Proceedings of the Subcommittee on Cities
Issue 2 - Evidence - May 29, 2008
OTTAWA, Thursday, May 29, 2008
The Subcommittee on Cities of the Standing Senate Committee on Social Affaires, Science and Technology met this day at 10:45 a.m. to study current social issues affecting Canada's large cities today.
Senator Art Eggleton (Chair) in the chair.
[Translation]
The Chair: Welcome to the subcommittee on large cities. Today, we will examine employment insurance and its impact on employment and income.
[English]
Our subcommittee is building upon some previous work done at the Senate in the matter of poverty. Even though we are specifically dealing with employment insurance today, it fits into our overall theme of poverty, housing and homelessness. However, there is a lot of information that we can build on. The 1971 report headed by Senator Croll is one; the 1997 report by Senator Cohen entitled Sounding the Alarm: Poverty in Canada is another.
At the same time, our study is complementary to the work being done by the Standing Senate Committee on Agriculture and Forestry chaired by Senator Fairbairn. At the request of Senator Segal, they are dealing with the issue of rural poverty.
Also, our colleague, Senator Keon, is dealing with population health and that, in dealing with the social determinants of health, brings poverty into the equation. There is a lot of work being done and hopefully it can be pulled together in a beneficial way in terms of development of public policy.
As I have said, today we will be focusing on employment insurance. We have four witnesses present. We are asking each of you to make brief opening statements of five to seven minutes.
We have with us today David Gray, associate professor, Department of Economics, University of Ottawa. He has written extensively on the subject of employment insurance, EI, for the C.D. Howe Institute and in other scholarly journals. He has focused on labour market participation and effects of the changes from UI, unemployment insurance, the old system, to EI, looking particularly at incentives and disincentives to work.
We have Axel van den Berg, professor, Department of Sociology, McGill University. He has written on the changes of employment following the change again from UI to EI, with attention to the quality of the work before and after the changes. He has also considered EI in the context of the balance between individual and collective responsibility for risk management, including risk of unemployment.
We also have Carole Vincent, PhD, principal research associate, Social Research and Demonstration Corporation, SRDC, who has written extensively on labour market issues, including attention to the arguments for and against experience-rating premiums for employers and recent work on the impact of compassionate and parental leave provisions with the EI program.
The fourth participant on the panel is Richard Shillington, senior associate, Informetrica Limited, and a consultant with Tristat Resources. He has written on changes in coverage in EI since the 1996 changes and how such coverage is measured and described, and on access to special benefits under the EI program.
Welcome to all four of you.
David Gray, Associate Professor, Department of Economics, University of Ottawa: To talk a bit about the context, the system, in my view, currently does a good job of meeting the income security needs of workers who are engaged in part-year employment patterns. As a result, the EI system, as it is currently structured, redistributes from densely-populated areas to sparsely-populated ones. That is not true for the special benefits, but it is true for the regular benefits regime.
Since this is the subcommittee on cities, I would like to talk about the urban unemployed. It is easy to demonstrate that many unemployed workers do not have access to EI benefits. It appears as though many of them had no work in the past 12 months.
We do know that the coverage ratio has declined tremendously in many parts of the country over the past three decades or so, and the unemployed people who are unable to qualify are in urban areas, often with fairly low unemployment rates.
This group, the urban unemployed, has a low share of seasonal and part-year workers, and that is precisely the type of worker who benefits the most from the EI regime as it is structured. Therefore, the system is not designed to help workers who are at the periphery of the labour force in places like the Greater Toronto Area.
This group also represents a disproportionately high share of permanently laid-off workers, and they do not benefit a great deal from the EI system as it is currently structured.
Therefore, I think that within this group, we really do want to find out why so many people are having trouble accessing and qualifying for EI benefits. However, I also think that the fundamental policy challenge is not so much to make it easier for people to qualify, but to make EI unnecessary in the first place so they do not suffer so many layoffs and separations.
The passive regime — EI Part I — is a unitary system, meaning that generally one-size-fits-all, the only modification being the 53 administrative regions. Each region is characterized by its local unemployment rate, and if that rate is above 10 per cent, it is considered to be a high unemployment area and a high entitlement that would otherwise be much lower.
It is my opinion that, given the increasing heterogeneity of both the employed and the unemployed populations, and the increasing share of so-called non-standard employment, the EI program cannot and perhaps should not even attempt to achieve everything. With a unitary system and an incredibly complex heterogeneous labour force, with heterogeneous employment patterns coupled with heterogeneous unemployment patterns, it is incredibly difficult to design a single unitary system whose parameters can be adjusted to meet the needs of these various groups of workers.
I would like to know why so many workers at the periphery of the labour force, not just immigrant workers — although that is certainly an important group — are having so much trouble qualifying for EI benefits in areas where the aggregate unemployment rate is not very high.
For some reason, they are just unable to amass a sufficient number of working hours, and I can only guess that a lot of them are working informally, doing totally legal activities but not having the work subject to regulation in the informal sector. They are thus not paying CPP, Canada Pension Plan, premiums or EI premiums.
It is extremely difficult to find out exactly what is going on because it is so hard to observe in the first place. The data sets that Statistics Canada does generate are primarily based on people in the formal labour market whose employment activities are subject to regulation.
Therefore, that is my guess as to why so many people are having trouble qualifying. We will need new surveys with a totally different design in order to try to figure out why immigrants, for example, are having so much more trouble accessing EI benefits. The current surveys, as they exist, just do not give us the answer to that question.
With respect to some potential policy reforms, the two parameters that are subject to modification are the qualifying period, how many weeks of insurable employment and how many insurable hours are required to qualify, and what the length of the benefit period would be. It is always tempting, and this is how the pilot projects work, to either lower the entrance requirements or lengthen the benefit entitlement periods.
As I say here, we should be aware of adjusting the EI system such that seasonal and part-year employment patterns become attractive to more Ontario workers. It would be a big mistake to just have uniform entry requirements of, say, 12 weeks throughout the country, along with 40 weeks for maximum benefits, because we do not want Ontario, Quebec and Alberta to develop these highly seasonal industries. I do not think that we want to encourage repeat use of unemployment insurance in most of the Canadian labour market.
Concerning the eligibility requirements and the benefit duration period, the design of EI Part I renders it difficult to target more aid to selected groups of workers.
The one case in point was the fairly recent five-week extension of the benefit period, which was designed to help a certain type of worker called a 'gapper'. They wanted to deliver more benefits and make the program more generous for approximately 30,000 or so gapers, and they ended up raising the benefit period for up to 100,000 workers. Therefore, it is very difficult to target aid on the group that appears to be in the greatest need of more EI benefits.
I advocate providing additional benefits to long-tenured workers who have not had very many recent EI claims because the research has shown that they have the most difficulty in finding re-employment. An equity case can be raised in that case because these are workers who have sometimes contributed to the system without interruption for 30 years and often receive no more than 20 weeks worth of EI benefits.
For some of these older long-tenured workers, I favour lengthening the benefit entitlement period.
I also favour helping the working poor who are engaged in stable employment patterns and suggest an EI premium rebate for the working poor who are at low risk of claiming EI benefits. This would work like the working income tax benefit.
This would also serve as a reward for stable employment patterns because the system, as it is currently designed, subsidizes and contains incentives that promote part-year and unstable work patterns.
I mention here that experience rating is a political nonstarter, but that idea is appealing to many, but not all, economists.
Turning to EI Part II, I favour separate and uniform entry requirements for EI Part II benefits. Most provinces now have labour market development agreements with Human Resources and Social Development Canada, HRSDC, but it is still fairly difficult to qualify for skills development, job training and job counselling. Therefore, I favour broadened access to almost anyone for some of the EI Part II programs.
The Chair: I would appreciate your coming to a conclusion soon.
