HUMA Committee Meeting

37th PARLIAMENT, 3rd SESSION

Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities

EVIDENCE

CONTENTS

Tuesday, May 11, 2004

¿

0905

The Chair (Mrs. Judi Longfield (Whitby—Ajax, Lib.))

Ms. Judith Maxwell (President, Canadian Policy Research Networks)

¿

0910

¿

0915

¿

0920

The Chair

Mr. Rick Audas (Assistant Professor, Division of Community Health, Memorial University of Newfoundland)

¿

0925

The Chair

Ms. Carole Vincent (Senior Research Associate, Social Research and Demonstration Corporation)

The Chair

Ms. Carole Vincent

¿

0930

The Chair

Professor Alice Nakamura (Department of Finance and Management Science, University of Alberta School of Business)

¿

0935

Mr. Marcel Gagnon (Champlain, BQ)

The Chair

Prof. Alice Nakamura

¿

0940

Mr. Yvon Godin (Acadie—Bathurst, NDP)

The Chair

Mr. Yvon Godin

The Chair

Mr. Yvon Godin

The Chair

Prof. Alice Nakamura

¿

0945

The Chair

Mr. David Gray (Associate Professor of economics, Department of economics, University of Ottawa)

¿

0950

¿

0955

The Chair

Mr. David Gray

The Chair

Mr. Marcel Gagnon

À

1000

Mr. David Gray

À

1005

The Chair

Mr. David Gray

Mr. Marcel Gagnon

Ms. Carole Vincent

Mr. Marcel Gagnon

Ms. Carole Vincent

Mr. Marcel Gagnon

À

1010

Ms. Carole Vincent

Mr. Marcel Gagnon

Ms. Carole Vincent

Mr. Marcel Gagnon

Ms. Carole Vincent

Ms. Judith Maxwell

Mr. Marcel Gagnon

Ms. Judith Maxwell

Mr. Marcel Gagnon

Ms. Judith Maxwell

The Chair

Ms. Carole Vincent

À

1015

Mr. Marcel Gagnon

The Chair

Mr. Rick Audas

The Chair

Prof. Alice Nakamura

À

1020

The Chair

Mr. Eugène Bellemare (Ottawa—Orléans, Lib.)

À

1025

Prof. Alice Nakamura

Mr. Eugène Bellemare

Ms. Judith Maxwell

À

1030

The Chair

Mr. David Gray

À

1035

The Chair

Mr. Rick Audas

The Chair

Ms. Yolande Thibeault (Saint-Lambert, Lib.)

Mr. Marcel Gagnon

The Chair

Ms. Yolande Thibeault

À

1040

Ms. Judith Maxwell

À

1045

The Chair

Ms. Carole Vincent

The Chair

Prof. Alice Nakamura

À

1050

The Chair

Mr. Marcel Gagnon

À

1055

The Chair

Ms. Carole Vincent

Á

1100

The Chair

Ms. Judith Maxwell

The Chair

Mr. Rick Audas

The Chair

Prof. Alice Nakamura

The Chair

Mr. David Gray

Á

1105

The Chair

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CANADA

Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities

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NUMBER 011

l

3rd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, May 11, 2004

[Recorded by Electronic Apparatus]

¿  (0905)  

[English]

    The Chair (Mrs. Judi Longfield (Whitby—Ajax, Lib.)): Good morning, ladies and gentlemen. Welcome to the 11th meeting of the Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons With Disabilities.

    This morning we're continuing our review of Bill C-2. We did a very large review of Bill C-2 after the passage of the bill, and we're looking at other proposals for reform in employment insurance.

    We have a number of witnesses with us today. I'm going to start with Judith Maxwell, who is the president of the Canadian Policy Research Networks.

    Welcome to our committee. You've been here on other occasions, and so you know that we start with a brief presentation, and then it will be followed by rounds of questioning. Good morning, Ms. Maxwell, and welcome.

    Ms. Judith Maxwell (President, Canadian Policy Research Networks): Thank you very much, and thank you for your kind invitation.

[Translation]

    Ladies and gentlemen, I'm going to make my comments in English, but I can answer your questions in French.

[English]

    I took the committee seriously this morning, so I want to talk about beyond EI, perhaps in a way that goes beyond even the span of this committee. Given that there will soon be an election and a new mandate, it seems to me this is a time in the political cycle when we need to embrace new and bigger ideas.

    I don't feel that EI is the program that Canadians need for the 21st century. I think it responds to the social risks of the post-war era, which were primarily cyclical and seasonal unemployment, and it is not responding to the social risks that Canadians face today in their daily lives. These are new social risks that are driven by such things as global competition and the pressure to reduce wage costs, the shift to the service economy, new technologies, new family roles, and cutbacks in public services.

    The consequences of these transformations in the world economy and in our society lead to specific risks for Canadians that we haven't seen in recent years. The first is the low-wage economy. It seems strange that a rich country like Canada would actually be described as a low-wage economy, but I'll come back to that in a moment.

    The second social risk is insecure employment relationships. They are part-time, temporary, casual, and self-employment. Slowly and steadily since the mid-1970s, this has come to absorb a very substantial minority of our workers, somewhere between one-third and 45%. This insecure employment is something that is being created by employers in both the public and the private sectors, so it's endemic in our society.

    Third, there are growing skill requirements for good jobs, so if you want to earn a good living, you have to make a very significant investment.

    Finally, we still have persistent unemployment, but it's primarily structural and seasonal. Very little of it is what we would call cyclical, which was the post-war phenomenon.

    Now, the implications of these new risks are significant for a large proportion of our population. We have two million adults in this country who work for less than $10 an hour. If they get full-time, full-year employment, that means they're working for less than $21,000 a year. One person can survive on that, but a family of two or three, especially a family living in a city where housing is expensive, would be very hard-pressed to keep going with those earnings.

    Second, 2.4 million workers are now self-employed. Within the self-employed, over 50% are what we call “own account” workers--they're very much out on their own. Their average earnings accounted for only $16,000 each when we last...the last data I'm able to find are for 1997, because it requires a lot of special digging to get there. So yes, maybe it's gone up somewhat since 1997, but people who work for low wages don't have a lot of leverage in this labour market.

    Third, we have falling real minimum wages. They're down about 15% to 25% since 1975, depending on which province the person lives in. Consequently, we have very high rates of dependency on charity--food banks, panhandlers, homelessness, etc.--because the public sector social safety net is not looking after these people, and we have a very large unmet demand for low-cost, affordable housing for people who are working and doing their best to make ends meet but can't survive in the housing market conditions that exist not only in our big cities but also in many of our smaller communities.

¿  (0910)  

    Let's turn the coin over and look at the people. They have no access to training if they're employed, because part II benefits don't apply to people who have a job, and yet it's a very large sacrifice to give up your job in order to qualify. Also, the part II benefits don't reach out to marginalized people, newcomers to this country, disabled people--that sort of thing.

    Second, because both parents are working, or in lone-parent families the only parent is now required to work, there are no caregivers at home to look after the children or any adults who need care, and our child care and our home care systems are not robust enough to cover the gap that's left as all these people go out to work.

    A very high proportion of these workers don't have access to supplementary benefits to cover the cost of prescription drugs, dental care, and the insurances that most of us rely upon as a regular source of security in our lives.

    And finally, as I said before, they can't afford housing.

    In short, Madam Chair, the problem is no longer unemployment; the problem is employment without an adequate wage and without adequate community and public services to support people who earn low wages.

    There are millions of Canadians for whom there is no second chance. If you have a spell of bad luck or you make one mistake, like dropping out of school, or quitting a job, or failing to invest in your education, it's very difficult for people to get back into the mainstream by getting a chance through public supports to get further training or to get a second chance with employers. One mistake and you're out.

    That's my description of the problem, but I think I was supposed to be restricted to five minutes. I have some more that I would like to offer in terms of what to do, but if you like, I could stop here.

    The Chair: Carry on.

    Ms. Judith Maxwell: So what to do? We obviously still need the part I benefits for temporary and seasonal unemployment, but beyond part I, it seems to me that we need a whole new conception of social policy, based on new goals, new principles, a new way of thinking about the needs of Canadians, and a whole new policy mix, one that goes well beyond the classical definition of labour market policies.

    We have a lot of work going on at Canadian Policy Research Networks this year that will lead to much more specific recommendations than I can give you this morning, but what's clear is that employers, and governments, and probably communities, need to change their behaviour.

    Employers in Canada have allowed themselves to become locked into a low-wage, low-productivity equilibrium. They need incentives to create good jobs. And what we know from the case studies where employers are required to pay higher than very low wages, if I can put it that way, is that actually productivity improves, so I think we need to look at this as a win-win for both the employer and the employee.

    Second, governments need to rebalance their policy portfolio. We finally have income supplementation for families with children, but we do not have that for other adults who do not have children.

    We need to provide more services in the community, especially affordable housing, child care and home care, or we need to support one parent to stay home.

