Why is Canada’s Employment Insurance system failing an entire generation, and why are young workers paying into a safety net that rarely covers them?
In this episode of Classonomics, Sabrina Maddeaux and Mike Moffatt examine how Canada’s outdated Employment Insurance model leaves young professionals and gig workers behind during record spikes in youth unemployment. They explore why current rules penalize urban renters, how maximum benefits fall short of basic living costs, and what practical policy reforms could fix the system for the modern workforce.
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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.
Sabrina Maddeaux: There’s a line on your pay stub called EI. You’ve probably been paying into it since your first summer job, and you’ve probably never thought too hard about it, because the entire point of insurance is that you get to ignore it until the day you really need it. Today, we’re talking about what happens when a whole generation goes to make that claim and finds out the policy doesn’t cover them, especially during a historic unemployment spike.
Canada’s employment insurance system was built for a way of working that has largely stopped existing, and the people falling through the cracks in this policy are overwhelmingly young.
Mike, before we get into who EI misses, give us a quick history. When was this thing actually built, and what did the labour market look like when it was designed?
Mike Moffatt: This is a time for one of “Professor Mike’s” famous history lessons, but I promise I’m going to keep this short.
Canada got its first national unemployment insurance all the way back in 1940. There was a big rebuild of the program in 1996. That’s when it switched its name from unemployment insurance to employment insurance, and it switched from counting weeks of work to counting hours of work.
EI was built under the assumptions of long job tenures, full-time work as the default, layoffs arriving in waves from factories and resource towns [when there was] a clean line between who was an employee and who was a business owner. The system never really worked well for everyone.
Back in the 1990s, I had a series of summer jobs. I was paying into EI all the time, and I was never eligible to collect, and that really bothered me at the time. I could understand why young people would be upset. But nowadays we have an economy that has a lot more gig work, a lot more blurred lines between who’s an employee and who’s an independent contractor. It’s made all of these gaps even worse.
Sabrina Maddeaux: Walk me through the mechanics then. If I were to lose my job tomorrow, what actually determines whether I qualify?
Mike Moffatt: Like most things in government, it’s actually more complicated than it should be.
The first thing is, it depends on the local unemployment rate in your region. In an odd but real way, it’s determined by your postal code - where you live. The higher the unemployment rate in a region, the fewer hours you need to qualify.
The range of hours is somewhere between 420 and 700 hours. If you clear that bar and are eligible, you get about 55% of your average insurable weekly earnings, capped at $729 a week, with that amount changing from year to year. How many weeks of coverage you get will also run off of your hours and your regional rate, anywhere from 14 to 45 weeks of coverage.
Sabrina Maddeaux: Right. That seems pretty unfair, but that regional map was drawn around seasonal and resource economies. A young worker in Toronto or Calgary is on the wrong side of that line now. That was never drawn with them in mind at all. Now the cities with the entry-level jobs are also the cities with the highest rents, and they’re also the ones where you need the most hours to qualify.
That’s the double whammy. Every dial seems to be set against that same young professional, and nobody picks their region. There’s no way to plan around it. Most people only find out while they’re on the phone with Service Canada, which is the worst possible moment to find out that you don’t qualify.
That regional design did make sense when unemployment showed up as a regional problem. What we have right now is a national crisis concentrated by age rather than geography. So let me put a number on it: in a given year, of everybody who is unemployed in Canada, how many actually end up collecting regular EI?
Mike Moffatt: It ends up being fewer than most people assume.
StatCan surveys this every year; the latest data is from 2024. Back then, an average of 1.4 million Canadians were unemployed at some point in the year. Once you filter in who paid into the EI system, who had a valid job separation, who had enough hours, and so on, only about half of those folks were actually eligible for regular benefits.
The split by job type is a tell - over 90% of workers who lost a full-time job were eligible for EI, but for part-time workers, it was just over 40%. That situation I described as a student in the 1990s- about young workers paying into the EI system but being ineligible to collect - is pretty common because those are your part-time workers, with roughly half of young workers aged 15 to 24 being ineligible to collect anything.
Sabrina, you’ve been writing about this job market for a while. If you take those numbers that I quoted and couple them with a youth unemployment rate that last year was above 14%, what does that mix look like?
Sabrina Maddeaux: The dominant framing is still that young people aren’t trying hard enough. Meanwhile, that insurance program has quietly written them out of the policy entirely. Stacking those two numbers you gave us, fewer than half of unemployed young people had paid in at all, and of the ones who did, only half cleared the hours bar.
