OTTAWA - Some economists and small business leaders fear Michael Ignatieff is trying to revive employment insurance reforms that proved disastrous to the economy and Liberal political fortunes 38 years ago.
The Liberal leader is pushing the minority Harper government to adopt a single national standard of 360 hours -- or nine weeks -- of work to qualify for jobless benefits.
That's very close to the eight-week eligibility rule introduced by Pierre Trudeau's Liberals in 1971, sparking a spike in seasonal unemployment and an electoral backlash that helped cost Trudeau his majority in the 1972 election.
"What happened in '71 to my mind was a policy catastrophe," says University of Ottawa economist David Gray.
To repeat it today "would just be catastrophic for the Canadian economy."
Back in 1971, the reforms introduced by then-labour minister Bryce Mackasey were blamed for actually increasing the unemployment rate by one to two percentage points. The ranks of seasonal workers swelled as employees, aided and abetted by employers who adjusted their contracts, worked the minimum eight-week qualifying period and went on the dole.
"It opened the floodgates," says Catherine Swift, president of the Canadian Federation of Independent Business.
"The number (of seasonal fishermen) doubled overnight, literally, because suddenly the dole was available."
The small-business group, then in its infancy and headed by John Bulloch, led a crusade against Mackasey's '71 reforms. Governments have been tinkering with the EI system ever since, trying to unravel some of the unintended consequences.
Now, Swift says the CFIB is on the warpath once again, fighting Ignatieff's proposed 360-hour eligibility standard, which she dismisses as "just ludicrous."
"You're just asking for abuse of the system."
Bulloch is looking on in amazement at the way history seems to be repeating itself.
"This is how parties stumble onto dumb things. They don't do their history," he muses.
But Liberals insist they've done their homework and have included measures to prevent a repeat.
For instance, Ignatieff's 360 hours is to be a temporary eligibility standard only, just until the economy recovers sufficiently to start creating jobs again.
"It doesn't create (labour force and economic) distortion if it's a temporary measure," says Montreal MP Marlene Jennings, a Liberal member of the bipartisan working group currently negotiating EI reforms.
The Tories have characterized Ignatieff's proposal as amounting to almost a year's worth of EI benefits for only nine weeks of work -- which Liberals dismiss as "nonsense."
While they haven't worked out all the details, Liberals say a person with 360 hours would be eligible for no more than 19 to 37 weeks of benefits -- the same duration as now applies to those with the current minimum of 420 hours.
As part of their negotiations with Prime Minister Stephen Harper's Conservatives, Jennings says Liberals have asked departmental officials to explore a variety of scenarios, including:
-- A minimum of 19 weeks of benefits regardless of the unemployment rate in a recipient's local area.
-- A minimum benefit period of less than 19 weeks.
-- Pegging the duration of benefits to local unemployment rates, possibly setting a threshold, for instance, of 10 per cent unemployment before benefits would flow.
Until such details are settled, economists acknowledge it's difficult to assess what impact the Liberals' reform proposal might have. But they're not particularly reassured by the promise that the 360-hour threshold would be temporary.
"I've watched the machinations around the unemployment insurance regime for the better part of 20 years now," says Gray.
"And it's so easy to expand coverage and every time they try to tighten it in the slightest way it elicits political pressure that is often efficacious."
Unless the duration of benefits is kept very short and repeat usage is strictly limited, Gray also worries that Ignatieff's proposal could turn the current pockets of structural seasonal unemployment in places like New Brunswick and Newfoundland and Labrador into a nationwide phenomenon.
"We'll have the EI trap in all of the Canadian labour force instead of in only three or four per cent of the Canadian labour force," he says.
Colin Busby, policy analyst with the C.D. Howe Institute, agrees that lowering the entrance requirement in traditionally low unemployment provinces like Ontario, Alberta and British Columbia "could create seasonal unemployment where maybe it didn't exist before."
"The consequence of lowering (the minimum threshold) ... in places like Alberta from 700 hours in most places to all of a sudden 360, well, you know what, it's likely that you'll create more forms of seasonal unemployment over time," Busby says.
Both Gray and Busby agree it's unfair and illogical to have 58 different requirements -- from 420 to 700 hours of work -- for qualifying for EI benefits, depending on local unemployment rates. And they agree in principle with Ignatieff's demand for a single national standard.
However, they're concerned that 360 hours would be setting the bar too low. Both suggest the standard should be something higher than the current minimum of 420 hours.
Swift isn't sold on the idea of a single national standard at all. She suggests the system could be made more equitable by reducing the 58 different entry requirements. At the same time, she'd raise the minimum threshold to something more than 420 hours.
"I don't know what the magic number would be there, but it would be a heck of a lot higher than 360."
