Proceedings of the Standing Senate Committee on Social Affairs,
Science and Technology
Issue 4 - Evidence
OTTAWA, Monday, June 3, 1996
The Standing Senate Committee on Social Affairs, Science and Technology, to
which was referred Bill C-12, respecting employment insurance in Canada, met
this day at 4:30 p.m. to give consideration to the bill.
Senator Mabel M. DeWare (Chair) in the Chair.
The Chair: Honourable senators, with us this evening to discuss Bill C-12, the
employment insurance bill, is the minister, the Honourable Douglas Young.
Mr. Minister, we are looking forward to hearing what you have to say. Please
The Honourable Douglas Young, Minister of Human Resources Development: Thank
you, Madam Chair. Employment insurance reform has been a topic of discussion
for quite some time now. I have no intention this afternoon of taking up a lot
of time presenting Bill C-12. We do realize, of course, that Canadians from
coast to coast are interested in the proposed legislation.
A number of issues remain unresolved, even though some changes have been made to
the bill. The proposal has been substantially improved as a result of hard
work. This being said, judging from the reaction that I have seen across the
country, I realize that many Canadian workers understand the need for changes
to the employment insurance program.
Generally speaking, and I emphasize generally, the reforms have been rather well
received. There are always some difficult decisions to be made. Clearly, this
was not an easy task for me since I am very well aware of the situation of many
people affected by job shortages in certain regions of our country.
Part II of the legislation prompted us to make a proposal last week in an effort
to resolve what is admittedly a long-standing problem, mainly the desire of
certain provinces to have more control over active measures in addition to
manpower training. We have already indicated that we intend to withdraw from
this last area.
While I am not saying that our proposal will be adopted quickly, it is
interesting to note that the vast majority of people who have commented on the
bill so far appear more or less receptive to it. Of course, a number of
reservations have also been expressed about the proposed legislation.
I hope that once your committee has examined the various components of the bill,
we will have an opportunity to take another crack at it in the House of Commons
so that everything can be in place for July 1, as planned.
Obviously, I am pleased that we have moved to this stage of the Parliamentary
process in consideration of the bill on employment insurance. We believe that
the bill represents a fair and equitable approach to a very thorny problem,
both with respect to the employment insurance side of it and how we deal with
the provinces in a cooperative way to ensure that the resources which are made
available for job creation and active labour market measures reach the
objectives that we have set - that is to say, not only ourselves but also our
partners, the provincial governments and certainly the private sector.
The need for the reform of UI on an ongoing basis is well known. Reforms have
been undertaken in the past by previous governments. Undoubtedly, changes will
be made to the legislation that we have put before Parliament this year.
We have made a commitment to monitor the impact of the changes to ensure that we
understand what is happening to individuals and to regions. I have no doubt
that, in our mandate, we will be able to respond as required to whatever that
monitoring process provides us with.
Employment insurance is a very important piece of business in this country. One
of the things that has always bothered me - and I have raised this issue even
in international fora in the last couple of months - is the whole notion of
good jobs and bad jobs. I have never quite understood the total definition of
what makes a job good and what makes a job bad.
For some, I understand that a good job is one that is highly paid and very
rewarding in terms of personal satisfaction; and that bad jobs are low paid and
perhaps not terribly exciting. However, it is probably fair to say that, if you
took a so-called "bad job", working in a situation which is not
terribly pleasant at the minimum wage and suddenly transformed that job into a
$30-per-hour job, you would have thousands of people applying for it. We must
be careful as we look at what has evolved into our every day discourse
regarding the "Mac" jobs: the hamburger flipping jobs, the part-time
jobs and the low-paying jobs.
I am from a culture that thinks any work is useful. Obviously, everyone wants a
job and they want to get started. A first job does not necessarily mean that
you will end up there forever, but you must begin some place. The service
sector has been doing a good job in creating a lot of employment opportunities
Part of my concern in that area has to do with the fact that, in addition to
remuneration and working conditions, part of being in a bad job was not,
apparently, having a job at all, as far as it related to employment insurance.
Unless you worked a certain number of hours a week, apparently you did not have
a job as far as employment insurance was concerned. We were very firm in our
belief that we should have "first-hour coverage", that any job where
you go to work should be recognized in all its components as being meaningful
work. It should be recognized as such. Thousands of people will be connected to
the system now through this first-hour coverage.
The only other situation I wish to address is workers in seasonal industries. I
have been involved with and close to people who have worked in seasonal
industries for many years - decades, in fact. I am convinced, and I think
experience will bear out the fact, that all of these people, practically without
exception, if they have an opportunity to work full-time employment in a
traditional way, they cannot get there fast enough.
For example, in my area of the province where we have created full-time jobs,
our experience has been that people have stayed at those jobs and there has
been very little turnover. Even in comparable job situations that exist in
other areas of the country where you can measure these kinds of things, there
is less turnover of personnel in northern New Brunswick, for example, than there
would be in some of the major metropolitan centres where people have access to
the same sorts of opportunities.
I do not subscribe to the theory that people who work in seasonal industries
choose to do so rather take advantage of alternatives that might be available
to them. The challenge for the government and the private sector is to prove
that we are right about that, and that jobs will enable those who want
stability in their income to be able to provide for their families in a tangible
way, will have the opportunity to find employment.
In closing, I know that many concerns will be expressed before your committee,
as have been expressed before the committee in the other place. We have heard
from the public. I have probably heard more from the public than most people.
The messages have been delivered in various forums and in different manners.
Some have been personal. Large numbers of people have verbally expressed their
views on the matter and others have written. Organizations representing people
in the work force have also had their say.
We have been listening to what people have had to say for a very long time. As I
indicated earlier, reform of this system will have to take place from time to
time to reflect what is happening in our economy and what is happening in the
Honourable senators, I look forward to the opportunity to express my views to
you today in response to questions. However, I will not be dealing with
specific issues today.
I do not profess to have mastered the myriad numbers involved in trying to deal
with this issue, but the deputy minister, Mr. Noreau, and other members of the
staff will take careful notes, in case there are questions of a technical
nature, regarding numbers or statistics, or how various situations may impact
on people. I hope we much of that work has been done. If we cannot provide you
with some of that information today, we hope to provide it to you in subsequent
days, and very quickly, because I know you want deal with this expeditiously.
The Chair: As you can imagine, Mr. Minister, a large number of witnesses have
requested to be heard before this committee. We are trying, as a committee, to
accommodate as broad a section of those as we can in the time allotted to us.
We will now start the questioning with Senator Phillips.
Senator Phillips: I would welcome the minister to the committee today. I was
rather surprised by some of his opening remarks. He said the UI reforms were
very well received. I obviously was watching the wrong TV channel when the
demonstrations in northern New Brunswick were televised. I believe that is
where your riding is located, Mr. Minister.
I have a number of questions for you, sir. I do not presume the chair will give
me time to complete them all in the first round, so I will put my name down for
the second round.
Last year, the budget removed $500 million from the benefits paid, and 27 per
cent of that came from Atlantic Canada, with 8 per cent of the population.
This year, if my memory serves me correctly, the figure is $700 million. What
percentage of that will come from Atlantic Canada?
Mr. Young: We will provide that information to you, senator.
Senator Phillips: Do you mean that, up to now, you have not looked at what will
come from Atlantic Canada?
Mr. Young: We have looked at all the numbers, but I do not remember them all off
the top of my head, senator. We will get the information for you.
Senator Phillips: Mr. Minister, I am intrigued by the fact that those numbers
have been kept secret, and I will look forward to receiving them.
I will move to my second question. In the last fiscal year, the UI fund had a
surplus of $4 billion. That disappeared into Paul Martin's reduction of the
deficit. This year, it is forecast that the surplus will be $5 billion, and it
will be going down into the Martin black hole. Then, the year after, it will be
a $10 billion surplus, and that will be disappearing down the same black hole.
I have certain objections to this, Mr. Minister. First, to me, the idea of
collecting premiums for unemployment purposes and then utilizing them for
deficit reduction is fraudulent. Not only that, I think it is morally wrong to
use those funds to satisfy Paul Martin's objective of reducing the deficit. I
do not object to deficit reduction but I think you have singled out the group
that is most unable to pay.
In addition, Mr. Minister, by doing this, you are putting a tax on small
business and low-income earners. As you review the program, I hope you will
consider this and find the way of reducing the amount of that tax on small
business and low-income earners.
I understand that major employers such as GM have been in contact with you, and
they have received what they want: that is the top-up. If an employee is laid
off, then the fund, provided by seasonal workers and others, will be used to
top up the benefits paid by GM.
I would like to have your assurance that you will review this - I understand the
act provides for a review - and assure this committee and the Senate that you
will not continue this unfair tax on small business and low-income earners.
Mr. Young: If I may respond, senator, to some of your points, we will certainly
get you the percentages that represent the impact of the overall change on
Atlantic Canada, and what Bill C-12 will do after it is implemented. However,
as a general observation, I will just say that this is obviously what we have
had to wrestle with from the beginning. Where there is a larger take-up on a
pro-rata basis of the program, for all kinds of reasons, but in particular
because of the seasonal industries, obviously any change that is made will have
a more significant impact.
One of the difficulties I have is that, as we debate with the provinces, and
with industry, small- and medium-sized businesses, for which you have indicated
your concern, very often they look at how much they put in, either by province,
by sector, or by industry, as opposed to what they take out in terms of
I am sure you have seen a lot of these charts, and we can provide them to you,
which show that one area of the country will put in a dollar and receive back
maybe 75 cents in benefits, and other parts of the country will put in a dollar
and withdraw $1.50 in benefits. That is a major problem when one is trying to
maintain broad support for this program.
Also, as you put it, when there is any change, significant impact will always be
felt amongst those people and in those areas where the usage is the highest. We
tried to be careful with that, knowing that there would be some impact, given
the amount of the reduction announced in the budget last year. Again, in that
area, we believe we have made significant improvements with the amendments that
were brought to the original proposal. However, we will provide you with the
With respect to Paul Martin, I want to be very careful in addressing areas that
the Minister of Finance feels strongly about, such as the deficit. I certainly
do not want to get into questions of beginning to determine, as a politician,
what is morally wrong. Let me say that, with respect to the surplus in the UI
account, this is a recent phenomenon, as you well know. We were running a
deficit in the account which was being taken care of by the Government of
Canada. It has always done that in very difficult times.
I want to address your concern head on because it is legitimate if it were to
continue for any significant period. When we went through this situation of
having very high unemployment, little or no growth in the economy, and
significant unemployment drains on the account, it went into deficit. I think
what we are trying to achieve now and what we, hopefully, will be able to do is
build in a level of comfort in terms of a surplus after having carried a
deficit for some time. I think the Minister of Finance and the government agree
that it is not something that can be left ad infinitum. It will have been to be
addressed. I am sure the Minister of Finance will be looking at it from the
fiscal point of view and from whatever level of comfort he feels is
Last year, although you are quite right that there was a surplus, the surplus
managed only to bring the account into balance. Now we are actually building a
surplus. The initial surplus was used to pay off deficits. Our net surplus
situation is just beginning to come into play now.
Your advice on that matter is well taken. We will have to look at what measures
should be taken to ensure that small, medium-size and large business - but
particularly employees - are not burdened with rates that are not appropriate
in view of the financial situation of the employment insurance account.
With respect to your comment on General Motors, I will look into that. I know we
have had some discussions. However, I am pretty sure I am on firm ground with
this. I do not believe I have given GM anything they did not have before. If I
am not mistaken, I believe the rules in play were probably put in play by the
previous administration. However, as a result of your interest in the matter, I
will review that and see what might be done. I would want to clearly understand
exactly what the impact will be on the employment insurance account and how
will affect small and medium-size business, if that is the basis upon which you
think it should be reviewed. I am certainly prepared to look at it. As I say,
to the best of my recollection, that was not something we initiated; it was
something we inherited, and it is something that we will deal with.
It has gone through several incarnations over the last 25 years. I am not trying
to stick anybody with it. It has been a long-standing practice; but, as usual,
I will try to fix it if its broken.
Senator Phillips: I agree with you on the principle that the situation
pertaining to General Motors has been in existence for a long time. However, it
required the minister's approval, and it was up to Doug Young to refuse or
I would appreciate you having a discussion with the Minister of Finance because
I think you will find, despite your denial, that the deficit reduction received
Mr. Young: Mr. Chairman, just to clear that up, I am not denying anything. I am
saying that last year the employment insurance account itself was in deficit.
We brought it to a break-even point around December or January of last year. It
will now be running a real surplus.
To ensure that we understand each other, the Minister of Finance, I and many
others are aware of the very point you make, which is absolutely legitimate,
that at some stage - not very far down the road - there will need to be a
review, not necessarily as it relates to the impact on the deficit, but as it
relates to a reasonable rate of premiums and a reasonably comfortable margin in
the reserve. I agree with you that should be addressed.
Senator Phillips: Earlier I mentioned how the $700 million would be distributed
and, in particular, what portion would be charged to Atlantic Canada. I want to
turn in particular to my province, which is very similar to yours when it comes
to seasonal employment. Our fishermen, fish plant workers, forestry workers and
farm workers confront the same problems. I think we can agree that our problems
are mutual, Mr. Minister.
Estimates indicate that the reduction in UI benefits will be $11 million in
P.E.I. in 1997, and $16 million in the year 2000. I am intrigued by the
increase from 1997 to the year 2000. That is a period of three years, and it
increases $5 million. The work force is drawing benefits in P.E.I. That is an
increase of $5 million per annum. There are intervening years, so it is
increasing gradually. In that, I see the government moving towards gradually
restricting the number of people who will benefit from UI benefits and the fact
that the only way one can accomplish this is by increasing the qualifier and
moving towards what was your original objective of a universal 20-weeks'
qualification. In other words, Mr. Minister, the people in your riding and what
used to be my riding in the House of Commons - I still call it my constituency
- will have to have the same qualifications as those living in the rest of
Mr. Minister, I find this most unusual given your knowledge of the area and your
knowledge of the problems of the seasonal workers. As I said earlier, we have
so many mutual problems that it is not difficult for us to agree.
Why, despite certain amendments, are you still moving towards that? Your
estimates on this surplus show that in the year 2000 - and these are not my
figures, they are yours - a $16-million loss to the economy of P.E.I. I would
like you to explain to me why you continue to move in that direction.
Mr. Young: I suggest your belief that it would be our intention to move towards
a basic 20-week system across the country runs counter to the direction we have
taken. There is no doubt that there was a lot of work done when the original
bill was introduced, especially with the divisor. The way that the original
hours system was set up, it would be a major problem in your province of Prince
Edward Island and in many other parts of the country. Other people will deal
with the impact, because I do not want to leave the impression that changes
were made to accommodate New Brunswick or Prince Edward Island. We found, as we
delved into this and did some analysis, where the impacts would really be felt.
There were tremendous implications for Manitoba, Ontario, and various other
parts of the country. It is a national pastime to assume that all the experts on
employment insurance are in Atlantic Canada, but that is not something I would
want to continue to nurture as a myth in this country. The fact is that the
employment insurance measures that were proposed last year would have had an
even greater impact in parts of the country other than Atlantic Canada.
Since you framed your question specifically in regard to Prince Edward Island
and the amount of money that progressively appears to be taken out of the
economy in terms of payments under the employment insurance program, let me
tell you that it is incremental in terms of the impact over the implementation
period of the new EI program, and not based on changes in the divisor or
eligibility. At the same time, there will also be a major impact on money to be
spent in Prince Edward Island through reemployment measures. As the impact will
be greater in areas like northern New Brunswick, when we make these changes in
terms of the impact on individuals, so too is it true that will the impact be
greater in the way that we designed the program to try to get people back to
work. The way the numbers will change is such that - perhaps we are a little
optimistic - much of what will be done will work.
It is one of the reasons, as I indicated earlier, that we are going ahead with
negotiations with the provinces to transfer to them the responsibility for
delivering active labour measures, if they so wish. We are not doing that
simply to walk away from a program that has been here for a long time, but
because we think that the partnerships that will exist in the provinces with the
private sector and labour will have the result of improving the job market. As
you have fewer claimants involved in the employment insurance program because
they have jobs, then obviously less money will be paid out through direct
benefits to claimants.
At the same time we are doing that, there is a $300 million transition fund.
That fund is targeted, and the criteria is based on employment figures. Where
the need is greatest to reinvest in these kinds of programs, that is where the
money will be spent.
The numbers you put forward, senator, are absolutely correct, but those are
numbers before reinvestment of the $300 million in transition funds and the
$800 million in reinvestment funds
The $800 million is also incremental. As there is a greater impact in the early
years of the implementation of this program, you will see that there is a
build-up of money which goes into the system in terms of trying to provide
opportunities for job creation to the private sector with government support at
the local level.
There has been a balance. Where there will be impact, I am not sure it will be a
wash, but we will try to get you the figures showing, at least notionally, what
amount from reinvestment funds should be allocated on a province-by-province
basis. I think that the government and people who work on Prince Edward Island
will understand that, as the impact of the EI premiums is felt by way of less
money coming into the economy, there will be a compensating factor through the
investment funds that will be made available.
Senator Phillips: Madam Chair, before yielding the floor, and I realize you have
been very generous, I would just like to say to the minister that I find it
difficult to accept his statement.
I remember that one-third of your $2 billion work program was to provide jobs.
Today, east of the Quebec border, there are less permanent jobs than there were
when you came to office.
Mr. Young: Anyone involved in the infrastructure program will know that the
Canadian Federation of Municipalities, as recently as the weekend, were still
telling us that, in their view, it is one of the best programs that has ever
been put forward.
Certainly, there was an important job creation component in that program.
However, since the nature of the program was to build infrastructure based on
municipal, provincial and federal agreement, anyone who is familiar with the
construction industry and infrastructure requirements in Canada would recognize
that most of the jobs that were created, as important as they are, because we
believe that the construction jobs and the spin-offs from construction jobs are
essential, would not be permanent. It is hoped that jobs arising out of an
improved and modernized infrastructure in the country will provide long-term
jobs, but that was not necessarily the main criteria for that program.
Senator Gigantès: Minister, thank you for appearing before our committee.
If I understand you correctly, you seem to be saying that, in the history of
UI, which will soon be the employment insurance program, when times are bad,
the federal government has had to top up the kitty.
That obligation remains. If it is taking money out, it is taking money out to
put back in that hole in the kitty it had produced earlier, which is now the
national debt, and the deficit which increases it. Am I right?
Mr. Young: We have must be very clear, senator: The UI account is running at a
deficit. The federal government is required to take care of the deficit on an
ongoing basis. There is no doubt that, once we run a surplus, it is still a
contingent liability against the "fisc" and must be credited to the UI
account. The money from the UI account cannot be used for any other purposes
than those provided for in the legislation.
From a cash flow point of view, there is no question that it is helpful, but
from a direct accounting point of view - and I would certainly want to have the
Auditor General tell me one way or the other whether this is the case -
although there can be a surplus, and it is real money at a given time, it is
still a liability against the Crown with respect to the UI account for which we
have the fiduciary responsibility.
Senator Gigantès: I am not quite sure how you answered my question. If I
understand my colleague Senator Phillips, he says you have a surplus which
results from payments by employers and employees, and that this surplus has
gone into Mr. Martin's black hole. Are you saying it has not gone there
forever, or are you saying it has not gone there?
Mr. Young: Senator, because it reduces the cash requirements of the government,
and because it is there as a credit and it is cash, it is in a real surplus
position. In other words, when we balance the budget, that money is taken into
account as part of the revenues of the Government of Canada.
However, there is no question that if next year, and God forbid that it should
happen, Canada were to face the kind of crisis it did a few years ago when the
unemployment insurance fund was faced with such a draw that it went into a
deficit position, we would be rapidly drawing down that surplus and would
eventually go into a deficit position again, for which the government would be
In the short-term, the senator is correct that it is useful to the government,
and anyone who understand the accounting process would recognize that it is
useful for all kinds of reasons to have it. That does not mean we should not do
it. Just because it is helping Paul Martin and the Government of Canada in the
short-term with an amount of money that is not required for employment insurance
purposes, does not mean that we should always run it at the margin.
