Proceedings of the Standing Senate Committee on
Social Affairs,
Science and Technology
Issue 18 - Evidence, October 20, 1998
OTTAWA, Tuesday, October 20, 1998
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 10:00 a.m. to consider the dimensions of social cohesion in Canada in the context of globalization and other economic and structural forces that influence trust and reciprocity among Canadians.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Colleagues, this is our third meeting in our study of social cohesion in Canada. At our first two meetings, we heard from Michael Adams of Environics Research and from Dr. Jane Jenson of the University of Montreal. We discussed changing social values in Canada. We were left to ponder the factors that influence changes in social values, in particular, the economic factors. What is the impact of globalization and technology on social cohesion in Canada? Can we integrate economic and social considerations, economic and social policy, in our work? Can we keep them apart?
We have two witnesses today who are eminently qualified to help us with these and other related questions. I need not go into any detail at all before introducing Judith Maxwell, who is the president of Canadian Policy Research Networks and was, from 1985 until 1992, Chairman of the Economic Council of Canada, and has been a director of policy studies at the C.D. Howe Institute and a journalist. She is well known to all of you by reputation, if not personally. In the last few years, she has written and commented extensively on this very subject, the impact of globalization and technology on social cohesion in Canada. She has written about the polarization of jobs and incomes, about the need to integrate the economic and the social.
[Translation]
We are pleased to welcome Alain Noël from the University of Montreal. Professor Noël is an associate professor with the Department of Political Science and an expert in comparative politics. His field of expertise includes work on the welfare state in OECD countries and more particularly on social and labour market policies. During the 1997-1998 academic year, he was a visiting scholar at the School of Social Welfare where he devoted himself to the study of federalism, decentralization and social policy. This year, he is continuing his work in this field, with particular emphasis on Canada's social union.
[English]
Welcome to you both. Judith Maxwell will begin a short presentation, to be followed by Professor Noël. Then we will open the floor for questions and discussions.
Ms Maxwell, welcome. Thank you for coming.
Ms Judith Maxwell, President, Canadian Policy Research Networks Inc.: It is a pleasure to participate in this series of hearings and also a pleasure to be paired off with Alain Noël for the discussion with senators this morning.
I want to talk to the committee about some of the economic dimensions of social cohesion in Canada. I think Jane Jenson provided definitions and much of the history of social cohesion in her presentation a couple of weeks ago. I would like to pick up on that and speak about economic dimensions. Thinking back over the past 15 years or so, we have experienced a phenomenal restructuring of economic policy, including the free trade agreement, the GST, other types of tax reform, fiscal restraint, a change in the basic parameters of monetary policy, and so on. We have also been through an economic restructuring in the industrial sector. I would be one of the first to say that Canada needed to make very significant changes on those fronts. However, perhaps unwittingly, we became so obsessed with the economic side of the agenda that we did not pay very much attention to the social consequences of all this economic restructuring. In fact there have been unintended consequences. I believe we now need to rethink the fundamentals on the social side.
We need to better understand how the economy affects society, but we also need to understand how the functioning on the social side affects the economy. We need to understand the two-way flows of feedback there. We need to know how the strengths and weaknesses of our social connections and our social institutions affect the economy. Then we will be in a better position to strike a balance between what we want to achieve in terms of economic well-being and what we want to achieve for our citizens in terms of social well-being.
I do not have the answer to that very fundamental set of questions, but I do feel that these hearings are a wonderful opportunity to begin to make headway in understanding those fundamentals and thereby creating much better economic and social performance in the longer term.
I prepared a handout that I believe has been circulated to you. I would like to take a quick trip through those notes, without going into a lot of detail, because I would like to cover a fair amount of ground. Some of this comes from the Hanson lecture that I gave at the University of Alberta in 1996, but it is also very much shaped by the work program that we have been following at the Canadian Policy Research Networks.
The first page of the handout focuses on the changing nature of capitalism, to use a very big expression. Most economics taught even today in our universities focuses on the three factors of production: Land, labour and capital. If we go back to the 19th century or even the post-war period, we defined those things in fairly simple and concrete terms. Land was minerals, rocks, trees, farms, et cetera. Labour was really thought of as being a strong back. Capital involved the concrete things of money, buildings and tools.
As we enter the 21st century, our sense of the main factors of production is very different. Land includes not only the farms and the forests but also clean air, clean water and soil. Labour is no longer a question of a strong back, but requires an educated problem-solver, a team player, somebody who can communicate well. These are very important qualitative aspects of labour.
On the capital side, we still need the money and the buildings and the tools, but we also need the embedded knowledge that every worker brings into the workplace every day. We need the social connections. The functioning of the economy is very dependent on the social connections -- the way work is organized, the relationship that exists between employers and employees, the trust that exists within the workplace and between producers, their customers and suppliers. We are now living in an era when the way our institutions function is part of the capital that enables the economy and society to perform well.
Another set of concepts I would like to introduce is laid out on the second page of the handout, where I talk about two notions of competitiveness. For the most part, in the past 15 years, we have been living in a society that has been driven by cost minimization, very short-term considerations of survival in the market-place. Even in the public sector, we have seen policy decisions driven by the need to cut costs.
