Proceedings of the Standing Senate Committee on
Social Affairs,
Science and Technology
Issue 31 - Evidence, March 24, 1999
OTTAWA, Wednesday, March 24, 1999
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 3:54 p.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: Last October, we heard from Thea Herman of the Department of Justice and Michael Wernick of the Department of Canadian Heritage, who were here in their capacity as co-chairmen of the social cohesion subcommittee of the Policy Research Committee. The policy research committee was created in 1996 as part of the government's 2005 project to try to understand better the policy environment over the medium term and to begin planning for the next decade.
The committee's mandate was to prepare a report for deputy ministers on the pressure points that are likely to arise in Canadian society by the year 2005 as a result of economic, demographic and social trends and to make recommendations regarding an interdepartmental research agenda and work program to address gaps in knowledge. There are four subcommittees under this overall committee: one on economic growth, one on human development, one on social cohesion, and one on global challenges and opportunities. They have a very ambitious research program under way.
The two senior public servants who are in charge of this work are Alan Nymark and Jim Lahey. Mr. Lahey is here with us today. Mr. Lahey's day job is as Associate Deputy Minister of Human Resources Development Canada, and Vice-Chairperson of the Employment Insurance Commission. He began his public service career in 1973 and has served in a few important departments of the federal government. He has been in the Privy Council Office from 1998 to 1999 as Deputy Secretary, Intergovernmental Policy. Before that he had been in the Human Resources Development Canada Department, and quite recently was named Associate Deputy Minister of that department. He is here to give us an overview of what is going on.
I do not think that we as a committee can reasonably expect Mr. Lahey to discuss the details of the research completed or ongoing. However, he can give us an overview of how the project is progressing three years in and reassure us that the advisors to the government are grappling with the issues that are our main concern, namely the social fallout from globalization and technology and the constraints on national governments.
Mr. Lahey has a brief opening statement to make, after which I will open the floor to questions and discussion.
[Translation]
Mr. James Lahey, Associate Deputy Minister Human Resources Development Canada, Co-Chair, Policy Research Committee: Thank you for inviting me to appear before your committee. As co-chair with Alan Nymark of the Policy Research Committee, an initiative which has made social cohesion a principal policy research theme, I am delighted that the Senate has chosen to scrutinize the state of social cohesion in Canada. You have heard from an impressive array of presenters and had some very interesting exchanges. We have been following your proceedings with great interest.
You have already heard from my colleagues Michael Wernick and Thea Herman, co-chairs of the PRI's Social Cohesion Network. And you are, no doubt, familiar with the Social Cohesion Report; "Rekindling Hope and Investing in the Future." I will try to avoid repeating too much of what you will have picked up through those sources. Let me make some general observations about the issue of social cohesion.
What struck me in reviewing some of the testimony that you have heard is the variety of perspectives and the range of issues that have been brought in under social cohesion, from income distribution and poverty, to social exclusion, to civic knowledge, crime, et cetera.
[English]
For the most part, these are not new issues for the policy community in Canada. For many of these issues, we have a good qualitative and quantitative picture. For some issues, such as child poverty and the well-being of aboriginal peoples, the trends raise concerns. For others, such as crime and poverty among older Canadians, things are more encouraging. For still others, such as the levels of giving and volunteering or access to information and communications technologies, it is difficult to be conclusive.
The contribution that the concept "social cohesion" is making is to push us to think about the interconnections among these many separate social policy issues and, even further, the connections between overall social policy and more traditional economic objectives. The arrival of "social cohesion" onto the policy research scene both reflects and encourages a greater recognition of the importance of social policy issues and of their connection to our overall well-being.
The unique challenge with "social cohesion" is trying to understand how all of these issues hang together, what weights to assign to different potential components in diagnosing the state and evolution of social cohesion, and identifying the probable impacts. I am sure that your committee will have an interesting time wrestling with deciding how to apply those weights. These raise difficult questions. Research in this area is new and necessarily of a multi-departmental and multidisciplinary nature.
For you as parliamentarians, social cohesion is more than a research issue. Ultimately, we all want to know what the state of, and the trends related to, social cohesion suggest about social policy. What are the policy imperatives?