I did not mention earlier that, when we went through this process the last time
and we went into deficit, with unemployment in double digits, we were at that
point of raising premiums because of the deficit. To do that is very
counterproductive. You have less money available for reinvestment
opportunities. You are raising premiums at a time when, as has often been said,
payroll taxes are a detriment to job creation, especially for the small- and
medium-sized business sector.
We think we should be conservative and careful, that we should ensure we have
some money in reserve. We must determine what is reasonable, and then we will
have to address the question raised by the senator as to how we will deal with
the situation if it appears that there will be a substantial long-term
accumulated surplus in the affairs of the government which will still be seen as
a contingent liability, although it will have some short-term benefits.
Senator Gigantès: What do I say to groups like the l'Association de la
jeunesse francophone, a group of francophone youth from outside Quebec? Their
association has produced a program which corresponds to many of the things
which everyone says are necessary for a job creation program to work. This
corresponds to what you were saying the other day in your press conference, that
the decisions have to be taken near the community or by the community, and that
we cannot expect to have decisions made in Ottawa for every part of the
country. The Swedes discovered that a long time ago.
That youth organization has come up with a program which looks pretty good. I
have worked a lot in this field as a senator. These young people want some
start-up money. What do I say to them?
Mr. Young: Senator, if they were asking me at this point, I would tell them
that, if it has to do with manpower training or active labour measures, we will
continue with business as usual to the extent that we can. We have to be very
honest and straightforward with our partners in the provinces as we discuss
this new approach to handling this area. Anything we are doing now is not being
done on an ad hoc basis. We are trying to deliver it through the existing
I would be very reticent about beginning any major new initiative in any
province when I think and hope that we will be able to arrange, on a bilateral
basis, to do new things in the country. The response so far provides a glimmer
of opportunity. I do not want to prejudice that possibility in any way.
I do hope that we can accommodate to some extent, on an interim basis,
individuals, groups and companies. However, I want to speak to the provinces. I
must keep them in the loop as we begin to explore new ways of doing things
rather than presenting them with a fait accompli which may not be compatible
with what they wish to do in terms of active labour measures.
I will be meticulous about this. We will not say one thing and do another.
Surely we all have one objective; that is, to get things done as efficiently
and effectively as possible. I would be very happy to cooperate with this group
or any other to see what we can do on a cooperative and collaborative basis
with the provinces which would be directly involved in one way or another.
You referred to the Swedish experience. I was recently at the OECD where I had
fairly extensive meetings with officials, as opposed to political people. They
have empirical evidence, in which I place some faith, which shows that where
there is an opportunity to do things with private sector labour, there is a
much better chance for success.
The example you give has a number of elements which would fit into that kind of
framework. The short answer is that before embarking on a new initiative,
rather than tie the hands of the provinces with something they may wish to put
another spin on, I would reserve my decision until I had consulted with my
provincial colleagues. That does not preclude doing it, but it brings another
nuance to it.
Senator Gigantés: Should I tell these young people to apply to their
Mr. Young: No. They should talk to us to see whether measures can be taken under
existing programs. If it is something that would have an impact on provinces or
bind them with the expectation that people could continue with the program, I
would want, as a courtesy, in the present environment, to discuss it with the
provinces involved. We would be pleased to be helpful at this stage and to give
them clear direction on what we think would be the most appropriate way to
Senator Gigantés: Could one of your officials give me a name and phone
Mr. Young: We will certainly do that.
Senator Rompkey: I wish to welcome the minister. I want to follow up on the line
of questioning begun by Senator Phillips about the effect on the Atlantic area.
It is fair to say, as a preface, that the system we have now does not work all
that well? If it did, there would not be the same problems and criticisms of
it. Those of us who have served people here know that a member of Parliament,
for example, spends a great deal of time helping people to jump through the
hoops of the present system to try to get the necessary stamps to qualify. Once
the necessary stamps are gained, there is a disincentive to work. It is true
that there has been income support, but I would argue that it has created a
dependency. It has taken away from people their pride in work and created a
I am interested in the fact that in this new system at least some of the funds
coming into the Atlantic region will be used for positive effect. It is true,
as Senator Phillips says, that there will be a net reduction of income
benefits. In Newfoundland, for example, I believe it amounts to 14.5 per cent.
However, that is before you factor in the funds which will come in from
employment benefits; the $800 million which is redirected; and the $300 million
in the special transitional fund. Well over $1 billion will be used in a
positive way, a way this fund never used it before.
Can you give us an indication of what impact that redirection of funds will have
on the Atlantic area in particular? The material which has been made available
to us has referred to certain studies. It would be helpful if we could have
those studies in order to consider what other people have said about the models
which have been used there and how effective they have been.
Can you give us any projections, in general, of the impact on individual income
in the Atlantic as well as on provincial income in the Atlantic?
Mr. Young: Madam Chair, it is sometimes difficult to deal with individual cases.
People always take their case to the absolute maximum. For example, because of
first-hour coverage, people have calculated benefits that may or may not be
available based on continuing to work 14 or 15 hours per week.
I am sure that you are aware of the extent to which individuals and firms
structured their work around the unemployment insurance system. There is
nothing wrong with that. Governments, over a long period of time, provided a
system with benefits, rules and laws which generated that kind of a response. I
understand that very well.
Individual cases are difficult because, no matter what number I give you,
someone will swear that it would be far more dramatic for them. I will try to
give you the rationale for how we arrived at where we are with the
modifications we made to the original bill.
The impact studies indicate, as you have said, that in Newfoundland it will go
from 8 or 9 per cent to perhaps 15 per cent, which means it was worse than
that. This is Bill C-12 now. That is without reinvestment.
We have tried to bring in, at least regionally, numbers which will indicate the
fairness and equity in the system.
We are looking at 5 per cent or 6 per cent, after you factor in the impact on
individuals. As you say, it is individuals, but it is individuals collectively
because it is all the employment insurance recipients. You will see then the
numbers you have indicated going from 9 per cent to 15 per cent.
Then you must include the reinvestment funds. When people are calculating that,
as you know, they lump together all the benefits paid to Newfoundland, or those
which will be paid under the new system, against what was paid before. You then
get that kind of spread going from now to the year 2001.
As I indicated to Senator Phillips earlier, the reinvestment funds and the
transition funds flow in ways in which they also account for an incremental
building to total amounts. Once you put in those total numbers, the impact is
between 5 per cent and 6 per cent, which is compatible with the impact across
The indications were that, as you take the money out of the economy, as Senator
Phillips said, in terms of individuals receiving benefits, and you lump them
all together, then you had to look at what the economy was receiving from
another source, which is reinvestment.
We think a level of equity has been put in when we compare high unemployment
areas such as Newfoundland and Labrador, which the senator represented for so
long, with other areas of the country. Naturally, at the end of the day, even
with all the attempts to be fair and equitable, there will still be a net
reduction, which works out to about 5 per cent to 6 per cent across the board.
It is a lot less.
For one individual as opposed to another, it could be more than 6 per cent. One
individual or one family may come to you and say, "No, it is significantly
more for me." Collectively, however, the province of Newfoundland and
Labrador would face an impact of between 5 per cent and 6 per cent.
Senator Rompkey: There will be wage top-ups, subsidies, self-employment
assistance and so on. One of the measures which intrigues the one which will
allow students to pursue a course of study. I do not think that should be
underestimated. The whole question of putting money into the hands of students
goes back quite a few years. It goes back to the Macdonald Royal Commission. It
goes back to other studies which were done, both provincially and federally. It
is really a voucher system.
I want you to elaborate on that, Mr. Minister. One of the drawbacks to students
- and I do not think we should underestimate the value of education - is that
they have had to pursue courses which have been offered to them, rather than
them making choices. What might be offered in any one year might be a course
for electricians, heavy equipment operators or hairdressers. Under the whole
TAGS program which we put into place we ended up with a lot of hairdressers who
I am not sure we can use in the economy.
I want you to elaborate on the whole question of vouchers, the effect of putting
money into the hands of students. I assume that students will be able to decide
for themselves what courses they will take. Have you been able to estimate the
effect of that?
Mr. Young: This will vary from province to province, but we hope that the
private sector will be determining what kind of labour requirements they have
in their particular region. Labour will be aware of where there are significant
gaps in the labour markets. Because provincial governments will have very much
of the say, we will be drafting framework agreements under Part II of the
legislation. Based on the proposal we made to the provinces last week, we hope
they will say "yes" to students, depending on the nature of the
students' needs, and match them with employment opportunities. In this way they
will be doing things which are more conducive to getting a job at the end of
the training period as opposed to what has happened in the past.
Part of our obligation and commitment is to go to the provinces and the
territories and say, "We will let you handle the active side of this
activity. We will continue to be responsible for passive claimants." I
want to be clear in this area. In regards to passive claimants, there is a
component in the legislation that allows us to continue to pay people
unemployment insurance while they are pursuing active labour market activity
which the provinces will conduct and approve. However, that will be a
provincial responsibility. It will be a shared area.
I want to emphasize, Madam Chair, that when I look at the Quebec experience, for
example, one of the things that gives me great comfort the SQDM in Quebec. The
SQDM is a partnership that developed a consensus among the labour sector, the
private sector and government. They are the ones who advise and consult. They
are involved in the process.
I am not saying to the other provinces that they have to do what Quebec does.
Certainly, for the people who pay the premiums, the employers and the
employees, the fact of having other people around with as much involvement as
has been traditional in Quebec through the SQDM is something we want to
The student issue must be dealt with. In some provinces, we may be asked to
retain a far greater degree of involvement than others. It will depend on their
capacity to deliver the services and whether they have a network in place.
Because we have been talking about numbers in terms of impact, let me put this
in perspective. For example, in Newfoundland, in the existing situation, for
every dollar that employers and employees contribute, $2.90 is taken out of the
system. Even after all the changes that we are making, and with the
reinvestment and redirection of funds, there will still be $2.73 put into the
system in Newfoundland from the employment insurance program for every dollar
contributed in that province.
We understand that. I want to say this to the senator from Newfoundland. In
Ontario, the situation is quite different. But would we not all trade the
system to ensure that we are in a viable economic position and create a number
of jobs so that we can contribute more to the employment insurance system than
we take out? It is fair to mention it, but it is also necessary to recognize
that it is not by choice that the system works that way, it is because of
opportunity or the lack thereof.
Senator Murray: Minister, since the early 1990s, we in this country have been
stuck with an unemployment rate in the range of 9 per cent to 10 per cent. When
does the government expect an improvement in the situation?
Mr. Young: Senator, as you know, we were into double-digit unemployment. It has
been reduced now to single-digit unemployment. I know that is little solace to
the 1.5 million people who do not have work. It was suggested in the House of
Commons today that I was puzzled by the phenomenon that makes it extremely
difficult to attack the problem of structural unemployment. I think that 5, 10,
or even 15 years ago someone looking at this situation who could see inflation
where it is and interest rates where they are, as well as the fact that we are
starting to get the deficit under control to some extent, along with the move
toward 9.3 per cent to 9.6 per cent unemployment, would have confidence in the
growth in the economy and see that that would have corrected the situation to
It would be ludicrous for me to suggest that there is some panacea or suggestion
that I can make to you today, senator, that would indicate that I have a clear
vision of exactly how we will do it.
I can only say that I am confident that our vision is somewhat clearer today
than it was a year ago. One of the reasons I feel strongly about that is that
we have been able to put this proposal before the provinces. It is something
which has been considered with varying degrees of intensity in different parts
of the country. However, there has been a broad consensus on the job creation
side that the Government of Canada, along with its counterparts around the
world in the G-7 and OECD countries, has not been able to find ways to get it
done as effectively and efficiently as we should have been able to.
It is our wish that what we are able to work out with the provinces will go some
distance to see that at least the money we are spending and the effort the
government is making can go some distance to help create that.
On the other side of the coin, unless we can continue to provide a better
environment with respect to the business community, the private sector, it will
be very difficult to achieve our goal. Real interest rates, inflation and
stability in the country are all beyond the government's control, although I
think we can play a great role in trying to help them along. Today, though, I
do not want to get into the impact of uncertainty.
The short answer is that aspect of what we are proposing will have some
beneficial effects on trying to reduce what you say is a high level of
unemployment for Canada, something with which I agree.
Senator Murray: You say your vision is a bit clearer now than it was some months
ago. Mr. Martin did not, in his last budget, include any projections for
unemployment for the next year or two. Are you ready now to let us have
projections of that kind?
Mr. Young: Senator, I would be very hesitant to predict. As you know, I am not a
trained economist, I do not understand a lot of these things, but as an
observer of the scene, frankly, if you put us in a room like this in some other
country, or maybe at Harvard or some school of business somewhere else but
here, and said, "Here are the facts about country X. This is the inflation
rate, this is the interest rate, this is the ratio of debt and deficit to GDP,"
and all the things that people do in these areas when they are trying to get
some grip on the direction their country is going in, I suspect that the
academics and theorists there would say that country has a situation which
should be generating significant economic growth and some real employment
growth. That is why I hesitate, senator. I think it would be foolhardy for me
to suggest that I am confident that it will change by .2 or .3 or .4 or .5 of a
per cent in the next six months or so.
I hope, and I think, we are going in that direction, but when there are some
fundamentals in place and the situation is still a little upside down, I fear
to tread where perhaps some angels would.
Senator Murray: The Department of Finance and the Bank of Canada, to name two,
have all the kinds of numbers you are talking about and they have the models
upon which to base projections of that kind. There is a concept dear to
economists called the "non-accelerating inflationary rate of unemployment"
- the natural rate of unemployment. What does your department and the
government believe that rate to be in this country at the present time?
Mr. Young: I would rather come back to you with a specific answer on that,
senator. I am very careful about making predictions or basing an answer on data
about which I am not absolutely certain.
Let me put it in this context: It is not any easier for me, based on any
information that we have available to us, whether it is generated by our own
department, by Stats Canada, by the Bank of Canada, or by the Finance
Department, to be comfortable with the first question that you asked me about
where I think we are going and when we will see a significant decrease in
unemployment. I just think that it will be very difficult.
Let me quickly say to you that, when I was at meetings of the G-7, and at the
OECD, in the last month, I tried to pick the minds of the best people of the
world who have been working on this. We had people from the United States, from
Japan, from various countries in Europe, all wrestling with the same question.
Japan has a rate of unemployment of around 3 per cent. In the United States, it
is just over 5 per cent. We are at 9.6 per cent. We were the third-best
country, if I may put it that way. The French, the Germans, the Italians, and
the U.K. were all telling us they do not know how to go about it either.
The Detroit Conference on Jobs and Employment, held through the auspices of the
G-7 about year and a half ago, also wrestled with this. There are no easy
answers. I am a novice in this area, and when I see the fundamentals and I
inquire as to what is wrong of people who are far better informed than I will
ever be on this, frankly, not many answers are forthcoming. It is not through
lack of trying. I am not trying to be evasive. There is nothing available to us
to give us absolute confidence that we can, with firmness and with empirical
evidence, indicate that our unemployment rate will be at a certain place a year
from now. We are just doing the best we can.
Senator Murray: I had the impression, as an outsider looking at that G-7
meeting, that a lot of them shrugged their shoulders and walked away, except
for the French, who seem determined to try to do something.
Mr. Young: Because of my respect for the Minister of Foreign Affairs, I do not
want to intrude on his ground, but as you are probably aware, at that
conference, one of the themes introduced by the President of the French
Republic was to the effect that there had to be a third way found.
Senator Murray: Sorry, I was talking about the meeting involving Ministers of
Finance and Employment. I think it was before you became Minister of
Mr. Young: The one I went to was in Lille. The Minister of Finance did not
attend. At the OECD ministerial meeting, there were a number of Ministers of
Finance from other countries, but it was not a meeting of Ministers of Finance.
They had people like me there, trying to find out how this works.
Unfortunately, I do not have the answers that I need for you today in terms of
being absolutely certain.
Senator Murray: I have a couple of questions on the bill. You said, as I would
expect with your background and experience, that people working in seasonal
employment cannot get to full-time employment quickly enough, if it is there
Why then are you bringing in this intensity rule, which tends to hit the
seasonal workers hardest?
Mr. Young: As you know, the original bill had an intensity rule that was
universally based. Anyone returning to the system on a repeated basis would be
penalized by the divisor.
I will explain what we are trying to do. We looked at the impact of the rule and
found that it went far beyond what you and I would consider to be seasonal
workers, people working in the fishery, in the woods, in tourism, and so on. It
affected a lot of single mothers, for example, people who are in and out of the
In order to be able to justify changing that rule, we went to a lot of effort to
identify the impact. It impacted on a lot of women, single parents, and
eventually, through extrapolation, and through the work of a member of the
committee, Mrs. Augustine from Toronto, we found that the government, even in
the bill itself, had provided for a topping-up provision, with which I am sure
you are familiar, for low-income families. Then we found that the Minister of
Finance had brought in the working-income supplement, again to help low-income
families. In the bill, we were going at those same people with the intensity
rule. What we did to try to ameliorate the situation was to tie the intensity
rule specifically to household incomes below $26,000, which was the figure that
was used in other means tests to achieve the same end of providing some support
for people in the lower-income sector.
That figure of $26,000 was chosen because it was an opportunity for us to make
it consistent and compatible with other government programs. We could have
chosen another figure. We also have a clawback at $39,000. We need some
rationale and consistency when we do these things.
I see the Government of Quebec has just introduced some measures where they have
also chosen the figure of $26,000 in another area of programs that have social
We have modified the intensity rule to respect the fact that some people at
lower incomes need to be protected against any kind of erosion of their
support. On the other hand, the intensity rule picks up people who have quite
significant incomes, either as individuals or as households. The clawback does
that as well. Much that is in this legislation is meant to act as a catalyst to
make sure that people take every opportunity they can to take advantage of
every job that comes along, or any kind of a situation that develops for them.
The intensity rule, as it was, was modified in that context of trying to be
consistent with other government measures designed to support other
Senator Murray: That would be my next question. What were you trying to achieve
by way of a policy objective with this intensity rule?
I have had a chance to read a couple of studies commissioned by your own
department last year. I do not have time to go into them, but they seem to
disprove the notion that UI is somehow acting as a damper on work incentive and
on attachment to the labour force. If you measure it in terms of what they call
"intensity of search", for example, neither UI benefits nor their
duration really affect it, or at least that is what this study shows.
I wonder, in some of these matters, whether you are not addressing problems
which really do not exist. I understand what you are doing in terms of saving
another $2.1 billion gross over the period. However, the point I was raising -
and if there were more time I would wish to explore it with you - is whether
there are really any positive and worthwhile policy objectives being pursued in
the course of these so-called "reforms" besides the fiscal one.
Mr. Young: Again, senator, we have made a commitment to monitor. There are a
number of components which do result in savings, and we will wait to see if
they, in fact, occur. The Minister of Finance will be anxious to ensure that it
works from his point of view. We have another responsibility, and that is to
ensure that the system works to provide support for people who have paid into
it and who should have access to it.
We believe that behavioral change will occur. We think there is empirical
evidence to support that. In a number of ridings, as you know, because of the
employment rate being the catalyst for change and admissibility requirements,
there is often a behaviour change where people find more work, different kinds
of work, and become more involved in job search.
Senator Murray: That is more or less anecdotal, minister. I invite you, if you
have an opportunity, to look at those studies which were put out by your
department last year. I do not think they support that.
Mr. Young: We have looked at many studies, so perhaps you could advise me which
those two are. I do not try to commit them to memory, but I know some do report
different findings. The department produces quite a bit of material. You may
even find some material that is contradictory. This has been a long and
difficult process, with a lot of input.
To go back to your question about the intensity rule, we believe there will be
behaviour change. The reinvestment funds which are being put into the system
will produce opportunities for employment, and we think that people will be
able to take advantage of some new opportunities. However, we also want ensure
that they are encouraged to do that. Part of it is motivational.
