OFL Rejects Pay Day Loan Scheme for Unemployed Workers

November 26, 2011, 11:00 AM EST

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Ontario Federation of Labour President Sid Ryan has rejected the latest report from the Mowat Centre Employment Insurance (EI) Task Force, released on November 22.

"I was dumb-founded to see that the report has focused on little more than a Pay Day Loan scheme for unemployed workers in precarious and non-standard work, instead of modernizing EI to meet their needs," said Sid Ryan.

Ryan was referring to a key Task Force recommendation that proposes a new temporary unemployment assistance (TUA) program funded by a "jobseeker's loan" with repayment contingent upon future income. According to the report, workers "could rely on TUA until other work is secured or use TUA to smooth income over periods of lower earnings."

"This is nothing short of a pay day loan scheme for workers facing tough times," said Ryan. "It downloads the cost of unemployment supports to workers who can ill-afford additional debt payments." Currently, EI is funded by both worker and employer contributions; the Mowat Centre's TUA proposal would eliminate the employer contribution.

According to Ryan, the report falsely implies that less than half of those who contribute to EI are eligible for benefits. In fact, the low rates of benefits going to the unemployed include those who are not eligible and those who are eligible but who run out of benefits before finding work.

One in three eligible workers exhaust EI, a situation that worsened with the 2008-10 recession.

"Too many EI recipients exhaust their benefits before finding another job," said Ryan. "That's why the OFL calls for an extension of benefits to at least 50 weeks for workers in all regions. And this is a modest proposal; in the U.S. workers can get up to 99 weeks of benefits."

"Yet the Mowat Centre rejects extending benefit duration as 'a disincentive to find work' and instead suggests those who have been supporting themselves on already modest EI benefits should turn to a Pay Day Loan scheme when they run out of EI-it's outrageous."

According to Ryan, workers who paid EI contributions but did not receive benefits tend to be those in part-time, irregular employment-the very jobs associated with low wages. "Putting such workers at risk of incurring additional 'jobseekers' debt will only undermine their economic circumstances-even if they get a decent job down the road."

The solution, says Ryan, is to reduce the entrance requirement to a single national rate of 360 hours to better reflect the reality of today's labour market, where non-standard workers comprise more than one-third of the workforce. At present, EI requires a range between 420 to 700 hours to qualify.

Employment Insurance Task Force was convened by the Mowat Centre, an applied public policy research centre located in the University of Toronto.

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