Proceedings of the Standing Senate Committee on
National Finance
Issue 13 - Evidence - October 7, 2009
OTTAWA, Wednesday, October 7, 2009
The Standing Senate Committee on National Finance, to which was referred the subject-matter of Bill C-50, An Act to amend the Employment Insurance Act and to increase benefits, met this day at 6:31 p.m. to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I call this meeting of Standing Senate Committee on National Finance to order. I welcome all honourable senators and our witnesses.
Last week we began our pre-study of the subject matter of Bill C-50, which is presently before the House of Commons. At this meeting we will continue that pre-study, which we do before actually receiving the bill. We know the contents of the bill, and the pre-study helps us to be ready when the bill does arrive.
On this panel we are pleased to welcome, from the Canadian Federation of Independent Business, Ms. Corinne Pohlmann, Vice-President of National Affairs. She is accompanied by Mr. Dan Kelly, Senior Vice-President of Legislative Affairs. Also with us this evening is Mr. Charles Cirtwill, Executive Vice-President, Atlantic Institute for Market Studies, which is based in Halifax, as I recall.
In the second half of this meeting we will continue with these witnesses and two others will join us: a representative of the Canadian Labour Congress and a representative of the Canadian Centre for Policy Alternatives. We were short on time yesterday and did not finish our questioning of them.
Corinne Pohlmann, Vice-President of National Affairs, Canadian Federation of Independent Business: Thank you for the opportunity to present the small-business perspective on Employment Insurance and Bill C-50. I will walk you through a slide deck, and my colleague, Dan Kelly, will help answer questions when we get to that portion of the meeting.
The Canadian Federation of Independent Business, CFIB, represents more than 105,000 independently owned and operated businesses across Canada. They are all small and medium-sized enterprises, SMEs, and collectively they employ about 1.25 million Canadians. They account for about $70 billion in GDP. Our members come from every sector of the economy and are represented in every part of the country.
Most people do not realize how big small business is in Canada. On Slide 3 you see that 98 per cent of all businesses in Canada have fewer than 50 employees. They employ 60 per cent of all Canadians and they represent almost half of Canada's economic output. They have also been responsible for the bulk of net new jobs in our economy. This is especially true during more difficult economic periods.
Speaking of more difficult economic periods, the past year has not been easy for many, and small businesses are no exception. CFIB produces a monthly business barometer that tracks the expectations of our members along with a number of other economic factors. Our most recent index, released just today, is on Slide 4 of the deck. It shows that SMEs' outlook dipped quite dramatically during the latter part of last year and earlier this year, but it been picking up since April, and this upward trend has continued into September, leading us to suggest that the economy is making its first tentative steps toward recovery.
The good news, on Slide 5, is that the level of optimism is up right across the country, and for the first time in many years it is our members in Ontario who are leading the country on this measure.
On the next slide you will see that the manufacturing sector is also among the most optimistic sectors, leading us to believe that those manufacturers who have been able to adjust and survive the downturn of the last few years are starting to come out the other end with renewed hope and optimism.
However, as you can see on the next slide, while optimism is growing, hiring plans remain on hold for now. Sixteen per cent plan to increase their full-time employment and 13 per cent plan to decrease it over the next few months. These results are not unusual during times of economic recovery as employment plans tend to lag economic growth. As employment growth is essential to the recovery of a real economy, we must be cautious of decisions that might end up deterring job creation going forward.
I would like to give you a quick glimpse at a new report on the small business perspective on EI. You each have a copy of a report called Ensuring Prosperity, which goes into detail about a variety of issues related to Employment Insurance. I will focus on only a couple of issues that are relevant to this discussion.
First, this survey was conducted in 2007 when the economy was doing well and unemployment was at around 6 per cent. Even then, as you can see on Slide 8, more than one in five small business owners felt that they were competing with EI to hire people, and in some parts of the country this went up to about one in three business owners.
Second, you should know that it was clear from our survey results that small business owners support the fundamental principles of EI to provide short-term financial assistance to workers who are between jobs, and for the most part they were relatively satisfied with the regular benefit side of the program. For example, as you can see on the next slide, when asked how the system could be modified to meet the needs of their business, the largest group would rather see no changes to the current benefit levels or current qualifying periods. In fact, a majority want no change or less generous benefit levels or qualifying periods going forward.
Therefore, instead of making changes to the benefit side of the system, CFIB believes that the most effective way to assist long-tenured workers is to help them get trained and back to work as soon as possible.
Another report CFIB released last May, entitled Canada's Training Ground: SMEs' $18 Billion Investment in the Nation's Workforce, found that when you calculate the costs associated with formal and informal training, smaller companies actually invest more in training per employee than do larger companies. This is illustrated in detail in Slide 10.