We must wait to see if it works, but we believe there is a very good chance that
it will. I will look at those studies again. Perhaps while I am doing that, I
will try to find a couple that at least give you the other side of the issue.
Senator Murray: The studies that support you.
Mr. Young: Yes.
Senator Murray: The Labour Force Development Board appeared before the House of
Commons committee and were quite dubious about the net economic benefits of
things like wage subsidies, earning supplements, and so on. They cited an OECD
study, for which I have sent. I share your hope that these steps will produce
something along the lines that you suggested they might when you were answering
Senator Phillips, but supportive evidence does not seem to be very strong.
Mr. Young: Senator, I have never gone out of my way to suggest that anyone was
right or wrong in the past. There is no doubt there was a broad view, that what
you have said was probably true, and that in many ways the unemployment
insurance system had evolved into a partial income support program. That is
what it did, and people worked around it to achieve whatever objectives they had
to to maintain their own situations as well as their families. I do not like to
drop names or to imply that any other organization is endorsing the
legislation. That is not the case, and I would not do that.
Going back to the OECD, for which I have a lot of respect because they try to
have a more objective view of what is happening here and well as elsewhere in
their analyses, when I met with them as recently as two weeks ago, they were
very helpful in indicating that only now, and only over the last year or year
and a half, did they feel comfortable. They are very capable people, and I am
sure they have diverging opinions on a number of issues, but now they feel a
level of confidence that some of the work being done, particularly in the
European countries, is sufficiently advanced and has enough data available to
demonstrate empirically that yes, in fact, some of the things that are being
suggested work, including trying to get people back into the work force and
matching the attempt to influence the behaviour change with some real
opportunity. You can have all the training, all the wage subsidies, all the
targeted kinds of programs you want, but they won't change the situation if, at
the end of the day, there is no job opportunity. I think there is a higher
degree of comfort today than there was two years ago that some of these things
The Chair: Before Senator Losier-Cool asks her question, I would indicate that
we have not finished our interrogation of you, Mr. Minister. We would like to
discuss with you women's issues, re-entry into the work force, and the
exemption for students. We would also like to explore with you your discussions
with the provinces, how long they will take and what will happen in between, and
also the question of people who are on contract training and do not have UI.
There is a possibility that we may have to invite you to return.
Senator Losier-Cool: Thank you, Madam Chair. I will be very brief. You have
already answered part of my question when you answered Senator Rompkey's
question. I am interested in youth training. I will monitor this program very
My question concerns the employment insurance program as it applies to women. As
we know, the majority of part-time jobs are filled by women. I was pleased to
read that for thousands of Canadian women, employment insurance eligibility
will increase. For my benefit and for the benefit of the committee, can you
tell me what impact the employment insurance program will have on women who
currently receive maternity benefits?
Mr. Young: You are asking what impact these changes will have in the future on
women who receive maternity benefits, that is benefits paid following the birth
of a child. You want to know what impact the program will have on them in the
Senator Losier-Cool: I am talking about the hours worked prior to receiving
maternity benefits. Can these hours be calculated retroactively?
Mr. Young: This is always the case. As far as the program is concerned, the
hours are calculated retroactively over a five-year period.
Mr. Jean-Jacques Noreau, Deputy Minister, Department of Human Resources
Development: Under the new legislation, women who have received maternity
benefits will be entitled to benefits and to employment measures. The
retroactive period will be five years.
Mr. Young: I want to be clear on this. I am not talking about benefits, but
rather about eligibility for programs financed through the employment insurance
fund. This is entirely different from the benefits they receive and this is
directly linked to their work.
You inquired as to how many hours and what the retroactive period was. We must
not confuse the two. People talk about 26 weeks. This has nothing to do with
the period during which the necessary hours or weeks of work can be accumulated
once the system has been converted to hours, that is on January 1, 1997. There
is no change in so far as eligibility is concerned. Of course, there would be in
the case of persons entering the labour market for the first time.
Senator Losier-Cool: As for the 45 hours...
Mr. Young: Are you referring to the 425 hours required for eligibility purposes?
Obviously, we are still talking about one year. If you want answers to specific
questions about people, three situations can occur.
Briefly, in my view, we can have a situation where a person has worked for a
certain period of time and then takes maternity leave. There are rules which
make that person eligible for benefits. We all know what they are.
Subsequently, if that person does not return to the labour force but chooses to
raise a family and then to re-enter the labour force at a later date, then we
have another problem. These persons are considered new labour market entrants.
The eligibility period is extended. There is no question about that. We are no
longer talking about 425 hours.
There is also the case of a person who takes maternity leave with benefits, but
who exhausts these benefits before going back to work. A waiting period kicks
in. For the sake of clarity, I think it would be much easier to provide you
with answers in writing because situations can vary greatly.
Senator Losier-Cool: As you pointed out, Madam Chair, we would appreciate
written answers to certain specific questions, for example, questions about
hours and maternity leave. Many of these questions have been raised by women's
groups. I would like to have detailed responses and to understand these issues.
Mr. Young: With your permission, I would like to make a suggestion. We have been
asked to provide answers in writing and of course we will oblige. This will be
much easier, particularly when it comes to answering technical questions. I am
not an expert on employment insurance. This is an extremely complex subject.
We can talk to you about guidelines, policy directions and objectives. However,
as you know, there are experts who are well versed in this subject and who have
15, 20 or 30 years of experience. I am referring to lawyers, business people,
analysts and the like.
If committee members were amenable, to keep things moving along, we would be
happy to answer specific questions about young people for example, new labour
force entrants, or questions of a technical nature. However, please ensure that
your questions are specific.
If your questions cover a range of problems, we will of course try to answer
them. However, I do not wish to waste your time either. I hope you do not think
that I can answer specific questions about eligibility rules. We can always
consult books and venture an answer, but this takes a great deal of time.
The Chair: Mr. Minister, we would like the answers to those questions submitted
to our clerk before our hearings are over.
Mr. Young: Madam Chair, there is nothing that I have that you cannot have. That
is the whole name of this game. We are into a important piece of business that
I know you take very seriously, as do I. It has serious implications for men
and women in Canada who rely on this program, much to their chagrin most of the
time, not because they want to, but because they have no other choice.
Senator Murray was absolutely right. We have studies going back God knows how
long. Some are totally contradictory, based on different data, different
perceptions and different understandings of what people are going to do.
However, anything that you want and that I can get for you, I will provide to
you. The sooner you ask for it, the better, because it will take some work. In
some cases, the most useful response I can make is provide specific examples on
As a member of Parliament, I had to smile when Senator Phillips was talking
about when he had his constituency and it is still his constituency. Senator
Rompkey talked about the work that people do as MPs and senators. Let me assure
you that the staff in my constituency office do more work on employment
insurance than I ever could. They do it about three days a week. I am in an area
where that happens constantly.
We know that people come to us with the marginal questions. We will not face
question with respect to the person who is into the system and who will have
500 hours a week in an area where they need 425 to qualify, or someone who will
now work 25 hours a week instead of 12 or 13. Our focus will be on individuals
or groups of people who might fall through the cracks. We do not want that to
happen any more than anyone else. If you have specific or general questions,
give them to us and we will get answers back to you. They will probably be as
complete as possible. If they are not, ask us again.
The Chair: Would that be satisfactory to you, senator?
Senator Losier-Cool: I think this is necessary, because, as you know, I am
interested in how this affects women. Women have been asking me these questions
and I want to be able to give them accurate answers.
The Chair: I would thank you, Mr. Minister, for appearing before the committee.
Your staff has been most helpful. They briefed our departments and all of the
senators. If we need to hear from you again before we are finished our study, I
know you will cooperate.
Mr. Young: Thank you very much, senator.
With respect to Part II and what we are doing with the provinces, I would be
more than happy to return and discuss that with you.
What I need to be careful about - and I say this as a caveat - is that we will
be negotiating agreements with 10 provinces and two territories. It will be
very complex. I will try to be as candid as I can in terms of what we hope to
achieve. Again, it will be a difficult negotiation and I will need to be
careful. I just want that understood.
The Chair: Senators, we have with us this evening, from the Building and
Construction Trades Department, Mr. Guy Dumoulin and Mr. Joe Maloney.
Please proceed, gentlemen.
Mr. Guy Dumoulin, Executive Secretary, Building and Construction Trades
Department: Thank you, Madam Chair. In the interests of time, we will not go
through our brief. We did not mind waiting ten minutes, because we are pretty
sure that we will be able to accomplish our goal here this evening.
The Building and Construction Trade Department made a presentation regarding
Bill C-12 to the House of Commons Committee on Human Resources Development on
March 13, 1996. A copy of that brief has been circulated to you.
We are here today to discuss three specific items with which we feel very
strongly this committee should deal. The first is the range of income and
benefit determination; the second is the devisor rule; and the third is an
hours banking or carrying forward system.
We have been actively involved in working with the federal government for over
two years on UI reform. We suggested an hours system where hours of work would
apply to eligibility and benefits. Bill C-12 recognizes hours of work for
eligibility but not for benefits.
We have also been actively working with the government to find ways to eliminate
the underground economy activity in the construction industry. If the benefit
determination and devisor rules are left as is, this will unintentionally
create incentive for Canadians to work every available hour and to work in the
underground economy. We do not think it is the government's intention to create
such an incentive.
Mr. Maloney will now give a slide presentation providing some examples of how
one person can work more hours than another in the same region and collect less
Mr. Joe Maloney, Assistant to Executive Secretary, Building and Construction
Trades Department: I will show only a few slides to illustrate the examples we
wish to give with regard to inequity in the legislation regarding the averaging
of income and the devisor rule.
As Mr. Dumoulin explained, at the beginning of this reform process it was our
intention to work out a program with a built-in incentive for people to work
every available hour. Unfortunately, this legislation does not do that. In
fact, it unintentionally does exactly the opposite.
It is common in the construction industry that a person can be hired on Friday
and laid off on Monday. That is the nature of the game.
To illustrate this we have a chart setting out the legislation. We have worker
one and worker two in a scenario in which they both earn $15 an hour. They work
in a region with 13 per cent unemployment. Worker one goes to work and works 35
hours a week for 14 weeks. He gets laid off, files a claim for unemployment
insurance with 490 hours and receives a benefit rate of $298.
Worker two gets called to start work on a Friday. He starts on a Friday and
works 35 hours a week for 14 weeks. He is asked to come back on Monday to clean
up the tools or whatever he has to do. He returns on Monday morning. What has
happened in this scenario is that he has worked 16 hours more, after which he
is laid off. Instead of his divisor calculation being 14, it is now 16.
Therefore, his insurance is averaged over the 16 weeks. He files a claim for
unemployment insurance and actually receives $28 a week less than worker one
for working 16 hours more.
There is no incentive here for anyone to work all available hours. All they will
say at that point is, "Lay me off and I am gone. You want me to come to
work for eight hours, forget about it; I will not do it."
The next slide is another example in which worker one and worker two are
involved. In construction, it is common to work staggered work weeks. Worker
one works for 35 hours, for example, and then 16 hours. In week number five,
worker one does not work any hours. Worker two, however, worked eight hours
that week. We see that, in week number 10, worker one did not get any hours and
worker two got eight hours. Worker one lives in an area in which the divisor is
automatically 14. Because he worked all his hours in 17 weeks, his divisor went
to 17; but worker two worked all his hours in 19 weeks and, therefore, his
divisor moves up to 19.
Again, worker two worked 16 hours more than worker one. He files for an
unemployment insurance claim and receives less benefit.
It is not difficult to explain the disincentives that are built into this
measure. What we should like to see happen in a case like this is that the
earnings in weeks of less than 15 hours are not claimed in the averaging of the
income, unless the person needs those hours to establish a claim for
It breaks down in this way: Anyone who works 15 hours or less in one week will
actually receive less of a benefit than someone who works 15 hours or more. We
want people to work every hour that is out there, yes, but we do not want to
build disincentives into the program where they will work for 8 or 10 hours in
one week and actually receive less of a benefit. They will just not take those
The other problem we have is with the divisor rule. The way the divisor rule
works is this: Your total earnings over 14 to 26 weeks are put over a divisor
calculation of 14 to 26 times 55 per cent to a maximum benefit rate. The
applicable divisor and all income must be earned in 26 weeks or it does not
count for benefit determination.
For example, in St. John's, Newfoundland, which is a high unemployment area, the
divisor is automatically 14. If a person works their required number of hours
for entry into a claim, which is 420 hours, in 10 weeks, it would not matter,
the divisor would still be 14. If they work those hours in 15, 16 or 17 weeks,
the divisor moves up accordingly to a maximum of 26. They have between 14 and
26 weeks to get as much income as they can to determine the benefit rate.
If you move up to a place like Hamilton, Ontario which, in the government's
opinion is a low unemployment area, the divisor starts at a minimum of 21. If
that person gets all their required hours in within 18 weeks, it does not
matter; the divisor will still be 21. If they get them in in 22 or 23 weeks,
the divisor will move up accordingly to a maximum of 26. Anything over 26 is not
counted for the purposes of that income.
We are saying that, if you are to give people in high unemployment areas 12
weeks in which to get those earnings, then everyone across the country should
have 12 weeks. In the case of Hamilton, the maximum divisor should be 33.
Senator Bosa: Is the present system not also based on the same principle, for
instance, that in the Atlantic provinces you must have 10 weeks before you
receive benefits, whereas in Ontario you must have 16 or 18?
Mr. Maloney: Yes, that is for eligibility. That is no problem for eligibility.
This is to determine what your benefit rate will be.
To illustrate this more clearly, let us take two workers who both work 630
hours. Worker one got his 630 hours in 17 weeks. He lives in an area in which
the divisor is 17. Worker two lives in another area. He got his 630 hours in 17
weeks, but he lives in a low unemployment area. Automatically, his divisor
moves to 19. His income is averaged over those two extra weeks and he receives
less in benefits.
We do not have a problem with the staggered entry level to establish a claim.
However, there is a serious problem in determining the benefit rate of that
The same situation applies at $15 an hour or $23 an hour. The scale fluctuates
in the same way.
Senator Bosa: What is your opinion as to why they devised this system which, in
your opinion, is not equitable?
Mr. Maloney: We do not know why they devised it in this way. We are merely
saying that these are the inequities in the system. If you are giving a person
in one area 12 weeks to get that income, then everyone across the country
should have the same benefit rate.
Senator Phillips: How did we get into questions before the presentation was
The Chair: I thought it was pertinent.
Senator Bosa: It was a matter of clarification.
Mr. Maloney: Senators, we have been working actively with the government in
trying to curb underground economy activity in the construction industry
because it is alive and well. With these two particular items which we have
explained, we will not get anywhere near solving problems in the underground
economy. If anything, it will only enhance them.
What we are trying to explain is that the bill should be sent back to be made
workable. In that way it would be fair to all Canadians as well as work toward
the elimination of the underground economy.
Another item which we wish to discuss here today is the hour-banking system, a
carry-forward system for hours which are worked in excess of a yearly minimum.
Mr. Dumoulin will explain this system.
Mr. Dumoulin: We met with many MPs, and every one MP that we met agreed that an
hour-banking or carry-forward system would be a tremendous incentive for
Canadians to work beyond minimum entrance requirements for eligibility.
We envision an hour-bank system where an annual maximum threshold is set and,
once a person worked beyond that, they would bank, or carry forward, excess
hours for the next year. We feel this would establish the incentive into
employment insurance and encourage people to work every available hour. We
fully understand that details and guidelines would need to be worked out before
When we first met with the government with regard to these changes, we felt that
an hour-bank system would be workable within our industry. We have problems
getting our people to work when they are called for just for an hour or two.
You may recall the stamp systems for unemployment insurance which included "small
stamps" and "big stamps." Workers would refuse to go to work for
a half-day because it would give them a "small stamp" for that week.
We feel that the hourly system, if applied to the eligibility and the benefit,
would create quite a change in the system.
We are then respectfully requesting that the bill be sent back to the House for
consideration of the above, and that the concept of such a system be
implemented in Bill C-12, giving the minister the authority to pursue such a
program. We would obviously make ourselves available to any committee in the
formulation and discussion of such an endeavour.
I believe you have received our earlier presentation which was made to the
Commons Human Resources Development Standing Committee. I hope you have had a
chance to review it; we will not repeat it here. We are now prepared to respond
to your questions.
Senator Gigantès: I am looking at the table which was on the overhead,
the English version, page 4, regarding four example workers and their
eligibility under Bill C-12. It begins, "A worker who tries to work more
hours can receive less benefits...." I do not question the figures because
they seem to follow fairly simple arithmetic. Why do you think the bill is
designed to cause these scenarios?
Mr. Dumoulin: It is hard for us to answer that, but it is clear that everyone
has understood it. When we explained this to others, we heard no contrary
arguments. As we said before, in our industry, this could happen to a
construction worker at any time. I have no answer with regard to why this was
We thought that the changes in the UI system would give incentive to a worker if
he is called to work for just one hour, five hours or seven hours. It is not
so. We must face reality.
Senator Gigantès: Could this be the explanation: Those who invented the
system did not want people to work beyond a certain number of hours so as to
leave room for others to be hired. Is that possibly the answer?
Mr. Maloney: We do not know the rationale behind it. We only know how the
numbers come out. We are recommending that any claimant who works less than 15
hours per week should not have the 15 hours of income averaged into the claim
determination unless those hours are required for insurance requirements. That
would eliminate this problem as we see it. That would encourage people to take
every hour of work available because it will not hurt them unless they need
those hours to establish a claim.
Senator Gigantès: Is there a surplus of workers for the amount of work
available? If we have unemployment, it means there are more workers than there
are jobs to be done.
Mr. Dumoulin: In our industry, it depends on which part of the country we are
discussing. In the construction industry, you must be prepared to move to where
the construction is. As a construction worker, you spend your life looking for
a job. The faster you work, the faster you are laid off.
Senator Gigantès: I have just sold a house for two-thirds of what it cost
me to build it six years ago. I realize now that, in western Quebec, the
situation is a catastrophe for construction workers and owners. It is only good
There are 50 houses available for every buyer, which means there is little
demand for building. Is this scheme devised to discourage people from working
more than a certain number of hours so that other people can take up those
hours? In other words, are they trying to spread around whatever work is
Mr. Maloney: I would not suggest that there was a scheme to do that. The
legislation simply washed out that way when it was drafted.
Mr. Dumoulin: When we started this exercise and our involvement with the
government, we were told that they would like to see changes which would give
an incentive for people to work. That is not what came out in terms of our
industry and that applies to other industries as well.
Mr. Rompkey: I am puzzling my way through this. First, I am pleased to hear you
say that the hourly-based qualifying period is a good thing. I would agree.
Second, there are disincentives in the present system which are perhaps even
greater than those in the bill. Perhaps we are moving from a system with
disincentives to a system which as "weaker" disincentives. The
question arises: Are these really disincentives?
You have constructed here one particular example of a person at the margins of
the system. Could you also construct an example to show that, by working more
hours, a person could get a higher rate of benefit?
I want to understand this clearly. I took the minister at his word when he told
us that there may be people who fall through the cracks. Some of us have been
around long enough to know that someone always does. It is our job to look for
Is it possible to construct a scenario whereby a person by working more hours
could get a higher benefit?
Mr. Maloney: Absolutely.
Mr. Dumoulin: It is possible. What we have shown you here is the maximum. You
are looking at a person earning $15 per hour in these two examples. This is the
maximum benefit in the area where he lives. His maximum would be $288.75 per
week. If he puts in more hours, it does not matter.
Mr. Maloney: You reach a maximum and you stop there. In the chart you have in
front of you, Worker 1's maximum is $237 per week under those conditions.
Mr. Rompkey: Let us look at it in general terms. The more hours you work, the
greater chance you have of getting a higher benefit. Is that not the case?
Mr. Maloney: No.