For the most part, we are a long way from knowing what policy changes seem to be dictated by concerns about social cohesion. However, we do hear -- and I am sure you have heard -- numerous hypotheses. For example, we hear that social cohesion is breaking down, that social cohesion is threatened by globalization, by technology, by income polarization. We hear also that policy could mitigate income disparity and other threats to social cohesion. We hear that social cohesion is conducive to economic growth.
These so far are hypotheses more than facts, and some are controversial. For example, is social cohesion really breaking down? You have seen, as we have, many statistics that support that view on income distribution and poverty, on low levels of trust in government, and so on. I do not challenge those statistics. However, you have also had the opportunity, I know, to be exposed to other statistics that tend to support a different conclusion. For example, contrary to popular perception, crime has been on the decline in Canada. Canadians remain among the most generous of all peoples with both their time and their money. Canadians are proud of their country by international standards. Although levels of trust in governments are low in Canada, confidence in democracy remains very high.
[Translation]
Identifying what might be threatening social cohesion in Canada is equally controversial. Given what Canadians have been through lately -- a very painful period of government budget balancing, a long economic recession, and an unsuccessful effort at constitutional reform -- it would be surprising if nerves and cohesion were not a bit frayed in this country. But how do we separate out the impact of those historical factors from longer-term trends and from current forces over which policy can hope to have an impact?
[English]
We do have some early findings. You will recall that Thea Herman highlighted some findings in her presentation. In particular, there is a growing recognition that the determinants of economic growth and health are far more complex than we had originally believed. As Professor Lars Osberg pointed out in this committee, it is not so long ago that the mainstream policy community took it for granted that there was inevitably a trade-off between social and economic policy, between equality and economic growth. The issue was how much economic performance were we willing to forego to get good social policies.
It is increasingly acknowledged that good social policies and programs are necessary ingredients to economic growth. As you know from some of your earlier sessions, many studies are finding a positive correlation between equality, trust and other manifestations of social cohesion, on the one hand, and good economic performance on the other.
That is not to say that all policies supportive of social cohesion are conducive to economic growth. We cannot claim more than the evidence justifies. There is still often a trade-off over a range of social and economic policies.
Associated with the policy research initiative is a renewed resolve to ground policymaking on solid research. We want to strengthen the culture that turns first to the available empirical evidence before putting forth policy solutions. Increasingly, we want to encourage the question: Yes, but what is your basis for saying that?
[Translation]
These are early days in terms of understanding social cohesion. We need to be sensitive about where this preoccupation with social cohesion is coming from and careful about being nostalgic for some supposedly happier, more cohesive past. Canada has changed and we would not expect it to be cohesive in the same way as was the case decades ago. We need to remember that cohesive societies are not ones where conflict is absent. Rather, cohesive societies find ways of channelling conflict constructively.
The PRI's social cohesion network has a good working definition but we cannot claim that everyone has rallied around it. Nor do we yet have a consensus on what are the key components of social cohesion and how they should be weighted in diagnosing social cohesion in Canada.
We need a much better understanding of the linkages between things like inequality, civic knowledge, trust in government and social cohesion. And we need to know much more about the linkages between social cohesion and economic performance.
I am certain that the deliberations of your committee will help clarify some of these issues, and will further refine the questions that need to be addressed in getting a handle on social cohesion and its implications for the public good in Canada.
[English]
As you are no doubt aware, we are continuing, like you, to struggle with these questions. Many scholars in Canada and abroad are working on issues that are directly or indirectly linked to assessing social cohesion and its relevance for public policy. You have already heard from a good cross-section of these scholars. The Policy Research Secretariat, in partnership with the Social Sciences and Humanities Research Council, is supporting a number of other scholarly efforts through its Project on Trends, many of which are are relevant to social cohesion, for example, projects on value change, social differentiation and globalization. In addition, the SSRHC has set aside roughly $10 million over six years for research on exploring social cohesion in a globalizing era.
Our attendance here today comes at an interesting time for our project. Our networks in the areas of growth, human development, social cohesion and global challenges and opportunities have recently completed a research update, which we expect to put on our Web site sometime in the next few weeks. Because of those updates, we have taken stock of our research needs and we are proposing the mandating of three new horizontal projects. Those projects will be in the areas of aging and its effects on our society and economy, sustainable development, and the social and economic aspects of productivity.
