Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 8 - Evidence - Meeting of March 6, 2008
OTTAWA, Thursday, March 6, 2008
The Standing Senate Committee on Agriculture and Forestry met this day at 8:05 a.m. to examine and report upon rural poverty in Canada.
Senator Joyce Fairbairn (Chair) in the chair.
[English]
The Chair: Good morning, honourable senators, and good morning to all who have tuned in to watch the Standing Senate Committee on Agriculture and Forestry hearings into rural poverty and rural decline. Our committee was authorized in May 2006 to examine and report on rural poverty and rural decline. We are now in the final stages of our hearings.
It has been quite a ride. In December 2006, the committee released an interim report which generated an immense and, frankly, surprising amount of attention. Since then, we have travelled to every province and territory in Canada, visited 20 rural communities and talked to 300 or so individuals and organizations. Along the way, we have heard many stories of hardship and hope. Many of our witnesses urged changes to the way Canada helps its most disadvantaged citizens.
Today's witness is very well positioned to help us think through what those changes might look like. Ken Battle is President of the Caledon Institute of Social Policy, a group that has been at the forefront of thinking about ways to restructure our social safety net. I must say that Mr. Battle has been working on this many years and is right at the top of the list of people who are trying to find solutions.
Last year, for example, the institute put out a working paper that argued that the time was right for a new architecture of adult benefits. More recently, the Caledon Institute has been pushing for an increase in the Canada Child Tax Benefit, a program that the institute had a hand in shaping.
We have an hour with Mr. Battle to cover a wide array of issues. As always, I invite colleagues to keep their questions as brief as possible to allow him to respond fully and to allow everybody to contribute to the discussions this morning.
Welcome, Mr. Battle. We look forward to your testimony. Please proceed.
Ken Battle, President, The Caledon Institute of Social Policy: Thank you very much, Madam Chair. I will just pass along some graphs to which I will be referring.
As you mentioned, for decades I have been coming to talk to the Senate. I have been fortunate to be able to work with Senate committees in different ways. As I mentioned last week, I appeared before the Standing Senate Committee on Social Affairs, Science and Technology. Some of the work I had done back in 1990 with the Senate committee looked at child poverty and was actually a forerunner to the national child benefit reform. The Senate played an important role in the evolution of an important part of income security in Canada.
I will cover a lot of ground this morning. I am going to cover a broad range of territory in terms of income security programs mainly, although I will be talking a bit about social services as well. When we began the institute back in 1992, we did some work with Lloyd Axworthy when he was the first Minister of Human Resources Development. We have been working since on various other areas.
I am going to talk to you today about how we can look at large-scale reform of income security programs for working-age adults. There are income security programs for kids, for seniors and we are talking about adults.
I know that I will not be able to get through all of my material. However, for those of you who are interested in following up on this, a couple of years ago we put out a paper entitled Towards a New Architecture for Canada's Adult Benefits. It provides a lot of the background. That is available on our website and I would urge you to have a look at it. It condenses, in a readable way, a large amount of research and information from over the years.
I also wanted to mention the framework I will be introducing you to this morning. We have been talking to people about this for the last couple of years and have shopped it around to both federal and provincial senior civil servants. We have met with a number of cabinet ministers and, of course, with social groups. We are in the process of trying to put forward our ideas for reform and to see what interest it sparks in people who are interested in the same areas of reform.
I am going to talk today about architecture, which is a fancy term for what we used to just call ``structure.'' Rather than focusing as we normally do at Caledon on specific programs — designs, options, costing, delivery and the sort of nuts and bolts of social policy, which is really what is important for Canadians — I want to step back and look more broadly at the structures and functions of programs for working-age adults.
This is this notion of architecture; it is a broader look at things. We deliberately do not get into the programmatic detail that we normally do. We want to look at how the big building blocks of social security programs for working adults work or not and how they relate together or not. It is a broader kind of perspective.
This is both frustrating and necessary. The frustrating thing is often being asked, ``How much is this going to cost?'' or ``How would a person in this circumstance be helped by what you are talking about?''
We are not dealing with that at this point. We are looking more broadly at programs that would fit in that structure. We are deliberately not looking at costing. We are in the process of implementing options using the architecture design. I will mention that as we go along. We are now thinking about costing issues, but this morning I want to look at this broader point of view.
Caledon was founded in 1992. The basic argument driving our work is an extremely simple proposition. It is what we call the modernization imperative. The social security system in Canada for working-age adults, children and seniors was largely dreamed up in the 1930s and 1940s and was implemented in the 1950s, 1960s and into the early 1970s. Much of what the social reformers had dreamed about was put in place, although not everything. We did not develop the large-scale welfare state that some reformers in Canada wanted. Canada never went that far. In international terms, we have a kind of middling social security system. It is bigger than some, but smaller than the European ones, for example.
It works quite well in some ways, although I am in the business of trying to improve it. For example, the social programs we have for seniors require improvements, but they work reasonably well and are, in fact, a model for the Western industrial world. Canada leads the way in terms of its retirement income system.
Other parts of our system are not doing as well, such as income programs and employment services for working-age Canadians. This is what I am going to talk about today.
We make the argument that the social security system we put in place has increasingly become outmoded. This is a result of the profound changes we have seen to our society: demographic changes, changes to our economy and even changes in our political system.
We need to update our social programs. We need to make them more relevant to the times. This is this notion of architecture. How can we look at what we have in order to determine what works, what does not work and to develop a better plan for the future? We are working on this now.