    We need to think about changing the minimum wage, and we need to create a new mechanism to deliver supplementary benefits so that the access to prescription drugs and that sort of thing is not tied to what kind of job you have. It should be tied to your rights as a citizen, more universally, or some other base that governments could use to deliver benefits.

¿  (0915)  

    I do think it's wrong to be attaching the important new programs that have been introduced, like parental leave and compassionate leave, to employment status because there are so many people who do not qualify.

    I think there are some core policy questions here. First of all, does Canada wish to become a high-productivity, high-wage country, and what kind of pathway forward would we carve in policy terms in order to support that new direction?

    We can ask some “what if” questions. We could say that maybe low wages aren't such a problem because we're so good at supplying affordable housing, child care, and home care that in fact a low wage becomes a sufficient wage to have a decent standard of living.

    Those are two different ways of looking at where we're going.

    Finally, Madam Chairman, just to look ahead, if we think about the next 10 years, the aging population will, we're told by most wise people, begin to generate even more skill shortages than we have now. We know, from looking at the recent past, that when labour supply is tight and unemployment rates are low, employers begin to behave differently.

    If we look at the imaginative things that hotel operators did in the United States in the late 1980s when it was so difficult for them to find workers to do the low-skill jobs in their operations, it just shows what employers can do even in a system where there's no requirement for them to do it.

    Second, in Alberta in the first part of this decade where labour markets were very tight, we began to see changing behaviour on the part of the retail industry in terms of programs for recruitment, and retention, and career development that far surpassed anything we would normally expect to see in that industry.

    In summary, the new policy challenge we have is to reinforce those new market pressures that are likely to emerge of tighter labour markets and skill shortages while finding the best policy mix for labour markets and for social policy generally.

    Thank you, Madam Chairman.

¿  (0920)  

    The Chair: Thank you very much.

    Our next presenter comes from the Memorial University of Newfoundland. Rick Audas is an assistant professor in the division of community health.

    Welcome, Rick.

    Mr. Rick Audas (Assistant Professor, Division of Community Health, Memorial University of Newfoundland): Thank you for the opportunity to appear before you.

    Employment insurance matters to families. It delivers important income support to Canadian workers and their families in times of real hardship. It allows families to maintain a sense a normalcy during what can be an exceptionally difficult period. My work has shown that youth in families experiencing unemployment tend to make better career choices if their parents are in receipt of EI. Others have shown that these families tend to be healthier and tend to stay together.

    EI matters to communities. In many parts of the country, particularly Atlantic Canada where I come from, EI plays a critical role in the viability of communities, and without it many would cease to exist.

    EI creates disincentives to labour market adjustment. A generous EI program has been shown to create a cycle of dependency and discourage individuals from making important labour market adjustments and reaching their full potential.

    This is a paradox for those interested in reforming EI. EI must strike a balance between providing necessary income support for those in need and not creating disincentives to making important labour market adjustments. In its current form, EI cannot resolve this paradox.

    Canadians need an EI system with multiple program components, one of which is insurance based, using sound insurance principles, including experience rating. EI needs to better reflect the multi-faceted ways in which it is used. It should be far more flexible in terms of its requirements to qualify and generosity while on claim, reflecting not just local labour market conditions but family and career circumstances.

    The ideal EI policy would deliver a generous income support to individuals who are at a life stage where opportunities to make major career changes are not practical and would ensure that families of these workers have sufficient financial resources to make good education and career choices.

    In contrast, EI should be less generous and less accessible to those who are more able to make important labour market changes, either through training or employment programs, migration, or changing career focus.

    EI can be more generous to individuals experiencing unemployment by extending the family supplement, particularly for single parents who have been shown to have difficulty making labour market adjustments and whose children are particularly vulnerable to a cycle of dependency.

    EI should be generous to workers who have invested their lives in occupations that are now becoming obsolete and for whom career changes are not viable.

    Families in particularly vulnerable positions should be treated with compassion. This may mean lowering the requirements to obtain EI, or reducing the hours required to qualify, or lowering or removing new entrance and/or re-entrance provisions.

    EI should be tougher on those expected to make labour market adjustments. Young Canadians, and particularly those without dependants, should have their benefits tied to participation in career-enhancing activities. These approaches have been widely utilized in many European countries, and they generally require youth to have a plan to prevent a long-term cycle of unemployment.

    The ultimate goal of EI is to provide financial support to those in need, but it should not create disincentives to labour market attachment or to work.

    Young Canadians in particular are at a critical stage in their careers, and EI needs to be reformed so that disincentives to work are removed. These people need to be active in the labour market, either through work or through education, and EI should not create impediments to either. The formative stages of a young person's career are too important for them to spend protracted periods of time claiming EI and doing nothing else.

    An EI package that makes seasonal work an attractive option for young Canadians and for the labour market creates the very real risk of repeating the cycle of dependency we have seen emerge over the last 30 years. EI must not create incentives to perpetuate this cycle. These young workers are critical to the long-term future of their communities and the country. EI needs to work with other government agencies to build capacity through adding skills and creating opportunities in the parts of the country that have historically relied most heavily on it.

    What is needed is a multi-tiered approach that provides basic insurance coverage but extends more generous benefits to those most in need and those most likely to benefit from them. We should offer alternative pathways, so that people can reach their full potential and make contributions to their communities.

    Thank you.

¿  (0925)  

    The Chair: Next we'll hear from Carole Vincent, who's the senior research associate with Social Research and Demonstration Corporation.

    Thank you and welcome.

[Translation]

    Ms. Carole Vincent (Senior Research Associate, Social Research and Demonstration Corporation): First of all, I'd like to thank the committee for inviting me.

    The Social Research and Demonstration Corporation is a private not-for-profit research organization that was established specifically to develop, test and evaluate social programs. Our mission is to assist public policy makers in setting up social policies and programs to improve the welfare of Canadians, especially the welfare of disadvantaged Canadians. The other part of our mission is to improve the criteria for evaluating these social policies and programs.

    Over the past 10 years, we have developed a vast research program designed to better our knowledge and understanding of the use of EI by analyzing the links between the EI program, the labour market, the behaviour of workers, their families and the companies that hire them.

    Based on our latest research in this field, there are three main conclusions that we can draw.

    First, the EI plan is a poor reflection of the realities of today's labour market, a market in which an increasing number of Canadians, particularly women, have part-time or casual jobs.

    Second, although the objective of the program is to provide temporary support to workers who lose their job, the rules of the program are often a poor reflection of this objective. The actual circumstances of individual workers are such that their experience differs from the EI program. On the one hand, there are workers who rely on the EI program repeatedly, because for one thing, the rules of the program discourage them from seeking or obtaining year-round employment; these are mainly workers who are disadvantaged in terms of skills, education and job opportunities. On the other hand, there are other workers who never manage to qualify for EI benefits because of their individual circumstances, which prevent them from accumulating enough hours to qualify for benefits, because they have family responsibilities or else a handicap that limits their ability to hold down year-round employment.

    The third conclusion is that something should be done about the difficulties that many workers face in finding stable year-round employment, whether they are EI claimants or not, rather than being concerned about frequent reliance on EI. Our research shows that a minority of workers frequently claim EI for a prolonged period. In fact, the problem of workers who frequently claim EI is a skills and education problem. These problems are also experienced by workers who don't access EI.

[English]

    The Chair: May I ask you to slow down for the interpreters? If you could, slow down just a little. They're good, but....

[Translation]

    Ms. Carole Vincent: Yes. So those are the three general conclusions that can be drawn from our work.

We based those conclusions on the findings of a number of studies that looked at various aspects of reliance on EI. Through this research, we have been able to shed new light on the working of EI and to identify public policy priorities to improve the plan and make it better suited to the realities of the labour market. So we believe that the labour market could produce better results if workers and businesses were provided with a range of incentives. I'll give you a couple of examples.

    In 2001, the committee recommended a decrease in EI premiums for employers who provided training to their employees in order to encourage them to adopt certain practices. We are of the view that this option is worth exploring, because our research shows that individual business practices or characteristics are twice as important as the geographic location of the business or the particular industry in determining whether the amount of benefits collected by employees exceeds the amount of premiums paid into the plan. It would therefore be important to identify specific business practices in terms of human resource management that differentiate businesses by the level of subsidy that they receive from the EI plan, and to see whether businesses might be encouraged to adopt such practices through lower premiums.

¿  (0930)  

    The committee also recommended in 2001 that the benefit eligibility rules be re-examined. We are also of this view. Our research shows that the benefit eligibility rules are so complex that it's those who make the most claims who are in the best position to understand and take advantage of the rules. It's also workers with greater flexibility in their work schedule who are in the best position to take advantage of the plan. So the current rules contain potentially significant deterrents against work and are potentially inequitable.

    For one thing, when you look at how the plan works, you see that a worker working in an area of high unemployment receives a compensation rate per hour worked, i.e., the number of weeks of benefits for each hour of work, three times higher than a worker working full time year round in the same region of high unemployment. The compensation rate for that worker is also three times higher than that of a worker working in a region of low unemployment who also has the required minimum hours for benefit eligibility.