There is another notion of competitiveness that is now quite widely accepted in the academic sphere, although I would say it is not universal, which focuses more on long-run, dynamic growth. When talking of dynamic growth, we are focusing more on the capacity of the organization to continue to perform well over time. In that situation, there are firms saying that their workforces are their most valuable resource. We have companies now that actually are trying to measure their intellectual capital or their intellectual assets because it is the knowledge that is embedded in the workforce -- and the training and the ability of that workforce to learn -- that makes a firm truly productive in the long term.
This new notion of competitiveness exists and is certainly legitimate and accepted in certain parts of our economy and in our society, but I would not say that it has yet become the conventional wisdom. What I would call the old-fashioned notion of cost minimization still has a very strong hold on many institutions and on much public policy.
I think that this transformation in our thinking about the nature of economic growth is an important consideration for your investigation, because that transformation immediately begins to show that the social and the economic considerations are interdependent. Many people are worried about where the economic trends of recent times might lead us. There are pessimists and optimists.
On the third page, I have given you two examples of quite divergent views. The pessimistic view comes from Jeremy Rifkin, who wrote The End of Work. The optimistic view comes from William Bridges, who wrote JobShift. He argues that the old, traditional notion of a job that you put different people into as necessary will disappear. We will end up with people who really have a portfolio of tasks, which they may do in one workplace or they may do in a combination of different workplaces. People who are self-employed, for example, already live that life. We are seeing a transformation in the world of work. It can be interpreted either in a pessimistic or an optimistic way.
There are many, many forces now that are reshaping the nature of work. I have laid them out for you on page 4. Again, I do not propose to go through all of these, although I hope that you might explore this further with other witnesses over the course of your hearings.
Some of the trends that are reshaping the nature of work have a profound impact on people's lives, both the economic and the social dimension. They reflect changes that individuals are experiencing through the changing patterns of work and family, through the stress that they experience in the workplace, through changing work values, and through different demographics. For example, we have many more women active in the workplace now.
Inside the workplace, we have important changes in work organization that lead to a much more bottom-line focus -- a tendency to hire people on contract or through non-standard means rather than the traditional employment relationship. Other factors involve the changing economy, globalization and the information technologies. Another factor that reshapes work is the way governments are reorganizing and also the way in which the social safety net is being transformed. We seem to be adopting policies that are much more focused on supporting individual self-reliance. There is quite a tension in Canadian society now between the notion of individual responsibility and collective responsibility.
I am going very quickly over the big concepts here because I would be quite happy to talk about any of these issues when we get to the question and answer part of our meeting.
On pages 5 and 6 I have presented some of the important consequences of these changes in the workplace, particularly the fact that they are leading to greater inequality in earnings and in jobs, which creates many tensions in society. Here, I think, are some of the very concrete, unintended consequences of the economic restructuring that we have been going through.
Again, I will not try in my opening remarks to speak to this evidence in detail. If you look at the charts that I have reprinted on page 5, which come from a recent Statistics Canada publication, you can see that the earnings of young workers, both men and women, have been falling in real terms quite dramatically over the past 20 years. Earnings of older workers, people in my age bracket, have been doing fairly well. Their earnings have not improved in real terms but they have been able to hold on to their standard of living.
This is not so much a widening of inequalities within a workplace or within particular age groups, but there is something very fundamental going on here in the way work is being remunerated and in the access of the younger generation to well-paying jobs. As you can imagine, that has major social consequences.
What we see in the 1990s, looking not only at the labour market effect of rates of pay, but at family incomes after taxes and transfers, there is a trend for more families to be clustered in the lower income groups. There are many reasons for this. We have more lone parent families, for example. The low earnings of younger workers are obviously a consideration. We also have higher taxes and lower social benefits, which have an impact on the actual purchasing power families have at their disposal.
What we see when we look at all of this detail is that the elderly population has been quite well insulated from these emerging inequalities. The position of women overall has been improving, although the earnings of young women seem to be very depressed. The situation of young men and of unskilled workers has deteriorated quite dramatically, and that of lone parent women in particular is also quite insecure.
An important question that needs to be addressed in any discussion of social cohesion is, are we asking the younger generation to carry the main burden of economic restructuring? Are they ever going to get their chance at actively participating in mainstream economic life in Canada.
In conclusion, Mr. Chairman, I think there is a risk of Canada becoming a more polarized society. It will take a clear political will on the part of the Canadian people to decide to go in the direction of dynamic growth and to make a commitment to what I call a resilient society, one that invests in people.
On page 8, I have laid out for you what I see as some of the cornerstones of a resilient society: First of all, it is a learning society that continually invests in education, training and early childhood development. Second, a resilient society, focused on dynamic growth, would give a very high priority to the caring roles of families and would ensure that families are well supported by employers, governments and their communities.