The area of child benefits is one that Senator Fairbairn knows well. We were talking about it last week at the Social Affairs Committee. It is an area in which I have done a large amount of work in my career.
We started putting forth this architecture two years ago. At that time, I said that the programs in place for families with children, in other words, family policy, had made substantial progress. This is in regard to child care, child benefits and parental leave. Ironically, I am not as optimistic as I was two years ago.
The current federal government brought in changes to child care and changes to child benefits that, we would argue, have turned the clock backwards. It is very difficult to make progress in public policy and this was progress that took two decades to make. These are unfortunate changes and the progress in family policy has been undone in two short years. It is very easy to rip down public policy and go backwards. That is what the federal government has done.
I cannot talk about that this morning, although I would like to. I have a copy of the presentation I made to the Social Affairs Committee last week. I will leave it with the chair and encourage members of this committee to review it. It is a very important part of social policy.
This morning I will just talk about programs for working-age adults. When I say ``just,'' I am talking about a lot here.
What am I talking about? We came up with the term ``adult benefits'' a couple of years ago because there literally is not a general word to describe what I will discuss today. We do not have a term for income security programs for working-age adults. We tend to identify them by the names of the constituent major programs, such as employment insurance, welfare, working income tax benefit, et cetera. They should all be part of a broader conceptualization that is adult benefits.
First and foremost, I am talking about earnings replacement or earnings substitution for Canadians who are not working. Here we have the twin pillars of Employment Insurance and welfare for those who are expected to work. Other programs also help some Canadians who are either unemployed or low-wage workers. These include Canada and Quebec Pension Plan disability benefits, paid parental leave, workers' compensation and welfare for those not expected to work.
Another layer of programs for adults are measures to ``make work pay'' for the working poor. This is a British term we have imported to Canada. Several provinces provide wage supplements for working poor, that is, they top up low wages. In a positive move, two years ago the federal government introduced a new Working Income Tax Benefit which helps some working poor Canadians. It is still far too modest a program, but it is an important step forward.
The third layer of benefits for working-age adults are a range of services and supports contingent upon being on one of the income programs. In other words, if you are on welfare, you are eligible for certain services and the same is true for Employment Insurance. These include employment programs such as training and counselling, and disability supports. Disability include technical aids, equipment and personal assistance accessibility measures that enable people with disabilities to study and work. Other important services include child care and supplementary health care such as health, dental and drug assistance. You can see that I want to cover a very broad territory.
What are the challenges facing this group of programs for working-age adults? Changes have been made over the years to constrict unemployment insurance and to make welfare much leaner and meaner. The current hodgepodge of adult benefits simply cannot cope with the profound changes in the labour market. I will mention some of these labour market changes. I think they will be familiar to you. They include: education and skills, which are the great divide in our knowledge economy; growth of non-standard jobs such as self-employment, contract work, part-time and multiple jobs; the revolutionary rise in women's labour force participation; marriage breakdown and the increase in single parent families; mass immigration, overwhelmingly to Canada's largest cities; low birthrate requiring Canada to rely more heavily on immigration for its labour supply; persistent poverty where half of the poor are working Canadians; and persistent high unemployment in some regions and communities.
I recognize that the national unemployment rate is perhaps the lowest it has been in decades. However, we still have pockets of unemployment, both official and real, that are much higher than the national rate. Unemployment is not a problem that has gone away by any means. These are some of the challenges to social programs.
What are the difficulties in the ability of our programs to cope with these changes? Let me start with welfare.
Basically, welfare does not work. Welfare provides very little real help to welfare recipients to get back to work. People who are repeat and long-term recipients risk rusted employment and social skills and loss of self-confidence. Welfare remains a very stigmatizing program, lacking in public legitimacy, often a political whipping boy. It is unable to provide people who cannot work with adequate incomes and dignified lives. The rules that require you to strip all of your assets and benefits mean that going on welfare actually engenders even more poverty than before. Many unemployed persons not eligible for unemployment insurance become tangled in welfare and cannot get out of the system. They are not eligible for EI. The only place they have to turn is welfare, and that is a really bad place to end up.
Many employable Canadians with disabilities are forced on to welfare in order to get the disability supports they need to live independently. Welfare workers waste time and energy policing the system and doing paperwork rather than really helping welfare recipients. Welfare is a complex, difficult to understand, rule-bound maze. It is a very complicated system and, as you know, it varies from one part of Canada to another, being a provincial and territorial program.
The National Child Benefit that I mentioned earlier has succeeded in lowering part of the welfare wall for families with children. We have made some progress in that regard, but the welfare wall still persists in other ways, for example, with the loss of supplementary health benefits that are typically not available to low-wage workers. If you leave welfare for the workforce, you leave the support of supplementary health benefits that you had on welfare, namely, loss of disability supports and other services that I mentioned. Employment-related expenses such as clothing, transportation and child care are not offset, even now, for most working poor Canadians. Low-wage workers pay income and payroll taxes. There still is a substantial welfare wall that makes it difficult for people to move from welfare to the workforce.
Employment Insurance is the other major program for working-age adults. Employment Insurance has shrunk phenomenally in the last decade or so. For many unemployed Canadians, Employment Insurance simply does not provide the income security that it is supposed to provide. People pay into Employment Insurance. They pay their premiums, but 60 per cent of unemployed Canadians are not eligible for Employment Insurance. If you look at the first graph that I sent around, under the percentage of unemployed Canadians receiving regular employment benefits, we go back to 1976 and take it all the way through to the recent data for 2006. I think the picture tells the story. The incredible tightening of the eligibility rules for Employment Insurance in the late 1980s and early 1990s led to an incredible drop in eligibility for Employment Insurance. This is the percentage of unemployed Canadians who get Employment Insurance. At last count, it was 44 per cent.