    In addition, workers with part-time casual employment might never be entitled to benefits if they lost their job, even if they had that kind of work schedule for years and even if they paid into the plan, because they don't manage to accumulate the minimum number of hours required to qualify for benefits. A large number of those workers are women.

    So it's important to assess the impact of a new benefit eligibility scale that would compensate workers for each hour worked, not just for hours worked beyond the minimum threshold.

    Regional differences in job opportunities could still be considered, but differently, and other factors limiting the ability to find full-time or year round employment could also be included, such as having family responsibilities or a handicap that limits the person's ability to work.

    In conclusion, I would say that basing the system on hours rather than weeks has made the EI program more flexible and has allowed for better recognition of different work arrangements. More recently, the extension of parental leave and the introduction of compassionate leave have allowed for better recognition of different work arrangements and of workers' family life. We have recently taken an interest in the various types of work interruption that are compensated under the program. We think that it would be important now to review the various types of employment that are compensated by the program. Our priority would be to evaluate an eligibility scale that would fully compensate employees who pay into the plan for each hour worked.

    Thank you.

[English]

    The Chair: Thank you very much.

    Our next presenter is from the University of Alberta School of Business. Alice Nakamura is a professor with the department of finance and management science.

    Welcome, Ms. Nakamura.

    Professor Alice Nakamura (Department of Finance and Management Science, University of Alberta School of Business): Thank you.

    I very much appreciate the chance to be here today. I was part of the Axworthy task force on social security reform, which helped make the EI program. I brought to that task force the proposal, for instance, to go to the hourly unit of account instead of a weekly unit of account.

    I realize you have a number of very pressing issues having to do with employment insurance now. My message today is going to be to urge you to act on these pressing needs you have right now within the context of a longer vision of a portfolio of national earnings security programs, a portfolio that would take into account some of these issues that Judith Maxwell and Rick Audas have mentioned and that have been mentioned in testimony you've heard in previous days.

    This envisioned portfolio would include an EI program. I disagree that there is no longer a need for an EI program. I think there's a reason we haven't had a major recession and that all developed countries have some sort of employment insurance program. I see a need for this, but I would like to see it be part of a portfolio that would include other programs that are not insurance based.

    I would like to present my suggestions to you by focusing on four key problems with the EI program as it has evolved, and some suggested solutions that I would very briefly outline to you.

    The four key problems I'd like to say something about are, one, the intentional repeat use of EI, which runs up costs for everybody; two, the EI premium rate schedule and the surplus that has developed; three, the virtual exclusion of some groups of workers from collecting EI program benefits; and four, the unmet needs of some Canadians for an ongoing, nationally portable income assurance or supplementation program of some sort that would be beyond what can be run as part of an insurance-based program.

    I'm going to devote about half a minute to each of these problem areas and the solutions I'd suggest, letting you then have the time to come back if you have interests in some of them.

    I'd like to begin with the intentional repeat use problem.

¿  (0935)  

[Translation]

    Mr. Marcel Gagnon (Champlain, BQ): I'd like to say to our witness that I'm having trouble following the interpretation because of the speed of her delivery. I'd like her to repeat the four conditions that she just listed. Do you understand me?

[English]

    The Chair: I understand. I'm going to ask her to go a little more slowly so that the interpreters can keep up. Then fleshing out the ideas would be up to you when it comes time for questioning.

    Prof. Alice Nakamura: Of the four key problems I would like to deal with today, the first is the intentional repeat use of EI. Problem two would be the EI premium rate schedule and surplus. Problem three is the virtual exclusion of certain groups of workers from collecting EI program benefits. That would include the part-time workers, the self-employed, the own-account workers, and some number of others. Problem four would be the unmet needs of Canadians for some sort of portable income supplementation program that would go beyond what can be handled within a program based on insurance principles.

    An insurance-based program works well for unplanned, unforeseeable disasters with a low probability of occurrence. Insurance works well for things like auto thefts, property thefts, auto accidents involving loss of life or injury, fires. A home insurance program allows us to have the peace of mind that we could rebuild our home without having to save enough money to be able to do it on an individual basis.

    The principle we're building on here is risk pooling. Risk pooling lets us have more security at lower cost. The wealthy benefit from risk pooling just as those who are less wealthy do. It's something we all avail ourselves of in some areas. The advantages of risk pooling are realized only when those who are allowed to enter the pool pay rates that in some way reflect their real risks of having the insured risk actually occur.

    My own belief is that every market economy needs an employment insurance program; that the reason we can say we no longer have the problems that led us to institute this program in the first place have to do with the success of these sorts of programs in various nations; and that we as a world economy depend on the continued existence and strength of these programs in member nations as a way of not having another great recession. But having said that, to safeguard the Canadian program, I believe we need to reinstitute some form of experience rating like what was removed with the passage of Bill C-2.

    Historically, before 1971, Canada had rules such that people could not collect employment insurance benefits outside their normal season of work. This acted to constrain certain types of intentional repeat use of the program in a way that then made the Canadian program grow at roughly the same rate as the U.S. program, which had experience rating in every state. In the case of the U.S. program, that experience rating is on the employers' side, and it is only the employers who pay into the program. It is not feasible in Canada to make that same sort of experience rating, because we have employees paying too, not just employers.

    But in 1996 we brought in a form of experience rating. There were problems with it, but those problems that developed could be easily remedied if we wanted to revisit making some sort of experience rating.

¿  (0940)  

    The second issue I'd like to raise is that the EI premium rates and the surplus have not been set in recent years, or have not been handled in recent years in accord with fair insurance principles. In a fair insurance program, the premiums collected should cover the benefit entitlements over the longer run, plus administrative costs. Prior to 1994, fair insurance principles were followed in setting the premium rate schedule for the Canadian employment insurance program.

    Mr. Yvon Godin (Acadie—Bathurst, NDP): I'm very sorry about this, but I remember that you were here the last time when we had “Beyond Bill C-2”. It was very interesting because you were one who worked very hard on the change of the EI.

    Maybe you will call another point of order, but I just find it very regrettable that this committee, when the minister is presently making an announcement on the EI.... Personally, I have to leave the room and do what I need to do, which I find to be wrong, as it's putting the plow before the horse. I think it's regrettable that we're—

    The Chair: Scheduling problems are always difficult for us. I appreciate that, and I can appreciate that the minister is making comments that a number of us would like to hear. But we also have some very fine witnesses before us.

    Mr. Yvon Godin: No, no, I understand. I just want the invited people who are here to know that it's very regrettable that it's happening, because it is very interesting what you are saying, and it's very important.

    The Chair: One of the wonderful things is that we'll all be able to hear a repeat of the minister's comments within minutes of leaving here. Television provides us with that instant replay.

    Mr. Yvon Godin: I understand that, but you are probably not going to be the one doing the réplique after the minister, which I have to do. Thank you.

    The Chair: I also appreciate that. Thank you.

    Prof. Alice Nakamura: Let's go back now. In the case of the EI premiums, the rate schedule, and the surplus that has developed, prior to 1994 the premium schedule was set in such a way that the program fund was kept in balance or there was an attempt to keep it in balance over a business cycle. Beginning in 1994 there was an attempt to use this program as a way of generating general revenues.

    The EI program, because it was set up to be an insurance program for earnings, is set up such that we only pay premiums on the portion of our earnings that is insured. We don't insure the full earnings of a person earning, say, $200,000; we only ensure a portion of earnings and only pay our premiums on that portion. This is a fine way of setting things up for an employment insurance program, but it's a very regressive mechanism to use for raising general revenues.

    I agree that there are arguments in favour of using a payroll tax as a source of general revenue. I happen to be personally against this, but I understand the arguments in favour. They have to do with administrative costs, and those arguments are real. However, if the intention is to use payroll taxes as a source of general revenues, I think it's vitally important that you set up a separate payroll tax rather than just sliding that into the EI program. The present EI program is not well suited to raising general revenues. I urge you to restore the EI commission or some other mechanism that would be dedicated to setting the EI premium rate schedule in accord with fair insurance principles.

    The third point I'd like to make has to do with the problem of the virtual exclusion of some groups of workers from collecting EI benefits, including part-time workers working very short hours who actually pay into the program. My recommendation having to do with that problem would be to expand the coverage to include the self-employed and the own-account workers and to lengthen the period we use for determining eligibility for qualifying so those who regularly work small numbers of hours would in fact be able to collect benefits. I think that all of those who are above the point where their earnings are excluded from that taxation should be eligible to collect benefits if they work continuously. I think it's a grievous error that there is a gap where people have to pay but can never collect benefits; that can be easily remedied.