This last project I am sure will be of particular interest because it aims to wrestle with one of the major conclusions of this round of research -- our growing awareness of the linkage between economic and social factors in shaping our overall well-being as a society. Hopefully, this effort will help us to better understand the social antecedents of productivity and economic growth and the social consequences of particular models of pursuing growth.
Senator Butts: When you refer to the four networks, are there different people working on each one?
Mr. Lahey: Different assistant deputy ministers are chairing these networks. There are two co-chairs for each network, to reflect the idea that we are trying to be horizontal. The people who are actively participating are generally not the same; however, in some cases there is overlap between the networks. For example, a number of people who work, let us say, in the area of human development are also engaged in the social cohesion area. There is a certain amount of overlap. That actually facilitates the horizontality.
Senator Butts: It is curious to me that social cohesion is all by itself. For us, social cohesion is linked with other aspects. For example, economic growth is part of our problem of social cohesion. However, you have separated these out and put social cohesion by itself. I find that peculiar.
Mr. Lahey: This project, as Senator Murray set out at the beginning, started off as a description of pressure points that we foresaw for the year 2005. Having done that, we decided that we needed to pursue what we did not know. Therefore, we invented these networks. I would not claim that they were the result of profound research on how to organize research, but they seem to make sense as focus points.
We thought it was important to give social cohesion its own network because, particularly two or three years ago, a relative lack of work had been done on that subject and we needed to focus some attention on it. If we combined it too readily with other things, it would risk being neglected or not given enough attention. I think the results support our conclusion, because the work that Michael Wernick and Thea Herman undertook has advanced, for example, our understanding of how to define the issue and the scope of it. They have reached out, as I think they explained, to colleagues in Europe and elsewhere. In other words, we have actually focused a fair amount of energy on it, which might not have been the case otherwise.
Senator Butts: We have globalization and economic growth with social cohesion. It is wonderful that you could compartmentalize them.
Mr. Lahey: It is not our intention to compartmentalize them. It was to build up the pieces, so to speak, in order to link them.
Senator Butts: Then they will all fit together?
Mr. Lahey: That is the hope.
Senator Butts: Good luck. On page 4, you say you have a good working definition of social cohesion. I wish you would share it with us.
Mr. Lahey: It was in the presentation that Michael and Thea made in October, and I will read it to you. It is on page 6 of that presentation. The definition that they have worked out is this:
...the ongoing process of developing a community of shared values, shared challenges and equal opportunity within Canada, based on a sense of trust, hope and reciprocity among all Canadians.
I will not swear that that is the perfect definition. I know there are alternative definitions, but this one works for us.
Senator Butts: So you are talking shared values among Canadians. That is the key.
Mr. Lahey: Yes.
Senator Butts: They are almost the same thing as what you call manifestations of social cohesion?
Mr. Lahey: Yes.
Senator Butts: I would say that if they are shared values they make shared social cohesion. On the fourth line of page 4, I understand you to be saying that there are signs that we already have social cohesion if we have those things.
Mr. Lahey: Shared values would build, encourage, and strengthen social cohesion, yes. But I would not limit it only -- and the definition does not limit it only -- to shared values. There are other elements.
Senator Butts: In the middle of page 3, you associate the low levels of trust with poverty. I do not know what the connection is. The level of trust is no greater among the poor than it is among the rich. The level of trust is something that is promoted by the media and people get so much out of the media that they go along with it.
Mr. Lahey: We are not attempting to make a correlation between poverty and levels of trust. We are simply saying that those are two aspects of social cohesion.
[Translation]
Senator Ferretti Barth: You referred to a report titled "Rekindling Hope and Investing in the Future." We are going to run into obstacles with two categories of citizens: the rich, who have no need to rekindle hope, and the poor, who have no hope left, who have lost a great deal of their interest in every day life because they are receiving government assistance in order to survive.
How can we rekindle hope and invest in the future? Do people have any assurance that the government will provide them with the tools to invest in the future and to close the gap between themselves and the people with money, economic security and power?