A resilient society would be one where progress is measured by tracking outcomes across both social and economic indicators. We would not simply measure our economic progress by the increase in gross domestic product or by the level of employment or total government spending, but we would look at the social dimensions of our progress. It would be a society that worked actively against polarization and attempted to create opportunities for citizens to achieve their potential. It would also be a society that fostered new forms of collaboration across all the players in society: governments, employers, unions, community organizations, para-public institutions, individuals and families.
The notion of social cohesion is based on a sense of shared enterprise and a sense of belonging. It ensures that there is a sense of hope and opportunity for all citizens. If we develop into a world where, in fact, many citizens are excluded from participating in economic and social activity, then that will be clear evidence of some weaknesses to be addressed. The key questions for these hearings to address will be whether or not we have well-functioning institutions that enable us to manage conflict, to foster collaboration, to create opportunity for citizens, and to balance the interests of the old and the young.
The Chairman: Thank you, Ms Maxwell.
Mr. Noël, the floor is yours.
Mr. Alain Noël, Professor, Political Science Department, University of Montreal: Thank you for the invitation to appear here. I will try to be brief. These are mostly notes gathered since I was invited to come here last week.
I will start with the point raised at the end of Judith Maxwell's presentation. After presenting two different models, she emphasized the need for a clear political will. The question I will raise is what does a clear political will mean in the 21st century. I will speak as a political scientist working on social policy, and I will draw from a few things that I have learned from comparative policies, mostly from people who have studied these types of choices across countries. I will speak about what I have learned because, obviously, other people reading the same books would learn other things from these.
The first point is, for all the talk about globalization and technical change, there are still important choices governments and citizens can make. These choices are present in a number of areas. Very often we have the impression -- and there have been many editorials and commentaries in Canada in recent years to the same effect -- that basically there is only one possible policy. We were caught in the deficit-reducing problem and it seemed there was no alternative. In fact, there have always been various possibilities.
First, if you look, as an example, at Canada and the U.S., you see clearly that the situation on poverty is very different. You just have to walk downtown in an American city to observe that. It is also clear, and has been demonstrated in comparative analysis, that the major difference between Canada and the U.S. with respect to poverty has to do, not with the labour market, but with public policies. Canada has adopted public policies that protect people at the lower end of the income scale, and it makes a difference.
More generally, there are a number of differences in public policy patterns across European and North American countries. These patterns relate to labour market policies, social policies, and even extend into foreign policy. I have worked with my colleague, Jean-Philippe Thérien, on foreign aid. We show that states design their foreign aid very much according to the same values that they embed in their welfare policies. That is to say, once you have adopted a certain set of values as a country, it has an influence even on foreign policy. That is the first point. There are choices. If you look at countries across the OECD, you see major differences even in the 1990s and there will likely be more in the future.
The second point is that these choices are often misunderstood and therefore often ignored. We are not necessarily looking in the right place to see these changes, in part because the policy options have changed. There are choices but they are not necessarily the same ones as before. I will give you a few examples. First of all, demand management, the Canadian framework, does not really work any more. It does not account for differences between countries. What matters very much, however, is supply-oriented policies -- the type of policies implicit in the previous presentation -- that affect the skills of the labour force, the incomes of people.
Within the OECD, some countries have emphasized public investment to support education, training and jobs; others have trusted the market to do the job. Similarly, of course, the countries that have emphasized public investment have been willing to tax citizens more heavily, and countries that have trusted the market to make decisions respecting labour have emphasized lower taxes.
First, it is less demand-management and more supply-oriented policies that matter now, but in these supply-oriented policies there are differences between what we could call social democratic parties and conservative parties or, in more general terms, the left and the right.
The second difference is not dependent on spending as such. If you look at countries around the world, you will not see a major variation in aggregate spending. Political scientists have tried to analyze the situation to prove that, when the left is in power, the government spends more. That is not the way it works. There are variations, but they are not very striking. What matters more is how you spend -- whether you spend on education or on law and order, for example. Again, this was raised in the previous presentation.
Third, the debate will continue in the future. Defined broadly, the debate is going to be less about choosing the degree of state control and more about choosing the degree of democracy. I cannot expand on this but I will give you an example. In 1996 I was on a committee set up by the Quebec government to review social assistance policies. Although the committee was composed of only five members, we ended up with two reports. It is a long story. The two reports necessarily converged on a number of things. We decided only in the last weeks to write two reports, and we did have time to reach similar conclusions on various things.
One major divergence between the two groups had to do with how much power, how many choices, should we leave to the person receiving social assistance. Should we say to that person: "You receive social assistance and therefore you abandon your right to make choices and we impose upon you whatever program we deem important"? Should we say instead, "We consider that you are in a difficult position. You are likely to be ill-equipped to face the labour market. You have important choices to make. We are going to try to offer you options, not only because we assume that you will be better at making these choices than we are, but also because the process has to do with empowering people who are marginal and not simply giving them skills." Among other things, we were split over this issue -- how much power to give to someone receiving social assistance.
There is literature on this issue coming out of Europe now especially. In the U.S., it is considered less important, although in other fields they talk about empowerment. In European social policy development, there is much discussion about the right of the users, of the citizens, of the communities, to define social policy. This includes a discussion of decentralization and other issues.