Mr. Gray: There are a number of potential policy reforms outside the framework of the EI system. I am interested in categorical grants for permanently laid-off workers because, as I said earlier, high seniority workers who are laid off tend to suffer very high adjustment costs. The Provinces of Ontario and Quebec have a disproportionate share of such workers. This could take the form of adjustment subsidies to be allocated to workers laid off from certain firms and industries.
I do not think much of this money has been spent, but there is a new program at Finance Canada that targets aid to certain one-factory, one-company towns. I do not know much about that program and how it is working. It is not an HRSDC program, but I am interested in programs of that nature.
I am not going to talk about new immigrants who are faring poorly in the labour market of today, but I will refer the committee to work by my colleagues Arthur Sweetman and Chris Worswick, who know much more about that perplexing issue than I do.
As far as the labour market development agreement programs are concerned, I will say that, throughout the industrialized world, publicly funded job training and retraining programs have a bad reputation and are not viewed as being very successful. That is what some of the existing research, non-experimental evaluation, has shown. That is distressing but I do not think we should give up on that. The challenge is to try to develop more effective job training and retraining and relocation assistance programs.
I say on this slide that skills development has a mixed track record. That is probably an overstatement. They just do not seem to be very effective. That goes for the United States as well as some countries in Western Europe.
HRSDC has some scattered programs targeting unemployed older workers. I am anxious to find out how those will work, but we will not know for another two years or so.
Finally, turning to new active labour market programs outside of EI, higher education and vocational training seem to have a strong impact. There is a lot of research going on right now trying to differentiate between the various types of training and schooling, et cetera, trying to ascertain which programs seem to be the most effective and which type of training seems to be the least effective.
I will stop there.
The Chair: Thank you. That is good information.
Axel van den Berg, Professor, Department of Sociology, McGill University: For something completely different now, I do not have a whole list of recommendations to make, as my colleague does. My research has been at a somewhat more macro level. I have been working on comparing the Canadian case with the Nordic countries in particular. My interest has been in the well-known question about whether or not EI systems or UI systems that are generous tend to or necessarily lead to labour market inflexibility.
The Nordic countries have always claimed they were able to circumvent some of the drawbacks of a more generous system by heavily emphasizing active labour market policies.
My research has in part been on whether or not that claim is justified, and whether or not the Canadian case could be reformed or modified in the direction that the Nordic countries have taken.
One of the major points here is that the Nordic countries, for all their reputation as being social-democratic and worker-friendly and so on, have always operated with a system that had an essential workfare component. They have always from the start implemented to varying degrees, of course, various sanctions on noncompliance for unemployment insurance claimants. They have heavily emphasized the need to compensate for the high generosity of their benefit levels and relatively long durations — compared to Canada, at least, but not compared to the other continental European countries — by a strict regime of putting people into training slots and requiring them to accept jobs when they are available and so on. Canada has been very lax in that respect.
There are pros and cons to both systems. The Canadian system works well, as Mr. Gray mentioned, in a very general sense. We have a low level of long-term unemployment, which is one of the major measures of labour market inflexibility. At this very moment we are the third lowest in the entire OECD, Organization for Economic Cooperation and Development, below the United States in terms of the per centage of unemployed who are unemployed for a year or longer. We do well in that respect.
We do not do well in terms of replacing earnings of unemployed workers. There we are on the lower end of the spectrum. We have very little in the way of active intervention in helping people to find new jobs.
The major EI reform in 1996-97 was implemented with a lot of rhetoric about shifting over from a passive system, in which people were basically given benefits without any requirements attached, to an active system, in which the supposed savings from the more restrictive regime introduced, were going to be used for active programs. However, in effect, the amount of money that actually went to the active programs has been minute compared to the European case. Less than half a per cent of our GDP, gross domestic product, goes to active measures, whereas countries like Denmark and Sweden spend 1.5 per cent to 2 per cent on active measures.
The results are commensurate in the Nordic countries in comparison with the continental countries. The real sick men of Europe are to be found on the European continent, as most of you are aware. They have high rates of long-term unemployment and large sections of the potential labour force essentially being excluded from regular employment, particularly in countries like France, Spain and Italy.
The Nordic countries have managed to obtain a high employment rate — that is to say, a high proportion of the labour force actually having jobs — high labour force participation rates, low unemployment rates, and middling long-term unemployment rates.
They have a measure of success, but it comes at a fairly high price. The price tag is around 4 per cent to 5 per cent of GDP — whereas we spend maybe 1.5 per cent of GDP — on all EI programs, Part 1 and Part 2. It is definitely costly, and there are many problems with the active labour market programs they have been running.
They, of course, are busy evaluating and assessing the effectiveness of these various programs, as Mr. Gray mentioned. Training programs generally end up at the bottom of the pile. There is a general consensus in the literature that training programs organized by the public employment service have very mixed results. On the other hand, there is also a growing consensus which has been reflected as well in a series of reforms implemented virtually everywhere in Europe, in the direction of applying stricter eligibility rules, closer monitoring, spending more resources on counselling, and so on. These seem to have very positive effects, according to all evaluation measures.
With respect to the training, I agree with Mr. Gray in that, just because the assessment reports so far have been showing us mixed results, this does not necessarily mean that training is not effective. I have seen some more detailed studies done, one in Finland and one in Denmark, both of which showed that there was a clear division among the clients of these training programs. If I remember the percentages correctly, in Finland, about 40 per cent of those who were participating in public employment office-organized training basically ended up being dead-weight costs in the sense that it could be shown that they would have found the jobs they ended up finding anyway even if they had not received the training. About 20 per cent were essentially — I will use a non-diplomatic term — hopeless cases, but another 40 per cent seemed to clearly benefit from those training programs.
The message I see in that is that one should not give up on providing training through these channels, but one should be more careful in differentiating the clientele for those programs. I think that is also a growing consensus among the researchers in this field. We should be more differentiated in applying our policies. In the Canadian case, that would mean we would have to devote a lot more of our resources to counselling, monitoring, and to general employment search services.
One major factor that tends to be underemphasized in the literature and debates is that, because this literature and these debates are about policies and not about economic conditions, they tend to try to attribute most results to the policies or tend to point out that the policies have no effect. They rarely adequately take into account macroeconomic conditions.
There has been a succession of successful European 'models'. It was Sweden for a while, then it was Germany and Japan, then Denmark, and now it is Holland. In each and every one of those cases, you will find that the services provided by the public employment office tend to be extremely effective when macroeconomic conditions are good. In other words, you have to have the jobs first before you can have an effective public employment service. This is, of course, a whole different ball game in terms of policy-making. Tinkering with the EI system itself will help, but it will only help optimally in favourable macroeconomic conditions.
Carole Vincent, Principal Research Associate, Social Research and Demonstration Corporation: Thank you for inviting me to speak here today and for giving me the opportunity to present some of the lessons learned from our research on the complex realities of work patterns and reliance on employment insurance benefits.
I hope that my presentation will contribute to a better understanding of the extent to which the EI program reflects current labour market realities, facilitates the functioning of the labour market, and provides adequate insurance to those who contribute to the program.
The EI program pays about $10 billion each year in income benefits to individuals, providing financial assistance every month to thousands of workers who find themselves without a job. Through the provisions of sickness, maternity, parental and compassionate leave benefits, EI also provides assistance to workers who have interruptions in employment for personal reasons, making the program more integral to all Canadians' life decisions.
In recent years, considerable debate has taken place about whom the program is intended for and how successful it is in protecting its target clientele. Since essentially all paid workers are required to contribute to the program, but the receipt of benefits is restricted to those who meet the eligibility criteria, an outcome of particular interest is the extent to which unemployed Canadians have access to benefits.
The proportion of the unemployed who are eligible for benefits under the program's rules has been in decline since the 1996 reforms — down to about 40 per cent, according to the latest estimates from Statistics Canada. This proportion could easily be lower in cities where regional unemployment rates are lower and the minimum number of hours to qualify for benefits is higher.