Combining this with the fact that organizations like the Organisation for Economic Co-operation and Development, OECD, have found that the most effective means of helping people get back to work is to provide on-the-job training incentives, we believe that providing an EI training credit to small employers would be a much better investment of EI training dollars and would likely go a long way in helping to create job and training opportunities for many long-tenured workers.
Our biggest concern with this bill and the EI system overall is the additional costs being added to the EI program, which will result in skyrocketing EI premium rates just as we are getting out of recession.
First, as you can see on the next slide, small businesses themselves have identified payroll taxes as having the biggest effects on the growth of their businesses, because when you increase the cost of payroll taxes like EI, you discourage hiring and fewer jobs are created.
What kind of EI increases are we talking about? The current EI rate freeze, which is in effect until 2010, has been very welcome policy as it has allowed many business owners to hold onto their employees through a very difficult economic period. However, it has become clear that the government also plans to charge back the two-year EI rate freeze to the EI account, which would require the new Canada Employment Insurance Financing Board, the CEIFB, to pay back an additional $10 billion to $13 billion to the government with interest, and the only way it can do that is through increasing EI premiums. As they are limited to annual increases of 15 cents for employees and 21 cents for employers, we foresee maximum premium rate increases for both employers and employees for many years to come, as illustrated on Slide 12.
By passing Bill C-50, yet another $935 million will be added to the total amount that the CEIFB will be expected to pay back through premium rate increases for several years to come.
Turning to the next slide, you see what this might mean for an employer or an employee. Taking the most pessimistic scenario, which is also the most likely scenario given what we currently know, we expect that between 2011 and 2015 EI premium rates will increase by 65 per cent. This will ultimately discourage job creation at the worst time, as the economy will just be starting to emerge from its employment slump. Ironically, the $935 million to help long- tenured workers with additional benefits may end up contributing to making their job prospects worse as employers watch the cost of hiring go up and the take-home pay of their employees go down.
What makes this whole scenario even more frustrating is that a $57-billion surplus has accumulated in the EI account from 1994 to 2008, as shown on the next slide. We would have no objection to the government's requiring the CEIFB to pay for additional EI costs as a result of the current recession if the government would repay the $57 billion first. Instead, the new CEIFB was provided only $2 billion as an initial reserve, which, given the scenario I just described, will be easily wiped out in the first year. We strongly believe that the federal government has a moral obligation to pay back the surplus accumulated from employers and employees by absorbing additional costs and maintaining a premium rate freeze until the full $57 billion has been paid back.
Finally, we believe that no real discussion about Bill C-50 can take place without understanding the much broader fiscal issues related to the EI system and dealing with them as well.
In conclusion, we suggest that an EI premium rate freeze be maintained beyond 2010 to ensure future job creation is not harmed by payroll tax increases; that CEIFB be properly funded to withstand recessions and additional costs by repaying the $57-billion surplus; that selective changes to enhance benefits be avoided, as they are unlikely to result in the successful restructuring of the program and will likely only harm the financial balance of the system; and that an EI training credit be created that encourages hiring and workplace training as an alternative means of assisting long- tenured workers and others on EI so that they can get effective training and have better access to new jobs that are being created.
The Chair: Thank you very much. You raised a number of interesting points, and I am sure honourable senators will want some clarification on some of them, but first we will hear from Mr. Cirtwill.
Charles Cirtwill, Executive Vice-President, Atlantic Institute for Market Studies: Thank you for the invitation to join you this evening. In discussing Bill C-50, we first need to consider what exactly this bill is intended to be. Is it stimulus, or is it EI reform? If it is stimulus and stimulus alone, then it is markedly better than many other aspects of Canada's Economic Action Plan so far. It arguably fits all of the conditions for the gold standard of good stimulus — timely, targeted and temporary. If it is EI reform, at least it has the merit of being unambiguously temporary. It also does not necessarily, as an EI reform, make the current situation worse in that apparently it does not unduly inflate the current negative incentives already built into the system against work. It also, to a certain extent, returns some of the EI surplus stolen from workers over time back to the people it was stolen from, or at least it would if we end up not using eventual increases in premiums to pay this extension of benefits.
Now, first, let us consider the stimulus question. The gold standard for stimulus, as I said, is the oft-repeated phrase "timely, targeted and temporary." Bill C-50 clearly intends the benefits to be temporary. The closing date for applying for the expanded benefits is September 11, 2010, and so payouts will cease naturally as eligibility expires through to the fall of 2011. However, like all stimulus, the initial spending might be temporary, but the long-term costs of the spending are not. In this case, again it comes back to the big, unanswered questions: Who pays this bill in the long term? Will the cost of the increase in EI benefits be picked up by a transfer of funds from general revenue, a return of some portion of the EI surplus, or will it be paid by increased premiums after the recession has ended and recovery starts?