    The fourth and final issue I'd like to raise has to do with the need for income supplementation that can't be met through an insurance-based program. If you take an insurance-based program that is federally managed and funded or where the federal government makes a contribution to that, there are several areas where this would be badly needed. One is workers in industries that have been decimated by technological change, by international trade shifts, or by natural disasters such as the decline in the fish stocks. This would build on the fact that our lowest-cost risk pool is our largest unit, that is, our nation.

    I would think it would be appropriate to have this type of income supplementation for those with long-term disabilities who would like to have labour mobility just like able-bodied people. I would think it's also becoming appropriate for those with care-giving responsibilities that severely limit their paid work. After all, if no one raises the children of the next generation, the human capital of the nation will greatly deteriorate.

¿  (0945)  

    In summary, I'd like to urge you to reinstitute some form of positive experience rating. This will open the door, then, to our being able to bring in the self-employed and the own-account workers and do something reasonable with respect to short-hour workers. I'd like to see a re-establishment of fair insurance principles for the setting of the EI premium rate schedule.I would like to see you extend the program to the self-employed and contract workers and make it possible for low-hour workers to collect benefits. I'd like to urge you to add a set of companion income supplementation programs that would complement EI and meet special needs that cannot be taken care of within an insurance-based program.

    Thank you.

    The Chair: Thank you very much.

    Our final presentation today is from David Gray, who is an associate professor of economics at the department of economics at the University of Ottawa.

    Welcome, Mr. Gray.

[Translation]

    Mr. David Gray (Associate Professor of economics, Department of economics, University of Ottawa): Thank you very much, Madam Chair and Madam Clerk.

    I'm sorry that I don't have any written notes. I did prepare, but on second thought, last night, I changed my mind a little bit. That's partly why I only have handwritten notes. I didn't have time, late last night, to type everything up. You asked me to speak slowly, but I have to tell you that I always speak slowly, whether it's in English or in French. Thank you very much for inviting me.

[English]

    Having the privilege of going last, I think I will easily fall within my five minutes, because I'm not going to reiterate some of the points that most of my colleagues on the panel have made--independently from me, I might add.

    One theme I would like to emphasize is the idea that we have pretty much a one-size-fits-all employment insurance program, and I am in favour of the development of an EI system with multiple program components.

    In effect, we do have a two-tier EI system, as it stands now. The key driving variable, the railroad tracks, if you will, the dividing line for our two-tier system is, do you live in a region where the unemployment rate is above 10% or do you live in a region where the unemployment rate is below 10%?

    My understanding for the announcements that are being made right now, as we speak, is that once again it will matter whether you live in a high-unemployment region or a low-unemployment region. So I argue that essentially we do have more or less a two-tier unemployment insurance system already, and I would like to perhaps extend that to multiple components to take account of the increasing diversity of employment and unemployment experiences that Judith Maxwell and other members of this committee have mentioned before me.

    One of the examples that I think we might want to follow is something I've studied quite a bit in France, where they have multiple regimes. They have somewhat similar and also somewhat different unemployment problems than exist in Canada, but they have a separate regime for youthful workers who are just entering the labour market. They would never allow any 18-year-old person entering the labour market to become a repeat user and to establish a pattern of strictly seasonal work for the next 40 years. They also have special regimes pour des industries sinistrées, for industries that have suffered major declines, such as steel, shipbuilding, coal mining, and so on. These special regimes take the form of early retirement benefits for older displaced workers and rather generous retraining and long-term income maintenance programs for younger workers.

    But I think one of the advantages of these special regimes they have in continental Europe is that it is possible to restrict entry into the regime, and so they are very expensive for the first four or five years in which they are brought about, to bring about an adjustment to an industry--such as, in Canada, the codfish industry--but they are able to phase them out eventually and they do not continue on for decades. We've had some of these issues in Canada for decades now.

    So I'm in favour of the development of multiple volets ou de caisses de régime et de paliers différents, which would be more differentiated than the two-tier system we have now that is differentiated only by the local unemployment rate, which, as some other member has stated, is a rather blunt instrument for trying to target someone for unemployment intervention of sorts.

    When I looked over the documentation from the previous committee meetings three years ago, there was one suggested change that was not implemented that I approved of, and so I want to stress the constructive and the positive as well as the negative.

    One member pointed out that we now have a rate calculation period that goes back only 26 weeks before the point of initiation of the unemployment insurance claim. This means that any worker who has successfully obtained a complementary seasonality employment pattern, having one seasonal job in the summer and another seasonal job in the winter, for instance, is going to be working weeks that are not going to count as insurable weeks towards their next unemployment insurance claim.I think we ought to be bending over backwards to do everything we possibly can to develop complementary seasonality, perhaps with relocation assistance to get people to try to move to different parts of the country and engage in a long-term unemployment pattern like that. That's done in the United States frequently, without the benefit of any unemployment insurance benefits.

¿  (0950)  

    I was quite heartened when I read about that particular instance. It seems as though a lot of seasonal workers are somewhat amenable to that type of arrangement. I think the rate calculation period should definitely extend further back than 26 weeks, so an insurable week worked any time over the past 52 weeks or so should definitely count toward a future unemployment insurance claim.

    Once we extended the rate calculation period, we would have to pay attention to what the weekly benefit amount was going to be. You would want people to be able to exclude zero-earnings weeks when they had no income at all, but you wouldn't want someone to be able to cherry-pick the four highest-earning weeks they had over the entire past 52 weeks and generate a weekly benefit amount based on a couple of weeks when they had a lot of overtime. We would have to address those issues somewhat and come up with some reasonable estimate of the normal flow of earnings.

    I think that is a rather constructive change that could be implemented with a bit more research, but not a major change in the administration of the program.

    Am I out of time?

¿  (0955)  

    The Chair: You can continue.

    Mr. David Gray: Thank you very much.

    The other members have talked about the experience ratings, so I think I will spare the committee members any discussion on that.

    I also want to talk a bit about some issues with the regime that I don't think attract a lot of attention now. Because we have a system that has two tiers based on the local unemployment rate, we have tried for many years now to tweak the system here and there to accommodate more and more workers with non-standard employment patterns. We've tried to make it easier for more and more workers with increasingly heterogeneous employment patterns to qualify.

    We find that the system is pretty unwieldy. Whenever we make a reform to one rule, or to regulations such as the rate calculation period, along comes an unforeseen and unintended effect, such as the small-weeks issue. We address that unforeseen consequence of changing the rate calculation period with a small-weeks initiative. We run a couple of pilot projects, the pilot projects are eventually extended to all of Canada, and then other unforeseen problems emerge. It's a bit like the finger-in-the-dyke scenario.

    If we had a greater array of programs to meet these various distinct unemployment and employment situations, we would be able to target some of these needs in a much more direct fashion. That would avoid imposing a certain rule or regulation on the vast majority of the Canadian labour force that we really aren't trying to target to begin with.

    The Chair: Because there are only three members remaining, I'm going to allot 15 minutes to each, if that's what you wish, and just have one round of questioning.

    I'll also indicate to our witnesses that since the minister and a number of the officials are otherwise occupied, I'm going to take it upon myself to ensure that copies of the minutes of this meeting are delivered to the minister and his officials personally within the next 48 hours, so they are able to take in what you have given us today.

    Mr. Gagnon.

[Translation]

    Mr. Marcel Gagnon: Thank you, Madam Chair.

    I'd like to thank our witnesses this morning. We are dealing with a very important problem, and in my view, it's a shame that there are only three members of Parliament—four, counting the chair—around the table. And I am replacing the person responsible for this file, who is attending the press conference where the minister is going to announce changes to EI.

    You have been brought here, and even though the chair says that she's going to forward the notes to the minister, I'm not sure that they will be read. In my opinion, this is a waste of time and I'd like to say that it's completely disgraceful. I am not an EI expert. I listened to four of the five witnesses. I wasn't here when Ms. Maxwell spoke. However, I am aware of what's going on in my riding and I know that our EI system isn't working at all.

    I think it was the last speaker who mentioned that we should adopt and adjust a system based on hours worked instead of weeks. In your opinion, how can we solve the problem of a worker who loses his or her job, for example, because of the softwood lumber dispute? In the northern part of my riding, workers have absolutely nothing to do with this dispute, which is purely political. And yet they are being told that they haven't worked the required number of weeks. In other cases, for some reason, they're not entitled to EI.

    For example, a worker told me that EI paid him to become a specialist so that he could return to work in his industry. He was trained for one year, or at least for several months, and became a specialist. But his plant closed down and he couldn't get EI because he had used up his insurable period in becoming a specialist. This kind of case, which we often see in our area, makes no sense.

    That's why it pains me that the minister and several members of Parliament aren't here, around the table, to hear you, you who have taken the trouble to present a well thought-out brief and who are skilled in this field. What answer is there for this worker?

    However, our EI fund is extremely rich. Apparently, over the last few years, the government has pocketed a sum somewhere between 45 and $50 billion. The worker that I was referring to asked me what he could do. I was forced to ask him what he intended to do, since the money that should have paid for his insurance against hardship wasn't there anymore. Because that money is used to pay down the government debt. That worker is in a bad way, but all I can tell him is that I sympathize with him.

