Canada’s primary social safety net, employment insurance (EI), is widely recognized to need significant reforms. It has remained largely unchanged through the labour market’s decades-long
shift away from full-time permanent work. It covers a shrinking portion of the Canadian workforce and is virtually inaccessible to Canada’s most vulnerable workers.
The COVID-19 pandemic laid bare many of EI’s shortcomings and the federal government is looking to modernize the program and make it available to more people.
Updating labour laws to address worker misclassification would help fill gaps in EI by bringing more workers under the program, while a separate emergency support program could help those who
still fall through the cracks.
One group left behind by EI who would be helped by this solution are low-income solo self-employed and gig workers. These workers are not eligible for regular EI benefits.
They are a growing subset of the labour market who experience significant precarious work – poorly paid, unstable and unprotected. Solo self-employed and gig workers make up 6.6 per cent of
Canada’s total workforce and are growing as a proportion of the self-employed population. They now make up close to three-quarters of all self-employed workers.
As a group, these workers are exposed to similar precarity; however, their employment experiences are different.
Some have no obvious employer, while others work as dependent contractors and rely almost entirely on one or two paying companies.
Some may be misclassified, meaning their employer has hired them as a self-employed worker or a contractor to avoid labour standards. Uber and Amazon have been accused of misclassifying
workers; however, this phenomenon exists across many industries.
Varied working relationships matter when considering who can receive income support. Those whose circumstances more closely reflect the employer-employee model may be more easily brought
under EI, while those who are truly self-employed may require more creative solutions.
Workers with short-term piecemeal contracts typically have little certainty that their employment will continue, little control over their working conditions and wages, low pay and poor levels of
protection (compared with employees who benefit from group insurance schemes, for example).
Many turn to self-employed or gig work to make ends meet because of barriers or challenges in the standard labour market, including insufficient income and job losses.
Others have caregiver responsibilities that preclude full-time work. Women, immigrants and those with lower levels of education are overrepresented in this group, which has some of the lowest
incomes in Canada. The median annual income was $15,400 for solo self-employed workers in 2022.
Self-employed and gig workers experience fluctuating incomes because of short-term contracts, multiple income streams and constantly changing pay rates. While they have flexibility over when
they work, they can experience “income shocks” beyond their control because of external events or changing economic conditions.
At the same time, already-low earnings make them less able to withstand sudden and further drops in their livelihoods. This volatility makes a social safety net crucial, yet EI doesn’t cover these
workers in these circumstances.
Fitting self-employed and gig workers into the EI model
Debates on including self-employed workers under EI are long-standing. The program operates on an insurance-based model that relies on strict eligibility criteria and premiums from workers and
employers. It is designed to cover job losses for standard employees; self-employed workers don’t fit into this framework.
A standard employee’s reason for making an EI claim can be verified by an employer, but no similar confirmation exists for self-employed workers. Including self-employed workers under EI could
expose the program to the risk that some would wrongly claim benefits, which would jeopardize the safety net’s financial sustainability.
The administrative challenges of including non-standard workers under EI would be sizable. Calculating a normal flow of earnings – needed to determine benefit rates – would prove difficult for
workers with volatile incomes. Determining triggers for coverage also would be challenging because workers could experience a significant income reduction, but not be laid off like a traditional
employee.
Some self-employed workers – for example, fishers, hairdressers, barbers and taxi drivers – already receive special or regular benefits. But without a rethink of traditional EI, proposed solutions to fit
all self-employed and gig workers are likely to be complex to administer and to fall short of income support needs.