The idea is that the state is not just sending a cheque and is not just imposing programs, but it is also trying to build communities by giving choices to citizens, as individuals and as members of collectives. That is a third area of choice that is a little bit harder to define because it does not primarily concern spending. It is not more expensive than other options, it is just different.
To illustrate this, an electoral campaign is beginning now in Quebec where the choices facing voters have rarely been so clear. In a way, the traditional debate continues. The Liberal party and the Parti Quebecois have always represented more or less the same ends of the spectrum, but the contrast is more striking now. I will come back to it in a minute with another example.
There are choices, but not the same choices as before. Overall, the problem is less a technical one than a political one, since it is a matter of choice. Also, I would argue that even though the choices are different, the debate is the same. It is a debate, more than a century old, between the liberal left and the liberal right in OECD countries. Each side is facing certain dilemmas.
There is no easy choice for parties on the right. They wish to lower taxes but also they are aware that people want to preserve social services. They must strike a balance. Parties on the left want to promote equality, but they realize that there is a trade-off between equality and jobs. Countries that have emphasized equality have higher unemployment rates. Similarly, they want to invest in the public sector, but they realize there is a limit to taxation. Each side faces difficult choices.
It is not clear which option is best for economic growth. What is clear is that the equality/employment trade-off is a real trade-off; that is to say, it is very difficult to have it both ways. You can have high employment with high inequality, as in the U.S., or higher levels of equality, as in continental Europe, but with higher unemployment.
In Canada, we are confronted with an additional choice. I am not happy to have to raise this, but we still have to face the questions of unity and diversity. All countries have to face what could be called, deep diversity. It is harder now, for all kinds of reasons, to think of programs that should apply in the same way to everybody. If you want to empower people and communities, you need to decentralize. If you decentralize, you need to think about how to do it and what it means. In the Canadian context, I would argue that decentralization in social policy is necessary. It is necessary, and it is not necessarily a bad thing. There is no evidence that decentralization is bad for social policy, contrary to the opinion of most observers.
I would argue that, to a large extent, Canada is a more generous welfare state than the United States because it is more decentralized. You have to keep in mind that the social assistance reforms in the United States were imposed from the centre. Similarly, health care is blocked at the centre. More centralization does not necessarily mean more generous social policy. This is a different way of thinking about these things for Canadians.
We have to tackle this question of the social union. I will not say much here, except that behind this notion there are many different visions being confronted, the consensus of the province now being quite different from that people who talked about social union in the beginning had in mind.
In conclusion, in the work I do with Jean-Philippe Thérien on the welfare state and foreign aid, we see, among other things, that what we could call global justice, or a sense of sharing in the world, is not rooted in a cosmopolitan vision. It is very much rooted in national visions of caring about fellow citizens. Countries that are more generous to their citizens are also more willing to contribute to international cooperation. Therefore, we should not necessarily fear local action, decentralization. It should also be stressed that justice can be good for the economy, that concern for the welfare state and social policies is not necessarily in conflict with the notion of creating an open world economy.
I will conclude with a quote from Schumpeter in a book published, I think, in the 1950s. He wrote: "Motor cars are travelling faster than they otherwise would because they are provided with brakes." In the context of the welfare state, that means that rapid globalization can be accepted only if there are brakes; that is, if you have protection for the passengers.
The Chairman: Thank you, Mr. Noël. For the record, the handout that Ms Maxwell referred to will also be tabled with the clerk and will be an exhibit of this committee.
Senator Kinsella: In your view, can we define a norm of well-being in Canadian society? Is there a criterion of social well-being? In other words, if we were to take an objective-seeking model of analysis as opposed to the diagnostic one, can we list a catalogue of human needs that must be responded to, perhaps even put them in a hierarchical order? Is previous literature on a hierarchy of needs helpful, or is it a hindrance, as we seek to understand how to respond to the demand for well-being from Canadians?
Can we use as a criterion the international covenant on international, cultural and social rights, which lays out a series of objectives that are only implemented by means of programmatic response, as opposed to the self-executory kinds of rights? In other words, can we define the objective that we are seeking? Your presentation and the other literature that you have produced have been extremely helpful, but I find it to be largely on the diagnostic side.
Ms Maxwell: I will try to give you some perspective on that. If you think about the way in which governments set social assistance benefits, for example, they appear to be striving to provide some sort of minimum material standard of living -- so much allotted for shelter, food, clothing, et cetera. There are many quarrels about whether those benefits are adequate or not. The requirements could be very different, depending on whether you live in a city with a high cost of housing or one where costs are lower, and whether the climate is colder or not as cold. Perhaps that is the way we have tended to think about minimum requirements in the past. However, we also know that people who live at those minimum standards have, for example, poorer health than do people who have a higher standard of living and more control over their lives. They do not live as long and they make much heavier use of the health care system. That suggests that living at the minimum standard is not really well-being.