Why is that? The main reason is that we have eligibility rules that are so stringent that the majority of unemployed Canadians cannot meet them. We are talking about new entrants to the labour force; workers who are in what I mentioned earlier, namely, non-standard jobs; self-employed; low-wage jobs; part-time jobs; and multiple job holders. We are also talking about new immigrants and the long-term unemployed. Typically, if those people are unemployed, they are not eligible for EI. Not only are they not eligible for EI cash benefits, but they are not eligible for parental leave and certain employment services that are linked to eligibility for Employment Insurance.
Employment Insurance coverage varies enormously across the country. If you look at the next slide, the percentage of unemployed Canadians receiving regular EI benefits by province, again, it is a pretty dramatic picture. For Canada, on average, 44 per cent of the unemployed are eligible for EI. If we look at all the provinces, however, there are enormous differences. In Atlantic Canada, the large majority of unemployed Canadians — in Newfoundland, all the unemployed — are eligible for EI. In Manitoba, Saskatchewan, B.C., Ontario and Alberta, a fraction of unemployed Canadians are eligible for this national program into which they all pay premiums to be covered. Employment Insurance covers less than half the unemployed in Ontario and the West, ranging from a low of 28.4 per cent in Alberta to 41.3 per cent in Manitoba.
Another way of looking at unemployment insurance is through the gender-difference lens. If you look at the next graph, we are looking at the percentage of men and women who are unemployed who are eligible for EI. Since the mid- 1990s, we see a growing gap in gender eligibility for Employment Insurance. More men than women who are unemployed are eligible for EI.
Looking at the large programs that I have just mentioned, namely, welfare and Employment Insurance, in the majority of provinces, Employment Insurance has become smaller than welfare. In other words, welfare, from Ontario west, has become the major income security program for working-age adults, whereas it should be Employment Insurance. Welfare was never intended to be anything other than a small, residual program for people who were not eligible for other programs like Employment Insurance. However, because of the contraction of Employment Insurance, the growth of working poor and the non-standard labour force, welfare in a number of provinces is actually the bulwark of income support for people with disabilities and other working-age adults. That is not the way it should be.
Another way of looking at the problems of Employment Insurance, if you flip the page to the next graph, is the percentage of unemployed receiving Employment Insurance benefits by census metropolitan area, by city. Again, it is a pretty dramatic picture. This is the large majority of Canadians we are talking about here because we are a very urbanized society.
In Kingston, 17 per cent of unemployed Kingstonians are eligible for Employment Insurance. At the other extreme, about half of unemployed people in the Saguenay region in Quebec are eligible. In the largest cities in Canada, only a fraction of unemployed people are eligible for EI. We are spending more on welfare in most provinces than we are on Employment Insurance.
If you look at the next graph, at Ontario in particular, you will see a dramatic picture of expenditures on welfare versus expenditures on Employment Insurance. Keep in mind that Ontario brought in some draconian changes to welfare a decade ago that made welfare eligibility much tougher in Ontario. Regardless of that, because of the constriction of EI, welfare is by far the largest income program for working-age adults in Canada's largest province.
Employment Insurance is simply not living up to its key objectives. It was designed for another time. It was designed for life-long industrial jobs with low risk of unemployment. It has now become a hindrance and not a support to a well- functioning, flexible labour market. Employment Insurance is simply not doing what it is supposed to be doing. It is a politically contentious program, as I am sure you know. It is a difficult program to reform. It is simply not helping the large majority of Canadians who are paying into it as it exists now.
What do we do about it? Flip forward from ``what is'' to ``what should be'': What should a modern system of adult benefits provide? What should it provide to low-wage and unemployed Canadians?
First and foremost, it should provide temporary earnings replacement for all unemployed Canadians. That, by the way, is the existing objective of Employment Insurance. However, we are saying that it should be achieving the core objective, which it has not successfully achieved in recent years. In other words, if you are unemployed, you should get earnings replacement for the period that you are unemployed, up to a certain point. We do not think that Employment Insurance should be for 5 or 10 years. However, certainly it should be assisting on a temporary basis all unemployed Canadians. The current system does not do that.
A modern system of adult benefits should also provide long-term income support for people with severe disabilities and others who reasonably cannot be expected to earn most of their income through employment. We simply have to face facts. There are some working-age adults who can only work part time, if at all, who will not be able to achieve a decent living from earnings, whether full or part time. We think the system should provide for those people, as well.
We also think a modern system of adult benefits should provide access to services that people need in order to study, learn, work and retrain. We are talking about employment services, supplementary health care and disability supports. We also need policies and programs to ensure that work pays. This is the notion of supplementing wages of low-wage people to make it is easier for them to make a go in the workforce so that they are not tempted to fall back on welfare and get tangled in the welfare safety net. These are the broad objectives we think the system should be achieving and is not.
How do we do it? Please turn to the second-to-last slide which says ``Towards a new architecture of adult benefits.'' It shows three tiers. Please bear with me; this will become clearer when I get to the end.
We are talking about a three-tiered system of adult benefits. The first tier would be unemployment assistance: It is the existing Employment Insurance system plus a new program that we are calling ``temporary income,'' for want of a better word. The second tier would be employment preparation: financial support and employment services for longer- term unemployed Canadians. We are calling the third tier ``basic income'': income support for people with severe disabilities and others who cannot be expected to make a decent living through work. We are talking about a three- tiered system.