The other proportion of the unemployed who are not eligible for EI benefits are not eligible either because, even though they are insured under EI, they did not accumulate enough hours to qualify for benefits, or they are not insured under EI since they had never worked, had been unemployed for more than a year or left their last job for reasons not deemed valid under the program's rules, including going back to school, or they did not contribute to the program because, for instance, they are self-employed.
The EI program is an hour-based program, but not every hour of work is treated equally. The EI rules, which are quite complex, give rise to major disparities — some may call them inequities — in the extent to which workers who pay premiums into the program can benefit from it.
Who are those who contribute to the program but do not work sufficient hours to receive benefits? As you probably know, women represent a disproportionate share of those paid workers. Young people are another large group.
Who are the workers that contribute to the program and actually receive a significant share of EI benefits? They are the workers who have work patterns and work schedules that best fit the EI rules for eligibility and calculation of benefits.
An increasing share of those who receive regular EI benefits had workers who experience predictable, often seasonal, and recurrent breaks in employment. Over the past five years, the proportion of regular EI claims made by frequent claimants has increased to close to 40 per cent.
Frequent claims are largely associated with seasonal employment. The proportion of seasonal claims has remained steady in recent years, despite important improvements in economic conditions and despite the fact that the Canadian economy has become less reliant on traditional seasonal industries.
Frequent reliance on EI can result from workers becoming familiar with the program and learning how to take advantage of its rules and provisions. Our research has shown that, in many cases, workers' reliance on EI is a symptom of their difficulties in finding stable or more meaningful employment due to inadequate skills or inadequate recognition of their skills, insufficient education or limited job opportunities offered in their region. Older workers, those with lower educational attainment and those living in regions with poor employment opportunities are the most likely to be caught in the EI trap.
Therefore, policies that focus narrowly on addressing workers' frequent reliance on EI are misdirected. Instead, policies should more broadly address the barriers to employment faced by workers who are not well equipped to realize their full potential in the labour market, whether they rely on EI or not.
In fact, our research indicates that, while some workers who face barriers to finding more secure employment are able to find jobs that enable them to qualify for EI benefits, there are many more workers who face those same barriers but are unable to find enough work to get sufficient hours to qualify for EI benefits. Our research also emphasizes the need to move beyond traditional measures of seasonal work to capture the many diverse circumstances of workers who face regular periods of unemployment on an annual basis.
We also find that workers with seasonal patterns of employment but who do not claim EI are not necessarily doing better in the labour market. They are the most likely to be working multiple jobs and are more likely to be employed part time if they get re-employed. They live in all regions across the country, including cities where better employment opportunities have not necessarily led to more stable employment for them. Many of them are women.
Reliance on EI benefits is also an issue at the level of the firm. There is clear evidence that firms are an important piece in the EI frequent claimant puzzle. Our research confirms that a considerable number of firms are predictably and persistently receiving subsidies through the EI program in that their employees' receipt of EI is higher than the premiums paid into the program. Our research also shows that the firms' own human resource practices and other characteristics are twice as important as the industry or geographic location of the firm in explaining whether it is subsidized by EI.
In conclusion, the EI program has evolved over the past decade in ways that are not typically expected in an insurance-based program. The 1996 reform introduced what had is called EI Part II benefits, which provide direct assistance to the unemployed through various employment benefit and support measures with a focus on helping disadvantaged groups reach their full potential in the Canadian labour market. Through the enrichment of parental benefits and the more recent compassionate leave benefits, the EI program is increasingly providing assistance to workers who have interruptions in employment for reasons that are, to some degree, foreseeable, planned and voluntary. While those benefits are aimed at assisting workers who must balance their work with their family responsibilities, they can be seen as a move away from an insurance-based program.
These moves away from insurance principles may reflect a major shift in values that could motivate future EI reforms. An important issue, however, is whether there are other and better means to improve the income security of Canadians.
Measures to promote labour market attachment need to go beyond getting people into work and should aim at lifting them out of poverty. Work can be part of the solution, but work is often not enough. Measures like the working income tax benefit for low-wage workers are also needed to ensure that work effort is rewarded and that families are not living in poverty. These types of measures need to be complemented by programs to help low-wage workers find more secure employment and higher-paying jobs.
Richard Shillington, Senior Associate, Informetrica Limited: Thank you for this opportunity to speak to you about employment insurance. Regrettably, in the time available, I could not prepare a formal brief but I hope you will find my comments useful.
I have done research on employment insurance dating back to the Forget Commission in 1986. More recently, I gave expert testimony on legal challenges to the 1996 changes to the employment insurance program.
In my view, the employment insurance program has been much abused for a number of years. It has become less and less effective in meeting its original goal, that being temporary income support for the unemployed, as its funds are being used for a variety of other purposes. EI has been constricted because governments worry that it is being abused by the unemployed. The program has certainly been abused by governments.
The following are some major assaults on this insurance program: the end of benefits for voluntary quits; the end of federal responsibility for benefits in high unemployment areas — they were called regionally extended benefits and were paid for by the federal government; the 1996 shift from weeks to hours which further marginalized the most marginalized employees; and squeezing the maximum insurable earnings which reduced, over time, the value of EI to middle-income Canadians.
Employment insurance contributions are a very regressive form of taxation. These contributions are now paying for training. In fact, under this structure, as I am self-employed, I am not paying at all for the training being done through the EI program. I am exempt from that tax.
As you are well aware, the EI surplus is now being used for purposes outside of EI in lieu of other forms of tax increases. An EI surplus is certainly a more regressive form of tax than the alternatives that would have otherwise been used.
Adding social benefits such as compassionate leave and maternity and parental benefits to EI confuses the benefits involved in caregiving with unemployment.
Maternity benefits are only available to about half of new mothers. Maternity benefits are not available to self-employed new mothers, except in Quebec. About half of new mothers who do not get maternity benefits worked in the last year, but they did not work in the ways and at the intensity required by EI.
New mothers cannot supplement their maternity benefits with part-time employment under EI. Quebec's parental insurance program for the self-employed has a higher replacement rate and higher maximum insurable earnings, provides flexibility in the duration and form of maternity benefits, and has dramatically increased benefit levels and number of recipients, particularly for males. Those with precarious employment are least likely to be eligible for employment insurance.
I will describe the maternity benefit program under EI. If you have been sick or unemployed in the previous year, you will get maternity benefits for a shorter time. You have a two-week waiting period, which is arguably reasonable in an insurance program but makes no sense in a maternity benefit program. In fact, the maternity benefit program that the civil service has negotiated themselves does not have a two-week waiting period. There is a 55-per-cent replacement rate of earnings. Earnings exclude things like tips; it is only wages. The maximum benefit is approximately $413 per week.
The civil service's maternity benefits program has a 93-per-cent replacement and there is no cap on that benefit. You are not allowed to earn additional money while on maternity benefits for EI.
The regional impact of eligibility and benefit rules for EI that favour high unemployment areas discriminate against young people, particularly in major cities.
For example, by my estimates, Toronto makes about 19 per cent of all contributions to the EI fund, but gets only about 10 per cent of the benefits. Ontario contributes 41 per cent and gets approximately 28 per cent of the benefits.
There has been some comment on what is called by technicians the BU ratio, the beneficiaries divided by the unemployment rate. It used to be over 80 per cent; now it is slightly over 40 per cent for Ontario and 28 per cent for the City of Toronto. It is 22 per cent for young people in Ontario and 10 per cent in the City of Toronto.
If you are a young person in the City of Toronto, your chance of getting employment insurance benefits is around 10 per cent. It is a logical consequence of the rules that have been put in place.
Some people say that the BU ratio is not a good measure of coverage because some of the people in the denominator of the unemployed did not contribute and were never intended for the program. You could ask why we have a program that is not intended to benefit the unemployed.