If we are going to try to foster a knowledge-based economy, one that can thrive in the so-called new economy, then we need to ensure that everyone achieves his or her potential in terms of technical skills, problem-solving, communication and so on. What are the necessary conditions for a child, or any individual, to learn, and acquire the skills, confidence and self-esteem necessary to function well in the kind of workplace that will generate an adequate standard of living in the current context. I am saying that we are moving up the hierarchy of basic needs. If we want a society that functions well for all participants, then we are going to define basic needs somewhat differently. We will want a healthy population, a learning population, as well as one that has adequate housing, clothing and food.
Senator Kinsella: You speak of earnings polarization. I wonder about the psychological polarization. The worker may have a job, as you described, but it does not provide fulfilment. Do we know how many people in the workforce in Canada are doing work that does not interest them, that does nothing for their personal development, which in that sense, for them is inhuman? My hypothesis is, that is the gap between the haves and the have-nots. I worry about that more than the classical case. We have seen in historical cycles the haves and the have-nots in economic terms, but I think this psychological division between haves and have-nots is a ticking bomb. We must come to grips with appropriate social policy.
Ms Maxwell: I know of only one study that has tried to measure the degree to which people are using the skills they acquired in training. It was done by a colleague of mine at the University of Alberta, Graham Lowe. He used the international adult literacy survey. Within that, he looked at questions that asked people whether or not they were using the skills they had acquired in their formal training. He found that quite a few people were working below their level of competence. I do not remember the number but I could get it for you.
However, when he reported on this, he got into a very interesting debate with people about what that really tells you. If someone has a Ph.D. but is driving a taxi, you have a sense of unfulfilled potential.However, it may be that a young person has a Ph.D. and is starting in an entry level position to permit the acquisition of practical skills that will lead to relatively rapid promotion because the individual is very well-trained. You cannot just take the raw data and interpret it as a failure to use the full potential of people.
We know there are people who are illiterate and have very little training but are brilliant. In fact, I have a cousin who had great difficulty in school but she is a brilliant businesswoman. We probably all know people like that. This is a very difficult thing to measure. We need to think about the polarization between the haves and the have-nots or, as Robert Reich would say, between the symbolic analyst or the clerk or the ordinary worker. We need to ask people in the less satisfying, and probably less remunerative jobs, if there are other dimensions of their lives that give them a sense of fulfilment, or whether, in fact, that low-paid and unchallenging job is a real bottleneck in their personal development.
Senator Wilson: I have a question for Professor Noël. It is really for clarification. You mentioned that the values of the welfare state really govern the values around foreign aid. Canada is in some sense still a welfare state, certainly in comparison to the U.S., as you pointed out. Yet our foreign aid, our overseas development assistance, is at its lowest in history. What is your comment is on that?
Mr. Noël: We have been better, but there are worse records. Actually, I do not think it is strange. The welfare state and foreign aid work I do with my colleague, Jean-Philippe Thérien -- usually, I defer to him on the specifics of foreign aid -- shows that the average of all the OECD countries has increased over the years. In the 1980s and 1990s, however, it started to decrease. Canada has indeed decreased the amount of aid, but is still somewhere in the middle, from a comparative perspective, because everyone else has retrenched.
Senator Wilson: I am asking in terms of our previous record. My statistics from the UN Human Development Report show ours is at an all-time low, comparatively speaking.
Mr. Noël: It is related to the general context of reduction and retrenchment of social services and other issues. We could hypothesize that this is a temporary situation. We will see. Overall, countries with more universal social programs tend to be more supportive of foreign aid, as is public opinion in those countries. Canada is somewhere in the middle in terms of public support for foreign aid. We are neither the most generous nor the least, which is typically Canadian.
Senator Wilson: You are more optimistic than I am. Ms Maxwell, you mentioned opportunities for citizens to collaborate on public policy and, Mr. Noël, you spoke of the rights of communities to define social policy in order to get establish dynamic growth. Ms Maxwell, you mentioned the young and the old. I have seen citizens collaborate on foreign public policy in Canada, on the land mines issue and the International Criminal Court. I have not seen it so much in domestic public policy. Do you have any comments on how that could be facilitated or examples of where it has happened?
Ms Maxwell: I will give you two examples. In the 1960s, Canadians became very concerned about the problem of poverty among the elderly and there was a very clear political will to do something about it. The response was a variety of retirement income programs that were funded primarily by the state: the Guaranteed Income Supplement, improvements in the Old Age Security, the creation of the Canada Pension Plan and others.
One of the great triumphs of the post-war period is that poverty among the elderly has fallen dramatically. The depth of the poverty that still exists is less than before. In other words, people are not living in the total privation that existed in earlier times.
The issue for the 1990s is child poverty. We have a project underway called "What is the Best Policy Mix for Canada's Children?" Income is certainly part of the equation in responding to the needs of children and families. However, the evidence we are accumulating is beginning to show that it is not just a question of better government cheques or maybe raising the minimum wage, thereby influencing the flow of money to families. There are also very important stressors in the work-family balance. Therefore, there are important contributions employers can make in terms of parental leaves, child care, flexible working arrangements, and other things. Potentially, these could be regulated, but not provided, by government.