We do not think the solution to the shortcomings of unemployment insurance is to turn the clock back to the 1970s to make Employment Insurance much easier to qualify for. Instead, we are arguing that we still need an Employment Insurance system funded through premiums the way it is now. However, we need another program, a ``temporary income'' program, which would be paid for through general revenues. It would not be a contributory social insurance program. It would help unemployed Canadians who do not meet the qualifications for unemployment insurance. We would be providing a new program so that people who are unemployed and not eligible for EI would not end up on welfare. We want to keep employable people who are unemployed off welfare because it is such a bad system. We want to keep them in the federal system of unemployment assistance.
We would create a geared-to-income program. In other words, it would be like the Canada Child Tax Benefit. A person would be eligible based upon income level. How much you receive would also depend on your income level. This would be a time-limited program. We are looking at perhaps six months or, at maximum, a year. Employment Insurance would remain eligible for a year.
One of the big changes we would make to Employment Insurance is to end the system of regional unemployment rates. This would plug one of the worst holes in the current system. As you may or may not know, eligibility for Employment Insurance — as well as the maximum duration you can draw unemployment insurance — varies by unemployment region across Canada. Looking at extremes, it is possible to have a case of two unemployed people, one of whom is eligible for Employment Insurance for a full year while the other unemployed person, living somewhere else, is not eligible at all for EI. They are both unemployed people. They both paid their premiums. One of them gets Employment Insurance and the other does not get any Employment Insurance because we have a crazy system involving regional unemployment areas. Under our proposal, we would eliminate those regional unemployment areas.
The second tier is the employment preparation tier. This would replace welfare with a program of intensive support for employable people. There would be income assistance, but it would be provided in a much simpler way than it is now for welfare. It would be a wage-like system; probably a flat-rate benefit for everyone. Welfare now is a very complex maze of different benefit amounts, levels, eligibility and so on.
This would be a much simpler system. It would be geared to getting longer-term unemployed Canadians back into the work force. It would be a very intensive employment support system with whatever people need in terms of training, retraining, jobs, improving skills, going back to school, getting their high school diploma and dealing with the problem of functional illiteracy. This tier would be very much focused on getting people off of income assistance and back into the workforce.
Our thinking about this tier is strongly influenced by a report put in Ontario out 20-odd years ago — the Thompson report. Some of you may remember it. They had this notion of opportunity planning. On a one-on-one basis, welfare case workers would work with people who are on social assistance to help them get back into the workforce. This would be that kind of system; it would be employment oriented.
The third and final tier, the basic income tier, would be a system of decent income support for Canadians who simply cannot be expected to work for a living. Most of those people have severe disabilities. About half of the welfare case load now is comprised of people who are disabled and on social assistance because it is the only way that they can get a basic income and receive the support they need to simply get by on a daily basis. It is shocking that half of welfare recipients are Canadians with disabilities. We would have a new system of income support for those people.
We can also look at older workers who have lost their jobs. Perhaps the industry has gone belly up and it is not feasible for them to completely retrain to get back into the workforce. This program would help those need people who are in dire need.
I will come back to the third tier in a minute because we are doing some more detailed costing of models and options for how that might work.
Finally, please turn to the last slide. This is an attempt to pull it all together, to talk about the three-tiered income system and how it will fit with other important programs and services.
The first tier is short-term support for employable adults who are unemployed. We are talking here about an Employment Insurance system and this new temporary income program. These are income support programs for the temporarily unemployed who are actively seeking work.
In our architecture, these would be federal programs. Employment Insurance is a federal program. The new temporary income program would, in our view, be a federal program as well. It need not necessarily be. Provinces could deliver that if they wished. However, we would prefer it to be a federal program, and I will explain why in a moment.
The second tier is medium-term support for employable unemployed adults. We have called this ``employment preparation.'' This would be the new form of welfare and would be a provincial-territorial program. This is the intensive support to get longer term unemployed people off assistance and into the workforce.
Finally, the third tier is long-term support for adults not expected to be employed. It is a basic income program, and we see this as a federal responsibility.
Along the top of the graph, a focus on support for low-income workers is another part of adult benefits that is also important to examine. These include: minimum wages that are both provincial-territorial and federal programs; employment standards legislation; tax credits; and income supplements.
Several provinces have various wage supplements for the working poor. Quebec has had one for twenty years; Saskatchewan has a new program, Alberta, B.C. and New Brunswick.
In the 2007 Budget, the federal government introduced the Working Income Tax Benefit, or WITB, which is a federal wage supplement for working poor Canadians. It is also an important part of adult benefits.
Along the right side of the graph, you will see other aspects of important adult benefits. They include the federal Canada Child Tax Benefit, provincial child benefits, and two new federal child benefits, the Universal Child Care Benefit and the non-refundable Child Tax Credit.
We would also have supplementary health care benefits, disability and other supports currently available to people on welfare but not available to the working poor. This would also extend to an emergency social fund that we would see as a provincial-territorial program. It would provide emergency assistance to people in need as is the case with welfare currently. For example, there would be emergency support if the roof collapsed or something like that.
We are looking at a model of architecture with quite a few elements. However, the core aspect is these three tiers of employment assistance, short-, medium- and long-term support.
We are working to flesh out the design of the basic income tier with more concrete ideas. We will propose that the federal government create a new program, much like the Guaranteed Income Supplement for seniors that is geared to income. We call it basic income. This program would be directed to people who have serious disabilities and are currently on welfare. Half of provincial welfare would be replaced by this new program run by the federal government.
