coast guard fleet, maintaining and improving federal infrastructure, investing in border infrastructure, building a new bridge over the St. Lawrence)

Let’s further focus on Employment Insurance changes. The stated goal of the changes is to promote job creation by removing disincentives to work and supporting unemployed Canadians by connecting them more quickly to jobs. The plan is to invest $482 million over the next two years ($177 million in 2012–13; $305 million in 2013–14).

How will this play out? How can we better utilize Canada’s workforce and make Canada’s labour market more adaptable to ensure Canada’s long-term economic growth?

The plan entails:

  • Limiting EI premium rate increases to five cents each year until the EI Operating Account is balanced
  • Providing $21 million over two years to enhance the content and timeliness of job and labour market information that is provided to Canadians who are searching for employment
  • Investing $74 million over two years to ensure that EI claimants benefit from accepting work
  • Investing $387 million over two years to align the calculation of EI benefit amounts with local labour market conditions

What does ‘being connected to available jobs’ mean?

Practically speaking, Canadians will be connected with available jobs by being provided relevant and timely job information. Also, the plan is to introduce legislation to strengthen and clarify what is required of claimants who are receiving regular EI benefits and are looking for work. These guidelines will be announced by the Minister of Human Resources and Skills Development.

Moreover, the government will pay extra attention to the Temporary Foreign Worker Program in order to better connect unemployed Canadians with available jobs. This will involve notifying EI claimants when employers are looking for workers, and informing employers if there are EI claimants in the same region who match the open positions.

Lastly, there is a plan to make skills training and job search supports available to EI claimants earlier in their claim period.

What does ‘removing disincentives to work’ mean?

The government aims to remove disincentives to work by introducing a new national “Working While on Claim” EI pilot project to align the calculation of EI benefit amounts with local labour market conditions.

Why is this going to happen? It is because EI claimants who stay active in and remain connected to the labour market find permanent employment faster than those who do not.

Instead of reducing a claimant’s EI benefits dollar-for-dollar once they have earned a certain amount (discouraging them from accepting additional work), the current clawback rate will be cut in half and apply to all earnings made while on EI.

Furthermore, by aligning the calculation of the value of EI benefits with local labour market conditions, the disincentives to accepting all available work prior to applying to the EI program will be reduced. More specifically, beginning in April 2013, all claimants will have their EI benefit amount calculated based on the highest weeks of earnings over the preceding year. The number of weeks that will be used will range from 14 to 22, depending on the unemployment rate in the particular EI region. It is important to note that while this new approach is being put in place, the current “Best 14 Weeks” pilot project will be extended, until April 2013.

What do you think about these proposed changes? Will it be a positive or a negative for employment in Canada?

Christina Catenacci
First Reference Human Resources and Compliance Editor

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Christina Catenacci

Christina Catenacci, BA, LLB, LLM, was called to the Ontario Bar in 2002 and has since been a member of the Ontario Bar Association. Christina worked as an editor with First Reference between February 2005 and August 2015, working on publications including The Human Resources Advisor (Ontario, Western and Atlantic editions), HRinfodesk discussing topics in Labour and Employment Law. Christina has decided to pursue a PhD at the University of Western Ontario beginning in the fall of 2015. Read more
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4 thoughts on “2012 federal budget: How will it affect employment in Canada?
  • Thanks for your comment, Etizaz. It does make sense to remove the disincentives to work and make it worthwhile to return to the labour market sooner.

  • The proposed changes are beneficial to both the government and the EI Claimants. EI Claimants will actively look for work; feel the support of the government(connecting them with available jobs and removing disincentives to work) and thus be more accountable. This in return, will benefit the government from their accountability and quick return to work.

  • Thanks for your comment, Matt.

  • Matt Johnson says:

    I think these changes will benefit employment. Removing the disincentives to work will will inspire those claiming EI to work more, thus reducing their dependency on EI.