The Unemployment Insurance Act of 1940 and its Role in Minimizing Unemployment in Canada

Content

Introduction

The early unemployment policy

The First World War and programs related to unemployment

Unemployment policy and the great depression

The establishment of national unemployment insurance

The impact of employment insurance scheme on Canadian Lives

Conclusion

References

Introduction

Unemployment insurance act of 1940, which was latter renamed as the employment insurance of 1996, is a benefit that government offers to people during the period of unemployment. In Canada, the financing of unemployment insurance scheme is undertaken by the contribution from the federal government, employees and the employers. The aim of the scheme is to offer financial support to people who have lost their jobs as a result of economic conditions that are beyond their personal interventions and is aimed at reducing any suffering and negative economic consequence that accompany job losses.

In Canada, the unemployment insurance act of 1940 was the aftermath of the great depression that affected the economies of many countries and is a major pillar of the modern social programs that the Canadian government has adopted. The insurance scheme that was initiated in 1940 has been undergoing major evolution, both in the structural and philosophical perspectives. Furthermore, the debate over the social program has never abated since its creation and thus, it is a major contemporary political issue in Canada (Canada 1997).

The early unemployment policy

Before the employment insurance program was set in 1940, the approach of unemployment in Canada was portrayed by several factors. The first is that the government did not consider unemployment as a priority. Unemployment was a more recent feature in the history of Canada. Basically, permanent reserves of labor was not available in the Canada colonies till in 1840s and it was during the 1870s depression that Canada faced widespread unemployment that left a multitude o Canadian populace destitute and Jobless. Even with the existence of the unemployment problem, a case of joblessness were viewed as local and individual issues and was considered as individual problem rather than a general social issue that required state intervention. The assistance and aid offered to unemployment was mainly undertaken by churches, municipalities and charitable groups and the federal and provincial governments came in when it had reached emergency level (Finnie &Irvine, 2011).

Secondly, there was uncertainty on the constitutionality of the assistance to unemployment. The British North America act, which was the basis of the written Canadian constitution, was not open on the activities that were related with the modern welfare state creating uncertainty on any assistance on some social programs such as unemployment. Although employment was considered as a social problem that called for the intervention of the state, it was not vivid which level of the government was responsible, either provincial or federal (Canada, 1994).

Whereas unemployment policy was non existent in Canada and even extended to early 1900s, other countries had began to consider it as a social problem. Countries such as Denmark and Britain had started social programs that were aimed to temporarily provide financial help to people who had become jobless (Canada 1997).

The First World War and programs related to unemployment

The first global war was central in the existence of unemployment in Canada and the formation of programs to address unemployment .After the First World War, Canada encountered challenges of integrating the returning soldiers back into the Canadian society in life in general while simultaneously handling an economic recession. As a reaction to the high level of unemployment, the Canadian federal government enacted the 1918 Employment Officers Co-ordination Act, which entailed sharing of cost between federal and provincial government, while the central government had the biggest responsibility of offering subsidies to provincial employment schemes. Furthermore, the federal government came up with the department of Employment services, that was responsible for providing advice and data related to employment. The creation of the department was the first concrete step in the change of the view of the Canadian government towards unemployment as a national and permanent issue in Canada (Lin, 1998).

The change on the Government’s view on unemployment set ground for other events that were related to employment programs. In 1919, the Canadian government ratified a draft document at the International labor conference that recommended the adoption of public employment insurance. In the same year and on the basis of political arena, the liberal party of Canada approved the public unemployment insurance as an important social program in its first national convention. Also in the same year, a Royal Commission on Industrial Relation was appointed by the federal government. The commission recommended an array of labor reforms that entailed the execution of national social insurance scheme for employees who had become jobless as a result of conditions that were not of their own making (Peeble, n.d).

Although the view of unemployment as a national issue had began to undergo changes, the structure of the actual programs and policies mirrored traditional approaches that could not withstand the test of time. With the deepening of the economic recession, which was a major economic factor that affected the labor market, the Canadian federal government was compelled to offer financial assistance to municipalities so as to support relied costs that were related to unemployment or job losses. However, upon the end of the recession in mid 1920s, the Canadian government resolved to terminate the program and the funding for the employment services were reduced significantly. The justification for the reduced funding was premised on the fact that during the normal economic periods, unemployment was considered as more of local issues and thus, the provincial and federal governments had minimal roles (McQuarrie, 2003).