The Disability Tax Benefit would also be changed. It is a non-refundable federal tax benefit. It would be made refundable to enable all seriously disabled Canadians, even if they have very low income, to obtain support from the Disability Tax Benefit as well. In effect, we would have a core benefit federal program for people with a long-term disability.
Our proposed basic income program would free up a lot of money in the hands of the provinces and territories. They would no longer have to pay for these programs for people with long-term disabilities. We are proposing a quid pro quo where the provinces and territories would reinvest their savings into disability supports and services for people with disabilities.
This is an area of provincial-territorial jurisdiction. We do not have a decent system. It is variable across Canada. When you talk to people with disabilities and their advocacy groups, beyond a decent income system, the other thing they will always tell you they need is support for daily living to enable them to go to school, to university, and to hold down a job. Under our scheme, the provinces would have a substantial amount of money freed up by no longer having to provide income support for people with disabilities. They would reinvest that into building a better system of disability supports.
That mechanism of reinvesting from one level of government to another is what was done with the National Child Benefit. The federal government increased the Canada Child Tax Benefit and the provinces and territories were allowed to reduce the child benefits they paid through welfare as long as they reinvested their savings into other programs and services for low-income families with children. This mechanism was successful in child benefit reform over the last 10 years. We would hope it could be successful in the reform of adult benefits.
I have one final point in talking about jurisdiction. The new federal temporary income program we are proposing would also reduce costs for the provinces that are now providing income support through welfare for the people we think should be on a different federal program. This would require an architecture where changes in one part of the system would enable changes in another. This is the kind of federal-provincial-territorial reform that is necessary in Canada. As I am sure you well know, poverty, low wages and unemployment are problems that do not respect jurisdictional boundaries. They cross government boundaries.
Our proposed architecture tries to establish a more sensible division of labour between the two orders of government. In effect, through the new temporary income program and the basic income program, the federal government would assume a larger role in income security than it has now. It is currently the senior partner in income programs. However, under our proposal, it would have an even larger role because it has the fiscal capacity. The provinces and territories would have more resources available to provide services that are within their jurisdiction. It is a more rational division of labour between the two senior orders of government. We think that would enable us to have a decent system.
Right now, we do not have any system. We have Employment Insurance and welfare. They are both large expensive programs that do not fit together at all. In the language of bureaucrats, they do not talk to each other. They simply go along in parallel. If some people are lucky enough, they get one program; others get the other program. We do not have an adequate system of support income and services for working-age Canadians. That is what we are talking about.
Having overwhelmed you with that, I will now take questions from you. Again, please have a look at the paper that I mentioned; I could only skim over it here. It gives you a lot more detail and it is quite well written. It is aimed at a general audience.
We are open to any suggestions that you have. If you have ideas that we do not have time to talk about today, please let me know at Caledon because we are looking for feedback on these ideas. We know they are not in any way ready for prime time. They need a lot more work, but we can only do that if we get reactions from people.
Senator Mercer: Mr. Battle, thank you for coming here this morning. You have challenged us. There is a lot of information here. The 40 minutes we have left will not be enough, but I have tried to edit my questions.
The current government is proposing an arm's-length Crown corporation for the EI program. I would like your opinion. Do you think that would help the adult poor? Some argue whether there is really an EI surplus. If so, should it go into the Consolidated Revenue Fund or be kept separate?
The second major question involves getting rid of regional EI differences, which you suggested. What would that cost and how would we fund it? Does it decrease the benefits for people living in Eastern Canada, who are the largest users of EI? I am from Nova Scotia, so I have a particular interest in that regard.
Finally, is your proposed system a bit labour intensive in that it would require a large number of social workers and case workers to manage the files of the people we would be trying to help?
Mr. Battle: Those are three difficult, but good, questions.
First, I cannot comment yet on the proposal in the budget. We are looking at it but have not had a chance to come up with a view on it. It looks promising to us, but I did not mention it in the presentation. In our ideas for reforming Employment Insurance, we stated that it should be a real social insurance fund so that the money would actually be there and would not be put into general revenues.
One can make the argument that the EI surplus helped us wrestle the deficit to the ground, but in terms of an ongoing program, we think it should have its own identifiable fund. I think that is what the budget proposal is getting at. In that sense, we are positive about it. However, I am not in a position now to comment on the details of the budget proposal.
Regarding the regional EI issue, you are absolutely right. Employment Insurance is a political hot potato and always has been. If you talk about any reforms to the system, you always face a lot of opposition from some people. We would get rid of the regional part of the EI system. The new temporary income program that I mentioned earlier would be better, especially if you believe that we must differentiate between different regions of unemployment. One can argue whether an unemployed Canadian living in a high unemployment area is any more or less deserving of assistance from an unemployed Canadian living in a low unemployment area. There is a philosophical argument there. Should we be providing different levels of unemployment benefits to different employment regions even though an unemployed person is an unemployed person?
If we were to decide that we want to maintain that kind of system because it will produce winners and losers — and it must do so, compared to the current system — then we think it would better to attach that to the temporary income side of the program rather than to the Employment Insurance side of it. We want to keep the Employment Insurance program mainly as an insurance program. There is merit in that. It makes the program more politically legitimate and sustainable. I do not think that having different unemployment regions that affect your eligibility for and duration of benefits is a particularly sound social insurance principle. They could fit into the temporary income program.
The temporary income program would be a program geared to income. It is feasible that the program could be differentiated by both province and territory.