    Personally, I insure my house lest I should lose it one day. This issue seems very complicated to me, especially after hearing each of you. I think that all of you are right, but couldn't we start by requiring that the EI fund, which belongs to the workers and manufacturers, be administered by them, so as to avoid what we are currently seeing, that is, the government getting its greedy hands on the fund to pay down its debt?

    Then, I think that with these people and under government direction, an EI plan more adjusted to our needs could be created, as you mentioned. What do you think of the idea of an independent fund?

À  (1000)  

    Mr. David Gray: I could answer at least one of Mr. Gagnon's questions. First of all, I'd like to say that I didn't speak French during my presentation because I'm a bit nervous. I have calmed down since and I think I can speak a bit.

    On softwood lumber, I'd like to tell you that about a month ago, I took part in a special workshop-conference at the Department of Human Resources... What's its new name in French?

À  (1005)  

[English]

    The Chair: Human Resources and Skills Development.

[Translation]

    Mr. David Gray: ... and skills development to talk about a special intervention. Our discussion lasted almost an entire day. There should be—I don't know when exactly—a report on a special intervention. I fully agree with your description of the situation. So the issue is not the frequent user who collects benefits every year. The issue is someone who has truly invested in a relatively stable career in an industry that is devastated, for completely unforseeable reasons that are totally beyond the control of the business or workers. That's exactly the kind of situation for which I advocate a special intervention over two or three years perhaps, not very long term, but medium term. We all hope, I think, for a settlement of this dispute. You are right that this is a situation that our program, which is very costly, doesn't cover. Despite $12 billion in annual spending, it doesn't cover a situation in which the need is quite significant, in my opinion.

    You raised some other points. Perhaps someone else could speak to that.

    Mr. Marcel Gagnon: Ms. Vincent.

    Ms. Carole Vincent: You say that there's a large percentage of workers who, when they lose their jobs, don't qualify. The percentage of workers who, if they lost their job, wouldn't be eligible for benefits is around 12%, according to the latest figures published by the government : 10% for men and 15% for women. We are contemplating the possibility of having a system that would compensate all workers who pay into the plan. Other people have also spoken about that. All employees are required to pay into a plan that in some cases, doesn't compensate them if they lose their job. Contributions are refunded if the worker earns less than $2,000 a year, but that represents a small percentage of workers.

    In addition, recent developments in the EI program, such as coverage for various work interruptions due to family responsibilities, lead us to ask what type of plan we need and what kind of EI plan we want. Is the EI plan the best tool to help the workers whose situation you've described? Is it the EI plan that should help them, or are there other measures that could help them better?

    This issue needs to be re-examined. Ten years after a major EI reform, we should be in a position to know what the program should do. I feel that if premiums are paid into the program, people should be able to collect compensation. Those who pay into the plan should be able to get compensated, whereas those with work patterns that shouldn't be compensated by EI shouldn't be paying premiums. I think that there are major questions about the type of EI plan that we want.

    Mr. Marcel Gagnon: I'd like to come back to the percentage that you just gave me. You say that 15% of women who qualify, can't get EI benefits and that that's also true of 12% of men.

    Ms. Carole Vincent: In general, 12% of workers who are working, should they lose their job, wouldn't qualify for benefits.

    Mr. Marcel Gagnon: However, if you consider all of the workers who pay into EI, only 39% of those people may draw from the fund, for all kinds of reasons, because of time, for example. Those are the numbers that we have. The percentage of contributors who are eligible is 39%. Of this number, 88% would be liable to get benefits.

À  (1010)  

    Ms. Carole Vincent: If they lost their job, yes.

    Mr. Marcel Gagnon: The percentage is not 88%, it's 39%. Sixty-one per cent of workers who contribute to EI can't get benefits because they aren't eligible. You can check these numbers. Perhaps I'm mistaken, but they are widely circulated. Those are the real numbers : 39%.

    The EI plan is used for things that it wasn't intended for. You mentioned parental leave, for example. There could be other things. That's why, as a matter of fact, Quebec requested that the EI plan be repatriated. We wanted it to be used for a job creation program or a job creation policy, so that these plans would work together.

    I'd also like to hear what you have to say about the administration of the EI fund. Is it normal for this fund to be beyond the control of workers and manufacturers and for the government to appropriate it to pay down its debt?

    Ms. Carole Vincent: We haven't analyzed that question.

    Mr. Marcel Gagnon: You haven't analyzed it.

    Ms. Carole Vincent: No, we haven't analyzed the question of fund management.

    Ms. Judith Maxwell: I'm not an expert on that, Mr. Gagnon, but in my opinion, the current surplus is problematic, because the level is much higher than what all of the insurance rules allow for, as Ms. Nakamura explained. To my mind, it's up to society to decide who, from government or the partners, should manage the system.

    Mr. Marcel Gagnon: It's society's choice.

    Ms. Judith Maxwell: The most serious problem is determining the most appropriate premium rate given the current employment situation in Canada. The idea has been put forward of a separate surplus fund for all workers. On the other hand, premiums could be decreased by abolishing the cap—

    Mr. Marcel Gagnon: ... or by adding services.

    Ms. Judith Maxwell: This is in fact a highly regressive tax. That's not really a good way to tax people's incomes.

[English]

    The Chair: Did you have one thing to add, Ms. Vincent?

    Ms. Carole Vincent: Yes.

[Translation]

    I'd like to add this. We haven't studied the question of fund management per say, but given the huge surplus, it would certainly be worth looking into. Lower EI premiums could be contemplated. We said that it was possible to contemplate a plan with greater reductions in workers' EI premiums in order to encourage certain employer behaviours. You would first have to look into the internal business practices that could account for the employees decreased reliance on EI. The surplus could thus be eliminated or reduced through a decrease in employer and employee premiums, which at the same time could have a positive impact on EI use or reliance.

    Ms. Nakumara said that since premiums are paid by the employer and by the employee in Canada, it's more difficult to set individualized premiums for employers than for employees, but that in fact already exists under the current plan. There are employers who pay lower premiums if they have set up a disability insurance program. We could therefore build on the program that has been around since 1971 and extend it to other employer practices that could be encouraged.

À  (1015)  

    Mr. Marcel Gagnon: I'd like to ask another question.

[English]

    The Chair: I think Mr. Audas had something to add and then I'll give you a minute, Mr. Gagnon.

    Mr. Rick Audas: It just strikes me, when we're talking about this enormous surplus, that the surplus should exist to deal with the kind of problem the member described. Basically, this is a worker who has done everything we could have asked him or her to do, one who has gone off and added to his or her skill base and is trying to add something to the economy, to the community, and has been left out in the cold--again, through no fault of his or her own, but because of an international dispute.

    It seems to me that this is the exact reason why a surplus is important and why it's important that we do have some opportunities to basically redress these very kinds of situations. The program has to be flexible enough to deal with unforeseen circumstances of this kind.

    The Chair: Ms. Nakamura.

    Prof. Alice Nakamura: Yes, with respect to the surplus, there is a place for building up a surplus within an EI program. When the economy is booming, over the course of the business cycle, we would like to take in more money than we're paying out so that, when we go into a recession, we don't have to raise the tax rates.

    I have vivid memories from being on the Axworthy task force of having discussions and hearing formal presentations where we were asked that the rate reduction not be built into the law that was going to be written, the reason being that we were making structural changes so that you couldn't know for sure how it was going to happen in terms of how much the expenditures would be reduced. Because we were making structural changes, the suggestion was that what should be built into the law that was actually passed was a review mechanism. The implication of this was clearly that then the rates would be brought down as it was appropriate, even though we are unable to see exactly what this appropriate trajectory would be.

    I bought that idea, and not only did I buy it, but in fact I spent a lot of time with a number of ministers in Parliament explaining it and saying that I fully supported it. But that's a different type of surplus than what has been allowed to develop.

    I think it's important, though, not to lose sight of why you let the development of a surplus happen. We all did it. We all allowed this to happen. I think it was done because in fact we've been unrealistic about the extent to which we need to tax our population in order to pay for things people want. So in fact, at the same time as we were building up a surplus in the EI fund, we had a shortfall of revenues for other things.

    We had a large deficit problem at the time the EI program was passed. I think that comes about because, if you go back over time, it's true that we have had an increase in the taxation rate, but it's also true that we used to have something called a wife tax. Each family donated the time of one highly educated woman to help make all these things happen in our society that now we need to pay for. So in our hospitals, in our schools, in our libraries, we no longer have those women doing the things that my mother did, for instance. We need to pay for those things now. And as we need to pay for them, we need to be realistic that then we have to collect the revenue.

    The reason nobody wants to raise the personal income tax is that then the government is confronted with a taxpayer revolt. The reason everybody wanted to raise--or implicitly allow the raising of--the employment insurance tax above what it should have been was that there would be no outcry from that. The people like me, who have higher earnings, don't feel it because we're all at the cap. The people who feel it are the ones who testified to you earlier, back when you passed Bill C-2, to ask you to leave the experience rating in it--that's the food services union. Those are people working a great number of hours at low wages and paying that EI tax on every single hour they're employed.