Another important issue facing families is the problem of isolation. They may live far away from the grandparents or they may not know their neighbours very well. Therefore, they may not have the social connections that enable them to take advantage of recreation opportunities for their children or to access the more informal connections that are very important to parents trying to do the best for their children. Those things require collaboration by citizens or by community groups or by church groups, et cetera.
If you look at all the services and support systems available in Canada for children and families, we see that indeed families need support. European countries have found many ways to provide very complex support systems, not purely through the effort of the state, but through a collaboration of stakeholders. This does not in any way take away from parents the full responsibility for care and nurturing and the passing on of values and ethics and ways of thinking. It is just that, in the modern world, it is very difficult for a family to provide all that is required. The family itself needs supports. In Canada we need a much more collaborative and coordinated approach to dealing with the fundamental issue of child poverty. Dr. Noël would have a different perspective on this issue.
Mr. Noël: I will start with one very striking example. When we worked on social assistance in Quebec, we met all kinds of people from all walks of life. We met many people who are on welfare and also people who are working with them. We studied the varying success rate of several social assistance training programs set up by the Quebec government. Depending on the point of view, the results were between disappointing and bad. Results were disappointing in the sense that people placed in jobs or in training very often did not return to the labour market. There was some positive effect, in that they had a slightly better chance of re-entering the labour market than people who did not take part in these programs. However, the people who went into these programs and did not succeed were eventually more discouraged than when they began.
This was also the case with education. Programs allowing welfare recipients to essentially either learn to read and write or, at the higher level, finish their high school education -- which appears on the face of it to be the most important -- the overall success rate of these programs was very bad. The reason, of course, is these are people who have already failed in the school system once and chances are that they will fail again. You could conclude that this just does not work.
Then we went to Le RESO, a rather large collective of autonomous social groups in southwest Montreal. Le RESO had received contracts from the government to manage some of these training programs. Their rate of success, that is to say the people who came through them, went back to school and ended up with a degree, was about 85 per cent. This was either primary school or high school.
We met with the people in charge of the program locally, who explained to us how they did it. We also met with their graduates, who described to us the support they received from the people in the programs. Obviously it was a very close-knit community. There was a strong emphasis on personal relations. It was very different from the bureaucratic norm established at the centre saying, "You go to school." When people were tempted to give up because they thought it was too hard or because they had problems at home, they said, "Well, I kept going because I did not want to disappoint Michel who is, you know, taking care of us." That was the reason they kept going. In other programs, some people gave up because they did not have the money for the bus, so Le RESO gave them a bus pass that month. These were very small costs. Nevertheless, when you do not have the money, you cannot go. Just this one local initiative made the difference between almost total failure and almost perfect success.
This illustrates part of a broader debate in social policy, where most experts think we have to retreat from national standards. The three options can be described in a simplified way. There are national standards, be it provincial or federal, that are good for everybody. Another alternative would be to decentralize, but allow market forces to take over; or you focus on local development. Local development means that you decentralize but also provide resources. In the case of Le RESO, it had money to do the job. They have to pay the people who run the programs.
That is one example of something that can work when it is done at the local level. Of course, this has all kinds of implications. Since it is a network of groups, once people graduate, they can access other programs to help them find a job or start a small business.
At a broader level, if in Canada we have a choice between national standards and letting the provinces take control, I would recommend the latter. I think that the history of health care in Canada illustrates the superiority of allowing initiatives to occur, not the maintenance of national standards.
My last example is with respect to the issue of child poverty. The Quebec government has adopted a policy that is quite different from initiatives elsewhere in North America. The most striking element of this policy is the $5-a-day day care system.
[Translation]
Senator Lavoie-Roux: How is that useful?
Mr. Noël: How?
[English]
I will complete my description and then I will explain why it is useful; or you can explain to me why it is not helpful. I believe it is much better than a tax deduction because it builds on something that already exists. There is a network of non-profit day care that can be extended. It creates a service where kids from different social classes interact, as in the school system. It deals with the issue of intervention in schools when it is important -- that is to say, early on. It is not in high school that children fail. Early childhood experiences leave them ill prepared to succeed. This system makes it possible for someone in a low-paying job to obtain and retain a day care place. This is superior to the previous tax credit system.
I have often witnessed the following scenario at the day care my children attend. A woman loses her job. She takes her child out of the day care because she cannot pay the required $500. She has difficulty looking for a job because she has the child with her all day. When she does find one, her day care place has been taken and she is placed on a waiting list.
Given these realities of the labour market, if you make day care similar to school, you make it essentially a public service, equally accessible to lower-income people. Actually, that extends into the school years, because it is also $5 a day for after school care. It is easier for parents to manage with this system than to wait for a year-end tax credit that is needed immediately.
Now maybe I will hear the contrary point of view.
[Translation]
Senator Lavoie-Roux: You support the idea of a $5-a-day day care system, whereas family allowances have been eliminated. How is that useful? The new minister has also said that from the moment a child is born, it should be placed in day care, a move which encourages parents not to take responsibility for their children's care. She argues that it would be easier to place children aged one, two and three together in a day care centre and that this would solve our problems. Moreover, you have not said anything about the shortage of day care spaces. Are you aware of this shortage?