I conducted research a few years ago for a government department and calculated a new ratio — those receiving regular benefits as a share of the unemployed who contributed to EI in the last year. What is the ratio when the numerator is regular beneficiaries and the denominator is those who are unemployed that worked and paid into the plan during the previous year?
It is not 40 per cent anymore, it is 48 per cent. It went up a bit. Only 19 per cent of young people who are unemployed that paid into the program in the last year are receiving benefits. For young females, it is 28 per cent.
You will understand why the 1996 rules particularly targeted part-time workers. For females who work part time, it is 27 per cent.
When you compare the benefits being paid in the early 1990s to now, overall benefit levels have dropped by about one-third after adjusting for inflation. For lower-income Canadians, it has dropped by half. We have taken benefits away from the most vulnerable for reasons that escape me.
Currently, the regular income benefits are the narrowest form of what employment insurance is supposed to do — provide income replacement. In the early 1980s, they were 86 per cent of the income benefits paid. Now, employment insurance is 58 per cent of the income benefits paid.
About 90 per cent of the contributions used to be paid out in income benefits. Now it is less than half.
Employment insurance regular benefits used to be a little over 2 per cent of wages paid in Canada — that is what they were insuring in a sense. They are now down to 1.2 per cent nationally and about 0.7 per cent in Ontario.
In conclusion, I would be in favour of exploring the possibility of removing the special benefits for pregnancy from the EI program that, to my mind, are not delivered well because they are mixed up with labour market issues. They should be placed into a program that would be funded more like the CPP where you contribute based on annual earnings. This is similar to what Quebec has done.
If you were to do that, I would also remove compassionate leave from the EI program and put it into a similar program.
I would further argue that disability benefits do not rest comfortably within the CPP. That program would be more reasonably administered out of a social security program funded like the CPP, but not tied into labour market attachment issues.
The Chair: Thank you to all of you.
You made a strong case for there being a lot of flaws in the system with inequities, inefficiencies and ineffectiveness. You have given reasons for that in a general context and ideas on how it may be fixed.
I will ask a question in each one of those areas on flaws in the system.
I am looking at a chart that is the per centage of unemployed receiving regular EI benefits by major city. You are probably familiar with it. This is similar to some of the statistics Mr. Shillington was giving.
At the bottom end, it shows Ottawa with 20.7 per cent of the unemployed receiving EI benefits. Not far behind is Toronto at 22.3 per cent. At the other end is St. John's at 51.5 per cent. That is a mammoth difference.
High unemployment areas are a factor in all of this, but a range from 20.7 per cent to 51.5 per cent is extreme. St. John's is part of what is becoming a "have" province. Therefore, I would think that difference would not be justified. Calgary, where one would not expect a high unemployment rate, has a higher eligible per centage receiving EI benefits than Ottawa or Toronto, for example.
What is to explain this and what is to change these inequities in those statistics?
Mr. Gray: May I guess? I said earlier that we do not know the answers to this question.
However, I think it has a lot to do with people working in informal employment jobs. In a city like Calgary, it ought to be possible to obtain the sufficient number of insurable hours to qualify for benefits. It is 35 times 20, so you need 700 insurable hours to qualify for benefits in Calgary. That does not seem to be a high hurdle in today's job market.
My guess is there are a lot of newcomers to Canada and people in precarious employment patterns who work a day here and a day there or possibly work for several employers and do not have a steady job. Statistics Canada and HRSDC are not picking them up in their databases.
The work is being done and the jobs are there, but it is simply not insurable employment. That is my hunch.
The Chair: There is a lot less EI being paid in Calgary than in St. John's. Are some of those factors not applicable in St. John's?
Mr. Gray: The unemployment rate in St. John's has now gone below 10 per cent. Therefore, it is not a high entitlement area and will not be as easy to qualify.
We need a survey that will find a representative sample of the types of people we are not covering. We cannot learn the answer to that question by a case study here and there. We have to gather a representative sample of people failing to qualify and determine why. The inherent difficulty of observing that is why we do not know much about it now.
Mr. van den Berg: I have started work trying to compare those unemployed with and without benefits during the 1990s. This period crosses the implementation of the major reform at the time to determine whether there was any difference before and after.
I should mention that while we all seem to be fixated on the 1996-97 reform, the actual decline in the benefits-to-unemployment ratio occurred before that time. After that time, there is hardly any trend at all. The weeks-to-hours change is not the major culprit. There are other reasons. Other restrictions implemented much earlier are partly to blame for the decreasing benefits-to-unemployment, the BU ratio. I have been looking at earnings using a data set from Statistics Canada called the survey of labour and income dynamics. I have found that those who are not receiving benefits and declare themselves unemployed do much worse than those who did receive benefits. When you look at family earnings, there is hardly any difference between the two. There are all kinds of things going on there. What is important to observe is that, when you look at family earnings, the standard errors, in other words the distribution is much wider. There are categories of families that suffer by not receiving employment insurance benefits and there is a group of families that does not suffer. That is to underline Mr. Gray's point that we have to look at this in a fine-grained manner in order to find out who is who and what is what. There is definitely a category of people who declare themselves unemployed and nevertheless do okay in terms of family earnings. There is another category of people doing badly because they are not covered by employment insurance.
The Chair: We know from the statistics that fewer people are eligible for EI across the country. Overall, it is about 40 per cent and before the changes it was somewhere over 50 per cent.
Mr. van den Berg: It was close to 80 per cent.
The Chair: Do we know anecdotally perhaps how people are generally making out under these circumstances? You say that there are compensating factors but are people a lot worse off? Do we have information of more people suffering as a result of this? Do we have hard data on this?
Mr. van den Berg: We were only beginning to identify who are suffering and the ones who are not apparently suffering. There are clearly families where others within the family compensate for the lack of benefits being received by the unemployed member of the family. Although we still do not have the hard data, there are likely to be single-earner families where compensation is not possible and there is real suffering. We do not know the exact numbers.
The Chair: We will move to the way ahead to solutions to some of these flaws. Mr. van den Berg, you talked about the Nordic countries and the fact that they are more active in trying to promote retraining and getting people into new jobs. We were supposed to do that but have not done so yet. That is a terrific and important part of this. You also said that there is a big price tag on it compared to what we put out now. All of you have come up with different recommendations. How should such programs be paid for? Should they become part of the rate that is now to be recommended by an independent body, which is just being established under the current budget bill? Is that how it should be done, or should some of it come from other sources of taxation in the consolidated revenue fund?
Ms. Vincent: I do not think it has to come from the EI fund. The issue of relying on EI, or using EI, is important but the main issue here is ensuring that all groups can participate in the labour market. Currently, we have the one of the lowest unemployment rates in 30 years but there are still specific disadvantaged groups that do not participate in the labour market. Some of them might benefit from retraining: Aboriginal people, new immigrants, younger people with less experience and older workers being displaced. All of these workers would benefit from more support to find more secure employment. There is no reason for it to be financed only out of the EI fund because it could be financed through general taxation.
Mr. Shillington: I will answer a couple of your questions. The chart with the BU ratio is from my report. There is data in StatsCan that could be plumbed by those with a credit card with a sufficient limit to get at the data to help to understand using the employment insurance coverage survey. I published some of that. One thing we wrote in that report was speculation on why that rate would vary in proportion to the population who are immigrants because of the high entrance requirements for EI. That will have a disproportionate impact on immigrants, which might explain St. John's versus Toronto.
You asked about the impact on various people. Your researchers will know of the chart. I looked at the impact of 1991 compared to 2002 of average employment insurance by income and found that the poorer you are the more you lose. That was the design. When you get rid of voluntary quits and do the 96 changes, it is absolutely predictable that the impacts would be greatest on vulnerable populations who are most likely to work part time.
In terms of funding. I do not get to pay for training, which I am kind of happy about given my age, but I am also not eligible for training. There might be good training programs helpful to self-employed people but, as long as it is funded from the EI fund, then you will get into a strange box. Would you not want to fund training out of the most progressive tax source? Why would you fund it out of a regressive tax source except for unfortunate political considerations?