Mr. Dumoulin: You have a certain period of time to calculate the amount of money
that you make, namely 26 weeks. The eligibility is 52 weeks. We felt that the
benefits should be within 52 weeks also. Since it is within 26 weeks and it
depends on your area of residence, then a gap is created which expands and
contracts. That is what makes all the difference.
Mr. Maloney: As well, senator, if you need 700 hours to qualify for a claim, and
you get 500 of those hours within 26 weeks, and the other 200 beyond the 26
weeks, the only number they will use to determine your benefit rate will be
those first 500 hours. The 700 will get you in the door, but 500 will determine
what your benefit rate will be.
Senator Rompkey: What I heard you say was that we should eliminate the first 15
Mr. Maloney: No, you heard us say that, in the high unemployment areas, they are
giving Canadians 12 weeks to play with, to get as much earnings in those 26
weeks. We are saying you should give everyone 12 weeks.
Senator Rompkey: Are you saying we should have a level playing field across the
Mr. Maloney: For that one particular area, yes.
Senator Rompkey: But we have never had that, of course.
Mr. Maloney: Yes.
Senator Rompkey: Surely the country is not level. The Atlantic is not at the
level of Ontario, much less Alberta, much less British Columbia. Surely you are
not arguing for a level playing field across the country. We would really go
down the drain if that happened, would we not?
Mr. Dumoulin: I think you are mixing up the benefits and the eligibility.
Senator Murray: You are not talking about variable entrance requirements.
Mr. Dumoulin: No, we are talking about the benefits. It is the same across the
country, if you do the same number of hours or weeks of work. We are talking
about working the same amount of hours and getting different benefits, and on
top of that, adding 16 hours more, which would give you two more weeks, and
getting less benefit. This is quite plain and clear. If you talk to the MPs, you
will see that they understand it because we have talked to them.
Senator Rompkey: I will talk to them.
Mr. Maloney: We are not talking about standard eligibility entrance
requirements. If it is 420 hours to qualify for a claim in a high-unemployment
area, and 700 in a low-unemployment are, that is fine. We are not discussing
that. We are talking about the benefit determination, how much that person
Senator Cohen: The hour-banking system sounds very interesting to me. Did you
present that concept to the committee in the other place?
Mr. Maloney: Yes.
Senator Cohen: What was the reaction? We all know there is an underground
economy when it comes to construction. What was the reaction of that committee?
Mr. Dumoulin: When we suggested the hour bank, we thought it would help to
eliminate the underground economy, if you calculate the hours for eligibility
and for benefits, but if you do not calculate the hours that you put in for
benefits, then it does the opposite. That is what we are saying.
Senator Cohen: I understand that. I wanted to know what the reaction was from
the committee when you brought this forward.
Mr. Maloney: Everyone we have talked to about the hour bank or carry-forward
system thinks it is a great idea. The committee thought it was a good idea. We
discussed it at the committee. However, no one knows how to work out the
details. We are asking the government to put the concept of this idea into the
legislation. We can work out the details and mechanics later on, through
committees and so on. We do not know the cost of it. We are saying, for
example, if a 1,200-hour or 1,500-hour yearly threshold is set, and the
individual works beyond that 1,200 or 1,500 hours, then they should be able to
carry forward or bank those extra hours into the next year if they need them.
That is the incentive we want to see built into the program so a person will
work every hour that is available to protect themselves for the next year. We
are not saying that the workers should bank them for 10 years so that they
could go on unemployment insurance for the next five years straight. We are
suggesting one calendar year.
Senator Murray: Did the government or anyone express a particular policy
objection to what you are proposing?
Mr. Dumoulin: No, not that I am aware of anyway. As Mr. Maloney said, it was
well received. I guess it came out a little late in time.
Senator Murray: The concept of banking is in the bill now to some extent, as a
result of an amendment by, I believe, Ms Augustine in the other place, where
you can bank hours or days worked against the application of the intensity rule
in the future. Conceptually, it is there.
Mr. Dumoulin: We suggested the banking of hours because we live with the banking
of hours in the health and welfare plan, whereby you need so many hours per
month to be eligible, and you bank the rest, so that when you are out of work,
at least you are covered. We are used to that system.
Mr. Maloney: We also have commitments from some of the bureaucrats, and some of
the minister's staff have told us that the minister would like to pursue this
down the road.
Senator Murray: After the bill receives Royal Assent?
Mr. Maloney: Yes, but times change and ministers change. We would like to see
the concept in the legislation so that we can pursue it with whoever can make a
Senator Bosa: I wish to return to the number of weeks that one works and this
inequality at the local levels where some would receive more benefits after
having worked for fewer hours. Is it not also true that the person who works an
extra week also has a longer benefit period?
Mr. Maloney: Yes.
Senator Bosa: In addition to having earned an additional week's pay, that person
also gets an extra week of benefits, even though the benefits might be lower.
Mr. Maloney: Senator, I am sure that you know that those of us in the
construction industry do use UI. We are users of the program, and we are
probably frequent users of the program, but we are not abusers. When an
employer calls you up and asks if you would come to work one day in a particular
week because there are some trucks to unload, you know that, if you work that
one day, when you file your claim two or three months down the road the benefit
will be $28 per week less. That is a lot of money to take out of your economy
over the life of that claim, and people are going to weigh it and decide it is
not worth it.
Senator Bosa: They may draw that $28 less per week, but would they not draw that
$160 per week for a longer period?
Mr. Maloney: They may get that for one more week but the point is there is no
incentive to work that extra eight hours. There is an incentive to work a full
week, obviously, but there is no incentive to work a lesser amount.
Senator Bosa: If I were that worker and I was called in to work eight hours,
using the mathematics that you use, which is correct, my benefit would be
reduced because it will count as one week, but the eight hours does not produce
the same amount of money I would earn if I worked for 35 hours.
Mr. Maloney: That is right.
Senator Bosa: This worker may get $160 per week, but he also draws that $160 for
a longer period, so that he gets the benefit for a longer period. Although he
draws less per week, he draws it for a longer period.
Mr. Dumoulin: I do not know. We feel that what you are suggesting is not an
incentive to encourage people to work. I do not know if you know much about the
construction industry, but in the construction industry the length of time you
work differs from job to job.
Senator Bosa: Believe me, I know. I have one such worker in the family.
Mr. Maloney: To keep it as simple as possible, what we are suggesting is that,
for anyone who works less than 15 hours in one week, when they apply for a
claim, that one week, those 15 hours or less would not be used in calculating
their determination of benefits. It would only be calculated into those
benefits if they needed those hours to establish eligibility.
Senator Bosa: Do you have any other negative views on the bill besides that?
Mr. Maloney: Other than the intensity rule?
Mr. Dumoulin: We have lots more but we did not bring it to this level because we
felt that our chances of getting any other changes were not that great.
Senator Phillips: First, I appreciated your chart showing the change in income.
The Maritimes fish plant workers share the problem you have described to us,
because they may be called back for three or four hours a day for three weeks,
which affects the calculation of benefits.
I should like to turn to your executive summary. In Item No. 6, you indicate
there should be no family income testing for EI purposes. I have your original
brief. What I am referring to is to be found just before the numbered pages.
Mr. Maloney: That is right.
Senator Phillips: How would you establish either the 60-per-cent rule that is
presently in effect, or the FIS that is proposed in this without involving
Mr. Maloney: We must be clear about this. First, we agree with helping out
Canadians who are less well off, but this is an insurance program, not a
welfare program. In our opinion, when you adopt family income testing
procedures into this program, you are opening the door to a national welfare
program. We agree with helping out Canadians who are less well off, but that can
be done in the child tax credit area or the income tax area. It does not belong
in an employment insurance program. This is an insurance program that is paid
for by individual, personal premiums.
When you start income testing, our fear is that down the road, when someone
applies to claim unemployment insurance, they will be asked, "Does your
wife work? Does your husband work? Does your daughter work?" The next
thing you know, that standard would be applied throughout the entire program,
not just for the people they were trying to protect at the beginning. That is
Senator Phillips: Next, I should like to turn to Item No. 7, "Restore the
powers of the Board of Referees and Umpires". What would you like to see
happen in that event?
Mr. Maloney: It was not too long ago that a local board of referees had some
real authority to make a decision. That authority has been stripped away over
the years. We would like to see some of that local autonomy replaced so that if
someone appeals a decision, that board of referees can make a decision right
then and there on their behalf instead of having hard-and-fast legislation to
which they must refer.
Senator Phillips: As I interpret it, this bill actually reduces the power and
the number of referees.
I am rather intrigued by Item No. 8, "Create a tripartite structure to
oversee the policy direction for the program".
Mr. Maloney: That is one of our favourites. You heard the minister explain that
the premiums paid into the EI account are paid by employers and employees.
Personally, we are sick and tired of every year or every couple of years having
to come before government and begging them not to slash and trash the program
at our expense. We want to be sitting at the table and formulating any further
changes in the proposed EI program. We know how to handle our affairs. We can
make decisions. If cuts are required, we can make them. If benefit increases
are to go, we can decide that too. However, we want to be at the table when
these decisions are made. We do not want to be coming in afterwards, like we
are now, saying, "Could you please do this or do that." We want to be
part of the decision-making process.
Senator Phillips: Would you include yourselves in employment training? This
afternoon, the minister placed emphasis on job creation. He was quite sure he
would lower the unemployment rate, although I am not so sure.
Would you expect to be represented on that retraining and job creation
Mr. Dumoulin: The construction industry does over 55 per cent of apprenticeship
training in this country, even though the industry is about 6 per cent of the
labour force. In other words, 6 per cent of the labour force does 55 per cent
of the apprenticeship training. Most of our local unions or trades have money
paid per hour from the pay cheque of the employees to go towards training. We
have training boards. We have been at it for hundreds of years. We believe in
it. Therein lies our future.
Senator Phillips: Earlier, you made some reference to the fact that 6 per cent
of your employees were apprentices. Would you expect them to have a say in the
apprenticeship program as well as the subsidy?
Mr. Maloney: Absolutely. As Mr. Dumoulin said, the construction industry
represents 6 per cent of the labour force, but we are responsible for over 55
per cent of indentured apprentices. We want to have a major say on how
apprenticeships are run in this country. As far as we are concerned, we are "apprenticeship".
Senator Phillips: One problem I have with the apprentice program is that if you
apprentice as a plumber in New Brunswick, you are not recognized in Ontario.
Mr. Maloney: That is right.
Senator Phillips: I do not see why federal funds should pay for a restricted
practice such as that. If federal funds are being used, then the program should
be universal across Canada and not restricted.
Mr. Dumoulin: We have a trades committee in place and working, a national
curriculum, and a national certification of trades. We are considering the
point you raise. That is to say, a person taking an apprenticeship in a
province should be able to carry it to another province. If he is a second-year
apprentice who lives in Vancouver and he decides to moves Saskatchewan, he
should be able to continue his apprenticeship in Saskatchewan, become a trades
person and get his ticket. Today we have the red seal which gives you the
possibility of working across the country. We feel that the red seal should be
the only certificate awarded when you complete your apprenticeship program so
that you have the right to work anywhere in the country.
Senator Murray: Whenever someone says it is not the money but the principle of
the thing, you know it is the money they are talking about. Will what you are
proposing cost a lot in terms of the government's proposed reduction in
benefits over time?
You have seen the tables showing that the reduction in benefits in the
construction industry in dollars as a result of the passage of Bill C-12 will
be much greater than any other sector at $210 million next year. In 2001-02,
the number will go up to a $390 million reduction in benefits to construction
workers as a result of passing the bill.
Do you think that what you are proposing in terms of banking and so on would
make any appreciable difference in those numbers?
Mr. Maloney: We know one thing - putting forward the concept of hour banking and
carry-forward legislation will cost nothing. Putting the concept in there and
working out the details later will cost nothing. However, if the concept is not
included, we might as well kiss it good-bye because it will not happen.
With respect to the money in the other two programs that we are suggesting, I do
not know what the cost factor will be, but it will not be substantial. We are
saying that you should not count those hours in determining what the benefit
rate will be unless they are needed for eligibility.
As the minister said, a few people may fall through the cracks in this
legislation, but those few people are us. We would like to see that crack
closed before this legislation is passed.
Senator Murray: Do you understand the concept that is in some of these tables we
have, namely, benefit-to-contribution ratios by industry?
Mr. Maloney: Yes.
Senator Murray: As a result of Bill C-12, in 1997, yours will be 3.94. Can you
interpret this number for me?
Mr. Maloney: They are saying that, for every dollar the construction industry
puts into the UI account, we are taking $4 out.
Senator Murray: I believe the figure for logging and forestry is somewhat
Mr. Dumoulin: We have not broken the record yet.
Mr. Maloney: No one can tell us how many people work in the construction
industry. We know that we represent approximately 425,000 unionized
construction workers. Statistics Canada tells us that over 800,000 people work
in the construction industry. The HRD numbers say that there are over 600,000
in the construction industry. The problem is that anyone can put a hammer and a
loop in their pants and call themselves a carpenter. There is no registration
or certification. Every province is different. There are no national standards
province to province. Ease of entry into the industry is very simple. People
who sell building material supplies are classified as being in the construction
Senator Murray: Are you sure you are not arguing against your own proposal?
Mr. Maloney: No, we are not.
Senator Murray: This would be seen by the government as a weakness in your
proposal, the ease of taking advantage of it.
Mr. Maloney: I know that we pay over $150 million a year into our private
training trust fund to upgrade and retrain ourselves in the construction
industry. I would be interested to see if there is another industry that does
that. Keep that in mind, and compare the 4-to-1 ratio.
Senator Petten: I want to go back to your suggestion about banking hours. If I
understood you correctly, you are not talking about 10 years. Are you talking
about one year and then it falls off the table?
Mr. Maloney: Yes.
The Chair: Thank you for appearing before the committee this evening. We all
have your brief.
Our next witnesses from the CAW are: Mr. Bob Chernecki, Assistant to the
Vice-President; Mr. Nick La Posta, Chairperson, UI Committee; and Ms Laurell
Ritchie, Staff Liaison, UI committee.
Mr. Bob Chernecki, Assistant to the Vice-President, CAW: Honourable senators, I
should apologize for not having the French version of our presentation
available. We will provide it to you tomorrow morning or tomorrow afternoon at
With me today is Laurell Ritchie, who I might call our "technician"
regarding this issue. She works in our training and UI department. Also with me
tonight is Mr. Nick La Posta from Windsor, Ontario. He is an officer and
vice-president of a large local union, Local 195 in Windsor. He is also the
chairperson of the UI committee, part of our CAW council. We have various
committees within that council, and given that this issue is serious and has
been for a number of years, we have formed a committee under that umbrella.
We presented a main brief to the Standing Committee on Human Resources
Development on March 28. What you have before you is basically an executive
summary of that presentation.
The CAW is the country's largest private sector union representing over 205,000
workers from British Columbia to Newfoundland to the Northwest Territories. Our
membership includes those working in a wide variety of sectors, including auto
assembly and auto parts, airlines, railways, mining, aerospace, fisheries,
electronics, hospitality, telecommunications and other manufacturing and
Our members also participate in Canada's unemployment insurance system. Many
have had claims when they have been placed on temporary or permanent layoff.
Sometimes layoffs are a result of specific circumstances in the workplace or
sector. Other times, layoffs are the result of economic policies pursued by
provincial and federal governments, policies such as free trade. Some of our
members also turn to UI for parental and sick leave benefits. The vital
importance of their social insurance program to the working people within our
union is recognized by a rank and file UI committee, as I mentioned earlier.
The government of the day appears to have forgotten, at least in our view, the
fundamental purposes of unemployment insurance.
In the midst of the desperate depression of the 1930s, the unemployed rose to
protest against the work camps that required hard labour in exchange for a
pittance in "relief" food vouchers. They wanted decent programs that
would provide for their "good and welfare" and that of their families
Municipal governments and even business began to support these demands. They
feared public rioting and, with mass unemployment, the local economy activity
was dropping like a stone. The flow of dollars had turned to a trickle, leading
to even more bankruptcies and layoffs. The Social Insurance Act was finally
introduced in 1935 and enactment was in 1940.
It is crucial for us to remember today that recessions of the early 1980s and
1990s could have become full-fledged depressions like the Great Depression. A
still relatively healthy UI system was one reason this did not happen.
UI acts as an economic stabilizer, providing a significant measure of earnings
replacement to the benefit of the insured person in the larger community. For
over 50 years, our UI social insurance program has played this critical and
economic role. The government ignores this role at our collective peril.
At the turn of the century and in a time of jobless growth we need a strong UI
system more than ever. Our economy would be much healthier today if we placed
as much emphasis on the stability of Canadian workers and their families as we
do on the stability of money markets.
I have included in my brief at this point a quotation from the Royal Commission
of 1939 which is self-explanatory.
In May of 1995, Human Resources Development Canada issued a study of the UI
system as an automatic stabilizer in Canada. It was written by Peter Duncan and
Steve Murphy. The study states:
The major conclusion arising out of the study is that the UI system, through its
benefit payments to the unemployed, acted as a powerful and important automatic
stabilizer for the Canadian economy in the two recent recessions.
The study found that UI reduced GDP losses by about 13 per cent to 14 per cent
in the recession of the early 1980s, and likewise in the recession of the early
1990s. The magnitude of this positive effect should not be underestimated.
Those who shred the safety net of unemployment insurance entitlements may be
too smart by half.
As a result of slashed benefit entitlements, only 46 per cent of the officially
unemployed are in receipt of UI benefits today - a scandalous low. In any given
month, a majority of the unemployed are not receiving UI benefits. A populous
province like Ontario with only 32 per cent of its officially unemployed
receiving UI is now worse off than many impoverished American states.
In 1990, fully 87 per cent of the unemployed still received UI benefits.
Benefits to the unemployed have been in a free-fall ever since.
The impact of UI cuts has been repeatedly and seriously underestimated by
federal bureaucrats, giving us no warning of the current crisis in beneficiary
rates. In a November 8, 1994 cabinet document, the executive director of
unemployment insurance and chief actuary for the UI account reported "a
lower than expected proportion of unemployed workers drawing regular UI
benefits, lower by 12 per cent". The officials then went on to project a
further 4 per cent drop for 1995. Instead, the rates plummeted by 13 per cent.
Bill C-12 will likely take us below the 40 per cent beneficiary mark, a crisis
in the making.
There is absolutely no financial justification for $1.9 billion in cuts to UI
benefits. Indeed, Finance Minister Paul Martin's budget estimates a cumulative
UI account surplus in excess of $5 billion this year and $9.4 billion by the
end of fiscal 1997-98.
With Bill C-12, the government is moving toward a system with highly restricted
access to regular insurance benefits and, for those who do qualify, poorer
levels of income replacement and fewer weeks of benefits. The Canadian Labour
Congress has estimated that over three-quarters of claimants face a cutback in
the form of both benefit payouts and clawbacks. Those who still qualify will be
very angry when they discover that they are getting less than what they were
getting a few years ago.
The cuts and restructuring will be hardest on seasonal workers, new immigrants,
youth and other new entrants, re-entrants like those who have been on extended
child care leave, the majority of part-time workers and some full-timers who
work 15 to 34 hours, workers with repeat layoffs, workers in regions with
unemployment over 10 per cent, and even workers with above average earnings.
On the so-called employment benefits side, for those who no longer qualify for
insurance benefits, there is to be cheap labour tools like wage subsidies and
supplements. The costs of retraining will be shifted to individuals in the form
of repayable training loans for those workers willing to mortgage their future.
If this government really wants to modernize UI and develop a 21st century
employment system for Canada, as its press release states, then why does it not
liberalize the rules and entitlements? That would make sense when so many jobs
are short term or part time. Instead, this government seems intent upon
tightening the screws and punishing people for taking the only kind of jobs this
economy is creating.
Off-loading federal programs to the provinces, and even the private sector, will
shape the Canadian UI system like the one in the U.S.A., with disastrous
results for the unemployed. Although the government's proposed EI program would
keep a federal structure for insurance benefits, a declining minority of the
unemployed will receive such benefits. Therefore, more and more workers will
have no choice but to apply for employment benefits. These benefits will also be
funded from the UI account but will be handed over as block funding to the
provincial and local level, without enforceable national standards and with the
potential for privatization.