The share of unemployed young Canadians who can actually collect regular EI lands somewhere around 1 in 5, which is dismal. You add the timing on top of that, which is the real insult: youth eligibility has fallen two years running at the same moment youth unemployment climbed to its highest level since 2010 outside of the pandemic years. That net has loosened as more people started falling.
That’s caused a lot of pain, and it’s nowhere in our public policy conversation. This one’s visible to people who get hurt by it in a way that a lot of policy failures aren’t. It’s a line item on every pay stub. People can see exactly what they paid, and when they don’t qualify, it just adds insult to injury.
There’s a whole other group that gets missed even more completely. Where do gig workers and contractors sit in all of this?
Mike Moffatt: As we said from the outset, this system was not designed for them, but it is something that the government is aware of. It’s kind of bolted on this side EI onto main EI, where self-employed workers can opt in, but only for special benefits: maternity, parental, sickness, caregiving, that kind of thing.
Regular benefits for lost work are just unavailable at any price. We’re talking about 3 million self-employed workers across Canada. It’s a massive population, and about a quarter of those 3 million would be considered in the gig economy. Gig economy workers obviously skew much younger than the rest of the population. What that means is that EI doesn’t work nearly as well for the young as it does for the old.
Sabrina Maddeaux: There’s a whole other layer on top of that where it’s even old school to say there’s a divide between full-time employed workers and gig workers. Now you have a lot of young people who might have that full-time job, but a good third of their income comes from having that second gig job or extra contracts, and there’s no coverage if they lose that part of their income.
Here’s the scenario I keep running into with people my age, and I want you to explain the mechanics to me: somebody who works for ten years, pays premiums the entire time, gets laid off, and collects. They then pick up eight months of contract work, and then that ends. What happens to all of those hours they banked?
Mike Moffatt: This is something that almost nobody knows about until it happens to them, and it’s incredibly complex.
The hours that count come from your qualifying period. This qualifying period is the shorter of two things: either the 52 weeks before your claim or the stretch since your last claim started. Anything that happened before that window - that is, eight years before - is all invisible, as if it never existed.
There’s a version of this that’s even more common right now that I think is even worse. Let’s say you get laid off, and it takes you six months to find full-time work. You get hired, but three months into that new job, it ends, and you get laid off.
You rack up about 500 insurable hours on that job, which isn’t enough for you to qualify in much of the country, so you’re not going to be getting EI, and you’re now out of luck. You’re staring down another search that will probably run six months with no floor underneath it all.
You’re penalized if you take that job for three months if it’s a little bit rickety; you might have been better off just staying on EI. The program effectively penalizes you for how long your last job search took, which is the one variable you have the least control over, and disincentivizes you from taking another job unless that job looks very secure.
Sabrina Maddeaux: That’s wild, especially in an economy where layoffs are so unpredictable right now. It’s a very real scenario that people can find another job, and then that job disappears very quickly.
We know that job searches in general are taking longer and longer these days. It’s not just the unemployment rate for young people that’s gone up; it’s the long-term unemployment rate - unemployment for longer than six months for young people - that’s also risen really quickly.
Then there’s the other end of it: say you do actually qualify, what happens when the benefits simply run out, but maybe you’re still looking because of that longer-term unemployment?
Mike Moffatt: That’s a real problem because those regular benefits run from about 14 to 45 weeks depending on several factors. Given the state of the economy, particularly for young people, it can take longer than that to find a job. In the last year, we have data that about a third of claimants used up their entire entitlement before finding work.
They’re basically running out the clock and then receiving nothing. Right now, about a quarter of unemployed Canadians have been looking for work for at least 27 weeks, which is up substantially from a couple of years ago. But there haven’t been any changes to EI in recent years to reflect that it’s taking longer for people to find work than it used to.
Sabrina Maddeaux: Which brings me to the tariff response, because Ottawa did move on some EI patches, and they moved fast. But every one of those measures looks like it’s aimed at a mass layoff from a factory that’s about to happen. Could you walk me through what those measures were? And what about the people who are already out?
I think about how trade uncertainty is causing companies, even if they’re not laying people off, to pause hiring. That’s a big impact I’ve barely seen talked about. What about all these young people who are already unemployed, and now because of the trade war, they’re having a much harder time finding work and probably don’t have a prospect of finding it in some fields in the near future?
Mike Moffatt: There have been some additional measures, and they are real. That one-week unpaid waiting period has been waived because of the trade war, so that certainly helps. Severance stopped being deducted, so you can collect while holding on to your package, so that’s good. Regional rates were bumped up a point on paper, which lowers the number of hours you need.