I have listed those options in the reverse order of attractiveness. In my view, a premium increase is the worst option for paying the bill. While specific stimulus efforts should indeed be targeted, they are not meant for the exclusive benefit of those targets. Stimulus is explicitly intended to benefit us all, and so we all should help pay the bill when it comes due. Indeed, depending on the size and timing of any of these premium increases, or a delay in needed premium decreases, making these funds up in the manner of premiums might actually hinder recovery, as you have just heard, by impeding reinvestment, slowing job growth and slowing re-employment of the very people this bill is targeted to help.
This allows me to move naturally to the theme of targeting. Bill C-50 is clearly targeted at a class of workers known as long-tenured workers, people who have, for the most part, been working and paying into EI and, for the most part, have not really been drawing it down. It could be said that, in fairness, they have some equity built up in the Employment Insurance fund and, in a time of challenge, they should be allowed to draw it down.
That being said, it is also targeted to a certain extent geographically. This occurs because of the manner in which long- term workers are not distributed evenly across the country and because of the disproportionate impact this downturn has had on certain sectors and certain regions. It could be argued that targeting the hardest-hit employees in the hardest-hit regions would seem to make sense, or that, more accurately, adding this new stimulus to all the other stimulus steps that have been taken to help these and other workers and employers arguably makes sense.
This brings me nicely to the question of timeliness. The recession came in earnest to Canada in late 2008 or early 2009, depending on who is doing the counting and what exactly they are counting in making the assessment. Some say it has bottomed out; others say it has turned; and others say a new dip is coming and the world will end tomorrow. Most, however, would agree that we are getting a little bit late in the game for major new stimulus, and few are predicting the need for stimulus well beyond 2011. Remember that this bill will continue to deliver stimulus out to the fall of 2011.
Before we judge Bill C-50 as being too much or too little too late, we need to recall that it is the latest in a series of EI tinkers that were all about stimulus: the expansion of benefits to all recipients by five weeks, making that offer actually richer in areas of higher unemployment, the freeze on EI premiums at the 2009 level for all of 2010, and two other specific steps targeted at this group of workers already, the early eligibility for EI if you use some of your severance funds to pay for training, and the extension of EI benefits for up to two years while you actually engage in that training to retool your tool kit. It seems to me that if we are placing this as bricks on a scale, we are getting awfully close to just right, and perhaps we are erring a little bit to too much, at least as far as assistance to long-tenured workers goes.
That brings me directly around to this bill as EI reform, because the principle challenge we have with our current EI system is indeed the question of too much. The issue here is that the system as currently designed and delivered acts as a disincentive to work. According to a study funded by the Canadian embassy in Washington and completed in 2007 by researchers from the University of California at Santa Barbara, the Canadian EI system actually explained about two-thirds of the gap between the rate of steady employment for men in New Brunswick versus in neighbouring Maine, and it actually explained essentially the entire gap for women in that province and that state. In New Brunswick, as of 1990, slightly over 20 per cent of employed men worked less than 26 weeks a year. In Maine, that number was 6 per cent. The gap was actually worse for our less-educated workforce. The researchers' basic message is simple: we pay people so much not to work that it makes absolutely no sense for them to work. That is especially the case when they can combine EI with seasonal wages and under-the-table transactions and walk away considerably better off than they would be if they took full-time employment and regularly remitted all of the provincial and federal income and payroll taxes associated with that effort.
Can we fix that problem while also dealing with the other problem of the large numbers of unemployed who are not being helped at all by the current EI system? The answer to that question is that absolutely we can. In discussing unemployment, particularly in a recessionary period, it is vital to recall there are three types of unemployment: cyclical, structural and frictional. Cyclical, the cataclysmic type of unemployment that occurs via a wonderful economic phrase, "creative destruction in a time of recession and market adjustment," is exactly the type of unemployment that our federal program was meant to address, and of course it is exactly the type of unemployment that our system deals with least effectively. Note the list of changes around EI since this fiscal downturn began. If EI were ready to handle a cyclical downturn, those kinds of tinkers should not have been necessary. See also the large number of unemployed workers, many but by no means all who are unemployed through no fault of their own in the current downturn but who do not benefit at all from EI today, either because they are not allowed to pay into it or not allowed to draw out of it.
In a paper recently published by my institute and provided to the committee earlier today, economist Robin Neill, from the University of Prince Edward Island, the chair of our research advisory board, argues that we have a golden opportunity to remake Employment Insurance into what it was intended to be, while at the same time effectively responding to the problems we unintentionally created by making EI other than what it was supposed to be.
First, he argues that we need to separate our response to cyclical unemployment from our response to structural and frictional unemployment. Second, we need to fund our cyclical response from general revenues, not from premiums; and the target group of our cyclical response should be the cyclical unemployed, to the extent that we can accurately identify them. Bill C-50, interestingly enough, as long as the funds for it do not end up coming out of premiums, comes close to the model that Mr. Neill is suggesting.