A U.S. study, conducted by the Center on Budget and Policy Priorities in
Washington, D.C., shows a widening disparity in UI coverage caused by nearly
unlimited local state control over UI design. In 1994, UI recipiency rates
among the officially unemployed ran the range from 64 per cent in Rhode Island
to a mere 18 per cent in South Dakota. Left to their own devices, and without a
sharing of the risk of unemployment countrywide, this is a perverse result. The
poorest states with the highest rates of unemployment are the least able to
provide UI benefits.
UI funds are intended for income replacement only. The labour movement has
objected repeatedly to the misuse of UI funds for training course costs, et
cetera. Now, with the CHST's $7.3 billion cut to health, education and social
welfare transfer payments, provinces are looking for dollars from just about
anywhere, including UI, to help with welfare costs. The federal government's
media releases made the point that 45 per cent of social assistance recipients
would now be eligible for the wage subsidies, et cetera, under EI. Is this
perhaps why the provincial Social Services Ministerial Council recommended
integrating UI and provincial social assistance, a disastrous conclusion of the
roles of these two social programs? UI was never intended to be a minimum
income program like welfare which serves quite a difference purpose in our
There appears no end to high national unemployment levels at 9 per cent or 10
per cent. Over 1.5 million jobless Canadians are actively seeking work. The
January 1996 "Canadian Economic Observer", published by Statistics
The ranks of stable job holders is becoming more difficult to join.
The development is one that holds for all age groups and industry sectors,
becoming "a significant trend that needs to be explained", states the
This is an era when long-term unemployment is increasing worldwide as a result
of economic restructuring and technological change. In its 1995 report,
entitled "The Jobless Recovery", the Conference Board of Canada
documented the steady rise in the average length of unemployment in this
country. It has more than doubled from 12.3 weeks in January of 1980 to 25.6
weeks in April of 1995. Indeed, under these conditions, there is good reason to
argue for the extension of the 50-week maximum benefit period, not cutting it
to 45 weeks as this legislation proposes.
Frequent users with more than 20 weeks of benefit in the previous five years
would take a one-point cut in their benefit rate for every 20 weeks of prior
benefit. This intensity rule is not insignificant. A drop from a 55 per cent to
a 52 per cent benefit rate means a 5 per cent cut in benefit income.
The majority of those now eligible for the 60 per cent low income rate would no
longer qualify with the introduction of family income testing to the UI system.
Currently, the higher rate applies to those with dependents and less than about
$22,000 earnings yearly. The proposed family supplement rate would apply only
if family income is less than $25,000. The average $30 supplement at maturity
will be doled out on the basis of the number of children. This could take us
back to the days when only the main bread winner had entitlements.
Clawbacks from workers with above average incomes ignore the purpose of
premium-funded UI social insurance - the stabilization of workers' earnings, to
the benefit of the individual in the larger economy. UI is not a minimum
program like welfare; it serves a quite different purpose. The 30-per-cent
clawback of benefits, plus taxes on the rest, would trigger a net income of
$48,750 instead of $63,750. This will result in a lower effective benefit rate.
A super clawback of benefits, as high as 100 per cent, would apply to frequent
users. It would trigger at a net income of $39,000 and result in a drastically
reduced effective benefit rate. A clawback that deems $39,000 or $49,000 as "excessive
earning" simply reinforces a cheap labour agenda.
Look at what the bureaus are saying today about this program: By the year 2000,
some 500,000 people in this country will earn more than $39,000 per year. That
is hopeful to some. What this means to the total UI program is another
question. This directly affects the auto industry, the auto parts sector and
many other sectors we represent. Most people are above that today in those
Seasonal industries are vitally important to the Canadian economy. The
government's own task force on this subject stressed this point. Seasonal
industries include more than fishing and lumbering. Tourism and hospitality,
for example, are found throughout the country, as is the education sector with
school bus drivers, clerical workers and others who are laid off each summer.
You will hear on June 10 from the fishermen's union on the East Coast who belong
to our union about the serious impact of this bill on them.
In June, the school bus drivers will end their year and will be laid off. They
will be seriously affected by this bill. They go back to work in September.
Their benefits will be significantly cut because they are seasonal. They are
taking my children and your children to school. This design is not at all fair.
The federal government proposes to reduce UI premium rates and lower the
earnings ceiling for premium collection. A worker at the new, maximum insurable
earnings of $39,000 will typically save $167 per year. The price for this
saving, however, is much too high. The price includes an immediate decline in
maximum benefits from $465 to only $413 affecting about one in four claimants.
It also includes a Draconian freeze on maximum benefits and maximum earnings
until the year 2000, which will result in a creeping decline in the value of UI
benefits. Maximum benefits would normally reach about $493 by the year 2000.
The price also includes a significant new cost for SUB plans. The SUB plan
provides for UI top-up, based upon a percentage of pay. Reduction and duration
of UI benefits and the various frequent user penalties will also add to the
issue of costs.
These shifts in adjustment costs to the private sector not only hurt those who
provide the best adjustment programs, but also exacerbate the collective
bargaining. We are left with no other choice but to go to the bargaining table
and fix what is being contemplated in this legislation.
An hours system penalizes part-time or full-time workers with 15 to 34 hours per
week. UI currently covers only part-time jobs with work weeks of 15 hours or
more. That means that over three-quarters of Canada's part-time workers already
participate in a UI program.
The government wants them to work longer to qualify. The requirements for new
entrants, re-entrants and those applying for pregnancy, parental or sick
benefits leaves, are especially harsh. Those who do qualify will have a shorter
The cuts to be introduced via the proposed hours system are one reason that the
NAC and CLC Women's March Against Poverty, now under way, includes a demand for
the withdrawal of Bill C-12 and restoration of pre-1990 terms and conditions.
The proposed employment and benefits measures, the other half of the Bill C-12
reforms, would eliminate apprenticeship supports and the National Training Act.
The existing 39 federal training programs will be reduced to five tools,
including wage subsidies, earnings supplements, skills grants, loans and
self-employment. Those particular uses will be determined locally. The $2.7
billion funding will not come from government coffers but from the UI account.
Training, we are told, would propel a value-added economic restructuring and
turn us all into knowledge workers; but even as training was being promoted,
the government was cutting hundreds of millions of government dollars and
programs. No attempt was made to establish national training targets or to
provide worker entitlements to training as other countries have done.
I have had the distinct pleasure of serving on the Canadian Labour Force
Development Board for about three years now. Most of you would know that body.
It is a unique structure with business, labour and government. We have been
trying to establish some good national standards and good training programs for
this country. Unfortunately, the budget has been cut. We have been given a
couple of million dollars per year to make this work, but the issues facing that
board are issues of training. What are we training for? The future. Here the
federal government is getting out of the business of training and pushing it
down to the provinces. This is most troublesome.
As labour, we will continue to be represented on that board because we believe
in it. We want to see them succeed in their it work. One of the major issues
facing the employers and the labour side of that was the use of UI money,
developmental money, revenue, for other than UI claimants. We have been able to
get over that debate and put it in abeyance and work together to try to put
together a good national standard for apprenticeships. This bill just flies in
the face of our efforts as a board. This will make it much more difficult for
us to function as a board.
Earning supplements will go directly to workers and are designed to lower their
wage expectations. As one government background document states:
A supplement of a few thousand dollars for a year or so provides the needed
incentive to accept a lower paid job and helps the worker adjust financially
and psychologically to the new situation.
If UI were left in tact, unemployed workers would be able to search for work
comparable to their previous job.
The wage subsidy program gives UI funds directly to business to hire people who
face barriers to participation in the labour market. This seems to suggest job
creation but it is only about trying to move certain people to the front of the
Wage subsidies will not convince an employer to hire. It will only influence who
is hired. In these circumstances, a wage subsidy is a direct contribution to
profit. There is another program: The Wage Subsidy-Induced Displacement
Program. These types of programs are often abused or so difficult to regulate
that the "strings attached" are effectively cut at the employer's
Skills, loans and grants would shift training costs onto those who have lost
their jobs. As the government states:
Greater emphasis on individual responsibility is reflected in a shift from
entitlement payments to loans.
Through the loans program, the government is shifting sizeable amounts of funds
from income maintenance to individual debt. When fully implemented, the
government expects about 175,000 unemployed workers per year to go into hock
for training courses that might, but probably will not, get them jobs.
Historically, the federal government purchased training courses from community
colleges each year. It is now closing off this stable funding and fuelling the
drive to a privatized and commercialized training education system.
Under the proposed legislation, "XYZ Training Inc." or even "XYZ
Manufacturing Inc." will be allowed to provide training which is eligible
for the loan program - then too bad for the community colleges in the area. We
have spent the last 30 years developing a training and education infrastructure
with public funds. We should be maximizing our social returns from that
investment by more fully utilizing the colleges, not shifting resources away.
The government admits that the combined impact of gutting UI and the cuts to
general revenue funding means a significant portion of unemployed will not have
access to re-employment measures.
Hard hit will be those who were eligible in the past such as youth and others
entering the labour market for the first time; women entering after a period of
absence; older workers; and recently arrived immigrants. It concludes that such
a move will push more people into provincial programs. By dumping these groups
of workers, the federal government is reneging utterly on its training
The government should withdraw Bill C-12 and use the UI surplus to restore our
UI entitlements. The UI account surplus was accumulated largely as a result of
slashing entitlements of unemployed workers. UI entitlements then are reserved
for the next recession and then for premium reductions.
Statistics Canada's new study of so-called payroll taxes, including premiums for
UI insurance, found that Canada's payroll taxes are the lowest of the G-7
countries including the USA.
Job creation will not come from the UI cutbacks, employment benefit tools or
premium reductions. Job creation comes with the lower interest rates via the
government's leverage with the Bank of Canada and other initiatives like
policies for reduced work time such as paid training leave, reduction of
excessive overtime and affordable early retirement.
As was the case in the Great Depression, the overriding crisis is to be found in
the job market. Employers in both the public and private sectors are making
increased use of temporary and term positions, just-in-time scheduling,
part-time work, and contracting out, all in the name of competitiveness and
Today the federal government is certainly leaning towards contract work. These
changes will negatively affect those people. Where is there a rational
explanation for a UI system that punishes workers participating in a
lean-and-mean market born of these policies?
There will be direct effects on women if this proposed legislation is passed. In
that regard, I should like Laurell Ritchie to provide senators with some
information which is contained in our brief. Following that, Mr. La Posta will
give you some examples of what these changes will mean to certain communities.
With your permission, we will do that at this time.
The Chair: I would point out that you have taken almost half an hour for your
presentation. We would like to have some time to ask you questions, so we would
ask your colleagues to be brief.
Senator Rompkey: We can dispense with questions and allow them to make their
The Chair: If you would like to make a point, we would be glad to hear it now.
Ms Laurell Ritchie, Staff Liaison, UI Committee, CAW: In summary, with respect
to how this restructuring and cutback will have a particular impact on women,
it must be said that there is evidence across the country that people are
assuming that this is mainly a problem for men working on the high seas in the
Atlantic as fishermen or perhaps lumbermen in B.C. What has not been fully
appreciated yet is that a number of these changes would have a very negative
impact on women. No one is immune.
First, I wish to deal with the hours system. We have commented on that in our
brief, but it helps to understand the system to recognize that, so far, the
system has recognized 15 hours of work or more as an insurable week. With this
proposal, we would be going to a system that would deem a 35-hour work week to
be a full insurable week and anything less than that would be prorated. It is
very important to remember that the large majority, close to 80 per cent, of
those working under 35 hours are currently covered by unemployment insurance
because they have 15 hours or more.
These people in the 15- to 34-hour category, some of whom will be full-timers
who work less than 35 hours, will face much tougher tests for eligibility; be
it for regular or special benefits. If they do qualify, in many instances they
will face a reduced period of eligibility.
I will not walk through each of these examples, but we have a one-page chart
that shows some of the consequences on a typical part-time job of 24 hours
weekly. We worked with the new numbers under this hour system using Toronto or
Vancouver with 8 per cent to 9 per cent unemployment. I will leave that for
Those requirements will be particularly hard on new entrants and reentrants.
Certainly, young women have had a particularly difficult time entering the
labour force. If they do not meet the 490-hour rule in the first year, they
will find themselves having to meet the 910-hour rule for yet a second year as
Along with many other groups, we oppose the introduction of family income
testing to UI in principle, not only for the reasons we have expressed in our
brief, but also because this is a social insurance system not a welfare model
and there are dangers in moving to that model. You must also consider the
simple reason that fewer women will qualify than currently qualify for the
We would remind senators that women represent 70 per cent of part-time workers.
Human resource development has itself acknowledged in its study that women work
on average 30 hours weekly, while men, on average, work 39 hours. Women
represent virtually 99 per cent of the claimants for pregnancy and parental
benefits, and 60 per cent of sick benefit claimants. That is because, in many
cases, they do not have sickness benefit plans at work.
A growing majority of the jobless who will no longer be eligible to receive UI
benefits will include single moms. They will have to rely on welfare. Some
provinces are already talking about "workfare". It is not too much of
a stretch to imagine how employability measures under employment programs will
become the kinds of workfare programs that we see being contemplated in some
Finally, with respect to the federal government's intention to abandon its
training obligations, we see the dumping of approximately 39 national
employment programs. We would remind you that a number of these were
project-based training geared to the needs of women, especially immigrant
women, older women and women of colour.
In the next couple of weeks you will be hearing more about this in the form of
one of the demands in the march against poverty. I hope you will find time to
hear from groups such as the National Action Committee on the Status of Women,
which our union supports, along with others who did not have an opportunity to
make a presentation at the earlier hearings.
Mr. Nick La Posta, Chairman, UI Committee, CAW: I want to tell you a little
story about the amalgamated local that I represent in the fair city of Windsor,
Ontario, the southernmost part of this province. We had a unique situation
where we were devastated at the start of the "1990" recessionary
period which actually started in 1988 and continued until 1993. Our local union
represents 72 different employers, everyone from metal stamping and
auto-associated shops, to service industries such as supermarkets, truck
drivers and hotel workers. We have a cross section of people who truly
represent our community. As the recessionary period hit, the smaller plants that
we represented were swallowed up in the depression. Believe me, it was a
depression, not an extended recession as the media would like us to believe.
During that period, in the neighbourhood of 17 to 23 plants were closed,
depending on which year you want to stop taking into account plant closures. As
a result, we took it upon ourselves to form a tripartite board with
representatives from the municipality, the federal government and our 72
employers. Labour, represented through local 195, came together and got
representatives of both the federal and provincial governments to sit down and
listen to a simple idea that we had. We said that if we could get the 72
employers to tell us what their current needs were, the type of employment they
had to offer, and the type of person they wanted to hire, we would give them
that person. In other words, we would package that person to fit their needs.
That system worked well until such time as both the federal and provincial
governments decided to cut the funding. At that point, it was decided that
there would be no further purchases of community college seats.
These workers, after 5, 10 or 15 years, lost their jobs through no fault of
their own - perhaps because of a plant closure, or because the board of that
particular company decided to do business elsewhere, or perhaps it was just a
result of the economy. In some cases it could have been because of poor
management. Whatever the reason, it was not the worker's fault. That worker may
have lacked in the area of skills. It could be as simple as a language barrier,
or that they were unable to grasp the new technology. No on had ever taught
them. The plant or the business they came from probably had not taken that step
yet. Through the UI fund and the community college, they would purchase seats,
and we would help this person.
Senator Rompkey: They can still purchase seats, can they not, if they have the
money in hand?
Mr. La Posta: We are talking about the situation whereby UI would purchase the
seat. Now we are talking about EI, where it is the individual who must purchase
the seat. These are two different concepts.
Senator Rompkey: Is it not better?
Mr. La Posta: No, I do not think so. Out of the first thousand members who went
through that plant, our 72 employers benefited from repackaged, if you will,
employees that fit their needs. All that was needed from them was a commitment
to hire people to fill the specific jobs that they had.
That is one of the reasons our city has taken the stance that it has, and on May
20, passed the resolution that is before you. I thank you very much for your
The Chair: Anyone who followed your history knew that Windsor was a success
Senator Gigantès: I am part of that endangered species - probably a
fossil by now - called a Keynesian economist. I have friends in Sweden who are
socialists, and they say that this is a worldwide trend and they cannot buck it
because they cannot do things that other nations and trading partners do not
do. If they try, the employers just move away. They cannot tax the employers,
because nowadays an employer would gladly give you his existing plant because
it is obsolete as of tomorrow. The only way they can recover money is by taxing
them when they buy their Mercedes or Rolls Royces.
We are living in a new world, say my Swedish friends, where capital has won and
is reversing everything that labour and the middle class gained in the 35 years
immediately after the Second World War, the one good period in our history.
It seems to be like that. Whenever I talk to anyone abroad who seems to have the
same feeling as I have, they say there is nothing we can do.
Mr. Chernecki: I learned a long time ago not to quote newspapers because the
next day you will find a different version, especially now that Conrad Black
has taken over so many of them. However, there was an excellent article in The
Toronto Star on Sunday that dealt with the very issue you mention, senator, the
"shrinking-down" concept. We can no longer afford what we have today,
and we must go into corporate restructuring. We have already done that. This
country had gone through the lean and mean, and we are about as lean and mean
as you can get.
However, at the other end of that equation there is also the argument that
corporations today have made more profit than ever in their history. We have
shareholders fighting with each other about whether their dividends are high
enough. We have corporate CEOs who do not know what to do with their money,
they are making so much of it.
As a union, what fascinates us is that with all this happening, and not even
talking about the banks, we cannot afford a social program that has served this
country well and kept it together, in terms of national structure and national
unity; something that brings the fibres together. You are right that it is all
falling apart around itself, and it will get worse in Sweden because people are
arguing that we cannot afford these kinds of programs.
Look at the surplus. Someone said earlier that if it is a toss-up between
principles and money, it is usually about money. I argue the reverse. This is
not about money. This UI fund is in very good shape. It has $5 billion, and
will have $10 billion next year.
Senator Rompkey: There is quite a bit in this brief, and it is difficult to go
through, but I will focus on the second paragraph on page 4 which indicates
that cuts and restructuring will be hardest on seasonal workers, new
immigrants, youth and other new entrants to the job market, as well as on
re-entrants such as those who have been on extended child care leave. I would
have thought that the legislation would have benefited those workers.
First, no one will be hampered now by the 15-hour barrier, and it seems to me
that that would bring in many women who were excluded before. You gave us some
figures about what percentage of part-time workers are women, and I would have
thought that the new system would benefit women who are in part-time jobs, even
though they do not necessarily want to be in such employment.
Second, as to re-entrants who have been on extended child care leave, I thought
the legislation particularly provided for those who had been on extended child
care leave and did not penalize them for that when they came back into the
workforce. Now, 500,000 more individuals will have their work insured than was
the case previously. A great many of those will be women.
As far as the training is concerned, I would have thought that that would have
benefited women, too. In an attempt to break through the "glass ceiling,"
training must be a key factor. If there is training available for women under
this program, that surely is a help in the long term for them in breaking
through that glass ceiling and getting better long-term jobs.
I am puzzled as to why this has a negative effect on women. I would have thought
that it would have a positive effect.
Ms Ritchie: I will not attempt to deal with all of the pieces of the
explanation, but certainly the hour system is a key to explaining this.
Senator Rompkey: Are you for that?
Ms Ritchie: We are opposed.
Senator Rompkey: You want to keep the status quo?
Ms Ritchie: No. We want what has been proposed by the Forget Commission, and by
the Wallace Commission on part-time work. That would be one possible way of
dealing with those with under 15 hours. Certainly, the labour movement has been
one of the key players in calling for coverage for those who have under 15
hours of work. The formulas that were advanced by those two commissions were to
move to true universality, but to begin by extending it down to counting weeks
in which there were eight hours of work per day.