Another thing, you make no reference whatsoever to the cultural communities. You have said that Canada is a mosaic of diversity. If we do not take into account the complexity of the needs of the cultural communities, we shall again end up with two clearly distinct groups.
On the one hand, we have those who are well off, who have done well here, and on the other those who have not had the means to assert themselves and to make a comfortable life in their new country. There are many factors that come into play. I do not see how there can be social cohesion in the near future.
Mr. Lahey: It is not our intention to exclude the issue of the cultural communities. On the contrary, this is an important dimension. I did not address all the dimensions in my introduction. In the presentation by Michael Wernick and Thea Herman on enhancing our understanding of the issues affecting social cohesion, reference is made to exploring the nature of linkages between cultural policies, citizenship and social cohesion.
I would go so far as to say that, here in Canada, our society is becoming more and more varied, more and more made up of multiple cultures and allegiances. We are a bit ahead of the rest of the world in finding the means to unify a people made up of so many distinct groups and traditions. Even if I did not emphasize that point in my introductory remarks, I can assure you that it is included in what we are doing.
I will probably disappoint you in that we are not making any suggestions on policies per se. What we are more concerned with is an analysis of factors, forces and trends. In that context, we need to understand the implications, to understand the reality and the potential for hopelessness of the least advantaged members of our society. This is one of the reasons we must enhance our knowledge.
For example, according to one study, between the 1980 and the 1990 censuses in certain Canadian cities, Montreal, Winnipeg and Quebec City among others, there was an increase in the number of census areas in which the majority of residents were poor. This implies a certain geographical concentration of the phenomenon of poverty. What are the implications of this? We can imagine what they are,. but this is one of the trends we need to track, since the census for the year 2000 is coming up very soon.
Has this trend increased, or has it reversed? It may be frustrating, but it is a reality nevertheless; it is not our job to offer prescriptions for policies, per se.
[English]
Senator LeBreton: I should like to refer to page 5 of your presentation. We have struggled with the definition of social cohesion, and some of our witnesses have interesting and unique definitions of their own. I note in your presentation that SSHRC has set aside $10 million over six years specifically to research social cohesion in a globalizing era. How will you approach this research and to whom will you turn to conduct it? I am asking this question in an effort to further help define what social cohesion really means in the minds of the public and those people who are trying to grapple with this issue.
Mr. Lahey: I regret that I am not able to give you the exact details of the SSHRC program, although I could get that for you and provide it to the committee.
In general, SSHRC adopts an approach whereby they invite scholars, mostly in universities but not limited to that, to make proposals for projects that are then peer-reviewed -- that is, by people of stature in the various disciplines. In other words, the awards are made on merit, as judged by other researchers. That is their standard operating mode. I would expect that they would be applying this.
Instead of their core program, which is, bring in whatever you want and compete, whether it is in history or the social sciences and humanities, they have said that this is one area that needs more attention and research. Therefore, there will be $10 million over six years for this purpose.
I shall use your question as an opportunity to explain the Project on Trends. This is worth noting because the traditional approach in SSHRC, while very effective, tends to be very long. People make proposals and then it takes a year or more before they know whether they will get the money. It takes literally years before projects can get started.
We did not want to take over the core of their work, but as an additional business line, so to speak, we wanted to encourage something that was a little more responsive. They agreed to experiment with picking nine subject areas -- for example, value change and social differentiation. Senior academic leaders were identified for each of these. The SSHRC put on their Web site requests for proposals for up to $10,000.
They expected to get a few dozen applications, but they got 200 or 300. SSHRC actually had to sift through the applications and make some choices. There will be a series of conferences over 1999 where the results of these studies will be brought forward. That is a good example, in effect, of facilitating the linkage between the university community and the policy-oriented community on issues that are important as emerging trends.
Those are a couple of areas. However, specifically, on the one you are asking about, I am sure they have a brochure. We can get it for the committee.
Senator LeBreton: You talk about shared values and rekindling hope and investing in the future. Those are all viable and certainly lofty goals, but how do you ensure that people have shared values? How do you instill hope in people? I am grappling with the whole issue of people in your position trying to get all of these views into one place and presenting something that most people can understand and that will have a direct impact on future policies of the government.