The Chair: Those happen all the time.
Mr. Shillington: I understand. However, employment insurance should be shrunk to the income replacement regular benefits and then you could have a fund that pays for that. The maternity and compassionate leave and other benefits should be funded far more broadly, perhaps still contributory like a CPP fund. You could argue that these be funded out of the general revenue fund. The more progressive tax source is the best place to go. We could debate that. Why fund training out of a regressive tax source?
Mr. Gray: I agree with just about everything Mr. Shillington said. Consolidated general revenues should be used for many of these things. The only reason maternity benefits were ever funded at all through EI was for administrative convenience. The administrative superstructure was in place to grab people's contributions from their paycheques. It was strictly for administrative reasons to collect the revenues and distribute the benefits. Apparently, when they set up the program it was seen as the easiest way to do it. It makes absolutely no sense that paternity or compassionate leave should be funded from EI. You could still allow HRSDC to do it but it should be a different administrative framework or superstructure.
The Chair: Those are good points. We are dealing with poverty, housing and homelessness in a broader category and EI fits into this. In consideration of what should be in EI and what should not be, those are good points.
Mr. van den Berg: I have a couple of hypotheses in answer to your earlier question and the reason that both Calgary's and St. John's relatively high BU ratios are different for the various cities. In Calgary, it is easy to amass the number of hours you need to qualify because there are lots of jobs. When you become unemployed, you become eligible for unemployment benefits. Until recently in St. John's, the period you could be on unemployment benefits was longer because it had an above-average unemployment rate. They are completely different reasons but they ended up showing the same level of figures.
The Chair: Perhaps there are more youth or immigrants in one place, which you say are the disadvantaged groups in terms of EI in Toronto.
Mr. van den Berg: That is right, in Toronto. I just had another comment on the last question you posed.
If your question is really a hidden way of asking where are we going to get the money from, then my answer is there is no free lunch. It will have to be paid for one way or the other.
At the same time, I would emphasize, as is generally done in the Nordic countries, that there are many benefits to be had from their greater emphasis on active labour markets that are not usually factored in. We will face a serious problem with older workers not being employable anymore. These people will not get training in the private sector because it is not worth the investment. That is a place where the public employment office can step in effectively.
The Nordic countries have a low unemployment rate for low-skilled workers — workers with less than a secondary education. The difference between workers with less than a secondary education and with a tertiary education is much smaller there than it is here, and far smaller than in the United States. Those are major benefits that are hard to quantify but that are quite important in the long run.
The Chair: It is an important part of it. I will go to my colleague. Senator Keon, who is the deputy chair of our main committee, the Standing Senate Committee on Social Affairs, Science and Technology, is a senator from Ontario and right here in Ottawa, which was the lowest one on the scale I read out a moment ago. Senator Keon is also the chair of another subcommittee on population health where a big determinant is poverty — one of the great social determinants — so he is involved with this subject as well.
Senator Keon: It seems to me that this harangue just goes on and on about the various programs that are there and the social safety net and the huge holes between the programs. When it comes to EI, which you have focused on this morning very well, you are critical of some of the areas it is funding, which you feel are inappropriate.
Certainly, I got the impression you feel it is inappropriate that the government dips into this fund when it is short of cash or even when it is not short of cash. Yet there is so much money involved here that there is no question the fund is going to go on forever, I guess. I do not see a solution to the bigger problem in your recommendations. The big problem we have is that there is no reliable way for the unfortunate citizen who is down and out to navigate the collective systems and find enough money to live on.
I was joking with you informally before, and I said even Houdini could not navigate the social safety net in Canada. I will not ask the question this morning because I keep asking it over and over, and my chairman is getting bored with this question about why do we keep tinkering with these hundreds of programs instead of bringing in a guaranteed minimum income and a guaranteed family income?
When this committee writes its report, it can take your considerations seriously about the abuse of the program, but what you have not addressed is whether the program is too rich or not. It is being abused from all sides because there is extra money in there. Yet, it is not doing its job. Why is it not doing its job?
The Chair: Okay, take it on.
Mr. Shillington: I will start. I am brave.
We could have a long conversation about a guaranteed annual income and I have worked on some of these issues in the past. In the last seven or eight years, a lot of my research has to do with that complexity. I worked with the MISWAA — Modernizing Income Security for Working-Age Adults — exercise in Toronto, which some of you will be aware of, about the problems of people understanding what benefits they are actually entitled to. It is possible some of you are aware that I did work in the past about seniors not getting benefits they were entitled to — 300,000 seniors not getting the guaranteed income supplement they were entitled to.
I would challenge anyone in five minutes to tell us, as an example, who is eligible for old age security in Canada? Describe it accurately, depending on how many years you have lived in which countries and under what conditions. It is virtually impossible.
The guaranteed income supplement, GIS, for seniors has just brought in an exemption for $3,500. I have done research on this issue almost half my time for the last five years. I discovered it is not the income I thought it was, it was something else, and I am supposed to be an expert in these things.
EI — again, I challenge anyone to describe how many hours of employment you have to have in the last year to be eligible. We can create an example for someone in a particular city. It would depend on how many hours they worked last year and the year before that, depending on the new entrant requirements. How many weeks of benefits would they get? It would depend: did you get any benefits last year or did you receive maternity benefits any time in the last five years — not whether you had a baby or had received maternity benefits, which is bizarre to me.
Old age security should be the simplest of programs. You are over age 65 and Canadian, whatever that means. Yet, in all of these programs, it is virtually impossible. I had a staff member come to me and ask, "What is the earning exemption for the GIS — I cannot find it on the website anywhere?" I said, "Well, it is not on the website, it is in the legislation." She took the legislation and could not find it. "It is those words there. That is it."
I am a huge believer in clarity and transparency. Simplicity would be helpful because the more complex the program is, the more it requires a certain level of literacy and education to get any benefits to which you are entitled.
Ms. Vincent: I agree it is complex. The rules of the EI program are complex but some workers understand them very well. They do not abuse the system because the system is there to serve them. Their EI program fits certain patterns of work and those workers who have those patterns of work can benefit from it; they do not abuse it, the system is there for them. They understand the rules very well.
They understand complex rules like the working-while-on-claim rules; Mr. Gray has done some work on that. We know that EI claimants use that rule over and over because they understand it best.
I believe the complexity comes from the complexity of life and work and work patterns. There are different circumstances that the programs are trying to address — not just the EI but social assistance programs and all the income security programs, such as the child tax benefits for families, et cetera. They are trying to address the different complexities.
Can this be resolved by one program for a guaranteed annual income? I do not have evidence to support or not support this model, but the complexities reflect complexities of the circumstances people are facing or experiencing in the labour market and in their lives in general.
Mr. van den Berg: It may seem that we are arguing in two different directions. On the one hand, we are saying there is so much heterogeneity out there that no single program could handle it. On the other hand, we are wondering why we do not have more simplicity.
It might look like we cannot have it both ways but one aspect of the Canadian system that has always struck me in comparison to others is we try to settle many things by administrative fiat. The new instruments are finely honed by economists to try to elicit or create specific incentives for specific workers by administrative organization.
What we have not really looked at is service delivery. You could have a relatively simple system where the service delivery is capable of different shading between the clientele. You could even have a complex system where the service delivery serves the clientele to move through the system. We have not done much work in that direction at all; we do not have a lot of experience in doing that.
We basically work within the old templates of our administrative service as it is. That is a major weakness of the Canadian system.
Mr. Gray: I would like to learn more about the guaranteed annual income. I thought a number of years ago that it was a nonstarter because it would have very strong disincentive effects for work.
If we were to implement a more universal type program such as the one spoken about, it would necessarily mean reducing the level of social protection that certain segments of our labour force receives.