Senator Rompkey: Are you, then, calling for a pure insurance system?
Ms Ritchie: We have a pure social insurance system, yes.
Senator Rompkey: Is that what you are calling for? That is fundamental to your
brief, I assume. If you are asking for a pure insurance system, then we have
never had that, and if we get to it, I think it would be a real deterrence to
us in the Atlantic provinces.
Ms Ritchie: This is a social insurance system, and we are doing quite different
things with a social insurance system than you are with a commercial,
for-profit type of insurance system. These kind of changes can be made, and
have been made in the system to extend universality. As I said, there are two
commissions. It is not just CAW and other groups that are saying this. There are
commissions that have come to that same conclusion.
There are also other ways of doing things. If you were to introduce pro-rating,
you could introduce it at the under-15 hour mark. Here, everyone who gets
between 15 and 34 hours of work per week, and who is currently covered, in the
case of re-entrants and new entrants, will face the requirement of 910 hours to
qualify for benefits.
Further, if you look at the features and trends of the current labour market,
those things will have a very heavy impact on employees who are in precarious,
short work week situations. These requirements will make it much tougher to get
regular benefits or special benefits.
Senator Phillips: Madam Chair, I would like to suggest that, in the future, the
witnesses be aware that they have a specified number of minutes in which to
present their brief so that we have enough time to ask question. As far as this
evening is concerned, they could have faxed the whole thing in and we could
have eliminated them as witnesses, because they did not provide us with any
opportunity to ask questions. If we have that type of procedure in the future
where the witnesses are inconsiderate and discourteous to the committee in
taking all of our time, I suggest we advise them that fax machines exist, and
that they utilize them in the future.
Mr. Chernecki: Madam Chair, we did not start until 7:10. The problem I have is
that we would like to complete the entire presentation. We know you have
questions, and we will try to answer them as best we can. I know it has been a
long day for people. We just want to get our points across.
The Chair: Sometimes your points come across much better when we are allowed to
question you. You spent about 35 minutes on your presentation, which is a
little longer than most presenters. However, we do thank you for coming before
the committee. We have your brief and your suggestions before us. We will take
them into consideration. I am sorry about the timing.
Mr. Chernecki: We appreciate the opportunity. However, I do want to say to the
senators here that all of you certainly have watched this country evolve and
change over many years and through many struggles, setbacks and growth. The
question is this: Will you allow this program that really ties Canada together
to be dismantled? In our view, this is a unity issue as well. We would urge you
to remember what this program mean to our country and the people who live in
it. These types of cuts do not build infrastructure and jobs - they destroy
The Chair: Honourable senators, our next witness is Judith Maxwell. She is
representing the Canadian Policy Research Networks. I believe her brief has
Please proceed, Ms Maxwell.
Ms Judith Maxwell, President, Canadian Policy Research Networks: Madam Chair,
thank you for inviting me to participate in your session this evening.
This is a large, long and complicated bill. I should like to make it very clear
from the beginning that I cannot really speak to the technical aspects of how
all of these formulas apply. I thought that a useful role to play, since you
are at the beginning of your hearings, would be to stand back a little bit and
put the bill in context, both in economic and social terms.
I have provided you with a short brief outlining the main points I wish to
raise. I will just follow the outline given there.
I do not think I need to elaborate on the changing context for unemployment
insurance or employment insurance. I think everyone is aware of the change in
the fiscal regime that we must now deal with. Perhaps the new labour market
bears a moment of discussion.
The way in which I characterize the new labour market is that increasingly we do
not think about jobs - we think about pieces of work. People are hired on a
short-term contract; they are hired for temporary work; they are hired
part-time; they work as self-employed contractees; and they are hired basically
to produce a specific piece of work rather than to fill a long-term position. As
a result, they are typically paid for performance. They are no longer paid over
the long term to be there when they are needed; they are basically hired at a
time when they are needed.
The next point I wish to make about the new labour market is that the insecurity
we see in that labour market affects people at all income levels. It is
certainly hardest on people with low incomes, but it affects everyone.
Another aspect of the context is the way in which citizens are making new
demands on governments with respect to government programming. They place a lot
more emphasis these days on efficiency, while still wanting to maintain a
standard of fairness. There is growing pressure for what we call "fiscal
neutrality", meaning that apart from equalization there should not be large
transfers from one region to another hidden in programs.
There tends to be more of a backlash against open-ended handouts. I think this
is largely because citizens see that the fiscal pressure is now squeezing
resources out of education and health, which are two very highly valued
programs. That, in turn, makes them much more conscious of the way in which
they are being taxed and their money spent.
That may sound at first as though I am affirming the kind of mean-spirited
sentiments that you read a lot about in the newspapers these days, but I think
it is very important to recognize that Canadians come at these issues with
enduring social values.
I circulated to members of the committee this little publication put out by
Canadian Policy Research Networks last December, which reports on discussions
that we had in eight cities, asking Canadians to reflect upon their basic
social values. To summarize very briefly, those values include the following:
The first is self-reliance, meaning that every citizen should make a best effort
for himself or herself. However, that self-reliance is balanced by a strong
commitment to compassion for others, leading to a sense of collective
responsibility. There is a strong sense that the state, or the collectivity,
has a responsibility to invest in people, especially in the next generation, but
there is this new emphasis, or renewed emphasis, on affordability and efficient
I would like to give a quick overview of the bill, bearing in mind some of the
contextual issues that I have just raised. If we look first at whether the bill
speaks to the situation of the new labour market, I think that the switch to
hours as the unit of account is a very important modernization of our insurance
system. It means that all forms of paid work will count, and every hour will
count. It eliminates an important discrimination against part-time workers, and
helps to legitimize something that I think will be important to us in the
longer term, which is that part-time work is an appropriate and valuable form
of work. Many full-time workers who might prefer part-time work would then
eventually accept it as a legitimate option on their part.
I realize that there are some transitional issues with respect to hours as the
unit of account, but I think that the basic principle is important.
Second, as far as self-reliance is concerned, there are changes in this bill
which are intended to break the dependency and encourage people to take more
responsibility for their labour market activity. They include the intensity
rule, the shorter duration of benefit and the increased clawback on high-income
Third, collective responsibility has been taken into account because of the new
forms of income redistribution that are in the bill, in particular the family
Obviously there is a strong emphasis in the bill on affordability and efficient
government in the sense that there is a reduction in the total cost of the
system, which has long-term consequences not only for federal finances but also
for the cost of the system for employers and employees. Going beyond that,
however, there are efficiencies in delivery systems that have been promised, and
there is the potential for greater stability in premium rates over the business
Then we come to the question of investment in people to encourage self-reliance.
Here I think we are presented with some difficult questions. Even before the
decision was made to offer to transfer these programs to provincial
governments, as announced last week, we were still presented with some unknowns
here as to whether we have the right programs in place, whether we have enough
capacity to help the people who want to try new options, and whether the
federal-provincial interface will be well managed. If we do not get this part
of the system right, we cannot call it employment insurance.
Senator Gigantès: Would you repeat that last idea?
Ms Maxwell: Will the federal-provincial interface be well managed? I mean by
that that the federal and provincial programming is interdependent, and if it
is not managed in a constructive and collaborative way, then you have people
who fall through the cracks, who cannot find the program they want, money is
wasted, and we do not get the bang for the buck that we are looking for.
I would like to go on for a moment, if I could, Madam Chair, with just a bit of
background on active programming. As has been made clear by the previous
witnesses, job loss today requires remedial action. That may mean upgrading the
skills of an individual, acquiring new skills, or helping with job searching.
In my view, a long-term unemployment insurance system, as it was originally
visualized by the economic council at least, would be accessible by all workers
who were paying into the insurance system, not just by those who had been on
claims in the last three years. We have a lot of evidence that Canadians want
to pull themselves up by their bootstraps, that they are very keen for
upgrading and assistance in their personal development, and that, in fact, the
demand for active programming probably exceeds the supply by a very
considerable amount. We still have a lot to learn about effective programming
in this area.
There are some very interesting ideas in the bill that merit testing, but we
have to remember that there are also a lot of relatively inexpensive
interventions, such as job-finding clubs and counselling, which offer positive
outcomes. Although training does not have the reputation it used to have, when
it is well targeted it really is a major pay-off, not only for the individual
but for employers.
Another important part of programming that is not even discussed in this bill -
and perhaps that is appropriate - but which certainly should be taken into
account in the longer term, is the development of systems that will encourage
individuals to build up savings accounts that they can use to finance their own
training, retraining, and upgrading over time. What we need really is programs
that are parallel to registered retirement savings plans, but they should be
registered training savings programs.
If I may go back to this question of the federal-provincial interface, I think
the major mistake we have made in the past in coordinating the whole basket of
active programming in Canada has been that we have not looked at
accountability, and we have not looked at the real outcomes of those programs.
Finally, Madam Chair, I should like to point out that we are in a period of
social transformation when it is very important to get adjustment policies
right because there is so much change going on in our economy. In a sense,
governments have the option of two models. One would be what I call the "cold
shower," and the other is the supporting-of-transitions model where there
is a much more gradual change in the incentives and in the framework within
which people operate.
In the budget of February 1995, we saw the cold shower approach being used with
respect to the Crow rate. That subsidy had been in the system for over 100
years, and basically it had cemented the behaviour of farmers or grain
producers and transportation companies in inefficient modes and had prevented
them from adapting over time. It is very important that we look at all our
programs to make sure that they have not become barriers to adjustment.
I think the old version of UI had actually cemented people into old ways of
behaviour, old ways of working, and old ways of employing on the part of
The real question that you should try to address in these hearings is whether or
not the changes in this bill are sufficient to break the cement that has been
holding people back in Canada so that they can move ahead with the changes in
their lives that will help them become more self-reliant.
On the last page of my brief, I have a list of six questions that I think are
important to address as you evaluate this legislation.
The Chair: You have brought some interesting suggestions and facts to the
Senator Gigantès: You spoke about federal-provincial collaboration, and
you spoke of accountability; do you mean accountability of the provinces to
some central authority? Do you mean national standards? Do you mean agreed
outcomes? I have a clipping here saying that the provinces want the federal
government to give money and shut up. What precisely do you mean in this field?
Ms Maxwell: I think that before the money is transferred, it is important that
the federal government and the provinces agree on their labour market goals.
They should have some fairly specific performance indicators in mind so that
they can track the effectiveness of whatever programs are put in place. There
should be a system set up that will ensure that we can compare results across
different parts of a given province, as well as across different provinces, so
that there is scope for learning from a jurisdiction that is doing well, and so
that those that are not doing as well have important incentives to change. This
is something we have failed to do in programs in the past, such as the Canada
Assistance Plan, and that has been a very expensive failure on our part. This is
an opportunity, when a new set of arrangements are being put in place, to build
in the appropriate accountability mechanisms.
Senator Gigantès: Do you think this is possible in a country where, since
its inception, provincial premiers running for election run against Ottawa? I
am sure it would be the case even if Jesus Christ happened to be the Prime
Minister of the country?
Ms Maxwell: There are very large inter-regional transfers embodied in this
program of employment insurance, or in unemployment insurance for that matter,
and therefore, I think there is an important responsibility to the employers
and employees who pay those premiums, as well as to citizens in general, to be
able to demonstrate that we are getting results from the programs that are being
financed by their contributions.
Senator Gigantès: From your mouth into the ear of God. Thank you.
Senator Phillips: Ms Maxwell began by saying that the concept of "job"
has changed, that it is now being thought of as "piecework", and
employment will be for shorter periods of time. I am not disputing that
concept. Rather, I should like to know how you train individuals for this type
Ms Maxwell: I think you have to take that in terms of different types of
workers. For example, there are many professionals who have had considerable
education and/or training, who are now living this kind of contract-
self-employment life, who could be expected to take responsibility for their
own training and upgrading. As I mentioned, it may make sense to have some
incentive program in place to encourage them to set funds aside for the day
when they do need that upgrading.
In the case of people earning lower incomes, who may start out with fewer
resources for their own education and training, the employer certainly has a
major responsibility. Even if it is relatively short-term work, there may still
be payoffs to the employer. If the employer fails to provide that training, or
if the worker is someone who has very limited attachment to one individual
employer, then I think we must look at the public system, whether that is
provided by federal, provincial or local governments, or by sectoral councils
or other types of organizations that we have begun to create in this country to
facilitate that process of upgrading the labour force.
Senator Phillips: I appreciate your answer. I am still having difficulty
relating training to the possibility of a one-year job appearing and then
disappearing at the end of that year.
I should like to turn to the proposed family income supplement. I do not see
this as making a great deal of difference. Under the present act, people with
low incomes can receive up to 60 per cent, if they have dependents. Under this
proposed bill, we are cutting back benefits. The average income supplement,
according to Senator Rompkey who introduced the bill, will be up to $800. After
the cutbacks, I cannot see that a family income supplement of $800 a year will
make that much of a difference. Did your group interview people in this area or
conduct any study in this regard?
Ms Maxwell: Senator, we have not done any specific studies with respect to the
way the benefits are structured. I would say, though, that in the values study,
which I mentioned to you earlier, a number of the discussion groups that we ran
across the country involved people who were on social assistance or who were
clients of family service agencies in some way. What those people were saying
to us - admittedly this is about welfare rather than about the UI cheque - was,
"Yes, the cheque is very important. I need that to get the groceries on
the table next week. But the cheque will not solve my problem. My problem
involves getting the right training, finding the job, finding the child care
arrangements that will permit me to use my training and to get to the job."
It is those active measures that will make the difference to people in helping
to change their lives.
The family income supplement is really meant to be a cushion to prevent the
hardships associated with the cutbacks in benefits here from bearing down too
heavily on poor families. At the same time, however, we are trying to get the
incentive structure better designed for people who are employable and who have
the potential to be working more each year, or those with the potential to be
seeking out new options for themselves through training programs, or something
of the sort.
Senator Phillips: You refer to transitional funds for the Atlantic provinces.
What advantages and what shortcomings do you see in that regard?
Ms Maxwell: We do not have very much confidence these days in short-term
job-creation programs. However, some money has been put on the table and is
available to try to make a difference in respect of economic development in the
regions that are likely to be most severely affected in the short term by this
bill. As I recall, the use of the funds is to be discussed with the provinces
and the arrangements are to be worked out together. I should like to think that
the two levels of government could come up with some options that would build
opportunity and create the possibility of more employment in the longer run.
Senator Phillips: I presume you are thinking of the long term rather than what I
call the transitional.
Ms Maxwell: Yes.
Senator Murray: It is always very interesting to hear you, Ms Maxwell, and to
read some of the words which you and your colleagues are producing on these
subjects. In the new labour market, instead of attachment to permanent jobs we
are talking about pieces of work, as you say. There are all kinds of statistics
around indicating how prevalent that is nowadays, including that portion of
total employment that is now accounted for by so-called non-standard
employment. For some people, that works very well. For a great many people,
however, it means low wages, no benefits and no security.
On page 2 of your remarks, you have identified what this bill does in terms of
addressing the new labour market. You identify the provision to convert from
weeks to hours as the unit of account.
First, that is of very limited value to the people at the lower end of the
scale, as you know. As a matter of fact, a great many of the people who work
between zero hours and 15 hours a week will not even be eligible, although they
will pay the premium for a while. Those who work between 15 hours and 34 hours
are losers in terms of their eligibility.
It is of very limited value. If this new labour market is becoming so prevalent
and the conditions so important to consider, it strikes me that policymakers
seem to be well behind in catching up with it. Could we not have been more
imaginative in addressing this area than simply producing this one idea of
converting from weeks to hours?
How much work is being done on this issue? It raises a whole host of other
policy problems, which we do not necessarily want to address tonight, but, for
example, if it is pieces of work, how will we collect the income tax? So much
of that tax now comes from deductions at source. How will the Canada Pension
Plan work? How will many of the other things work that affect public policy?
Ms Maxwell: Those are all important questions, I agree. Another important issue,
which is not addressed in the bill but which must be addressed eventually, is
the issue of self- employment. That is another big element in the new labour
Senator Murray: They ducked that issue in this bill, did they not?
Ms Maxwell: It is not here in terms of coverage. It is here on the employment
benefit side as a possible source of encouraging people to make a transition to
self-employment. It is very difficult, as I understand it, to design coverage
for self-employed people, because it is difficult to verify their work hours if
they are their own bosses. There are difficult technical issues there.
It is a real challenge to catch up with the way the labour market is evolving. I
should have included under this bullet that the real demand is for active
programming to help people in their own personal lives to make the transition
from the old concept of employment, which was that you would work in a single
job for long stretches of time, possibly all of your life, doing the same kind
of work, relatively speaking. Now we are in a situation where for many workers
that just does not occur anymore. That is why all the active measures which
help people to be self-reliant, to make them more employable, to acquire
skills, are such an important part of the whole notion of employment insurance.
Senator Murray: You are talking about the training measures. Later in your
brief, you take a rather more positive view of the possibilities in such things
as wage subsidies and earning supplements and the rest of it. The Labour Force
Development Board came before the House of Commons committee and flashed at
least an amber light on that stuff, citing an OECD report which apparently
indicates quite a displacement effect in terms of wage subsidies. They are
generally saying that the net economic effect of these was quite dubious.
Ms Maxwell: Yes, I know that. As I said, these ideas have merit. They need to be
tested in the Canadian context. They need to be designed for the Canadian
context. For example, some interesting evidence is emerging now with respect to
earning supplements. That evidence is still incomplete because the experiments,
under the self-sufficiency project, are still only in midstream. However, there
is very interesting evidence of significantly increased labour market
participation during the period that the supplement is available.
We are waiting to see whether behaviour changes on a permanent basis so that
when the supplement disappears, the individual can continue to work.
Senator Murray: I do not want to be too agnostic about all this stuff, but you
are really talking about the old economy or the present economy when you talk
about dependency. How does the bill measure up with respect to self-reliance?
You identify the intensity rule, the shorter duration of benefit and the
increased clawback on high-income frequent users. What is the behaviour that we
are trying to change here? Where is the hard evidence for this? It seems to me
that the intensity rule adversely affects seasonal workers for the most part.
There is another category which I will mention in a moment.
I do not know what behavioural changes we want to effect there. Someone must cut
the logs and process the fish. In the places where that is done, as you and I
know, the off-season employment opportunities are not there. What are we trying
to do to these people with an intensity rule or a shorter duration of benefits
or even an increased clawback on high-income earners?
Where is the hard evidence on this stuff? I saw a couple of studies put out by
the Department of Human Resources Development on wages, search intensity, the
probability of re-employment. The studies seemed, to some extent, to disprove
the notion that UI was the problem.
Ms Maxwell: There is evidence of behaviour which minimizes the use that one
person will make of a job. There is job-sharing in communities, for example.
Senator Murray: It is alleged that, in addition to seasonalism, there is some
collusion which apparently takes place as between certain firms which schedule
their layoffs to fit in with the UI program. That is not what I am discussing
here. In that connection, I wonder why they did not target the employer rather
than the employee.
Senator Rompkey: And government departments.
Senator Murray: You said it, senator. The seasonal workers seem to be the ones
who will be hit by the intensity rule. I wonder to what good? To what purpose?
Ms Maxwell: There are a couple of things which one might expect to happen.
First, a seasonal person may work in more than one season. For example, a
winter forestry worker may pick up a seasonal summer job, putting together two
packages for himself or herself.
One might also see that people are working more weeks in the year but that not
all the weeks are reportable. Perhaps a lot of unreported income will suddenly
surface because it helps that person to qualify for the program.
Another important thing that you might see happen is a change in the life plans
and expectations of young people. They will stay in school longer. They will
realize that this is no longer a guaranteed lifestyle for their generation and
that they must find a different way; they must prepare themselves better for a
different kind of labour market.
I admit to you that even with the arrival of hard times in Atlantic Canada in
the last few years, we have seen high school completion rates rise quite
significantly. Young people are getting these messages. They are working to
prepare themselves better for the labour market. I think that these kinds of
changes in the rules will reinforce that message.