You talked about aging, sustainable development, and social and economic aspects of productivity. Is there anything specifically being done regarding our aging population and the impact of that on, say, families, because people are living longer, on our health care system, or on society as a whole?
Mr. Lahey: In a sense, aging is not a new subject.
Senator LeBreton: But people are living longer.
Mr. Lahey: That is right. The proportion of the population over certain age thresholds is rising compared to the whole population. Certainly there has been research in this field. What is emerging is an interest in a more comprehensive and more integrated assessment of the social and economic impacts of aging. The Organization of Economic Cooperation and Development in Paris, of which Canada is a member, over the last couple of years has done much work on all the broad aspects of aging.
On the one hand, people talk about fiscal implications of, say, pensions and the costs of health care and so on. That is one dimension. But there are other dimensions -- for example, the effect on the labour market. In recent years, there has been a tendency to try to encourage people implicitly, at least, to retire early to make room for people who want to enter the labour market. As we have fewer and fewer workers compared to the population, it is quite likely that the social preference may shift to working longer and trying to encourage people to actually stay in the labour force. In order to do that, you may need to adjust the way of working. You may want to look at partial pensions and people easing into retirement and the impact of that. Then there are questions in terms of the financial market. If you have a lot of the capital of a society tied up in pensions, what does that do to the way the capital markets work? Then there are health questions of a substantive scientific nature.
The work of the OECD starts to pull this all together and it puts it in the context of not just aging per se, but changes in the life cycle. Peter Hicks, who was an assistant deputy minister in our department and in Health Canada, led a lot of this work at the OECD after he retired. To be slightly facetious, as we see the age of starting to work creeping up and the age of retiring creeping down, you could reach the point where you show up in the morning and retire in the afternoon. Obviously, that is not going to work. The point is, however, that you have to put all the pieces together.
To that end, Health Canada has done some work, as has the Department of Finance and our department. We are just starting to put all of this together. As it happens, the big bulk of the baby boomers start hitting 65 more or less in a decade from now. We have some time to try to work through a lot of these issues before there is a substantial shift in the proportion of the population that is over 65.
We have done some work. We need to do a lot more. We are launching this horizontal project to try to encourage more of that.
Senator Johnstone: How can you suggest that confidence in government is low and at the same time contend that confidence in democracy is high? When you use the term "government," do you really mean politicians?
Mr. Lahey: Luckily, I do not have the exact details of these surveys with me so I can fudge my answer a bit. I would, however, be happy to find the relevant surveys and share them with you.
From reviewing some of the testimony of people like Michael Adams and others -- and we may be quoting Michael Adams, for all I know -- my sense is that there is a lot of evidence of mistrust of politicians, of public officials generally, of governments as institutions. However, at the same time, as I understand it, there is among the public well-entrenched commitment to the basic values of democracy.
It may well be -- and this is just a hypothesis on my part -- that that deep commitment to democracy causes people sometimes to wonder whether government institutions are reflecting their priorities. I will not speculate any further, and undertake, with the help of my colleagues, to get some of the surveys that underpin this and share them with you.
Senator Johnstone: You do not want to speculate any further and we will not push you any further.
The Chairman: One possible indicator, of course, is the declining turnout at federal elections, which reached almost an all-time low in 1997. It was also low in 1993. In some provinces, it was very low, which is quite worrisome.
Senator Wilson: I have read your paper, although I missed your opening comments. I am interested in the three new horizontal projects. You referred in your paper to channelling conflict creatively. I hear about the conflict, sometimes on an empirical basis, between an aging population and a younger population, where the young are concerned about their lack of pensions, how they are going to have to support all these old people, the drain on them and the resentment that is there. What is your comment?
Mr. Lahey: I am tempted to quote my 16-year-old son, who expresses these views, but I will not.
Senator Wilson: Go ahead.
Mr. Lahey: We try to make the conflict creative in the household. It is not always easy.
There will be conflicting views in society. The trick of a healthy society is to try to find a way to reconcile them constructively. Many have made the observation that the so-called baby boom generation, who are people born between the late 1940s and the early 1960s, the so-called big generation, has had a tendency to want to have their cake and eat it too, and then have it again. All the schools were built for them; there was vast job creation; they are blocking all the promotions; and now they want to look after the pensions, and so on. A certain amount of social tension has resulted.