    I also think it's very naive to think that employers would not reduce employment in response to a large tax wedge. Although economists have not been able to demonstrate that empirically, I think it's just because of the timing. If you have a tax wedge here, a company then looks at labour-saving devices, like scanning and other similar things, which it implements up here.

    I'm an empirical economist, and our empirical tools do not enable us to pick up this type of effect. That doesn't mean it doesn't exist. There are many things we don't have the empirical means to prove, but we know with our common sense that they exist. We know that any retailer who has a small margin will care about a large tax wedge that's inserted there by keeping a rate higher than it needed to be to run that particular program.

À  (1020)  

    The Chair: Thank you.

    I'm going to move on to Monsieur Bellemare.

[Translation]

    Mr. Eugène Bellemare (Ottawa—Orléans, Lib.): I had a hard time preparing questions given the complexity of the topic and particularly the multiplicity of good ideas that have been expressed today. It will be interesting to see whether we could apply all of those ideas.

    As they say in English,

[English]

it was a long wish list and an overload of wish list information that we had today. Questions that would come to my mind immediately would involve the sustainability of this.

    To complicate things, the opposition keeps talking about that surplus, and the surplus, in my mind, really doesn't exist, because of the Auditor General's rule that all moneys received should not go to any dedicated account but to general accounts.

    Also, to complicate things, why are we still getting all these extra funds from EI? Since the Mulroney days, since 1993, the rate has been going down constantly.

    Also, knowing that if you're going to have an insurance policy you have to be able to pay out the requests, the demands for payments, how do you reconcile all of this? That's what I find difficult. I was listening to all of you, and every idea that you gave to me made sense, but then I said yes, but who pays for all of this? And of course we have a complication in that. In one province they're overly rich, and sometimes you wonder if what they're saying is applicable to the national scene, and you have another province that says, I want the money, but I don't want you to touch anything, I'm going to run the show--like la province de Québec. Don't touch this, don't touch that, but give me the money, give me the money, give me the money.

    At the national level, we say, are we going to have a national program or are we going to have 10, with 3 territories--13 different programs? We need to have a program if we're going to have mobility. Provinces are not prisons. A lot of people move from Quebec to Alberta and from Ontario to New Brunswick, or vice versa. So we have to think towards mobility, towards sustainability.

    One word that did come up,

[Translation]

    from Ms. Vincent, I believe, had to do with training programs. I see that one of the major causes of the lack of employment is training. Many people don't have adequate training and have jobs that pay very little. For example, they have

[English]

hamburger flipper salaries.

[Translation]

    There is no future in these jobs. If people have financial, family, health or other problems, and they have to stop working, it's a catastrophe, and it's a situation that might last for the rest of their lives. So there are all of those aspects. I'm sorry to

[English]

ramble on like this, but you gave so many good ideas that I'm trying to make a fit of how you reconcile all those ideas with the sustainability, on the one hand, and how to improve the programmes de formation for those who are working now, who have had some tough luck, hard luck, call it what you want, or were in the wrong place at the wrong time, in the wrong province, in the wrong area, in the wrong region. They don't know what to do. They're stuck, and because of lack of funds, they cannot be very mobile. If they're mobile, they may just become street people.

How do you work this out financially? Without pointing fingers at the caisse de dépôt--there's lots of money there, let's go and get it, it doesn't exist.... You get into these political debates, which doesn't help the ordinary worker.

À  (1025)  

    How do you create sustainability and how do you tax properly? Perhaps we could have a discussion on this.

    Prof. Alice Nakamura: I think it would be a good thing to return to the previous situation that you had prior to 1994, where there was a serious attempt to set the rates so that the program was in actuarial balance.

    As to why it is that the surplus built up, the excess from what we take in over what we take out is easily explained. We had a mandate back in 1994 to try to find ways to make it so that the program was cheaper. The program expenditures had been growing over a prolonged period of time, and the mandate given to the task force that I was part of was to try to make it so that the program was taking less out of the economy. I think we successfully delivered policies that, in fact, made that happen. The part that didn't happen then was that the rates didn't come down.

    The last thing I'd like to say, then, is with respect to the issue of whether or not the EI fund is separate. We were certainly given instruction at the time the task force met that it was to be thought of as a separate fund.

    You mentioned the Auditor General. The previous Auditor General testified when Bill C-2 was being heard. I sat through his entire testimony and kept it afterwards. He testified passionately, asking that the separateness of that fund be protected. Whereas it's true that it was part of general revenue in the sense that legally it wasn't a separate fund, certainly the EI tax was put forward to the population as something to pay for the EI program. If it was to be a tax for general revenue, then it shouldn't be a capped tax. It's very contrary to the principles of general taxation as a general revenue raiser.

    It is only in the context of providing employment insurance for a limited amount of our earnings that it makes sense to have that type of capped tax.

[Translation]

    Mr. Eugène Bellemare: Thank you, Madam Chair.

[English]

    Ms. Judith Maxwell: Monsieur Bellemare, clearly, any policy choices have to be made within the boundaries of fiscal prudence, but we also need to realize that there is a deficit out there that we're not addressing: the people who are not getting a second chance, the people who are working hard and don't have enough to eat. I don't think, morally or economically, that makes sense for us in the long term. Therefore, we need to look at how we spend our money, and we need to perhaps figure out ways to tax them more for some purposes that are shared across our whole society. I think we should be asking those kinds of questions.

    Some of the ideas that people have put on the table today, including those I did, are ideas that benefit all economic classes of Canadians, not just the people who are poorly off. I also made the point that many of these changes actually contribute to productivity growth, so you get the economy growing at a better rate and paying better wages. It's a positive-sum game, a virtuous circle. So I don't think you can start with a negative proposition that we don't have the money, we can't think of new ideas.

    We've allowed ourselves to get trapped in what I call deficit thinking for too long, in my view. We did it because we had a very serious fiscal problem back in the 1980s and the first half of the 1990s, and it was very painful to get over that problem. I know from the work we do with Canadians across the country that nobody wants to go back there; we've bought our fiscal correctness,and we want to hold onto it. You can't just close the barn door at one point in history and say, everybody who got protected before we closed the door will keep their protection and everybody who needs protection after that will do without. We can't run our society that way. We have to run our society on the basis that we share, and when you share, you're constantly re-examining priorities and looking for better ways to get things done.

    We're stuck with a program that is not efficient, that is not the appropriate tax base for general revenues, but we're not getting the benefits for labour market programs, or we're not using the money that's collected for labour markets for labour market programs that are desperately needed. Because we've allowed these other deficits in housing, child care, home care, and other areas to build up and become so massive, we're putting too much strain on the labour market. We're expecting the labour market to solve every problem, instead of looking at the society as an integrated piece. People are workers, but they are also family members, they're taxpayers, they live in communities, they have responsibilities for their parents and their children. The employer is blind to family size, but society cannot be blind to family size.

    So I think it's a matter of saying we closed the barn door at the wrong time, we have a lot of people who are left out, and the time has come to figure out how we level the playing field here. I must say that the other way in which the playing field has become very uneven is that we give far more protection to the elderly than we do to other generations, and it's young families and children and young singles who are particularly disadvantaged.

À  (1030)  

    The Chair: Mr. Gray.

    Mr. David Gray: I really appreciate the question as to how it is that we accumulated such a sizable surplus, currently, I believe, at $44 billion, given the fact that there were significant cutbacks in the generosity of the employment insurance regime. There has been some lowering of the premiums paid over the past six or seven years, and even though most of these premium reductions have been minor, if you take the cumulative effect over seven or eight years, most of us are paying substantially less than we used to in employment insurance premiums. This is an issue I'm trying to research now. I hope within a year and a half or so we will be a bit closer to the answer, but I think it's a very complex combination of three different factors.

    One is overall labour market conditions. We have been blessed, with the exception of perhaps a blip in 2002, with a pretty strong labour market, and it is a bit coincidental, or perhaps providential, that unemployment insurance reform coincided with the period of strong labour market performance ever since, with one minor exception. According to last Friday's employment report, in the aggregate, the labour market is still doing well. So there's one factor. There is also the generosity of the unemployment insurance system, and there's also a very complex effect associated with the shifting demographic composition of the labour force: what are the shares between youthful workers, women workers, immigrant workers, etc.? That has a lot to do with who can qualify and who cannot qualify for unemployment insurance benefits if they happen to be laid off.

    So these are the three contributing factors, I think, that generate the bottom line for the employment insurance fund, and the discipline at this time is not able to disentangle the relative importance and the relative roles of those three factors.

À  (1035)  

    The Chair: Mr. Audas.