Senator Gigantès: A recent study shows that our schools, in terms of
math, produce students with achievements in 13th place behind the leaders,
Korea, Taiwan and China. We are better than the Americans but only just.
How well are we preparing our youngsters for the 21st century, when they cannot
add and, by grade nine, they have not learned to read? Apparently the
definition of an illiterate is someone who has only done nine years of
Ms Maxwell: We could have a long discussion about the weaknesses of our
education system, but I would still insist that a young person is better off
with grade 12 than with grade 10 and better off with some college training than
with none. If training does not do it for them, then imagine not being trained
at all. That is the way I would put it.
Senator Cohen: On the subjects of young people staying in school longer,
enduring social values in the next generation and investment in people, I
should like to point out that young people may not be able to stay in school
longer, because the so-called first-dollar coverage introduced in this new
employment insurance bill will have a detrimental effect on a student who is
working 15 hours per week in a service industry, such as the fast-food
They will have smaller pay cheques once they have to pay into EI. They might
have to work longer hours to make up that difference, jeopardizing their study
hours. It has been proven that 15 hours is all they can handle to cover their
work in school and to cover their work time. They will be in a very difficult
position. In many cases, they will not qualify for a refund or their premiums.
Second, the service industries in which they are employed are very competitive,
low-profit industries. The increased premiums businesses will have to pay will
come out of the human resources, not the cash register. The student will suffer
there. With all due respect to my colleague Senator Rompkey, that 15 hours will
affect students the same way as it will affect women. I wanted to put that on
the record because it has not been mentioned here at all today.
The Chair: I have one last comment, and then we will go to our next witnesses. I
think we got ourselves into this position beginning in 1940, and it has taken
us 50 years to get here. We know that the problem is of people being used.
Unemployment insurance was a transition from work to work; now it is a job
creation program. We say that we have to break the dependency, but we create a
lot of the dependency by saying to our workers that they can only work 16 weeks
and then we lay them off. Or, we try to find them work. Even our own provincial
governments will try to find two extra work weeks to make sure that someone has
enough money to go on UI. We have created this problem over a period of 50
years. With this new program that the government is introducing, how long do you
think it will take us to work our way gradually out of it?
Ms Maxwell: To be frank, when I put this set of proposals in the context of the
dimensions of change that are occurring in our health care system and our
education system across the country, I think we are taking this one very
gradually. Therefore, I would expect that the adjustment in behaviour would
also be gradual and may very well take a generation or more before we see much
The Chair: Is it worth our making the effort?
Ms Maxwell: I think we must change the behaviour. We certainly have a collective
responsibility to support people. However, from the point of view of providing
that income support, we must ensure that people understand that their main
responsibility is to plan for ways which will provide them with work over their
lifetime. The real test will be our success with training and all those other
forms of active programming that I spoke about. Therefore, in the current
context, the real test will be making the federal-provincial relationship work
well and building accountability into the transfer of funds to the provinces.
The Chair: I want to thank you for your informative presentation tonight.
We will now hear from our final group, the Canadian Labour Congress.
Welcome to the Social Affairs committee. We are dealing with Bill C-12. We look
forward to your presentation.
Mr. Bob White, President, Canadian Labour Congress: Thank you, we are pleased to
be here. You were asking questions about behavioural change. It is a
behavioural change for us to be here to try to convince the Senate once again
to hold up a piece of legislation on UI, which they had done once before. Maybe
we can get it done again.
With me tonight from the Canadian Labour Congress is Nancy Riche, Executive
Vice-president; Robert Baldwin, Director of Economic and Social Policy; and
Kevin Hays, Senior Economist. Mr. Hays does a lot of work around the whole UI
program and has done so for many years.
Unfortunately, because we were notified just last Friday, we have submitted to
you the brief we presented to the parliamentary committee. Since that time,
approximately 80 amendments have been submitted, but we do not think it changes
fundamentally the thrust of the bill at all in terms of the damage it does.
Because the government has limited debate on the bill and brought in closure, it
is important that the Senate take the opportunity to try to provide Canadians
with a real opportunity to be heard on this bill. Therefore, we would urge you
to do as has been done in the past - that is, do some travelling across the
country. If you do and listen to people who work with this program and are
affected by it on a regular basis, we hope you will come to the conclusion that
the bill should be rejected and sent back.
I will not read the whole brief to you; it is short. As we have said from day
one, we are prepared to sit down and be involved in the discussion about the
question of changes in social insurance, including unemployment insurance,
because the world has changed. We have also said that you cannot start those
discussions on the premonition that you have to take so many billion dollars out
of the pockets of the unemployed. If you do that, you are not talking about a
real discussion about the future of real unemployment insurance.
In our view, there has been a lot of discussion in the country about what is
wrong with the bill and not enough discussion about the importance of
unemployment insurance. In my speeches across the country, I keep saying one
thing about the people in the communities who collect unemployment insurance:
They do not do what happened recently in terms of family trusts; they do not
take their money out of the country nor do they transfer their capital, as we
saw in terms of $80 billion of transfers by international capital. They spend
their money in communities all across the land.
I think I saw some comments by Senator Murray and others who understand the
importance of the unemployment insurance system not only to the people who
collect it but also to the communities and to the small business people. In
many areas of the country - and this is the reality today and has been for
quite a while - there are no jobs available and there are people who are on
seasonal or part-time work. There must be some kind of system that protects
them when the work is not there.
I have said also in my speeches - and this is on record - that if you arrived
from Mars and took a look at this bill to understand why the government is
restructuring it, you would say, "There must be too many jobs available
and unemployed people are not trying to take them." However, that is not
the case at all. Or you might say, "Well, the unemployment insurance fund
is going broke. You have to cut it back and take money out of it because it is
going broke and is costing the taxpayers a lot money." Again, that is not
correct at all. That is not what is happening with the unemployment insurance
Or, you might make the argument that there is a large number of workers who are
working full time who are complaining about UI premiums. Therefore, we do not
want to continue the premiums. There is no evidence of that at all. We
represent members all across the country. There is no demand to reduce UI
premiums by workers. Or, you might assume that there are large numbers of people
who are unemployed who are ripping off the system. Again, there is absolutely
no evidence of that. Any evidence at all puts the rate at around 1 per cent. No
matter what section of society it is, the rate of rip-off is about 1 per cent.
I can take you to sections which are much higher than that.
If you looked at that you would probably say, "I guess the problem is that
the jobs will be more long term and more secure in the future and, therefore,
that is why you are changing the system." Mr. Hays and others can talk
about some of the details, but we think that the whole thrust of this bill is
We have been involved in unemployment insurance since its inception, in every
task force and in every commission, but we have not had any input into the
restructuring of UI. That has shocked us. We have appeared before a
parliamentary committee, but that is not what I call input. When Mr. Axworthy
set up his original task force, we appeared. When you look at other real changes
in UI, we have not been consulted. When you look at the latest legislation that
has come down, we have not had any real input into it. It is not that we are
whining about it, it is that we have not been involved in it.
When Ms Maxwell comes here, she is asked: Have you talked to people who are
impacted by this legislation? She does not have those contacts; we do! We have
people who are impacted by UI, people who work with this system every day of
their lives and help people collect it; people who track the unemployment
numbers and the employment numbers. Our organizations and our affiliates work
with this program as part of our ongoing life and, quite frankly, we think it is
shocking that we have not been involved. Therefore, when we see a bill that is
put together in such a fashion, it is little wonder that we run in opposition
to it, and we will continue to do so.
Approximately 46 per cent of unemployed workers draw UI today, compared to 87
per cent in 1990. By the same token, unemployment insurance benefits have
dropped from $18 billion to $13.5 billion over that period of time. That shows
what is happening in terms of the people who are affected by unemployment.
I will not make a long political speech tonight because everyone knows the
record of the past government, where we were on that issue, and the record of
the people who ran for office. This is not for me a political forum tonight.
The reality is that we were absolutely shocked when Mr. Martin came in with his
first budget in 1994 and cut $4 billion out of unemployment insurance without
any discussion with the players - least of all with us as major players in the
UI system. That has never happened in the 54-year history of the program. There
was no warning, no public consultation, and no public debate or extensive
hearings. Again, that came after we said that we were prepared to participate
fully in the process.
We did participate in the process through the committee on social security
review. If you remember, there were some proposals about a two-tiered UI
system. The committee clearly rejected that. There was some discussion about
the whole question of seasonal work and UI. A task force was established, and
recommendations against the way in which they were moving were made to the
minister. Those were two of the most open and responsive areas, and again they
were not allowed to carry the day.
There has been a great deal of talk about UI cheaters. Quite frankly, I have
great difficulty with that. I will say it in this room because he was here
giving evidence ahead of me. The current Human Resources Minister talks about
zero tolerance for cheaters and abusers as if he were talking about people who
work in crack houses in the inner cities; not about people who are unemployed. I
do not think that is the way to deal with this situation. Again, there is very
little evidence in terms of the numbers of people who abuse the system, and in
any event there are procedures to deal with that problem.
The other thing that has not been discussed sufficiently is the issue of
seasonal work, part-time work, and hours. I do not think people understand yet
that the benefit rates will be reduced for about three-quarters of the
claimants. Many people who are working today and who drew unemployment
insurance two or three years ago will find an incredible difference when they
draw unemployment insurance the next time. That situation will apply across the
country. I say that because sometimes we are inclined to refer just to a
certain area of the country when talking about the impact of these measures.
The proponents of this bill talk about it being an asset to seasonal workers,
short-time workers, and part-time employees. Again, I think the evidence before
this committee is coming out clearly, and witnesses preceding me have said it,
that because of the way the hours system is structured, while many people will
probably end up paying premiums they had not paid before, hundreds of thousands
of them will not draw any benefits whatsoever, and a number will be worse off
because of what has developed here.
We keep asking ourselves the question: What is the reason for this substantive
change to the UI system? When you ask yourself that kind of question, you come
back to two basic arguments: One is that it is an attempt to use a significant
amount of money for deficit reduction, and by "significant" I mean
billions of dollars. Second, it is an attempt to establish a low wage policy
whereby people are told that they must take any job at any price, and it does
not matter where they are located.
We do not think that is the proper way for this country to go. We mentioned the
1940 constitutional amendment which made unemployment insurance a federal
responsibility. That was a major turning point in our history, and we still
believe in having federal responsibility in a number of these areas. We believe
in federal responsibility in dealing with trade, financial policy, and other
matters that go to the creation of unemployment. We therefore think the whole
question of federal responsibility for UI is still very important.
We have seen the announcements by the minister in the past few days on training
and wage supplements. Again, we are not sure what all of that means in depth,
except in relation to training. At a time when our society is saying that one
of the main problems is that we do not have enough good training programs, the
federal level is divesting itself of the training responsibility. The jury is
still out on that point. Again, many people do not understand the implication
of that move for the future.
I do not wish to read our presentation to you, because I think it would be a bit
of an insult to do that. We are not here because we want to fight with anyone;
we are here because we have been involved in this issue from day one. We think
this is a bad piece of legislation. We think it takes significant money out of
the economy at a time when the economy - and the individual - desperately needs
it. We think it impacts on many people at the lower end of the income scale who
need this support system.
I have heard many people, including the chairperson tonight, ask how we got into
this sort of matter over the last 50 years. I am here to tell you that we got
into it because it made a lot of sense. The fact is that the unemployment
insurance system in our country has made a lot of sense. It has helped many
families through many difficult periods of time. Before we talk about ripping it
up and putting something substantively different in its place, we should
understand the implications that the present system has for many people. Many
of them are voiceless, and many of them may get along after all this is done,
but it is not the way to improve the social standard in our country.
The reality in our society today is that we have many people who want jobs.
Every time jobs come available in this country, there are many more
applications than there are jobs. There is no evidence at all that people are
sitting around with their feet up on unemployment insurance and not wanting to
When I was working in the factory, hundreds of people from Atlantic Canada came
to my home town of Woodstock, Ontario because they could not find work in their
home area, and they came to Woodstock because there were jobs. I can take you
to Kitchener and Cambridge, and you will see hundreds of Newfoundlanders who
have relocated there because there was no work in Newfoundland and Labrador.
This inference that somehow people are sitting around on unemployment
insurance, and that if we just take away these benefits they will find jobs
somewhere else ignores the reality of what people have been doing.
In terms of training and education, we have thousands of well-trained young
people all across this land with good education, good skills, good academic
qualifications, and they cannot find work. Somehow we say the way to solve this
problem is to restructure this bill and call it an employment insurance bill.
There is no guarantee of employment here. This bill does not guarantee you any
You can see we feel very strongly about it. We do not think you can patch it. If
you go out and hear from people who will be affected by this legislation, you
will realize that it is the most significant and biggest change to our
unemployment insurance system in its 54-year history, and it should not be
allowed to pass until people understand the ramifications much better than they
do today. I know we are in a mode of cuts and deficit reduction and all those
things, but I tell you that this is not the way to do it.
We talk about shorter term jobs, about part-time jobs, and about contract work.
There are many corporations making millions of dollars of profit who today are
determining those kinds of jobs. It is not happening by accident. They are
laying off, in many cases cutting, people with full-time jobs, and then
contracting out stuff on short-term, as someone said, with no benefits, low
wages, et cetera. The economy has changed to that extent, and you will not help
those people with this kind of legislation.
We feel very strongly about it. We are prepared to answer questions. We hope
that the Senate will react to it in the way they have reacted to unemployment
insurance bills in the past. It really is worthy of much more than what we have
Senator Phillips: I should like to welcome Mr. White and point out to him that I
feel the Senate is getting rather special attention from the NDP party in
dealing with this bill. We have already had one NDP group, and now we have
another, and tomorrow morning the leader is coming to speak to us.
Mr. White: I am not here representing the NDP. I am here representing the
Canadian Labour Congress. If I am a member of a political party, that is
irrelevant. I am not here giving an NDP line but representing the Canadian
Labour Congress, which is an independent labour movement in this country that
has been involved in the development of the UI system for the last 54 years.
Whether the NDP agrees or not, I do not really care.
Senator Phillips: I am glad to hear you assert some independence from the NDP.
However, that does not take away from the fact that I agree with many of your
viewpoints. I agree with you when you say that people do not understand the
impact of removing and reducing the benefit.
I am concerned with a very small province, Prince Edward Island. Next year it
loses $11 million in benefits; in the year 2000, it loses $16 million. I wonder
if you can give me any indication of the multiplier effect. This has an effect
on the service station operator and on the corner store. Do you have any
indication of what the multiplier effect would be in this case?
Mr. White: I do not think we have done the multiplier effect. However, I will
say that we cannot take money out of smaller communities - for example, out of
Prince Edward Island - without its having some impact on businesses.
The president of the Bank of Canada is saying that the economy seems to be doing
well. However, on the job side, it is not coming. As well, there is no consumer
confidence. You cannot take that kind of money out of the economy in terms of
public cuts, including UI - whether it is public-sector workers getting laid
off, private-sector cutbacks or major cuts in health care and social programs -
and not have some impact. We have not done a study in terms of the jobs impacted
by that course of action, but what do you replace it with? You either replace
it with jobs, which in many areas of the country are not there - certainly not
in the numbers we need them - or, as you say, there will be an impact on all
the service station operators, corner grocery stores and drugstores, because
that is where these people spend their money. They may leave these communities
Senator Phillips: My next question involves training. Most unions, including
your own, take an active part and interest in training. I am concerned for two
reasons with the proposal to hand over training to the provinces. First, I
think it is becoming evident that the provinces will have to participate
financially in the training. Second, you mentioned the influx of Atlantic
Canadian residents to your area because of jobs in the automobile industry. How
are those provinces going to know what job requirements there are in Ontario or
western Canada and provide training for them? For instance, it would be awfully
hard for someone in P.E.I. to train for underground mining.
Mr. White: I think there is a joint responsibility here. The question of
national standards in several areas is very important.
With respect to the latest announcement on training, handing it to the provinces
sets up a whole patchwork of training across the country. Moreover, a
significant amount of money comes out again. A number of the provinces will not
have the money to put in.
We have been involved very much in the CFLDB to try to get national standards.
We were involved in trying to set up provincial training boards. We were
involved in getting people from municipalities to participate in those boards.
Many of those are coming down.
Again, I think we need more detail on the latest proposals, but we think this
sets up a patchwork. How can our national government say that the problem with
the economy is jobs, the problem with the economy is skills, or the problem
with the economy is training, when we are getting out of training almost
completely? We do not think that is the best way to go. That is not to say the
provinces should not be involved, because in different parts of the country
different emphases are placed on training.
We have been arguing for a long time that employers should be responsible for
training. We advocated an employer-training tax. Some of the successful
countries of the world have had that for years. They have had a very high
commitment to training. We think we are taking a dangerous route.
Perhaps Mr. Baldwin should speak to this issue, because has had to deal with it
every day for quite a while.
Mr. Robert Baldwin, Director, Social and Economic Policy, Canadian Labour
Congress: I have many concerns about the federal government totally abandoning
the training field. We have argued over the years that training by its nature
will always be an area of joint jurisdiction. It is so tightly connected to so
many other activities in both levels of government that it will prove impossible
over the long haul to cut either level of government totally out of the field.
I think it is worth adding that our concerns about the unanswered questions with
respect to the devolution of training responsibility to the provinces are but a
subset of an even wider area of unanswered questions about where the federal
government is going with respect to training and labour market programming. You
will note that in our submission to the House of Commons committee we asked the
committee on a couple of occasions to please hold public hearings to focus
attention on this question.
Some of the unanswered questions include such things as the role of these
accountability frameworks; what money actually is available; and what will be
the impact of moving from the current system of providing income support to
trainees to this proposed system of loans and grants. We do not know what the
connection to the UI program will be in the future.
For many years now, UI claimants have had fairly ready access to training while
unemployed. We do not know how this will work in the future. Administrative
roles are not clarified. We do not know who will get to tell UI claimants
whether they can get training or cannot get training, or what kind of training
is available. Too many questions in this area have not been sufficiently
answered, and that is why we have asked for special hearings focusing
specifically on the training and labour adjustment issue.
Senator Phillips: Mr. White, you complained that they have been left out of the
discussions leading up to this legislation. Would you be willing to participate
in a group studying the retraining program?
Mr. White: Sure. We are now at the CFLDB level. We want to be part of this
process. We will not agree with everything, but that is not the point.
When you take a thing like unemployment insurance and do such a massive
restructuring, if you do not have at that table people who have dealt with this
for many years - and whether or not you accept their arguments at the end of
the day is beside the point - and include people who represent seasonal workers
and others impacted by this legislation, that is when you stumble into some
committee having to make 80 amendments, and find that a new minister comes in
and says he will make different changes.
Obviously, the bill was not thought out very well in the first place, and you
are trying to patch it up politically. I do not think that works. We are
prepared to participate.
Senator Gigantès: The Swiss leave the training not to the cantons but to
the communes, which are even smaller units. They have high standards of
education, even though they cannot agree on when the school year starts. The
necessity of having a national standard is not necessarily provable.
We face many problems. Mr. Rocard, the former Prime Minister of France,
suggested that payroll taxes should be graduated and that the more hours
someone works, the more the employer and the employee pay per hour for
overtime. I suggested this to some economists and asked if it made sense. They
said no, because the employers will form companies to perform the overtime with
the workers who are not performing the overtime. They will take it out of the
system. They will do it on a contract basis.
What I asked before is that we do not seem to be able to get out of this trend
which has set in in all the industrialized countries. If the Swedes cannot buck
the trend, and they have a socialist government, how can we buck the trend,
when we are attached to the United States?
Mr. White: You mentioned the Prime Minister of France.
Senator Gigantès: Former Prime Minister of France.
Mr. White: As you probably know, I have taken over the presidency of the Trade
Union Advisory Committee of the OECD and I will be meeting with the President
of France in about 10 days on the pre-G-7 labour summit.
Senator, this debate is going on around the world, but it is a real debate about
whether or not competitiveness, free trade, deregulation, et cetera, will be to
the benefit of the majority of the population or will be to the benefit of
international capital and a smaller number of people at the top.