Mr. Noël: Yes. I guess it proves that day care is a popular option.
Senator Lavoie-Roux: Before we go and praise a $5-a-day day care system, perhaps we should take a moment to weigh the advantages and disadvantages. Parents bring children into the world and then rely on the state to raise them. That is life. What are your feelings about this?
Mr. Noël: As far as the shortage of day care spaces goes, it simply shows that this is a popular option. So many parents want to take advantage of day care centres that the demand exceeds supply. I see that as a positive sign. The shortage of spaces is merely a transition problem.
With respect to family allowances, it should be noted that the family policy makes provision for a flat rate child benefit and that is something that we recommended. The various child benefits are combined to ensure that the money is directed to the poorest families. This move was part of a major effort to reduce the budget deficit. Given the limited resources, there will necessarily be winners and losers. Funding can be increased over time, provided the flat rate child benefit remains in place.
Regarding day care, I agree that it is a choice people make. My colleagues and friends who are professionals, university professors, journalists and public servants all send their children to day care centres.
Children learn many things there, notably how to socialize. In middle-class neighbourhoods, parents who keep their children home find that they have no play mates because all of the other children are in day care. If you want your child to have other children to play with, you have to put him in day care.
The policy gives all families a choice, a choice now restricted to families that are better off. Numerous studies have been conducted, particularly in United States, in a bid to determine whether or not day care is good for children. Generally speaking, the results have not been very conclusive because a great deal depends on the type of day care provided. After living in the United States for one year, we found a day care, although it had no black children because it was a very expensive facility. However, there was nothing unusual about it. The day care centre our children now attend in Montreal welcomes children from all backgrounds, francophone and anglophone, and from all social classes, including those from wealthy and single-parent families. In my view, offering a choice to everyone, not merely to the wealthy, is a progressive approach. If, based on their own values, people opt not to go the day care route, then that is their decision. Again, judging from what Quebec families are doing, day care appears to be a very popular option.
Senator Lavoie-Roux: We will have to wait a few years before making our assessment. You are trying to sell us on the idea of $5-a-day day care.
Mr. Noël: I am not here to sell you on that idea, but rather to make it clear that we have two major choices: either we cut taxes and let people choose what they want or we try to create opportunities for everyone.
If we reduce taxes and allow people to make their own choice, for me, it means keeping my children in the same day care facility. I am not certain, however, that everyone will have that same choice.
Senator Lavoie-Roux: Ms Maxwell, on page 6 of your brief, you talk about perspectives on inequality and polarization. You report how there has been a growing concentration of families in the low income cluster. I was surprised to hear you say that in general, the elderly have not experienced these trends. Our country's senior population is growing, not declining. Seniors' incomes are also shrinking. How will they be affected by the current market instability? It is not only those who have money invested in the stock market who will be affected. Everyone will have to pay higher food prices this winter. Seniors are also very isolated. I am having trouble understanding why you say that they are not affected by these trends.
[English]
Ms Maxwell: Incomes of the elderly generally come from either the earnings -- the dividends and the interest -- on their own savings over their working lives, or from public transfers like the Old Age Security and the Guaranteed Income Supplement, and the Canada Pension Plan, to which they contributed. Basically, they are being subsidized because that contribution does not generate the transfers they receive. For the most part, pension payments, whether public or private, have not been affected by the recent fluctuations in interest rates and the value of shares. The fluctuations in income that I think you are referring to tend to have more impact on high-income people. There is not the same impact on the average incomes of the elderly.
Over the last 20 years, there has been a very sharp compression in incomes for younger families. The same is not true of the elderly. In fact, the incomes of the elderly continued to increase because there is at least partial indexing for many of the transfers that they receive.
In effect, by the time you get to the stage in your life where you are using retirement income systems of whatever sort, you are more insulated from these dramatic fluctuations in the marketplace that have been primarily affecting the lives of younger people in our society.
[Translation]
Senator Lavoie-Roux: -- even in the case of those who depend solely on their pension plans? I am talking about public pension plans here, not private pensions.
[English]
Their incomes have not kept pace with the cost of living. They are getting poorer and poorer all the time. The future of the public pension plan is a very critical issue. That is why I was surprised to read this.
Ms Maxwell: I think that we are speaking relatively here. On average, in the 1990s, the generation of Canadians that is independent and forming families but is under the age of 35 has experienced a very sharp decline of 10 per cent to 20 per cent in real purchasing power. It has reached the point where it is very difficult for a young couple to decide to start a family because they are not sure that they will be able to support a child. This generation is facing quite different circumstances from the erosion in income that may have occurred for retired people.
Senator Lavoie-Roux: I hope you are right and I am wrong. I am quite involved in many social organizations, and I see evidence to the contrary. Maybe some of the elderly are richer than their grandparents were, when there was little in the way of retirement income programs, but in comparison with 10, 15 years ago, the problem is becoming quite acute. Changes in health services, including decreased accessibility, are also not helping them. These changes are actually putting a lot of pressure on their adult children to do what was traditionally done by the state for the last 40 years. As I say, I hope that you are right and I am wrong.