This is a huge debate -- and I do not want to open the whole debate, but let me give you an illustration. There have been recent decisions by the federal and provincial governments to change the funding arrangements for the Canada Pension Plan. Their aim is to shift some of the burden of maintaining the plan back to the current generation, thereby raising rates while the baby boomers are still working. The result would be building up the fund and accumulating interest. Now it is projected to get to 9.9 per cent eventually. The alternative, according to the actuaries, is that it would have to get to 13 per cent or 14 per cent and essentially be paid by the younger generation.
The foregoing is an example of how constructive creativity can be applied to these generational conflicts.
There has not been enough attention given in research terms to the objective of transfers between generations. I would agree with that.
Senator Wilson: Not only the financial transfers but the way in which provinces have downloaded, for example, their health services, expecting the younger generation to care for the older generation when they are heaved out of the hospital. I am not sure how that will happen when the younger generation is working.
Mr. Lahey: That is why governments are starting to look at things like home care and so on as a way to bridge that gap.
Senator Wilson: What do you mean by "sustainable development"? That is a catch phrase.
Mr. Lahey: It is a catch phrase. Essentially the concept is to find a balance between economic growth -- which often involves the consumption of resources and environmental impacts -- and viably maintaining the water, air, and other societal resources. Exactly how to do that, of course, is difficult. It is not a secret that in preparation for the Kyoto Summit on climate change, which took place last year, the federal government and the provinces were not fully together on the analytical base for greenhouse gas reductions in Canada. It is those types of events that lead us to believe that we need to put a lot more emphasis on understanding these phenomena.
One of my colleagues, who used to work in the Department of the Environment, said that if we look at various specialized areas, pollution, for example, as a pure subject or economic growth in itself, we actually have a good knowledge base. Where we are lacking -- again, this is horizontality -- is linking questions of pollution with questions of economic growth.
It is that kind of research that we want to pursue through this sustainable development project. That research will involve, as its participants, the Department of Fisheries and Oceans, the Department of the Environment, and some of the natural resource departments.
Senator Butts: Mr. Lahey, I am fascinated by the fact that you have read all the reports out of this committee.
Mr. Lahey: I cheated a bit because I had summaries.
Senator Butts: We have heard from Mr. Broadbent, who has just produced a mammoth study about the voluntary sector, the charity sector and the non-profit sector. I have the report's recommendations about accountability and regulation. I thought that at one time the voluntary sector was part of the cohesion we are talking about because they have a special motivation and a special interest in their communities. However, I am afraid that a lot of them will be driven away if we adopt this.
This government has been spinning things off and divesting, yet to me it seems as though they are jumping in on this sector. Is the government for more social cohesion or for less social cohesion?
Mr. Lahey: I have not read Mr. Broadbent's report. I would agree that, from a research and policy point of view, what we could call the health of the volunteer sector in society is a critical part of social cohesion. We often refer to the volunteer sector and the work they do as the civil society. One of the observable differences between, say, Eastern European countries and Western Europe or North America is that in those countries where the state is all-providing but where there is not a commitment by the citizenry to the state or to the society there is very little engagement. However, in North America there is a dense underbrush, so to speak, of activity that brings people together.
As a parent involved with my children's hockey, I am struck with the diversity of people who show up at a hockey arena. They almost certainly would not be talking to each other except at the hockey arena. That leads people to have a better understanding of the different outlooks in society. That is part of what social cohesion is about. Mind you, you always end up thinking the parents of the other team are somehow or other very strange, so that may work against social cohesion, but only on a temporary basis.
Senator Butts: That is only in an athletic context.
Mr. Lahey: Yes, I am only teasing.
Senator Butts: It is a real worry that, for example, a board of directors of a group have eight big questions they will have to reply to if they hope to get any kind of grants.
Mr. Lahey: Am I correct in believing that this is a set of recommendations as opposed to a decision at this point?
Senator Butts: Yes, but there are people deciding that it is good. I am worried about the volunteer sector, that they will be threatened and frightened off by a whole lot of rules and regulations.