All of those are good things, but they’re all marginal. A big headline piece basically dominated all of those: they added up to 20 extra weeks of EI collection for so-called long-tenured workers. To qualify, you have to have paid at least 30% of the maximum annual premium in seven of the last ten years, and you have to have collected fewer than 36 weeks of regular benefits in the last three.
If you combine those, what that basically does is exclude almost everybody under the age of 30, or anyone who’s suffered sustained job losses recently, because they’re not going to meet the length criteria or the under 36 weeks criteria. All of that’s a little bit puzzling.
Ottawa ran two full rounds of EI modernization consultations back in 2021–2022 looking at the issues that gig workers and others have. Both of those reports were published, but then there were no major restructurings that followed. We got another round of temporary measures that were designed more for older, stable workers and not for younger gig workers.
I feel a little embarrassed because I’m telling Sabrina things she already knows and, in fact, knows better than I do. I would love you to walk me through the actual politics of this. Why do we keep seeing these quick patches instead of serious reform?
Sabrina Maddeaux: Patches that seem to always favour older voters rather than younger ones. Shocking these days, right? But a patch is cheap, and a rebuild is a fight, and that’s what it comes down to. Temporary measures get announced at a podium, get some nice headlines, and then expire on their own, and nobody has to defend them at the next election.
Rewriting the entrance rules means picking a fight with every region and industry that does well under the current formula. Also, a fight between demographics, especially those older voters who still have a very hard time understanding the realities facing younger workers these days, both in terms of the employment situation and cost of living. Of course, there’s still that stigma that persists that if you’re unemployed, you’re just not looking hard enough and it’s your fault, even though that’s really not the reality at all, especially these days in this current economy.
The books make it worse. The EI operating account was carrying a deficit of about $17.2 billion at the end of 2025, and premiums are set specifically to work that off by 2032. The default setting of the whole system is actually set against widening access.
The other issue is that the people losing out have no lobby. Seasonal industries in Atlantic Canada, for example, have decades of organized advocacy behind them, and that shows up in the formula. Meanwhile, a 24-year-old on rolling contracts has nobody in the room when the regulations get drafted. A lot of politicians think that person’s not going to vote or donate anyway.
Then the pattern repeats: CERB, wildfire pilots, tariff measures. Every crisis gets its own temporary workaround, and each one is another piece of evidence that the permanent program can’t do the job. If we’re having to patch it this often, that says it’s broken at a systemic level. But at some point, the workarounds are the system.
I’d also like to talk about the size of the EI check, because I think a lot of people assume EI replaces something you could actually live on. Run the math against, let’s say, a Toronto rent for me.
Mike Moffatt: If we look again, the maximum you can collect in EI is about $729 a week. Put that in monthly terms, that’s about $3,150, but that’s considered taxable income, so that’s $3,150 before tax. When the average asking rent for a one-bedroom apartment in Toronto is about $2,200, you don’t have a lot left over after you’ve paid your rent and taxes on that $3,150. That’s assuming you’re getting the max, so there’s really not much left over for food and everything else.
That 55% replacement rate was set when housing took a much smaller bite out of a paycheck. That percentage has stayed put; the bite hasn’t.
It’s really tough to live off 55% of your income when housing costs are often 40%, 45%, or 50%. There’s a big squeeze there, and you really can’t make ends meet. It’s one of the reasons why we’ve seen a big increase in food bank usage in Toronto - because of that gap between EI and rent.
Sabrina Maddeaux: Costs are rising everywhere, not just housing. That’s assuming a young person is living on their own - they could have a young child. We keep talking about why young people don’t have families. What happens if you lose your job? How are you going to pay for anything when $3,150 a month before tax is against a $2,200 one-bedroom?
What if you have a larger place because you’re trying to raise a family or just had a child? That’s the program working exactly as designed for somebody who’s cleared every single hurdle and is living in a very specific circumstance. 55% of a wage that already lost the race against housing is 55% of a number that stopped being enough years ago.
This formula just assumes that your rent is a manageable slice of your pay. In Toronto and Vancouver, the reality is it’s actually more than half of your pay a lot of the time. People organize their whole lives around this: you stay in a job you should leave because a gap in your hours means there’s no floor underneath you.
A program meant to make the labour market more flexible ends up freezing people in place. When a check can’t cover the rent, all EI buys you is a slightly slower slide towards the same outcome: you lose the apartment in month four instead of month one.
So I’d like to get practical: if you were redesigning this, what actually changes? Give me the honest version, including the best arguments against.