During the course of my dissertation research, I remember reading about France's social protection network. An author made an analogy between a huge French cathedral lined with chapels along the sides. There were groups of elite workers who had their special retirement programs and their special unemployment insurance programs, et cetera.
There is some degree of what I call "gold-plated social protection" here in Canada, as well. Those groups know exactly who they are and they would just fight vociferously towards the implementation of a more universal, broader-based income security system.
Senator Keon: You are quite right. Of all the witnesses who have come before us addressing this subject, there has been only one who said, "I think a guaranteed annual or family income would be ideal." Everyone else said it was a nonstarter. You are being consistent.
Mr. Gray: I am willing to give it another shot.
Senator Keon: I would like you four to come to the following conclusion: When you talk about EI not being news for maternity benefits, et cetera, please do not talk about the creation of more new programs. I think we have far too many programs.
We need consolidation of programs, at least in relational programs. We also need a system whereby some navigators can help people find their way through the system. That is not a question, it is a comment. I would like to leave it with you as you think your way through this and try to help us find something useful here.
The Chair: I might add that next month, on Friday 13 to be precise, we will have a half-day round table on the subject of the guaranteed annual income. Maybe I could call it a "dust-up." Anyway, it will happen. It will be broadcast, although probably a delayed broadcast. It will be webcast, anyway. I welcome you to come, or you can just come and sit in on it.
That will get a full airing, believe me.
Senator Cordy: I would like to go back to the comment that Senator Keon just made. I have actually been doing a bit of reading on maternity and parental benefits and was astounded to discover that about 50 per cent of new mothers are eligible to receive the benefits.
Mr. Shillington, you made reference that perhaps it should not be within the EI mandate. Perhaps you could expand on that further and I would like others to discuss it, also.
Some of the things I discovered: 50 per cent of new mothers are not receiving benefits; those who are tend to be older, better educated and in higher-paying jobs; and those who are eligible are in the 50 per cent for whom it is important for the family not to lose the second income entirely. However, those in lower-paying jobs who are not well educated are not eligible to receive maternity benefits.
This is a tie-in to something some of you said earlier: I think Mr. Shillington said you need 600 hours to receive maternity or parental benefits. This was designed so that people are not in and out of jobs. However, maternity benefits are different, in my opinion.
Why do we have the two-week waiting period? I think Mr. Shillington brought this up. It is not like someone has lost a job. It is a maternity benefit. There is a lack of flexibility for maternity or parental benefits; it is all or nothing. You are either receiving the benefits or not.
There is a very low uptake of fathers taking parental leave; it tends to be the mothers. With some flexibility, perhaps you could have maternity or parental benefits for four months and then decide that you want to work part time and still receive benefits. Instead of receiving them for another 20 weeks, you would receive them 50 per cent for 40 weeks but you could also work.
It is the lack of flexibility that bothers me.
Also, the 55 per cent of eligible income is what you are entitled to receive when on employment insurance benefits. Is that necessary for maternity/parental leave? The whole idea behind the 55 per cent is that it does not become so attractive that you decide you do not want to go back and get a job. That is not relevant for benefits for parental leave.
Someone mentioned that, perhaps, it should be under the umbrella of the CPP or general revenue. I have asked a lot of things there but, when reading over the past few weeks about this, it became frustrating that those who need it the most — single parents and those on low incomes — are the ones who are not likely to be able to receive the benefits.
Ms. Vincent: You are raising important points. I agree with what you say. There seems to be a consensus that these benefits should be taken out of the EI program. Like you said, many of the rules applied to the EI program are being applied to these special benefits. It does not make sense for maternity or parental leave.
As Mr. Gray said, it was convenient to leave it in the program because the structure is already in place. It was convenient in the way that it would give benefits to people who would never claim EI regular benefits but pay into the program. Year after year, they pay into the program and never get any benefits. Now, those who have stable employment will get some benefits. The husband or the wife is getting some benefit from the program to which they contributed all their lives. They will never lose their jobs. I think it was convenient in that sense, too. It was giving back some benefits to those who would have never claimed regular benefits.
I agree with you about the eligibility rules. The waiting period — I think it is clear — does not make any sense. The number of hours required is 600 wherever you live. Why do you not qualify for maternity benefits in a high unemployment region with 420 hours of work while you can qualify for EI year after year with 420 hours in a high unemployment region? You are raising important points.
The Quebec parental leave program made some interesting choices, and this could be an inspiration for a national program of maternity benefits.
Senator Munson: I wanted to ask about that and follow up on Senator Cordy's question. In Quebec, how long has this program been in effect, what is the flexibility in the program, and why have other provinces not taken a serious look at this and adopted this program?
Mr. Shillington: A couple of months ago, I finished a year-long project for a professional association, most of whose members are self-employed and women, so they asked me what would it cost for EI to provide maternity benefits for the self-employed and what would it cost to take the Quebec parental insurance plan, QPIP, national. I have done some work on this. The program started in January 2006. There was a significant increase in the take-ups. They also introduced a paternity benefit. There are maternity benefits for the mother, parental benefits which could be shared, and a paternity benefit which can only be taken by the male, which is interesting. Because there are higher replacement rates and maximum benefits, higher insurable earnings, it is easier for men to take the money because they tend to earn more. There is less of a drop in pay for them to take the benefits, which is interesting
I want to answer the question also by telling a quick vignette. I met with a Member of Parliament who asked how we might make EI benefits more effective. I talked about doing what Quebec does, which is allowing more flexibility and a trade-off between the duration of benefits and the level of benefits, so you can get 60 per cent for this period of time or 75 per cent for a shorter period of time. I was saying we could do that at the federal scheme. Then it occurred to me that there are earnings rules in EI where, if you earn more than 25 per cent of your benefits, they claw back dollar for dollar everything over that. I ended up phoning HRSDC and finding the person who understands the rules. What are the clawback rules around maternity and paternity benefits? The maternity benefit has a dollar for dollar clawback starting with the first dollar. You are not allowed to earn a penny and keep it, which seems to be inflexible. Under parental benefits, it is the usual rules — 25 per cent and then 100 per cent clawback. You have no flexibility.
In the middle of a conversation, there was the question, "But then you guys get a 93 per cent replacement, and you are allowed to top-up your maternity benefits up to 90 per cent. Why is that not clawed back?"
The Chair: The answer?
Mr. Shillington: "It is not earnings," to which I laughed. He said, "Why are you laughing?" I said, "It is another example of the rules seem to work coincidentally better for you than for the rest of us." You can have a top-up from your employer with no wage attached if it is gratis and keep it, but if you work for it, you are not allowed to keep it. I am sure there is someone in Ottawa who would explain why that is reasonable.
Senator Cordy: And where would that person be?
Mr. Shillington: A Member of Parliament.
The Chair: Senator Trenholme Counsell has to leave, and she is next to get a question in. I wonder if we could have her ask a question.
Senator Trenholme Counsell: I have listened with great interest. I come from Beauséjour, which is an area where this is an important issue. I would not say it is a large proportion of the people, but one of our most significant industries is the fishing industry. If you go around Atlantic Canada and the Gaspé, certain parts of Quebec, we all have the same issue at heart.
When I hear someone using the word "abuse," I get upset. I want to thank you, Ms. Vincent, for differentiating between abusing the system versus using the system that is there to serve them. I thought you had put it very well.
I know we are talking about specific industries this morning, be it forestry, tourism or fast food, but we have not talked about the fishery. I felt it would be wrong not to mention the unique situation of the fishery. The people I think of are largely women, but there are also many who are fishermen's helpers, and they certainly depend on the system. There was talk about retraining people and upgrading their skills and so on, but so far technology has not found a way to replace those hands and those persons who do the work. I really thought we might have a bit of reflection on the situation of the fishery industry in terms of our whole discussion today.