    Mr. Rick Audas: The issue of sustainability is one you raised, and I've tried to be thinking about this more. We're not talking necessarily about spending more or less per se, we're talking about readjusting how we spend money on EI. The key thing I've tried to focus on is that EI should do more for some people, people who are particularly vulnerable and people in particularly precarious situations, where the money really is going to matter. Here we're talking particularly about young families and single parents, those people for whom EI is going to have an enormous impact and the potential to change the lives of their kids, hopefully keeping them away from a spiral of intergenerational dependency.

    It needs to do less for some other people too, young people, particularly people without dependants, who are in a strong position to adapt to the new labour market, to add skills, to be occupationally mobile, to be geographically mobile. EI should offer them a basic level of support, but shouldn't create a disincentive for them to make important adjustments, so they don't spend their entire lives in a position where they're perpetually relying on very short seasonal work and 35 or 40 weeks a year of employment insurance benefits. The system needs to be in place to encourage people to make the adjustments they can.

    The Chair: Thank you.

    Madame Thibeault.

[Translation]

    Ms. Yolande Thibeault (Saint-Lambert, Lib.): Thank you, Madam Chair.

    Ladies and gentlemen, to begin with, I'd like to talk to you about workers eligibility for EI benefits. I'd like to try to set the factual record straight. My colleague from the Bloc, Mr. Gagnon, spoke of 39%, whereas Ms. Vincent spoke of 88%. I have looked into this, especially since last week. Because last week we were given a report produced for the Canada Labour Congress by Statistics Canada. The department, for its part, told us that the 88% figure that it had arrived at came from Statistics Canada.

    What's going on? How can the discrepancy be so great? There's something wrong, and I think it's due to the methods used. Of those who currently work at the department, but who could have the misfortune of losing their job tomorrow morning, 88% are eligible.

    The Canada Labour Congress study includes everyone who has contributed but is not contributing for the time being. Included, for example, are students who currently cannot be in the labour market because they are at school. There are also two or three other categories. Personally, it seems clear to me that this is a comparison of apples and oranges. I find it very unfortunate for such figures to be spread around without at least explaining where they come from.

    That said—

    Mr. Marcel Gagnon: Point of order, Madam Chair. What has just been said is totally false.

[English]

    The Chair: You had an opportunity to put your figures on the table. She is discussing documents she has in her possession, and the witnesses at the end will respond to her questions, as they did to yours.

    Continue.

[Translation]

    Ms. Yolande Thibeault: Thank you, Madam Chair.

    Ms. Maxwell, you've painted a very interesting picture of what our country could look like over the coming years. You mentioned productivity and high wages. I would like you to explain to us how this could be accomplished.

    I would, however, like to deal first with an issue that you mentioned yourself. The working poor, people who work a normal year and have children. Ms. Bradshaw, my colleague and Minister of Labour, is also as you know the minister responsible for homelessness, and she toured Canada. In several areas, she noticed that families were being housed in church basements.

    These people work but they are not in a position to be able to pay rent, feed their children and dress them. On the other hand, I have a difficult time understanding how people who receive social assistance benefits are also entitled to dental care, glasses, and a series of other privileges for free. Good for them! I have nothing against it. Obviously, if people are receiving benefits it's because they are entitled to them, and that there are good reasons for it.

    I personally wonder how we could help our working poor remain in the labour market. They could in fact be tempted to take another course. You see?

À  (1040)  

    Ms. Judith Maxwell: Excuse me, Madam, but may I answer you in English?

[English]

    You're right to describe them as working poor. That's what they are, and that's not our image of Canada. In Canada the idea is that you work, you make your contribution to society, and you should be able to have an adequate standard of living.

    Let me reply first to your question about the link between low wages and low productivity. There are a few case studies that have taken place in the United States and some other anecdotes I can tell you about here in Canada.

    In the United States it was a living wage requirement in the city of Baltimore. The municipality said they would not enter into any contracts for services with local employers unless they paid a living wage. In order to pay what they considered a living wage, they had to raise the wage by 33%. So clearly, these contractors were paying very little. They raised the wage by 33%, and some contractors dropped out and said they wouldn't bid, but other contractors did bid at the wage required. What they ended up discovering was that they could actually get the work done paying those wages without any loss. They came out at about the same overall position from a profit point of view. Why did that happen? Because workers who are paid a decent wage work differently. They stay in the job, so there's less turnover. You only have to train once, then you can give them more training, because they're still on the job, so they can work more effectively and produce higher-quality work; they work more intensively. The efficiency of the enterprise goes up, and the worker is better off, feels better about his job, and feels more committed and loyal to the employer. And the employer is still making a profit.

    Studies like that provide important insights, but they're still on a relatively small scale, so I don't think we can leap from there to say, okay, raise the minimum wage by 33%. I do think--and Madame Vincent has suggested this too--we need to get employers to think about their human resource practices and about the quality of the milieu de travail in order to understand what it is that will produce a better quality of work, a better wage, and a better outcome for the employer. It's the double bottom line of the employer and the employee. I've seen that happen in Canada for small service industries like drug stores, dry cleaning outfits, and so on, but we don't have any major studies. It would be a good job for SRDC to do, actually.

À  (1045)  

    The Chair: Madame Vincent, then Ms. Nakamura.

[Translation]

    Ms. Carole Vincent: I want to tell you that I share your interest in low-income workers as well as in struggling workers in general. Over the last few years, under our research program, we have focused on employment insurance use. We did however realize that it would be ill-advised to only consider this element, given the fact that a larger number of struggling workers did not even use employment insurance. So just because they do not use employment insurance does not necessarily mean that things are going well for them. In fact, in many cases, things are going quite poorly, to such an extent that people aren't even eligible to benefits.

    Our research has led us to conclude that the use of EI was not the fundamental problem in and of itself, which had more to do with a lack of skills, adequate education or job opportunities. These are difficulties several workers have to deal with, whether they get employment insurance benefits or not.

    People are often concerned with the possibility that seasonal workers could be frequent employment insurance beneficiaries. We studied this issue and discovered that many of them are not dependent on employment insurance. Their job situation is unstable, but in trying to find to what extent they rely on EI benefits is not helping us deal with their difficulties. We need to study the problems faced by these workers and their difficulties obtaining stable employment which would guarantee an adequate standard of living for themselves and their families.

[English]

    The Chair: Thank you.

    Ms. Nakamura.

    Prof. Alice Nakamura: Some of the issues that have been raised by those of you here today have to do with how we can have a growing economy that provides a better standard of living for everybody. Other issues have to do with how we can protect those who are vulnerable and need help. It seems to me that these two questions need to be considered separately. They have very different mechanisms.

    On the one hand, when we ask why some countries would have a more growing economy than we do, if we look at the United States, for instance, the percentage of those with a university education is much higher. If we look at the availability of data, I can get data to do studies on the United States essentially for free. I can go to the U.S. Department of Labor website, download the data, and do research on it. Then they get research that was done on my time to help their economy grow.

    In Canada, since 1990, I would have to pay for the data. We're in an information economy, yet we charge our own citizens to use the data we collect through Statistics Canada. We prohibit them from doing what is done in the United States. Then with respect to openness and information, we have a lot of concern about privacy, but I don't think we have enough concern about the right of the public to know. There are many times when we actually want to know things from the data, yet we now require our federal departments to destroy earlier years of data. It will make it impossible for any future generation to ever know those things.

    We also need some mechanisms for the matching of workers and employers. The United States is doing brilliantly here. They have something called Monster, which I'm sure you're all aware of, and other such systems. Monster is owned by TMP Worldwide Inc. We have students and grads signing up on Monster.ca. The data is owned by TMP Worldwide, which is headquartered in New York. It's a recruiter for the Fortune 500, and 480 of the Fortune 500 companies are using it.

    The universities gave plans and helped to start something called Campus Work Link, which was built with tax dollars. It was subsequently sold to Workopolis. Workopolis is partnered with CareerBuilder. It is a U.S. recruiter. When we gave the program, the system, to Workopolis, we essentially gave all the contact information to our competitors. We have links that we worked desperately hard on to put up all across the country. Those links now go straight to the front page of Workopolis.

    At the same time, we have not supported the Canadian programs that were started. For instance, faculty members started a program called CareerOwl to try to connect employers with the talent generated within our own universities. Our newspapers say nothing about it. Faculty members have spent more than $1.5 million of their own after-tax dollars.

    If we take the external sources we have for validating how large something is, we have a system called Alexa, built by Amazon, that tracks the amount of traffic on any website. We can now show that the system Canadian faculty members built has more traffic than SkillNet, built by Industry Canada, and roughly the same amount of traffic, or somewhat more, than the whole of the WorkinfoNET system, yet there is no effort to tell the Canadian population about it.

    It could save every employer a great deal of money. An employer goes to Workopolis and pays $620 for a job posting. An employer who comes to CareerOwl pays $49 for a job posting. CareerOwl has done the back end of the employment outreach to the campuses for the Department of Finance Canada for three years. Its employees have extended security clearances, yet there's no outreach on this.