On that issue, the Working Income Tax Benefit that I mentioned, an important new adult benefit, allows provinces and territories some leeway in changing the design of that program. In the first year of the WITB, Quebec, B.C. and Nunavut have taken up that federal offer and have a different design for their working poor than in other provinces. I mention that because one could use the same idea with the temporary income program. That program could vary in design from one province to another, even though it would be preferable if it were a federal program.
The labour-intensive question is an excellent one. To be honest with you, we have not looked closely at that issue. In developing this architecture, however, one must do so.
The first tier programs, Employment Insurance and our proposed temporary income program, are relatively easy to administer. They have a low administrative overhead. The medium-term support for employable adults that would replace welfare would require two things to work properly. First, welfare workers who are now spending a lot of their time policing welfare recipients to ensure that they are not breaking the rules, even if they know what the rules are, would spend less time doing that because we would have a more simplified benefit structure. Consequently, they could devote more time to essential opportunity planning. However, one would need more case workers to make this one-on- one system work, and there would be an additional cost there. The amount of that cost would depend upon how that program was designed in each province.
The third tier that I talked about, the basic income tier, would be mainly for people with severe disabilities. It would be much cheaper to administer than the present system, where they get their benefits through welfare, because it would be a geared-to-income program like the Guaranteed Income Supplement. It would be inexpensive to run.
You are right: Some parts of the architecture would require more expenditure, and other parts would require less.
Senator Mercer: You said that you did not think that the EI surplus should go into the Consolidated Revenue Fund.
Mr. Battle: No, I think it should be in its own fund.
Senator Mercer: This leads to my final question: What happens in better economic times, with higher demand, and the program goes into deficit? If it is locked into its own program and it is supposed to be self-sustaining, what do you do then?
Mr. Battle: I am not an actuary, but I would think it would require a built-in actuarial adjustment so that, over two or three years, there would be enough of a —
Senator Mercer: Higher premium.
Mr. Battle: You are right: Premiums would have to be adjusted.
Senator Mercer: That is really sellable, politically.
Mr. Battle: Keep in mind that Employment Insurance premiums are incredibly low in Canada when compared to other countries. They are very small. You would have enough of a contingency fund so that one would be able to run the system that way. In draconian unemployment times, I suppose one might have to either increase the premiums or dip into general revenues.
Our premiums are not a heavy tax; they are about the lowest tax we now levy. They have been going down every year for, I think, 12 years.
Senator Callbeck: Mr. Battle, you have been working on these issues for a long while. We appreciate your input.
I first want to ask you about the Canada Pension Plan. Right now, roughly 26,000 Canadians have been identified as receiving the old age pension. We have their names and addresses. They have paid into the Canada Pension Plan so they are eligible for it. However, they are not receiving it simply because they do not know that they should be filling out an application or for some other reasons.
It is a different situation in Quebec. I understand that the number of people eligible for the Quebec Pension Plan who are not receiving it is practically zero.
Do you feel that the federal government should be more proactive in getting those 26,000-plus seniors signed up for the Canada Pension Plan?
My second question has to do with retroactivity. The retroactive period is roughly a year. In Quebec, it is five years even though we are basically paying the same premium. Do you feel that the federal government should increase that retroactivity period? Has your institute done any studies on this involving the costing?
Mr. Battle: No, we have not. Just to be clear, are you talking about people who have paid into the Canada Pension Plan and who are not getting benefits? We are not talking about Old Age Security.
Senator Callbeck: No, no.
Mr. Battle: I am not aware of the 26,000 figure. That is news to me, and I have to confess that I am surprised.
When we look at income-geared programs like the GST credit, the Canada Child Tax Benefit and some of the provincial programs, sometimes we have problems of take-up, where people who are eligible are not aware of that for some reason and are not getting the benefit.
I am surprised that would happen with a social insurance program like the Canada Pension Plan. For one thing, you are mailed a statement every year in terms of your contributory record, so I do not know where you got the figure of 26,000. I find that shocking and surprising.
Senator Callbeck: This figure came from several places. Actually, the Finance Committee had hearings on this matter. The officials were there and verified it.
Mr. Battle: That is the CPP and not the GIS? There has been an issue over eligibility for the GIS.
Senator Callbeck: No, it is the CPP.
Mr. Battle: I guess it is a problem that should be rectified. I am sorry that I cannot give you a concrete answer.
Senator Callbeck: I wanted to clarify something. The second chart in your presentation is entitled ``Percentage of unemployed receiving regular Employment Insurance benefits, by province, 2006.'' For Newfoundland, we see a percentage of 100.5 per cent. However, when you look at the cities, you have St. John's at 51.4 per cent.
Mr. Battle: Again, this has to do with two things. It is always difficult to figure out results such as this because Employment Insurance is such a complicated program. That is why you get these kinds of results.
I can come up with only two explanations as to why you get these pictures. One has to do with the nature of the labour force in different parts of the country, different cities and provinces. It depends partially on the labour force. You can have a larger percentage of the unemployed who are in the groups that do not meet the eligibility requirements. For example, when compared to another area, it is possible to have a larger percentage of people like recent immigrants or new entrants to the labour force or people working in non-standard jobs. Then, we also have to factor in the different unemployment rate, which means that the eligibility for EI and the duration of EI will be different in different unemployment areas. You will get these kinds of results where there are very high unemployment rates, such as in some parts of Newfoundland, for example, and it will be easier for people to be eligible for EI. In specific parts of that province, such as St. John's, the unemployment rate would be lower, and therefore it would be more difficult to be eligible.
The other factor is simply the differences in the makeup of the labour force.
I am sorry for the answer. It is a complicated question, but that is all I can see happening here to get these results.
