Earnings Supplement Project, Phase III

ESP_Final report coverThe Earnings Supplement Project (ESP) was originally funded by the former Human Resources Development Canada (HRDC) in 1994 as a demonstration project to test the effectiveness of a financial incentive in hastening re-employment. It subsequently grew into a broader program of research that examined patterns of work and reliance on Employment Insurance (EI) benefits in order to better understand the barriers that some workers face in securing year-round employment. ESP came to an end in March 2004 with the publication of Understanding Employment Insurance Claim Patterns: Final Report of the Earnings Supplement Project by the Social Research and Demonstration Corporation (SRDC).

Phase I: Testing an Employment Incentive

Between March 1995 and June 1996 ESP enrolled over 11,000 EI claimants in a randomized trial to test the use of temporary payments to encourage re-employment. Participants were either displaced workers or frequent EI claimants. Participants in the program group who returned to work quickly and who took jobs that paid less than the job from which they were laid off could receive an earnings supplement that would make up 75 per cent of the earnings loss for up to two years. ESP was found to have a small (4.4 percentage points at peak) and short-lived impact on the re-employment of displaced workers (more information is available in the SRDC publication Testing a Re-employment Incentive for Displaced Workers: The Earnings Supplement Project). The results in the frequent claimants component of ESP were more disappointing. Fewer than half of eligible EI frequent claimants were willing to volunteer for the project, and only four per cent of volunteers received a supplement payment (more information is available in the SRDC publication A Financial Incentive to Encourage Employment Among Repeat Users of Employment Insurance: The Earnings Supplement Project).

Phase II: Investigating Frequent Reliance on EI

To obtain information about the characteristics of workers who frequently rely on EI benefits and to help better understand their needs and motivations, Statistics Canada was commissioned to conduct the Survey on the Repeat Use of Employment Insurance (SRUEI) in 1998. The data collected in that survey was summarized in the SRDC publication The Frequent Use of Unemployment Insurance in Canada: The Earnings Supplement Project. The data from the SRUEI also provided the basis for a series of studies by Canadian academics (published by SRDC as Essays on the Repeat Use of Unemployment Insurance: The Earnings Supplement Project). One of the key insights stemming from this research is the finding that the conventional definition of only two types of EI claimants — frequent and occasional — is an oversimplification. In reality, there are a variety of different interactions between claimants’ work histories and EI reliance. This heterogeneity makes the task of analyzing which policy options would best meet the needs of these workers even more complex.

Phase III: Formulating Policy Responses

Drawing on new research on Employment Insurance (EI) published by SRDC in a series of working papers, the final ESP report Understanding Employment Insurance Claim Patterns: Final Report of the Earnings Supplement Project suggests potential directions for improving the program and identifies alternative options that could make EI more responsive to the realities of today’s labour market. Rather than focusing policy attention on frequent reliance on EI benefits, the report concludes that it would be more appropriate to place priority on finding better ways of addressing the barriers to stable full-year employment that many workers face, whether they claim EI benefits or not.

Funding

ESP was funded by Human Resources Development Canada (HRDC) and came to an end on March 31, 2004.