Mr. Lahey: You are citing an important issue.
The Chairman: Mr. Lahey, I want to paraphrase one sentence to you from the report entitled "Canada 2005 -- Global Challenges and Opportunities: Draft Interim Report," dated February 1997. The report says that the traditional dichotomy between `economic' and `social' policy has less and less relevance to Canadians and to the governments that serve them.
There are a lot of people at this table -- maybe everybody at this table -- whose response to that would be "Hear, hear." I am inviting you to show us how your research program reflects that conviction.
I have an impression from looking at the list of research projects being undertaken that the two solitudes still exist in government, economic and social. I ask myself: When and how are they going to come together?
Would you please comment on how this dichotomy is being resolved. How are the economic and social aspects going to be integrated?
Mr. Lahey: That is the big question, and you are quite right to pose it. I would not want to suggest that we have solved the problem, that we have blended social and economic outlooks seamlessly in our work. That is not the case. You are quite right that many projects that are undertaken let us say in the growth network are undertaken from a fairly classic economist's perspective. You can see many traces of the traditional dichotomies.
That being said, we are engaged in culture change. This is a work in progress. I would give you some examples of why I feel we are moving in the right direction.
Before the formation of the Policy Research Committee, the truth is that departments very rarely shared and compared their research work. I will not say that they never did. It was not that the stuff was secret. You could get it and read it, but there was no structure that forced people to listen to each other.
Senator Murray -- and perhaps other senators attended as well -- was at our conference in October where we brought together several hundred people with different perspectives. These people are, in a sense, forced to sit and listen to other perspectives, which causes them to start wondering how these things relate. That is kind of a structural thing that is pushing in the right direction.
The specific manifestation that I would point to, and it is still very much in the developmental stage in terms of design, is this horizontal project on the economic and social aspects of productivity. There was originally a proposal to look at productivity planned, but a number of articulate people around the table made the point that you cannot treat it as an input-output in the workplace, in the factory kind of question. There are deeper issues, and particularly in a knowledge-based economy, where the human capital, that is, the knowledge that is embodied in individuals, is a critical factor. That in turn is related to questions like the upbringing of children, the way transitions happen into school and from school to work.
The home environment and the community environment in which you live are also determinants of whether you develop certain kinds of human capacities. There was an ongoing debate around this. We agreed, then, that we had to formulate the project as economic and social aspects of productivity. We have not yet sketched out the research program. We will be doing that work over the coming months. It will not be easy. The fact is that economics offer self-contained analytical constructs and the people who are trained in it begin to feel uncomfortable when they move outside familiar paradigms. Even there you start to see change. The traditional approach of modeling was one that did not include factors like human capital. It tended to deal with capital in the form of machinery and labour. However, now you will find that even the growth people, the Department of Finance people, the industry people are talking about what they call endogenous models, where there are factors within the model -- that is, human knowledge -- which is making a difference to the outcome. Even in their own economically oriented models they are starting to import some of the factors. We would argue that there is a bigger context, and issues like trust and social cohesion are important as well. We have to work that out together.
We are not the only ones who are struggling with this. For example, the Canadian Policy Research Networks, Inc., who are working with, are struggling with those kinds of issues. I can tell you that many people involved in the Project on Trends are struggling with these issues. So we are not alone.
The Chairman: I was scanning the list of research that is being done. One paper ask the question: What is the natural rate of unemployment? That is an old question, to which various answers have been given over time. I am aware that in the budget papers two or three years ago it was, if not stated, at least hinted at very strongly that 8 per cent was a natural rate of unemployment. There are two papers being done on this -- they are probably finished by now -- one by the Department of Finance and one by your department. I presume they come at it from different perspectives; I have not seen the papers. I presume they are available if one wanted to send for them.
Mr. Lahey: Yes.
The Chairman: Are these two authors invited to come together and resolve the different perspectives in order to come up with one particular definition or analysis of that problem, or am I asking you too much detail?
Mr. Lahey: You are not asking an unfair question, but I do not know the specific answer. I could look into that and let you know.
The studies, if they are completed, would certainly be public and they could be shared. It is a good question, and I would like to know the answer, too. I will look into it.