Senator Callbeck: Regarding the second tier, you say that will basically replace welfare; yet, it is a flat fee. Under this system, does a single person receive the same amount of money as another individual who has five children?
As you know, the more children you have the more money you receive from welfare. If you are living in an urban area and paying $600 a month for your rent, you are going to get more than if you are out in the country and paying $400. Where do they get the extra money?
Mr. Battle: That is an excellent question.
Simplifying welfare is a difficult thing to do. It is a very laudable goal, but it is hard to do. Some provinces — and Saskatchewan is the leader in this area — are simplifying their welfare in many ways, which brings us to the broader picture: We would like to have a single income payment. Perhaps you could vary it slightly, but it would probably be the same for each adult. The child portion would come from the Canada Child Tax Benefit. The whole point of the National Child Benefit reform that we have been doing is to get benefits for children out of welfare into the federal Canada Child Tax Benefit system. Another way of saying that is that the adult benefit architecture we are looking at here is reliant upon a decent system of child benefits, because we do not want to be providing income assistance for kids through the welfare system. That creates the welfare wall, where if you are working poor, you end up with less money for your children than if you are on welfare. With a decent child benefit — the $5,000 maximum child benefit that we have been talking about — you would more than replace the benefit that used to be available through welfare. It would now be through the federal Canada Child Tax Benefit.
Housing cost is a difficult issue. Obviously, you would still need a variable shelter allowance, the way we do now. You simply cannot pay a flat rate benefit for shelter because shelter costs vary from one area to another.
However, with a decent child benefit, you could have a single adult benefit. That would be what we are trying to do. We are trying to create a much simpler system. Saskatchewan already does that.
Saskatchewan also has an ongoing wage supplement to provide income support for working poor people who may be moving in or out of the employment preparation system.
It is a difficult issue, but it is not impossible. I believe we can simplify the welfare system.
Senator Callbeck: With respect to housing, you say there would have to be a supplement under the second tier. What about dental benefit? Would they be the same?
Mr. Battle: That would also no longer be provided in the second tier. It is actually on that final graph I provided for you.
Senator Callbeck: Who will provide that?
Mr. Battle: That falls under health benefits, disability and other supports and services. That program would be outside of welfare and would be provided by the provinces to all low-income people in a province — the working poor — or if they are on income support.
Again, we are trying to peel the onion of social assistance to get as much out of it as we can so that it is delivered outside of welfare, in a separate program that does not discriminate against working poor recipients.
Senator Callbeck: The person will then need to go to two places, whereas now they can go to one.
Mr. Battle: Now they are trapped in one, called welfare, which treats them like criminals or children. In our proposal, yes, they would apply for benefits out of a different program. That, in part, would be the role of the opportunity planner to make sure that people access benefits to which they are eligible.
Again, Saskatchewan is in the process of doing this. I acknowledge that this kind of fundamental change is not easy, but it is possible.
Senator Peterson: I trust with this new architecture that you are endeavouring to create a whole new system, not an addendum to existing programs that would be a patchwork. If that is the case, under income support would farmers be included and eligible for that?
Mr. Battle: Yes.
Senator Peterson: This whole thing appears to be working toward a guaranteed annual income. Would that not be a simpler way to do this, because I think it will be quite challenging to break down these things. I thought there might be a more direct and easier route. What are your thoughts on that?
Mr. Battle: Guaranteed income is an idea that comes and goes. It has come and gone several times in my career. We are not totally dismissive of guaranteed income, but what do we mean by that term? Part of the problem is this: What is a guaranteed income?
We would argue that we already have a guaranteed income in Canada; it is just not all delivered through one big program. It is delivered through several programs. Some parts of that guaranteed income are more adequate than others. We have a guaranteed income for children — the Canada Child Tax Benefit. That is why we have been pushing so hard to get that program boosted to $5,000 per child in a low-income family, which is roughly the cost of raising a kid in a low-income family.
That is a guaranteed income program. It is delivered through a negative income tax, through the federal income tax system, which is the same kind of negative income tax suggested by Milton Friedman, the conservative American economist who proposed the idea of guaranteed income.
We already have a guaranteed income for kids. It is not adequate, and the addition of the two new programs, the Universal Child Care Benefit and the non-refundable child tax credit, are a step backwards.
We have a guaranteed income for seniors, which is Old Age Security and the Guaranteed Income Supplement, and about half of the provinces and territories provide supplements as well.
We have a guaranteed income for unemployed people. It is Employment Insurance, if you receive it. If you do not, your guaranteed income is welfare. Most people would argue it is an inadequate guaranteed income.
What I am getting at that I think it is more useful to look at guaranteed income as an objective than as a means. An objective is to provide a decent base income for Canadians who are simply unable to work or do not have an adequate income for whatever reason. We are already doing that. We are not doing it well enough, and indeed this whole architecture is an attempt to improve the way we do it in the terms of working-age adults. I would argue that we have guaranteed income, but it must be done better.
To follow up on your first question, if we were to blow up and get rid of everything on my chart and come up with one program called ``Guaranteed Income'' in an effort to serve all of the needs of all unemployed or low-wage Canadians, I would argue that it is impossible. We would end up reinventing a system something like this because different people have different needs.
It is useful to think of guaranteed income as something to try and move towards. The question is how do you get there?
Senator Peterson: I agree with you. We may be going that way but we do not dare call it that. It is very inefficient. Millions of dollars are spent just trying to get there.
Mr. Battle: Canada is leading the world in the use of the tax system to deliver benefits, which is something we can be proud about. The tax system is the mechanism that will move us toward the objective of a guaranteed income. We have a tax system that reaches virtually all Canadians, and it is a way of delivering benefits.