Senator Gigantès: We know the answer in advance. I do not see why we are
Mr. White: The question is, if you are moving to globalization, how do you
protect people in that kind of environment? You talk about the Swiss, in terms
of training. The Swiss economy is very different from the Canadian economy, in
terms of our integration with the United States and foreign investment, and
there are many other areas where the Swiss have arrangements very different from
The question for me is where do we start from here? We are not talking about a
situation where we have not had a good unemployment insurance system that has
not worked well and therefore have to build one. We are talking about the
Canadian unemployment insurance system, which in most cases has worked
reasonably well. As you look to how the workforce changes, you have to talk
about how you include people. We talked about the hours system, about bringing
people in who are independent employers and all those things, but that is
different from talking about starting one from scratch.
In this country, we seem to be saying that we will follow the road that says the
way to prosperity is to dismantle much of our social safety net and to create a
poverty level of working poor and somehow that will be the answer to our
problems. For a few years, we may get by on that basis, but my guess is that
the social stress, the impact on health care and families and children in
general will cost much more over the long term. There have been a lot of
articles written recently, including some by corporate leaders in the United
States who say that they are not sure the corporate adjustment, with
structuring and laying-off, has been the right way to go because, at the end of
the day, you have a much different society that will cost a whole lot.
We have a chance here in Canada not to buy into that approach. The Swedes have
changed some things from the way they were but, in many cases, they are still
significantly ahead of us in terms of the number of avenues they take. Surely,
if globalization is supposed to be to the benefit of people, there must be the
social safety net to help people through change. This bill is an example of what
we are saying. Change is coming rapidly, and the bill will make it more
difficult for people to adjust through change. We have lived in a society that
says, "You are worthy if you have a job, and if you do not have a job, we
should have some kind of social safety net for you. If you fall through that
net, you will get social assistance of some kind. Now we are attacking people
merely because they are unemployed. We say they are ripping off the system, and
even those good people who have not been included in those remarks will now get
less. Why? What is the point of all this? What does this do for our economy?
What does this do in terms of generating future jobs? I do not know what it
Senator Gigantès: I do not know either.
Ms Nancy Riche, Executive Vice-President, Canadian Labour Congress: I heard the
senator ask a couple of times tonight how we can get out of this trend. The
question is how did we get into it. This did not happen by accident. It did not
happen by accident that we are now talking about living in a globalized economy
and that we can only survive by becoming competitive.
We hear these same people say that to become competitive we must provide the
highest-skilled, best-trained workers so we can compete with others around the
world. What in fact has happened is the developing countries have become
dumping grounds for free trade zones and Maquiladora regions where women
particularly are exploited to the most horrendous degree, where they are dying
by the hundreds and locked in buildings on fire so that Toys`R'Us and other toy
companies can provide toys. It is a world where the guy who advertises Nike
shoes, Michael Jordan, the basketball player, makes the same amount of money
himself as 3,895 workers. He gets $20 million; the same amount that is divided
among 3,895 workers.
This is not like a trend or something that we cannot buck. Someone bucked the
previous trend to get us into this trend. A decision had to be made globally,
and it was made through Thatcherism and Reaganomics and conservative and
neoconservative policies. That became the trend. The sad part is that, if we in
Canada continue along this line, we may be competing only because we have
provided another low-wage economy like Mexico or Thailand.
Senator Gigantès: Let me be clear. I fought free trade and Reaganomics.
The fact is these guys beat us.
Ms Riche: You could change that. This committee, the Liberal senators here,
could buck the trend. You could buck the trend of the Liberal government,
instead of apologizing for it.
Senator Gigantès: If the Swedes cannot do it, we cannot do it.
Mr. White: Senator, I live in the world where sometimes victories come with a
lot of distance between them, but seriously, on the international scene, we
have the international labour movement. I spend a lot of time talking about how
you need to have a social dimension to international trade, so that if
countries want free trade, you set up a social clause that includes the right of
freedom of association, free collective bargaining, no child labour, no forced
labour, equality between men and women. As yet, we cannot get the Canadian
government to accept that that social clause should be included in the World
Trade Organization agreement. That is a basis for discussion. So there are
avenues that we can follow, but we will not solve the world's problems by having
countries like Canada dismantling important social programs like the
unemployment insurance system, as is being proposed here.
Senator Gigantès: Mr. d'Aquino would say to you that it is all for the
benefit of the those poor people in Indonesia who now have jobs which they did
not have before. He says that is why he is doing it.
Senator Murray: My first question is a somewhat technical one, but it is one on
which I think you will want to pronounce, if not now, then later. How big a
surplus in the UI fund do you think it is prudent for the government to
maintain as a cushion against the next recession? I realize it has to be big
enough to ensure we will not have to raise premiums in the middle of a
recession. Have you formulated a view on that?
Mr. Baldwin: Not on the specific size of the surplus. We have said since October
1994, when the government first indicated its desire to maintain a stable
premium rate, that we agree with them in principle. We have said, however, from
the beginning that we want a concrete proposal to look at. We still do not have
one. While we do not know the size of the fund that ought to exist, we
understand the rate that would be stable through a business cycle is $2.50,
which is about 45 cents less than what has been proposed.
Mr. White: We have not put a figure on the size of the fund. I guess where we
are at one with some of the people in the government is that we think it makes
sense to build up a significant surplus so you are not increasing the premiums
to employers at a time when you are in recession, when they are getting hit
with all kinds of adjustments costs as well, but we have not put a figure on
Senator Murray: We all know that the so-called development uses of UI go back to
about 1977, although I seem to think that in the early days, most of those
costs, if not all of them, were paid for out of the federal government's
contributions to the fund in one way or another. Ever since then, those
developmental uses have been expanding. There was a major expansion under the
previous government, under the labour force development strategy.
Senator Gigantès: You mean your government?
Senator Murray: Yes. I was a member of that government, and supported it.
In this bill, we have the biggest expansion of all, in terms of the uses and the
coverage of people who are not even current claimants.
There are all kinds of questions one could ask here. However, let me get down to
the basic one. If you were redesigning the UI program, would you design an
income replacement program, period, and let those other issues be addressed
through other departments, other programs, out of general revenues?
Ms Riche: Yes.
Senator Murray: Is that your view?
Ms Riche: That has been our position all along. We have said that income support
can be provided to a UI claimant while on training. What has evolved is that we
bought the training. What we have seen, in particular under the previous
government, is a clear decrease in training money out of general revenue, that
is, the Canadian Jobs Strategy, and a clear increase in money for training from
the UI fund. Honestly, that is very dishonest. It will now get worse if it is
used for other than UI claimants.
I know Senator Rompkey will talk about a "pure" insurance program at
some point. A pure social insurance program would allow for income replacement
for the person from job to job, for maternity and sick benefits. It would
provide UI, if you like, while the person is on training. It could have been
accomplished with the surplus that we have. Someone on UI whose claim had run
out in 32 weeks but who had a training program that lasted for 70 or 80 weeks,
which, hopefully, would provide a job, would continue receiving UI while on
training even though the claim ran out after 26 weeks. That is still income
replacement, but not a developmental use.
Senator Murray: The distinction I am making is not between "pure"
insurance and "social" insurance. The distinction I am making is
between an insurance program on the one hand and using the funds in that
program for wage subsidies and earning supplements on the other hand.
Ms Riche: The simple answer to your question, senator, is "yes".
Senator Murray: I do not think it is putting it too strongly to question the
morality of taking that money from employers and employees and then using it
for an insurance fund for these other purposes, even allowing for the fact that
there is some precedent over the years. Perhaps the moral question is now
compounded by the fact that that part of the money will be turned over to the
If we are to stay with Part II of this bill, is there not some way that the
people who pay the premiums could not have some effective say? I do not mean
just consultation. They are paying the piper as it is. Have you turned your
minds to some structure that would let the premium payers have some real say?
Ms Riche: We do have the UI commissioners, one of whom represents the workers
and one of whom represents the employers. Over the past decade, their influence
and role has diminished considerably.
In the past, we have suggested an arm's-length unemployment insurance board made
up of employers and employees. However, we always believed, and still believe,
that the government must play a major role. We are not talking about
privatization. We would look at a governing structure similar to the
transportation commission, if you like, that would report to Parliament.
We have made that presentation. We almost had the employers under the Canadian
Labour Market Productivity Centre. We were getting to the point of looking at
that whole governance idea when Mr. Axworthy, the previous minister, shut down
the process of consultation on UI.
Senator Murray: My final question has to do with training and its devolution to
the provinces. You will be aware, Mr. White and Ms Riche, from your activity
with the CLFDB, and also from your acquaintance with the labour movement in
Quebec, that there is something called the "Quebec consensus" on this
in favour of devolving responsibility for labour market programs, for training
in particular, to the province. They call it the "Quebec consensus"
because it is joined in by the government, the business community, labour,
Liberals and Péquistes - just about everyone.
I have the impression that this is not just a matter of traditional
jurisdictional demand of a Quebec government but, rather, that they think they
have a system that works. One of the reasons it works, perhaps, is that they
have some kind of tripartite arrangement in place. What do you say about that?
Mr. White: Internally, we have worked out a much different relationship with our
labour movement colleagues in Quebec which does not apply to the rest of the
country. That arrangement has stood the test of time.
There is no question that in Quebec, for the past 20 years, there has been a
much greater consensus around what is good for the economy of Quebec. That
consensus involves dialogue among the business community, labour movement and
the government. All governments in Quebec have recognized the importance of the
labour movement at the table. If you look at the last economic discussion in
Quebec, the labour movement with all its labour centrals was at the table.
I think it started initially as a result of the development of strong
enterprises based in Quebec, such as Bombardier and Lavalin. You know of them
as well as I do, since you were around in those times. I think that established
something fundamentally different.
Take a look at Ontario today, senator. The employers are going before the
Ontario legislature demanding changes in labour legislation, the dismantling of
health and safety provisions and the training sector in auto parts. That
training sector was set up with the auto industry, the auto workers union and
the Ontario government. The employers want no part of it any longer. That
consensus does not exist in the rest of the country.
There are historical reasons for its existence in Quebec. I think it will be put
to a real test. It was put to a significant test in the referendum debate when
the employers from Quebec started coming out on the other side. That created a
lot of tension. It is different. It is one which we recognize. You will see in
terms of the training going to Quebec a much more positive attitude by the
labour movement in Quebec.
They are sceptical about the amounts of money, what it really means and whether
this is just a political charade, but there is something different there. I
If there is something close to that situation, it is the situation which exists
in British Columbia with the organization of labour and business and the role
of government. There is something more consensual there in terms of training
and the labour market provincially.
Ms Riche: The one significant difference in Quebec is that there is one
employers' council. The fragmentation of employers' organizations in English
Canada provides their strength. When we in labour reach consensus, as we
recently did with Fedco on Part I of the Labour Code, the Chamber of Commerce
criticized it. We will not get very far. We cannot get to that government's
position if we have the chamber, the BCNI and Fedco all going in different
directions to serve the strength of all, I would suggest, at any given moment.
Senator Rompkey: I understood you to say, Mr. White, that the employers had
withdrawn from what could be described as sectoral arrangements in Ontario.
Mr. White: Yes, in the auto parts sector in Ontario.
Senator Rompkey: In my opinion, the auto industry was the farthest ahead of any
sector in the country in terms of training. I think that was one of the best
initiatives that we have had.
Mr. White: It was not a parts sector trading council that was established about
four years ago.
If you are talking about the major auto sector, I have not been involved there
for four years. I do remember there was a lot of training on new technology in
the major auto sector through General Motors, Ford and Chrysler.
The auto parts sector is very volatile in terms of contracts. We managed to
establish a training module which allowed employees of a failed auto parts
company to take their training certificate to another auto parts company and
from there apply for work. That company could hire them with the clear
knowledge that the worker had passed a general training course on
computerization and other details for the auto parts industry. Notification has
just been given that the government wants to cancel that program.
Senator Rompkey: One thing which we have not put on the record is the transfer
of decision-making to the lower level. One of the important side benefits of
this legislation is that it creates regions which will have some
decision-making powers they did not have before.
For example, in Labrador, there is now a region. The bureaucrats there have more
authority than they had before to approve and disapprove. Partnerships are
being created with other entities in the community. That is an important point
to put on the record because of the training aspect.
You asked if the unions could be consulted. I agree that they should be,
although they may not be the only people who know about unemployment insurance.
I can tell you that a large part of the activity in the office of a member of
Parliament involves unemployment insurance and helping people to beat their way
through the system, one way or another. Members of Parliament know a fair amount
about the system, too.
In terms of training, though, I come back to your comment about Newfoundlanders
moving across the country to Thunder Bay, Fort McMurray, Thompson, Ottawa or
wherever. Three of us are here in Ottawa because we could find no jobs at home.
A project like Voisey's Bay may provide thousands of jobs. However, the trick
will be in providing the training because the companies will not provide it.
Newfoundland has the highest illiteracy rate in the country; it is something
like 43 per cent. You have low achievement on standardized testing. There is a
real need for training if the people who are unemployed are to get those jobs.
That is why the redirection of money in this scheme is important. For the first
time, it will put money in the hands of people who can then choose the training
they want; they will be empowered.
Do you not see the benefit in bringing more people into the system through an
hourly-based benefit qualification and in redistributing income to people for
Ms Riche: First, you have a bunch of things in your preamble. You are assuming
that the hourly system will bring more people into the system.
Senator Rompkey: We understand it will bring in 350,000 more people.
Ms Riche: Yes, it brings them into the system, but that does not mean that they
ever benefit from the system, even though they will pay premiums. That is all
it does, for certain, for every one of them.
Senator Rompkey: People are not qualifying now if they work less than 15 hours
per week and if they do not get 12 weeks in the year. Many people are not
Mr. White: We proposed an hour system.
Ms Riche: You keep trying to sell this. Our position has always been very clear
on first-hour coverage. However, the way it has been put together does not
follow our proposal. People will not benefit in the way that you are strongly
Let us get back to the training. You suggest that money will be taken out of the
UI fund and put into the hands of the locals and the regionals to provide the
training. When you put the question that way, of course, the answer is yes.
However, we have always had federal-provincial training agreements. Nothing was
ever set out that federal-provincial training agreements could not provide basic
training for skill development, upgrading, literacy training and then training
or further upgrading in a trade to provide the competency needed to work in,
for example, the smelter at Voisey's Bay. There was nothing in the previous
federal-provincial training agreements to stop that.
I worked in the vocational system. I know how it works and it could have
happened in the way I have described it. We had money coming from the General
Revenue Fund to do that. We had the Canadian Job Strategy. We did not and do
not need to steal money out of the unemployment insurance fund to give local
people and regional people an opportunity to empower themselves. It is unfair
and misleading to sell this bill as if it is doing something like that because
it is not and we did not need this bill to do it. I was involved in the
vocational system in Newfoundland for 15 years. I know how it works. I know how
the training agreements work.
Mr. Baldwin: You commented on local decision-making and empowerment which took
me back to the need for some hearings focusing specifically on the future of
training and the labour market program. First, it is important to note, going
back to an earlier question, that the legislated restraints which currently
exist on developmental uses are being dropped. Some of the important ones are
being dropped under the new bill.
Second, when it comes to local decision-making, local labour markets are
integrated, of course, with regional and national labour markets. We do not
know yet what policy and accountability framework the local decision-makers
will face. That is really important because part of what underlies the UI part
of this legislation is an attempt to drive people out of local labour markets -
not to put too fine a point on it.
Third, when it comes to empowering individuals, I would be surprised if it was
the intent of the government to establish conditions under which a claimant
could, for example, demand to get any training that the claimant wanted. That
is not clear. One hears a lot about the rhetoric of empowerment, but the rights
and obligations of UI claimants who want training are far from clear. It is
also unclear what income support will be available to them.
Senator Cools: I do not have a question. I just wanted to thank this group of
individuals. I have met with them extensively in the past on the predecessor of
this bill, Bill C-21. Senator Murray remembers very well. As always, I find
their testimony insightful and knowledgeable. I recall very vividly having many
conversations with Ms Riche and Mr. Hays. This group of people have been
extremely instrumental in uncovering those famous simulation models and the
Senator Cohen: I have heard the request for us to travel across the country to
hold hearings. I want to inform the witnesses that this side was willing to go,
but the other side must be convinced that it would be to our best advantage.
Ms Riche: It used to be the other way around. When Senator Murray was having a
discussion with Ms Maxwell on behavioral change, I said to myself that the only
great behavioral changes caused by UI occur when one side goes in opposition.
Then we see great behavioural change.
Regarding travel, I understand from some of the people on the east coast, that
you will bring some people to Ottawa. Will you be travelling?
Senator Rompkey: No, the witnesses will travel.
Ms Riche: I would suggest, Senator Cohen, that the Liberals would be terribly
embarrassed to travel. If Bill Rompkey had to show his face in Goose Bay after
I have told them some of the stuff he has said at this table, I would not
wonder that they will not travel.
The Chair: How many people do you represent?
Mr. White: All of them. The figure we keep using is 2.2 million. That is pretty
close. I will not say that they all speak with one voice all the time.
Senator Bosa: Mr. White, you expressed a global opinion of the bill which was
very negative. Have you nothing good to say about any provision of the bill?
Mr. White: I am an old bargainer, senator. I will not take a package that stinks
and try to put a little perfume on, for example, page 8. That does not work.
The problem with the bill is that it starts from a premise of taking a
significant amount of money out of the unemployment insurance system which is
We have said from day one - and I repeat it again here - that we are prepared to
participate fully in the restructuring of the UI bill. We have been there
before. You cannot patch this one up.
Senator Bosa: I have heard that before. Presently, there are 500,000 more
individuals who have their work insured.
Mr. White: You have also heard that approximately 370,000 of them probably will
never draw a penny but will pay premiums. By making a public announcement that
500,000 people will be covered, they assume that they are being covered not to
pay more but to get more. Certainly, that will be the tone of the political
speeches around the country. No one will say, "Guess what? We have good
news and bad news. The bad news is, you are in the UI system; the good news is
that you will pay but you cannot draw."
Senator Bosa: But hundreds of thousands of people will benefit under this bill
who are not presently getting any attention at all.
Mr. White: I am not sure of that. There may be some, but there are also
thousands of people who will not benefit - people who currently today will find
that their level of benefits is significantly lower. We are not here because we
want to do this. Why would we be doing this? If this bill is to benefit the
unemployed, help part-time and seasonal workers, bring more people into the
system and be better for the economy, why would we be doing this?
Senator Bosa: Given the fact that some restructuring had to be done and it was
done this way, there are some positive factors in this bill.
Mr. White: I am sorry, I do not accept that. But thank you.
Senator Losier-Cool: There must be some positive factors because 54 per cent of
Atlantic Canadians support the bill. Across Canada, over 70 per cent support
Ms Ritchie: I suggest that you check the date of the poll and check the
speeches. We did hear, as Senator Rompkey and the other senator have been
saying, about the figure of 500,000. I would strongly suggest - and I know this
will not sound very nice or pleasant - that, clearly, they were misled by the
Senator Losier-Cool: They could be clearly misled by others, too.
Ms Ritchie: There has not been a poll since that one.
Mr. White: In the environment in which we live, when you have high unemployment
and people who are employed who are worried about losing their jobs, it is very
easy to attack the people at the lower end of the income scale, including
people on social assistance and UI. Never mind about what the polls are saying.
What does this measure do for people? The facts are that there are still more
people working than there are unemployed. We are here to say that this is not
the system for unemployment insurance of the future, for those who are
currently unemployed, or for those who are about to be unemployed.
Ms Ritchie: I suggest the poll would be a lot different since the demonstrations
in Atlantic Canada and Quebec. This one was taken long before that occurred.
Mr. White: Thank you. I hope that our visit and the lateness of the hour is not
in vain. We appreciate the reception but, as an old friend told me once: Talk
is cheap; it takes money to buy whisky. We hope the decision of this committee
will be an important one.