The Chairman: Those same two departments were invited to do something on why the unemployment rate in Canada is higher than in the United States.
Mr. Lahey: There was a public conference about two years ago, largely funded by our department but organized by the Canadian Centre on the Study of Living Standards. We heard from people from the United States and Canada, both government officials and experts. There are proceedings from that. In a sense, that conference was held in order to bring together a range of perspectives from both countries and from different disciplines. Again, I know that is available and could be shared.
Senator LeBreton: Following your scenario on the natural unemployment rate, what if the Department of Finance were to say 8 per cent and your department were to say 6 per cent. Different interest groups, political or otherwise, would cite the figure that best suited them. Who gets them together and decides what number they are going to base all their policies on when government policy is being developed? How do these things become resolved?
The Chairman: You should tell her that she knows the answer to that question as well as you do.
Mr. Lahey: That is right. These tend to get resolved through the cabinet process.
The Chairman: You mentioned productivity, Mr. Lahey, in an interesting context. You talked about some work being done on the social and economic aspects of productivity. In one of the documents that the PRC has already put out, they talk about the two different notions of competitiveness. Judith Maxwell has also written and talked about this. The first notion is the idea of cost minimization, the short-term focus on the bottom line, which has led to layoffs and many social problems, such as under-employment, especially among younger workers. This leads to growing economic insecurity for Canadians and has produced a trend toward the polarization of jobs and income.
The second notion of competitiveness focuses on the long-term success of a society in generating economic growth and well-being for its citizens. The dominant theme is one of investing in human and social capital.
In an earlier document, the committee said that little is really known of the role of social programs in effecting investment location decisions and that, in fact, it could be argued that some government programs offer cost advantages while others may contribute to sustaining a comparative advantage. They said that, consequently, well-designed programs may offer advantages and serve to attract investment.
If we are going down this road, are we going to question the adequacy of the traditional measurements of, say, productivity and competitiveness? Tell me what work is being done on this, if work is being done on this issue?
Mr. Lahey: A lot of work is starting to be done on measurement of outcomes. For example, one of the themes that is central to the framework on social union that was agreed to between nine provinces and the federal government recently is precisely that, to promote that idea of assessing the outcomes of social programs.
There is an intriguing piece of analysis called an index of social health.
The Chairman: If we are going to consider seriously the second notion of competitiveness or productivity, if you like, greater investment in human capital and so on, how do we link that with the traditional notions of competitiveness and productivity?
Mr. Lahey: One example, which was implicit in what you were reading, to cite a program, is that Canada actually enjoys significant comparative advantage in purely economic terms vis-à-vis the United States because we have a centrally funded medicare system. One reason Ontario has a disproportionate share of the North American auto industry is that they have a tremendous per-hour advantage because they do not have to pay for the health care insurance of their workers. This was true even when the Canadian dollar was closer in value to the American dollar. That is a classic example of where a farsighted social policy, which is very much an element of cohesion, turns out to be of tremendous benefit economically. The economists are clued into this as well.
The Chairman: Here is a quotation that most of us find a little troubling. It is from the October 1996 draft interim report:
The potential medium-term economic growth path under current assumptions is not sufficient to make a dramatic reduction in the jobless nor return us to a situation of steadily rising income for most Canadians. This may well compound the already troublesome shift towards more inequality and opportunities for Canadians and aggravate the unsetting fault lines in social cohesion which are becoming more and more evident.
That was 1996. To your knowledge, is there any reason to change that statement about the potential medium-term economic growth path?
Mr. Lahey: Growth in Canada has been better over the last two years than we were looking at in 1996, but long-term issue economic growth, in terms of being able to generate wealth and, therefore, being able to share and so on, is still a problem. We still do lag the United States in terms of average per capita income, and we compare ourselves to the United States. The gap has not been closed significantly. That will continue to be an issue. However, if somebody thought that the non-accelerating rate of unemployment was 8 per cent, we are at 7.8 per cent. We are past there already and hopefully it will go lower still. We have had a better outcome than we foresaw, but the underlying trends are still worrisome.
The Chairman: You have been extremely helpful, Mr. Lahey. Before we finish this exercise, we may have an opportunity to talk to the people who are running the growth network.
The committee adjourned.