Canada’s Unemployment RateFor decades prior to the 1981-82 recession, the national unemploymentrates of Canada and the United States had been nearly identical. Since then, apersistent ;unemployment rate gap; has emerged. Throughout most of the 1980s,Canada’s unemployment rate has consistently been about 2 percentage pointshigher than in the United States. The gap developed in spite of very similareconomic performances across the two countries: the growth rate of real percapita incomes has been virtually identical since 1976.
However, now, well intothe 90s, the gap has widened much more significantly. In the last five years,the United States average has actually fallen from 6. 7% to 6. 5%, with a currentrate of 5. 2%, while the Canadian rate has and still remains at 9.
4%, with acurrent rate of 9. 7%. This substantial difference in Canada’s unemployment ratecan be attributed mostly to the safety net which the government provides,including generous payments of unemployment insurance and other social services;but also to the high payroll taxes; and the under performing Canadian economy. There is no single reason for the persistent gap in the unemployment rates ofCanada and the U.
S. , but rather a combination of the above factors. ;No society can be flourishing and happy, of which the far greater partof the members are poor and miserable. ; (Adam Smith) This is the theory behindthe creation of social services such as unemployment insurance and welfarepayments in many countries. The Canadian government provides a substantial;social safety net; for its population.
At first, this seems like a fair andproper thing to do, as it is in the best interests of society as a whole. However, when this generosity is taken advantage of by undeserving recipients,problems and controversy arise. The problem of abuse of Canadian social serviceshas become prominent in 1996. The general consensus of organizations such as theFraser Institute and the OECD, is that Canada’s generous social safety net is adisincentive to work, which leads to dependence on the government, thusresulting in increased unemployment. By comparing the social benefits providedfor Canadians and Americans, the cause of this gap in the unemployment ratebecomes apparent.
In general, the social benefits provided for Canadians are incrediblygenerous, and unregulated in comparison to those of the U. S. , resulting in adependency on them and creating a disincentive to work. Unemployment insuranceis a means of protecting workers who are out of work and looking for employment.
The unemployed workers receive cash payments, usually each week for a limitedperiod of time. Unemployment insurance is financed by the combination ofemployer and employee contributions, of which the employer contribution (a formof payroll tax) is slightly higher. Canada currently spends 70% as much on U. I.
as the United States, in spite of the fact that the total U. S. labour force isabout 11 times the size of Canada’s. There are two principal differencesbetween the two U. I. systems.
The first is that unemployment insurance isoperated at a state level in the United States. This means that the statesadminister the insurance system and determine the benefits, while maintainingcertain standards according to federal law. The second is that in most cases theinsurance premium employers must pay is related to the extent to which theiremployees use the system. In other words, there is an explicit insurance, orexperience rating feature built into the U. S.
system. In Canada the oppositeoccurs, with no penalty for employers who overuse the system. Unemploymentinsurance is regulated by the federal government, it applies in all provincesand territories, and covers about 97% of all Canadian workers. Due to thedifferences between the two systems, one can understand how Canadians have amore generous system and an easier time in claiming benefits. The differences in the requirements for obtaining unemployment insurance,also result in a more generous distribution of benefits in Canada. Over theyears, there have been many changes in these requirements in the U.
S. , making itless accessible and desirable for the people. It is only recently that similarchanges have been undertaken in the Canadian system. In comparing the laws andregulations of the two systems, it becomes apparent why Canadians have a greaterdependence on unemployment insurance. The system of U.
I. distribution in theU. S. requires workers of all states to be available, and able, to work to beeligible for the benefits. Most states also require the recipients to activelyseek work. Although the rules are the same in Canada, the government .