    The United States has been very active in this area. On the high end, in terms of making use of their talent, providing university education, and then helping employers to cost-effectively connect with the talent that their dollars helped to train, I feel that the U.S. is out in front of Canada.

    On the other end, on the lower end, in many ways, I feel that Canada has done far better than the United States. We have public health; at least the working poor here have health care. They don't in the United States, for the most part. Canada has welfare programs that are open to both men and women; men also need to eat. There are many things in Canada that have helped make it so we have a lower crime rate and our cities are safer. It is not perfect, but at least on that end, it seems to me that we have made substantial progress and we're continuing to make progress. The problems at the lower end are where we need programs that are not insurance based, which do some of the things that Judith Maxwell and others have been talking about.

À  (1050)  

    We need the employment insurance program to just have our core economy run properly. We have large numbers of people in jobs of the sort where the employment insurance program is badly needed, and then we need the things at the higher end that keep us part of the higher-wage economy. Those are not going to come by helping people who are down and out, but by doing the things that allow us to have innovation and to keep more of our young people here, rather than having them go to the United States.

    The Chair: Thank you.

    Mr. Gagnon, I'm going to give you the wrap-up, and I'm going to cut you off at the 10-minute mark, with not one second longer.

[Translation]

    Mr. Marcel Gagnon: Thank you for your generosity.

    I'm still not satisfied. You've come up with many good ideas, as Mr. Bellemare said, and it seems to me there should have been more of us around the table listening to you. If we are working for the common good, we should try to find the best solutions possible.

    While the government should be redistributing the wealth, I have the feeling that the employment insurance fund is a way for it to horde the riches and hand out poverty. I find this regrettable. When you take money from workers that have earned up to $39,000, it means that only some workers are contributing, those with a salary of up to $39,000. For instance, the Prime Minister, a minister, a member of Parliament do not contribute to employment insurance. Many workers don't contribute to employment insurance, not even on that first $39,000. This money is then used to reduce the debt, which means that the lowest earners are those that are paying the country's debt. This is incredibly unfair in my opinion.

    If I earn $39,000, I contribute on 100 per cent of my salary. If I earn $80,000, my premiums are based on 50 per cent of my salary. And if I earn $200,000, it's based on about 20 per cent of my salary. Moreover, if I'm a high-income earner who does not contribute to employment insurance, it's as though the government debt was not my problem. I find this both unfair and unacceptable.

    I am not an expert in EI, but I know full well that there are many programs that overlap. We spoke about social assistance and the working poor. In fact this is why Quebec wants the EI plan to be rapatriated so as to add to it other responsibilities, such as labour training, social assistance, etc. in order to make it a broader program.

    As far as I'm concerned, if EI doesn't change, we will have to make sure that the worker... Many workers contribute without the slightest hope of ever receiving EI benefits. There are some in my riding. Don't tell me that only 12 per cent of workers are in that situation. There are either more of them than that, or they are all in my riding. It does not make any sense. There must be something wrong with the figures.

    I find this scandalous. a genuine EI reform is necessary, but that's not what we've been hearing this morning, according to me. While we discuss the issue, the minister announces a pre-electoral reform. If we want to redistribute the wealth rather than pocket it and handing out poverty, we have to develop a concrete plan.

    We hear about the working poor. All those people that earn minimum wages could usually manage their affairs, but when you earn minimum wages three months of the year or, for some reason or another, you don't even have the right to a minimal level of employment insurance... In my riding, some workers have spent 10 or 12 months without wages because of the soft-lumber crisis, such as those who didn't have the opportunity to go and work elsewhere. When you live in La Tuque or in Abitibi, it isn't obvious. But you know this because you represent that area, aren't you? No. You're from Ottawa. I was confusing you with your colleague from Abitibi.

    These people can't find work overnight. Given all the money that's in the Employment Insurance Fund, we shouldn't be paying down the debt, we should take advantage of this to decrease premiums or, even better, improve services. Employment insurance, like every other program meant to help people find a way out of poverty, is supposed to help workers and the public, before serving the government's interest.

À  (1055)  

    I find it scandalous that this fund was used to serve the government's interests. This fund of $50 billions was used to pay off my share of the government debt, but I don't believe that a worker earning $39,000 or less is responsible for the government debt. Under the reform, we should ensure that the money paid out by workers is indeed used to help workers. If this were the case, we wouldn't hear so much about the working poor because, at the very least, this insurance would help them get through the hard times. That's more or less what I had to say. Thank you.

[English]

    The Chair: Thank you.

    And in responding, if you're going to respond to Mr. Gagnon, you can also take that opportunity to give a bit of a wrap-up. So I'll give each of you one or two minutes to either respond or wrap up. Who would like to begin?

    Madame Vincent.

[Translation]

    Ms. Carole Vincent: We often don't know what the solution is. Sometimes we implement policies which are then abolished two years later. The employment insurance program is broad and complex, and it is important to strictly assess the various options.

    Take for instance the small weeks initiative. It was a step in the right direction. It started out as a pilot project and it was then assessed and implemented nationwide. I think that this is very important.

    I don't have any recommendations to reform EI. We've identified research priorities and I think it's very important to be cautious because I think there are many factors we fail to understand. We could understand them better thanks to rigid research methods.

Á  (1100)  

[English]

    The Chair: Thank you.

    Ms. Maxwell.

    Ms. Judith Maxwell: Because this is a pre-electoral period, it is a good time to be thinking beyond, if I could put it that way, at the big challenges we face. We've tinkered with employment insurance now for many years, sometimes for the better and sometimes for the worse, but if we are too focused on that program as the only instrument, we're missing the boat.

    There are problems that need fixing, and I think you've heard about that today, but I also think we need to think bigger about the issue of working poor, because it is bigger than any single program, no matter how perfect it was, could possibly address.

    The Chair: Thank you.

    Mr. Audas.

    Mr. Rick Audas: I think EI needs to be part of the national society net, which is a theme we've hit on. It's one part of the way in which governments can help make the lives of its citizens, and particularly the citizens who are in particularly difficult circumstances, a little bit better.

    It needs to have local flexibility, because what works well in one part of the country might not necessarily work well in other parts of the country. So the idea, again, of one-size-fits-all EI doesn't work at a national level, and it may not even work at a local level. So again, there has to be local flexibility to reflect the particular subtleties of particular places.

    And it needs to promote adjustment and skill enhancement. I think any form of social program that creates disincentives for people to add skills and better themselves is clearly something that needs to be redressed.

    The Chair: Thank you.

    Ms. Nakamura.

    Prof. Alice Nakamura: Yes. In conclusion, I urge you not to make EI itself more complex but rather to add a portfolio, a concept, along the lines of what other speakers have also recommended, where some of the other components are not insurance based.

    As for the core EI program itself, I would urge you to bring back some form of effective experience rating. I'd urge you to make that, then, the window of opportunity to be able to bring in the self-employed and the own-account workers. I'd urge you to lengthen the period for qualifying so that we get rid of the problem of people who are required to pay in and do pay in over long periods of time but cannot collect. I'd urge you to also use the reinstitution of experience rating as a window of opportunity, again, to get rid of the 900-hour threshold for new and re-entering workers. That's a threshold that isn't necessary if you have some sort of other effective way of controlling repeat use, and I think it's a draconian way of trying to control repeat use to just stop people from getting in in the first place.

    Some of those who are re-entering workers will have paid in for 20 years and then have had an industry collapse, a long period of unemployment. Now they end up classified as re-entering workers and they're part of those who cannot collect, when surely they should have been able to. So it's linked to having experience rating as a way of controlling repeat use. There are many ways of doing this that would overcome the problems you felt were there back when you passed Bill C-2.

    The last thing is that I would urge you to reinstitute the integrity of the fund as a separate fund. It doesn't necessarily have to be a legally separate fund, but a fund where you tell people this is the EI tax rather than a general revenue tax, and you use the money for EI. So if you want to use the money for other things, you tell people what it is you want to use the money for, and you rename the tax. Don't call it the EI premium.

    Thank you.

    The Chair: Thank you.

    Mr. Gray.

[Translation]

    Mr. David Gray: I'd like to answer a question asked by Mr. Gagnon.

    I think he raised several very legitimate points. I don't have the most recent figures regarding the province of Quebec, but it is true that in the past, Quebec received in EI benefits an amount higher than the amount paid out in premiums. I'm not sure about the current situation, but in the past, Quebec benefited, perhaps slightly, from its contributions to the Employment Insurance Fund.

Á  (1105)  

[English]

    The Chair: Thank you. I want to again offer my sincere thank you to all of you. You have given us some very valuable information. I reiterate my earlier comment: I will see that your comments in the transcript of this committee are delivered to the minister with a strong recommendation that he read them very carefully. As you've alluded, we are arguably in a pre-election phase, and you've made some very valuable comments and observations. We know you have spent a great deal of your life studying, and will continue to study, this very important issue.

    So again, on behalf of the committee, I thank you.

    The meeting is adjourned.