Mr. Gray: The fishery industry is very heavily subsidized by the EI system. In fact, they have their own special program even within the EI system. Not only is it typically located in high unemployment areas, which makes the workers in that geographical region eligible for extended benefits after having only contributed say 420 hours, but in addition to that, there is a special fund for the fishery workers. They are the only self-employed workers in the entire country who are covered by the system at all. They have different qualification requirements. They do not qualify based on insurable hours; they qualify on the amount or value of the catch.
Senator Trenholme Counsell: You are talking about the fishermen who actually go out and fish and hire other people. I am talking about the people who work in the fishing plants.
Mr. Gray: The fishery workers, yes.
Senator Trenholme Counsell: You are right that it is a different category. I am talking about the people who work in the fishing plants without whom, so far, this industry cannot survive.
Mr. Gray: They could not survive because of how many weeks of work are available, something like two months a year or something like that?
Senator Trenholme Counsell: I think it is 14 weeks now, I should know.
Mr. Gray: They are allowed to qualify after 12 weeks; that is 420 hours.
Senator Trenholme Counsell: In certain areas, unless they move somewhere else for a particular species of fish, the fishing is six, eight or ten weeks, depending on the species and whatever the appropriate time is for that species when they are ready to be harvested, and there are many other factors, as you know, such as seasons and so on. It is very time limited. You might have to move to a different part of Atlantic Canada to fish something else.
Ms. Vincent: Obviously, those types of workers are subsidized through EI. They receive more than their share of what they put into the program. Again, this is a goal of the EI program. One of the goals of the EI program is regional income distribution. This is a feature of the program right now. Whether it is a legitimate goal or not could be debated, but this is included in the EI program, and in the EI rules some industries and regions are subsidized by the other workers or other contributors to the program.
Mr. Gray: There has been a little bit of research done on other countries heavily dependent on fishing, such as Iceland, Norway and a few others, and they have different ways of addressing this problem.
This is the only country which will basically pay for up to 40 or 45 weeks of employment insurance benefits per year. There is a study I know of which looked at what they do in Iceland and Norway and other fishing countries with seasonal industries. They have other ways of providing income security that do not use employment insurance in those countries.
Senator Trenholme Counsell: Thank you.
Senator Cordy: I would like to switch now to the whole issue of training. How well do we monitor and evaluate the effectiveness of the training being done? How likely are you to get a job? I do not mean a job just anywhere in the country but in a region. I am from Nova Scotia. If you are looking at someone who is 48 or 50 years old, they are much more unlikely to move to Alberta than someone who is 25.
I know of a small town in Nova Scotia where the fishing plant closed down, and they provided training for a number of women, 20 or 25 women, to become hairdressers. Maybe you need a lot of hairdressers across Canada, but for a small town of 2,000, you do not need 25 hairdressers. All of these people were trained and they have the finest looking hair in all of Canada for all the people living there.
We need to look at common-sense issues related to training. Sometimes I find that, when you look at the training people are given, it is almost the type of training to keep them in low-paying jobs. Why can we not invest — short-term pain for long-term gain — in training so that, when people finish their training, they will be eligible for a job that will get them away from the periphery and into a field where they are not likely to use EI? I think it was Dr. Gray who said, "Let us have programs to make EI benefits unnecessary." I thought that would be a wonderful goal.
If we have training programs, let us make it so that the people are much more unlikely to need EI benefits in the future. My other point of that question is that we also need evaluation.
Mr. van den Berg: You do have to have the jobs, and they do not come with training.
Senator Cordy: You are right.
Mr. van den Berg: The kinds of mistakes you are speaking about are familiar from the literature. There has been a long period where other countries have made similar kinds of mistakes with highly centralized training systems, and the emerging consensus is the only training systems that work — if they work at all — are systems that are closely tied to the local labour market in which employers are involved and where the employment office works together with the employers. The employers have to be there. If they are not, then there is not much you can do with training.
Mr. Gray: I will say that HRSDC tries very hard to evaluate the labour market development agreements. The employment benefit and support measures are all subject to five-year evaluation cycles, and non-experimental evaluation is extremely complicated to do because you have to try to find someone like the trainee, like the treated person, who is exactly like him or her except he or she did not go through the training process — what we call a control person. It is difficult to find someone who is just like the treated person so you can compare the outcome to see whether the program was effective or not. I think the government is doing as well as it possibly can to evaluate the effectiveness of these programs.
The Chair: Thank you.
Ms. Vincent: I wanted to add and pick up from what Mr. Gray just mentioned because he mentioned the exact work we are doing at HRSDC. We evaluate programs in this way, with a control-and-treatment group. We are doing work in evaluating those kinds of approaches.
You mentioned some women being retrained to be hairdressers, but there is much to be learned from recognizing the skills people already have and what we call the essential or the soft skills. Perhaps we need to better understand the skills transferable to other jobs.
There may be jobs. Employers do say they have labour shortages, and that is one of the biggest challenges they face. There are some jobs. Maybe some people do not look like they can fill the job, but perhaps with a better assessment of their current skills and some improvement of their skills, they could match the employers' needs. There is more research to be done in that, and we are doing research in that.
Senator Munson: I will keep my questions really simple here, but I like what you said, Mr. Shillington, about the OAS, old age security. I know a person rather well who is 64. The person beside me said, "You make sure that person starts to apply now for OAS." You wonder what people are doing for the next 12 months if you have to apply for OAS one year before. Is there a CSIS, Canadian Security Intelligence Service, check? Do they have to go back and check all your records? Do you have to pledge allegiance to the flag? You would think, as you said, that there would be an automatic process and they would be proactive in the federal government and do something and clean up what should be a very simple thing: You turn 65 and get OAS no matter who the hell you are, right? I find it absurd anyway. I got that off my chest.
You have given us the statistics, but we like to have take-aways in this committee. When we studied autism, we had autistic groups here. We learned a lot from people who were in their 30s who actually gave us new ideas that we put into our report that we pushed governments on to change their attitudes and minds about things.
If there is one concrete change to the program as it now exists that we could put into our report — for all we talked about simplicity — what would it be? We have all the statistics.
Mr. Shillington: I would reverse the voluntary quit rule. People who did the voluntary quit had a penalty in their benefits. They had a longer waiting period. They were not treated like the others. We do not cover voluntary quits. You rebalance the bargaining position between employers and employees in favour of the employers, and you will have noticed the lack of any increase in real wages over the last 25 years.
You can do one simple thing so that people will not be sitting in jobs they would really like to leave but cannot quit. Of course, in a proportion of jobs people quit but the record of employment shows that they were laid off. In fact, the current rule encourages — I do not have the right word but you know what I mean.
Senator Cordy: Misinformation.
Mr. Shillington: You saw the headline in The Globe and Mail. Fifty-three dollars is the average increase in average wages in the last 25 years. I just gave a talk last week to the Canadian Federation of Students. People ages 25 to 29 working full time, full year with a university degree, had an average income drop of 15 per cent. That 53 per cent hides the fact that this generation is better educated than 25 years ago and somewhat older. In fact, wages have gone down, and part of that has to be the relative bargaining position of employees versus employers. That drop in the coverage rate started in 1993. It started with the voluntary quit rule. That is my one simple one.
Ms. Vincent: I would like to comment on the idea of having to apply to OAS a year in advance. If you want quality subsidized child care services, you have to apply before the child is born or before you think about having the child. That is a long time.
I do not know if that is the recommendation, but I would like to support what you are saying, Mr. Shillington, especially since we are in the age of retraining or the recognition of new skills. With the aging of the labour force, we are in a situation where it is a good idea to leave a job and go back to school or do some retraining in order to get a better job.
This is certainly something to consider. I do not know if that is the biggest flaw in the EI program. I do not think it is. Maybe the biggest flaw in the EI program is that there are so many people who contribute to the program but do not receive benefits. I think we should address that.
Mr. Gray, you mentioned perhaps EI premium rebates for those who can never obtain their EI benefits. I think it could be marginal. It is good in principle, but I do not think it will make a big difference in the decision.
