Unemployment Compensation and Adjustment Assistance for Displaced Workers: Policy Options for Canada

This paper examines the role of EI in providing support to “displaced workers,†those who permanently lose their jobs because of changing circumstances. Adjusting to change benefits Canadians as a whole. However, some workers suffer much more from job loss than do others. Those who have held their jobs for an extended period experience substantial earnings losses, while those who have been employed for brief periods experience small losses. Like other job losers, long-tenure displaced workers experience earnings losses due to reduced income during unemployment following displacement. However, unlike other job losers, many long-tenure displaced workers become re-employed at significantly lower wages. EI does not take into account these consequences of job loss. Long-tenure displaced workers constitute a small minority of job losers. My analysis indicates that job losers with 5 or more years of job tenure constitute about 5% of unemployment and 15-20% of permanent job losers. The paper makes several policy recommendations. Some address gaps in research and knowledge, while others recommend enhanced EI benefits for those who suffer greatly from job loss. Since most loss from displacement occurs after reemployment, wage insurance seems the most promising approach for insuring against large losses.