Mike Moffatt: There are a lot of proposals out there. I’m going to choose a few that I’ve seen that make sense to me, and none of them are particularly radical—which I know is unusual for me. I’m not looking to blow up the system, but there are some tweaks we could do.
One is setting a national entrance requirement instead of this regional ladder that discriminates based on where people live, and setting that requirement lower. If we set it around 360 or 420 hours, more people would qualify, particularly younger people. When you widen that qualifying window, you can make it so that a decade of premiums counts towards something on your second claim if you have one. That would be the first area I would look at.
The second one is we really need to figure out what gig workers are and have a better system of classification, because right now they’re neither fish nor fowl. We need to have a bunch of reforms there to make sure those folks aren’t falling into the gap.
You asked me for honesty: the challenge on those first two things, particularly the first one, is that it’s going to cost more money. Where does that money come from? Which brings me to my third change: we probably have to change how EI is financed.
Right now, EI runs entirely on worker and employer premiums, and the fund is carrying a deficit, which means current premiums have to be used to pay down that deficit. The federal government could top up the system through general revenue instead of raising EI premiums - the same way the Old Age Security system is financed 100% through general revenue. We could put a little bit of general revenue into EI.
That may be necessary because EI premiums right now are a payroll tax, and the risk is that if you make the system more generous, you’re going to have to raise those premiums, and it may cause young workers not to be hired in the first place, simply because employers look at that and go, “Well, I can’t afford those premiums.”
Government is going to have to step in and finance some of this EI deficit and not put it all on the backs of young workers.
Sabrina Maddeaux: Those reforms make a lot of sense to me. Relatively small tweaks can make a massive difference; this doesn’t necessarily need to be a burn-it-all-down-and-build-it-up-from-scratch situation.
I also agree that there needs to still be robust protections in place so that people are being verified and we make sure it doesn’t have unintended consequences, like young workers not getting hired, choosing not to enter the workforce, or any inflationary impacts, which we saw some of with CERB.
The point is, with EI, the word “insurance” is doing a lot of work. It’s something you pay into and cannot claim, which really makes it, in many situations, a tax that’s just wearing a friendlier name. There’s a through-line here to everything we cover on The Missing Middle: a system designed around one generation’s working life, still running and still funded by a generation that works entirely differently and gets far less back out of it.
The cost when it comes to EI goes past just the money. What it erodes is the basic belief that paying into the system gets you something, and that having good faith in the institutions and the social contract will generally work out fairly in your favour. That idea holds up a lot of the rest of the social contract more broadly, and young Canadians keep watching it fall on their pay stubs every two weeks.
We know the fix is well understood. Those things you listed have been brought up by others over the years and haven’t been acted upon. Those two rounds of consultations just a few years ago already told the government what to do. What’s missing here is anyone willing to spend political capital on people who often don’t yet vote in the numbers that would make it worth their while.
Mike Moffatt: This is really one of those issues where young people really aren’t getting the support that they truly need.
Sabrina Maddeaux: So we’ll keep an eye on it. I hope that politicians do act, because there are a lot of young people in a lot of pain right now, and they deserve better from government.
Thank you, everyone, for watching and listening, and to our producer Meredith Martin and editor Sean Foreman.
Mike Moffatt: And if you have any thoughts or questions about the downsides of having a student job in the 1990s, please send us an email to [email protected].
Additional Reading/Listening that Helped Inform the Episode:
Statistics Canada - Labour Force Survey, July 2026 (youth unemployment 12.6%)
Service Canada - EI regular benefits eligibility and the qualifying period rule
Service Canada - EI benefit amount (55%, $729 weekly max, $68,900 MIE for 2026)
ESDC Digest of Benefit Entitlement Principles - long-tenured worker definition and 20 extra weeks
ESDC - EI Monitoring and Assessment Report 2024-25, Chapter 2 (34.4% entitlement exhaustion rate)
Canada Gazette SOR/2026-64 - 25.4% of unemployed were long-term unemployed in January 2026
Rentals.ca March 2026 Rent Report - Toronto one-bedroom asking rent $2,206
Statistics Canada - Experiences of self-employed workers in Canada, 2023
Canada Employment Insurance Commission - 2026 premium rate and $17.2B Operating Account deficit
ESDC - EI modernization consultations, Phase 2 What We Heard report (2022)
IRPP - Canada’s EI Is Once Again Failing Its Stress Test (benefit exhaustion as the coverage driver)
C.D. Howe Institute - Should gig workers be covered by the EI regime? (the case against)
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