Unemployment policy and the great depression

An important economic condition that had a big influence on the employment policy was the 1930s great depression. During this period, the unemployment insurance reemerged. The promise to address unemployment through federal action, the conservative government as elected into office and was then headed by R.B. Bennett. At first, the federal government followed the traditional model of giving the municipality’s temporary emergency funding to offer relief Aid, but as time went by, the conservative government adopted the policy that encouraged the scheme for public unemployment insurance, which was to be provided and administered nationally by the federal government (Lin, 1998).

In 1935, Employment and social insurance act was passed by the conservative government and thus, it set up the national unemployment scheme. The model of the new scheme was based on the British approach that entailed flat-rate financial benefits for those who had lost their jobs and the contributions were made by the state, employers and the workers. The eligibility of benefiting from the scheme was limited and excluded low skilled and seasonal employees (Canada, 1994).

Still on the political effect on the unemployment insurance scheme, the election of the liberal government discontinues its implementation and based it on the constitutional ground and based on the concept that the scheme was under the jurisdiction of provincial government and thus, the Canadian federal government lacked the power of imposing its own scheme unilaterally. The withdrawal of the scheme was further compounded by the rulings of Supreme Court of Canada, which was in turn affirmed the Judicial Committee of the Privy Council in London and this struck out the legislation. In this case, an amendment of the constitution was required if the federal government was to come up with its own scheme and transfer its jurisdiction from provincial governments (Peeble, n.d).

The establishment of national unemployment insurance

Towards the end of 1930s, the Canadian federal government, on the basis of the constitution, started negotiations with provincial governments to expand its jurisdiction and power in employment insurance scheme. Prime minister King got immense consent from the provinces and in 1940,the amendment to the British North American Act was passed by the British parliament thus recognizing and accepting unemployment insurance among an array of federal powers. The passing of this amendment changed the views of unemployment by the Canadian government and among the Canadian populace, which increasingly started to be viewed as involuntary and social phenomenon that required state intervention. In August 1940, unemployment insurance act was enacted by the Canadian federal government, setting up a national public system through which the execution of the insurance scheme could be realized effectively. The new scheme was funded through the contribution of the federal government, employers and the employees. The social program was administered by the commission that comprised of 3 commissioners appointed by the federal commission and its responsibility was to enforce the act. Since then, the employment insurance act has been subjected to numerous amendments as the trends in politics, economy and labor market change with time (Finnie &Irvine, 2011).

The impact of employment insurance scheme on Canadian Lives

The insurance employment scheme has been proven as a major component that has enhanced economic safety offered by the Canadian federal government to the citizens. There is little disagreement, in principle that it has promoted income security among the Canadians, which has further translated in social stability. This has been the case with economic crisis especially the 2007 financial crisis where it played a great role in assisting the unemployed people get the basic finances that could drive their lives white bout of employment. What can be learnt is that the employment social employment scheme has been instrumental in reducing the level of despair and hopelessness that accompany loss of jobs and has thus assisted Canada to build stable political, economical and social environments. However, the employment policy has faced some criticism with some critics stating that it encourages unemployment especially where the unemployed may seek for benefit rather than look for off season jobs (Organization For Economic Co-operation and Development, 2005).

Conclusion

The unemployment insurance act of 1940 has played a key role in minimizing the negative impacts of unemployment in Canada. It has been instrumental in creating a stable political, economic and social stability in the country where the jobless are given a chance of some financial relief to enable them to cope during the period that they are under unemployment.

References

Canada. (1994). Improving social security in Canada: From Unemployment Insurance to Employment Insurance: a supplementary paper. Ottawa: Published by the Authority of the Minister of Human Resources Development.

Canada. (1997). Employment Insurance: Regular benefits. Hull, Quebec: Human Resources Development Canada.

Finnie, R., & Irvine, I. (2011). The Redistributional Impact of Canada's Employment Insurance Program, 1992–2002. Canadian Public Policy, 37, 2, 201-218.

Lin, Z.(1998). “Employment Insurance in Canada: Recent Trends and Policy Changes.” Canadian Tax Journal. Vol. 46, No. 1 .

McQuarrie, F. A. E. (2003). Industrial relations in Canada. Etobicoke, Ont: J. Wiley.

Organisation for Economic Co-operation and Development. (2005). Canada. Paris, France: OECD.

Peebles, A. (n.d.). Canada's unemployment insurance act and the Canadian employer. Boston: McGraw Hills.