Senator Gustafson: Is your institute funded by government?
Mr. Battle: No. We are primarily funded through a family foundation. We do get contracts now and then from government, but most of our funding is private. We are a non-profit organization, but we are independent of government, thank God.
Senator Gustafson: If a worker is on Employment Insurance and someone offers him a little job for a week, he gets cut off Employment Insurance and the job does not get done, which does not help him or the taxpayer. What can be done about that, or is that an impossible thing to deal with?
Mr. Battle: Are you asking whether short-term jobs are impossible? Is that that what you are getting at, or is it the fact that Employment Insurance does not insure part-time jobs?
Senator Gustafson: No, I am saying that he is drawing Employment Insurance. Let us take, for example, a farmer who needs help for a week. If he goes to work for the farmer, he is cut off. That does not help him or the treasury or the farmer who wants to hire him.
Mr. Battle: In our architecture, we would try to better serve that need through the temporary income program that we are talking about.
You are talking about the difficulty of an insurance program that was never designed for a workforce that moved in and out. It was designed for someone who is temporarily unemployed. They get a job and then they are back in the workforce; that is it. Now that we have a contingent workforce, many people are in the position you are talking about. I do not think a social insurance program like EI, even if it is reformed, can adequately meet their needs. Therefore, you would need the temporary income program we are talking about. It could fill in the gap for that kind of person.
Senator Gustafson: I will pick up on one thing that Senator Peterson mentioned, namely, farmers getting Employment Insurance. Our farmers never really understood why the fishermen in the East got Employment Insurance and our farmers did not. I raise that as an interesting observation.
Mr. Battle: There are groups like farmers and fishermen that obviously have special circumstances and needs that one would have to take into account. I am not saying this is the answer for everything. We would have to have some adaptations.
Senator Gustafson: There is a lot of contract work now. Rather than having people on the payroll as such, companies contract the work. Someone may take their truck and do whatever, and that seems to work very well.
The small business community in North America creates about 70 per cent of the jobs, but middle-class income earners are dwindling. The wealthy are getting wealthier and the middle class is disappearing. We will have to bring in some kind of program that will stop that process.
Mr. Battle: I completely agree with you. It is a real struggle.
I forgot to mention self-employed people, who are not eligible for Employment Insurance. What do we do about them? That is another group.
I mentioned the Working Income Tax Benefit that came in last year, which is a federal program. Although it is too small, you always start with a program and build it over time if it is working. It can help a lot of the people who are working on contract or who are contingent workers, depending upon their earnings. It would supplement their wages. That can help many people keep a foothold in the workforce, which is incredibly important.
I am quite keen on the Working Income Tax Benefit. Several provinces have their own versions. As the WITB becomes better known and as it grows with larger benefits, at least it is a step forward in helping the working poor who are not eligible for the range of benefits provided in traditional ``good jobs.''
Senator Gustafson: I am sure that everyone around this table is in favour of helping those who cannot help themselves, much more than we even do under existing programs. However, when you look at the situation today, try to get a plumber, an electrician, a carpenter or a carpet cleaner. It is very difficult to do. There are a lot of openings there. They are being paid well, at least in our corner of the world, but our young people do not want to go into these jobs. We tell them that education is the answer, but if they get an education, they want a white-collar job. What we produce as a country comes with a little sweat and tears at times.
I would like to hear your observations. Have you thought this through?
Mr. Battle: Economists would look at it from the point of view that we have been discussing and say that labour shortage is actually a good thing for the mainly low-wage, unemployed people we are talking about in our architecture to the extent that there is a great demand for labour. One would think that would increase the supply of less-skilled jobs for the kind of people we are trying to help.
That does not solve the problem of skill shortages and the need to get people into community colleges and so on. Lower unemployment rates are good for our architecture because the people we are talking about are not the people with the highly skilled jobs. They are the people looking for work. That could be a good thing. I am not saying that labour shortages are a good thing, but for these people, it would be better than if we have mass unemployment, where the poorest of the poor have the hardest time getting work.
Senator Mahovlich: You were talking about policing welfare. What percentage of Canadians abuse our welfare system?
Mr. Battle: I cannot give you a definitive answer. When I looked at this issue in the past, the percentage of people who were knowingly abusing the system was quite low in the studies that were done. It was about 5 per cent or 6 per cent. That is low compared to other programs.
Welfare is a complicated system with many rules. Sometimes people end up breaking those rules without even knowing that they have done so. In fact, some case workers may end up misapplying a rule and, in the strict sense of the term, there is a type of fraud there. It goes both ways.
I am glad you raised that issue because this problem speaks to the need for a more transparent and simpler system of social assistance than we have now. The complexity of that system makes it more difficult for people not only to know their benefits but also their responsibilities and their obligations. That is one of the reasons we think we must have a much simpler, more transparent system.
Senator Mahovlich: In the United States, millions of single women are having children just to get on welfare. It is a big problem. They are sent by their families to go out and have children so that they can get on welfare and not have to work.
Mr. Battle: I cannot speak to what is happening in the United States. I do not think the situation is the same here. We have gone the other way. It has become more difficult to qualify for welfare. We have lowered the age of children in order for single parents to be eligible for welfare, and so on.
The Chair: Thank you very much, Mr. Battle. You really should get a special room in this building if you are coming here every week. We are glad to have you.
Mr. Battle: Thank you very much.
The Chair: You bring a lot of history with you. Good luck at what you are doing.
The committee adjourned.