Ms Maxwell: I would like to make one clarification. I am not saying there is no poverty among the elderly, but I think that we have dramatically improved their situation since the 1950s and 1960s. My recollection of the data is that for the elderly poor, living below the low income cut-off, the inadequacy of their income would be in the $1,000- to $2,000-a-year range. For young, lone parent families, their shortfall in income can be $8,000 to $10,000 a year. It was that difference in the degree of hardship that I was trying to emphasize.
Senator Johnstone: It is hard to quarrel with the precept that the dignity of the individual transcends the sovereignty of nations. With that in mind, my question is to Mr. Noël. When a country provides an acceptable standard of living and quality of life, does that have an impact on the economic viability of that country and, if so, how?
Mr. Noël: Are you asking if there is a contradiction between providing adequate conditions and being competitive?
Senator Johnstone: I thought I heard you say earlier that possibly European countries have more unemployment, or at least more social assistance.
Mr. Noël: In the last 15, 20 years, there has been a change in the composition of the labour market. There is an increase in the number of low paying, low-skill jobs. On the other hand, high paying, high-skill jobs are available. The other day I remarked to my wife that if you only read La Presse in Montreal, you would think all the young people of Quebec are either computer programmers or squeegie kids, because that is all we read about. Of course, that is not the case but, in a sense, it is a reflection of a labour market that produces high-skill level, high-paying jobs and also many low-skilled, low-paying jobs.
Faced with globalization and technological change, essentially countries can take one of two roads. One road is to let the market determine pay scales, and not set a minimum or "floor," or not much of a floor. Then, as in the U.S., people will work and there will be near full employment. However, there will be many people who have a job -- or sometimes two or three jobs -- and are still essentially living in poverty because the jobs just do not pay enough.
The other option is taken most obviously by continental European countries. To give you another image, I think it is still accurate to say that an unemployed German worker has a better income than many employed American workers. High unemployment is tolerated because such menial wages are not acceptable, and therefore we set the floor at a certain level. If that means there is unemployment, because obviously certain jobs will not be created at a certain wage, that is accepted and the unemployed are compensated, recognizing that there are not enough jobs for everybody. There is a more generous social package, even though it creates unemployment.
We like to think that we can have it both ways. That was the case in the 1960s and 1970s, when some countries had full employment and high levels of equality of income. Probably it is still the case in Norway. The examples are becoming more difficult to find. Overall, there seems to be a trade-off, which means there is no easy answer and no perfect solution. The issue is whether it is more important for human dignity reasons for people to have a job, no matter how low the wage, or more important for society as a whole that nobody should live below a certain income level. There is no objective answer to that. It is a choice that we must make collectively. Sometimes we do not even make the choice. We stumble into the situation gradually and we try to make one decision after another and end up with the result.
The Chairman: During the recession of the 1990s, when companies were slimming down dramatically, someone coined the phrase "corporate anorexia" to describe situations in which companies were downsizing so drastically they would lose the capacity to grow when conditions improved. Ms Maxwell is suggesting, with this concept of long-run dynamic growth, that perhaps there is a trade-off here being exercised, at least in some parts of the corporate world, in favour of the long term. In other words, some companies make a conscious decision not to take steps that might be desirable and even necessary in terms of the bottom line this year and for a few years ahead, in favour of long-run dynamic growth. That would be a very difficult choice to make in many cases and, I suppose, to explain to your shareholders. I would like to pursue it. I do not think we can pursue it very much today, but if there is some hard data or literature on the subject, I would be obliged if you would give it to us. Also, I would be obliged if you could advise us what witnesses we might call to discuss this matter with because I think it is a very interesting area to pursue.
Finally, this concept of long-run dynamic growth might be examined in terms of the public sector as well. I am quite serious about that. Various ministers in recent years, and presently, are taking considerable pride in telling us how greatly they have been able to reduce the size of the public service. If you would like to comment on that, there is a minute or so.
Ms Maxwell: I think that is a very productive line of questioning for this committee, to explore those issues with corporate leaders representing a spectrum of different organizations that have pursued different business strategies and that operate in different kinds of markets. There may be some industries, where a commodity is produced, where the cost minimization rule is very difficult to avoid and it is very difficult to stay in business if you do not follow that route. However, clearly there are many industries that require the institutional memory and the creativity and the embedded knowledge of the workforce, and can only work at full productivity when they have that understanding of the firm and its suppliers and customers. I think that it is important to explore those issues with a variety of corporate leaders. I talk about it in the abstract, but they will able to speak to it in "real world" terms.
The Chairman: Perhaps it is not very different from resisting the temptation to cut back on your research budget or on your advertising budget or on your sales force when times are bad. If you do that, you may be sacrificing the medium- to long-term health of your enterprise. It is an interesting subject, as you say. If there is a list of possible witnesses, and if there is some literature on the subject, I think we would all be interested.
I thank Ms Maxwell and Mr. Noël on behalf of all members of the committee for having given us a very interesting morning discussion.
The committee adjourned.