Mr. Gray: That is not a radical report.
Ms. Vincent: I did not mention much about the role that firms play. Some firms are consistently subsidized by EI.
Something we can look into is the behaviours of a firm that could be encouraged through the EI program, if we keep the program pretty much the way it is. In the program currently, there is a provision that lowers the premium paid by firms who provide short-term disability benefits to the employees. We do reward certain human resource practices by the firm because it is a private insurance program that is likely to reduce their employees' reliance on EI.
That is something to look into, the human resources practices of the firm that could be encouraged through EI. That could take the form of workplace training, for instance, if we do find this is a good practice to encourage, and it will likely reduce employees' reliance on EI.
Mr. Gray: What I am about to talk about is not my idea at all. I think it appeared in the Forget commission as well as in the Macdonald commission, and that is to have a totally separate regime for frequent and seasonal workers. I do not believe that occasional workers and people who almost never file a claim should be covered under the same regime as those who file a claim almost every year. We should have a special program that is designed to supplement the income of seasonal workers.
Mr. van den Berg: I would argue for better service delivery. If it was properly applied, I think there is an opportunity for turning service delivery into real mediators between the "client" and the agency providing the services, both in terms of navigating the complexity of the rules and, on the other hand, in monitoring and counselling the clients so they get the benefits they are entitled to and not the ones that were not meant for them. I think much can be done in that respect.
Mr. Shillington: The service delivery comment and your comment, senator, reminded me of something. I think the chair was in the room when someone from Service Canada explained why, when someone applies for old age security, they are not told they are eligible for the CPP. The official explained two or three times why it was reasonable. I had completed work about the problem of take-up of benefits and the people who are eligible but who are not receiving OAS, GIS and the Canada Pension Plan. The bureaucracy was defending the position of when one phones Service Canada to ask about old age security, they will not tell you about Canada Pension Plan benefits.
The Chair: Mr. Shillington, I mentioned this briefly earlier because you talked about using the surplus in lieu of other federal tax revenues, and having come from a government, I know something about that. I understand what you are getting at.
Is the new entity that is now being created supposed to end that? This new entity does not determine the policy of what benefits are changed. It is almost like an investment income outfit, but it is supposed to set the rate, which is the big thing. It is supposed to set the rate and base it on what is actually needed to keep the fund viable. Do you think that will end raids on the EI surplus?
Mr. Shillington: That mechanism will end raids, but the desire to use, in a sense, cheap money will not end. The EI fund was cheap money, and that is why maternity benefits are in there. This is non-partisan behaviour.
The Chair: Unless there is anything else, we have arrived at the end of the formal part of the meeting. I will formally adjourn the meeting in a minute, but Mr. Shillington would like to say something.
Mr. Shillington: I have been thinking about Senator Keon's comment about complexity. It reminded me that there is a section on my website that rails about various things.
I am struck by how, when we as a society deliver a benefit that is targeted to low-income people, we bring to it a set of concerns that make sure that we are only giving benefits to people who are truly needy. Therefore, we have taxbacks, clawbacks, asset rules and income rules, and a bureaucracy whose job it is to make sure it only goes to people who are truly needy.
In almost all of those programs, there is a parallel program that people like us benefit from, which is not based on need, obviously, and is much less encumbered. I will give one example to illustrate.
With respect to child care, if you want subsidized child care in Ontario, your income and assets must be below a certain level. If I remember correctly, $5,000 in a scholarship fund would make you ineligible, until recently. They have just changed it, but it still exists in other provinces. You cannot get child care spaces convenient to you. It might be across town because it is the closest subsidized space. That is the way we deliver to low-income people.
With respect to middle-income people, you get your child care costs and we deduct it. We will give 40 per cent of your child care costs back through the tax system.
For higher-income people, not only do they get that, but they can deduct the first so many dollars per week of summer camp. If they do not deduct the cost of the nanny as part of the costs of child care, then they should be talking to their accountant. There seems to be a constant tension.
With respect to prescription drugs, I have done a lot of work over the last decade in relation to access to drug plan coverage. I hesitate to say anything in front of Senator Keon because I am sure he will tell me if I am wrong.
With the provincial programs, such as the trillium drug program in Ontario, as your income goes up, your deductible goes up. However, if you are a senior, a deductible kicks in, and all formulary issues about which drugs are covered and which are not are in that public plan.
If you are lucky enough to be under an employer health plan, there are no formulary issues, as long as the drug is effective and available. We use the tax system to subsidize the drug plan coverage for well-off Canadians with no limit. The higher the income, the higher the subsidy and the better off you are. The subsidy increases with income. The program for lower-income people, on the other hand, has all these rules.
As one last comment, I am sure the chair will have seen the article in The Toronto Star a few months ago about the current mayor being upset when he discovered that, when he wanted to come up with a mentoring program for young adults, the parents were telling these young adults that they could not go into the mentoring program because their rents would go up as they lived in subsidized housing.
That is the system we have designed. We have designed that system in part — and my website rails against this — because those of us who designed the system, and I am including myself, do not live under these regimes so we do not have personal experience with them. We need the people who live in these regimes in the room when they are being designed to have the experience of what it is like to apply for EI. I have never received EI in my life. Have any of us? We are the experts.
Senator Munson: Is there not also the hidden issue of men and women between the ages of 55 and 65, people who have worked all their lives who are fired from the high-tech sector or any sector — not laid off; I hate that phrase. They are finished, yet they have to make it to the finish line at 65 to get OAS and the Canada Pension Plan. I have seen it with people living in poverty. They went through this labyrinth and now they have some dignity again. People are living in seniors' residences because it is the only place they could get into, to have a life, because of things that have happened.
Mr. Gray: I am glad you mentioned that, Senator Munson, because I am researching that right now. I will be presenting a paper at the Canadian Economics Association meeting next week in Vancouver, dealing with the income sources and the configuration of income of people who separate from their jobs anywhere between the ages of 45 and 65, and the ways they bridge the gap between their retirement income and the various sources of income that may or may not be available to them in that 20-year period in between.
Senator Munson: I will wait for that. Thank you.
The Chair: The Caledon Institute has a variation on a guaranteed annual income. If you are not familiar with it, you may not want to comment. It is a tiered system. Tier 1 is short-term support for employable adults. In that category, they have employment insurance. They also have a temporary income-tested kind of system to supplement people who are unemployed. These are, I suppose, some of the people who are ineligible for EI. People who get fired or who voluntarily quit might come under this temporary income program. Tier 1 is support for employable adults. Tier 2 is medium-term support for employable adults, which would be performed by the provincial or territorial governments, and these are employment support systems, the kind of thing that Mr. van den Berg was talking about improving upon. These would be the more proactive kind of things to help people get back into the employable stage.
Tier 3 is long-term support for adults not expected to be employed, including people who are disabled, et cetera. That is where basic income would come into it, very similar to a GAI, guaranteed annual income. Do you have any thoughts about that kind of system?
Mr. Gray: My instant reaction is that perhaps it has merit. I do know that Australia does not really differentiate between social assistance and employment insurance. They basically have a pretty universal system. I do not think it is connected to old age insurance issues at all. It may not be connected to a disability insurance or workers' compensation, but they have moulded social assistance and employment insurance together in one program that Mr. van den Berg can talk about.
You were asking about the Caledon Institute, which sounds like two or three tiers worth, so it would be a much broader program than the one we have now.
The Chair: It is a poverty-reduction program.
Mr. Gray: It would not be exactly a guaranteed annual income but it would be much more universal than what we have now.
Mr. van den Berg: I am not familiar with the program so I cannot tell you anything.
Mr. Gray: I have heard of the Caledon Institute but I would have to read about it. It sounds to me as if it might have some merit.
The Chair: Thank you for your engagement in the dialogue. It has been very helpful to us.
The committee adjourned.