OTTAWA - The worst recession in decades is hitting Canadians at a time when they are least able to cope, says a report released as new data shows more workers are having to rely on employment insurance.
The Canadian Centre for Policy Alternatives says the combination of historically low savings rates and record household debt leaves Canadians vulnerable to bankruptcy if they lose their jobs.
And the safety net they counted on - employment insurance - has been so gutted that it covers fewer than half the jobless and pays significantly fewer benefits than it did during the recessions of the early 1980s and 1990s.
"Not since the Great Depression have unemployed Canadians been so exposed to the full force of recession and economic calamity," says the left-leaning think tank in a report to be released Wednesday.
On Tuesday, Statistics Canada reported the number of Canadians collecting jobless benefits jumped 7.8 per cent to 610,200 in February, the highest level in more than 10 years, reflecting the massive job losses of recent months.
Since October, 357,000 overall jobs and 387,000 full-time jobs have disappeared in Canada. But even so, only about 43 per cent of the 1.4 million Canadians currently unemployed are collecting benefits.
That is a far cry from the about 75 per cent of jobless who got benefits during the 1981-82 slump, or the 83 per cent eligible in the early '90s before Ottawa tightened qualifying criteria.
As well, those that do collect benefits receive about $100 less a week in inflation-adjusted dollars today than they would have in the early 1970s, the report states.
Compounding the issue is that Canadians are no longer the savers they once were and have little to fall back on if they lose their jobs, the report says.
Last year, the average savings rate was 3.7 per cent of income, compared to 13 per cent in 1990 and 20 per cent in 1981. And household debt has never been this high, 140 per cent of disposable income.
"Today's families are starting with much more stuff," the report states, "but their exposure to economic risk and free-fall is disarmingly high." The report points out that personal bankruptcies jumped 22 per cent in January.
Report author Armine Yalnizyan, a senior economist with the Ottawa-based think tank, said many more bankruptcies will result as layoffs mount.
Comparing the past two recessions, Yalnizyan noted that it took several years for employment to return to pre-recession levels even after growth had resumed.
"It's a disaster in the making that is utterly preventable," she said.
Yalnizyan said government could help the situation by relaxing the rules to allow more laid off workers to qualify for EI and by upping benefits.
During past recessions, giving the unemployed money to spend not only helped those in most impacted, but helped avert even more serious downturns because the benefits boosted spending, she argued.
"The number one priority of government should be to get to the floor, to stop the decline, and one of the ways to do that is by supporting purchasing power, so that the pull-back in spending doesn't become another reason for tumbling GDP (gross domestic product."
All three opposition parties have called on the government to improve the EI system, calling for a reduction in the number of hours needed to qualify and better benefits.
NDP Leader Jack Layton said of the 357,000 Canadians who have lost their jobs since the recession began in October, only 100,000 are collecting benefits.
"Something is wrong with this system and it should be fixed," he said.
But in the House of Commons, Prime Minister Stephen Harper argued the system was working, covering a majority of those who pay into it.
He added that Ottawa has extended the maximum benefits period by five weeks, and said some recently laid off workers may not be collecting yet because they received severance packages.