That being said, he argues we should also, at the same time, take a serious look at structural and frictional unemployment and deal with that through a true insurance program, with experience rating, bonuses for good behaviour, and impacts both on premiums for employees and employers, as well as benefits. In such a scheme, no one who has paid into EI goes without EI when they lose their job. Their benefits may not be as substantial or last as long as the benefits of those who have paid more or made less risky career choices, but benefits and protections they would have.
We have a system for workers' compensation, for instance, that works exactly in this way. It is entirely experience rated. Why not for Employment Insurance?
The Chair: Thank you very much, Mr. Cirtwill. We did not have a copy of your remarks. Are you able to provide us with that?
Mr. Cirtwill: Yes.
The Chair: That will be helpful for us in reviewing your comments.
Ms. Pohlmann, you used a figure for the cost of the initiative that is in this bill, and you referred to initiatives in other legislation — Bill C-10, which this committee dealt with as well. In this bill, Bill C-50, which deals with experienced workers with a low experience of drawing on Employment Insurance, we were told by the government officials last week that they anticipated a cost of $1 billion. You have been using a figure of $930 million.
Ms. Pohlmann: I said $935 million. That came from the department as well, from Human Resources and Skills Development Canada, HRSDC.
The Chair: Did I misunderstand the evidence previously of $1 billion, or were they just rounding up?
Ms. Pohlmann: I think they were rounding up, from what I understand.
The Chair: By $65 million. Okay.
Dan Kelly, Senior Vice-President of Legislative Affairs, Canadian Federation of Independent Business: We had that number confirmed as recently as this morning.
The Chair: So we should think in terms of $930 million.
Mr. Kelly: $935 million.
The Chair: I am rounding down.
My recollection is that Bill C-10 contained a specific provision for the government to top up the fund for the cost of the initiative that they anticipated. I hesitate to use the figure because I will probably get it wrong, but there was a specific provision there.
You do not see that in this legislation. We have to assume, therefore, that they — being the drafters of this bill — are making the same assumption that I think the Canadian Federation of Small Business is making, which is that it will have to be paid for from premiums of those people working over the next several years once we get by the ramp-up again.
Ms. Pohlmann: That is correct.
The Chair: The Atlantic Institute for Market Studies, Mr. Cirtwill, you keep saying this is great "as long as." On what do you base your assumption that the workers of the future will not be called upon to make up that $935 million?
Mr. Cirtwill: Based on the bill I have seen, the assumption is they will be called on to make it up. That is totally inappropriate for a multitude of reasons, not the least of which being the moral imperative around the $57 billion that the federal government borrowed from EI and does not seem to have any intention of ever paying back.
The Chair: Your recommendation to this committee would be that we recommend to the government that they make the same provision as they did in Bill C-10, to top up the fund for this $935-million initiative, rather than requiring the workers to pay for that. Is that correct?
Mr. Cirtwill: To be frank, I would suggest that any time EI legislation comes in front of you, you should take the opportunity to encourage the government to give it all back. That being the case, at a minimum, that provision should be in this legislation, yes.
Mr. Kelly: One reason groups like ours were complimentary about some of the budget initiatives around these temporary measures was that the government did make the commitment to pay those additional program benefits, the temporary ones, out of general revenue rather than calling on the fund to pay that back. The number was around $2.9 billion in money that would be transferred from general revenue into EI to pay for those benefits.
We are concerned because we have had it confirmed as recently as today that the government's intention is to require that the fund pay the additional $935 million cost of this initiative. Plus, of course, once the EI rate freeze comes off, the increased use in EI would also be called back on the EI fund, which has a total allocation of about $2 billion.
Right off the hop, we will be billions and billions of dollars in deficit come 2011 in the EI fund. That is totally inappropriate, given that $57 billion was taken from workers and employers over the last decade.
The Chair: I want to bring to honourable senators' attention that we had asked for one other group to be here this evening, the Canadian Association of Retired People. Although they are not involved in paying into or drawing from the Employment Insurance program, they do have an opinion. They were not able to be with us this evening, but they prepared a letter dated October 7, 2009, which will be circulated to all honourable senators in due course in both official languages.
[Translation]
Senator Carigan: Welcome to the Finance Committee. Some witnesses have suggested additional changes to employment insurance such as eliminating the two-week waiting period or changing the retroactive effect of January 2009, perhaps by backing it up an additional year to 2008.
I would like to hear your comments about these suggestions? Should we consider them?
[English]
Mr. Kelly: I can begin. At CFIB, we outlined some survey data from our members. I think that is on Slide 9. This came out of our research study.
Small businesses accept the basic principles behind Employment Insurance. They accept that if someone involuntarily loses their job there should be a form of income support upon which they can draw for the future. When we ask our members whether that system is too generous, not generous enough or about right, the majority say the mix is about right or should perhaps be less generous than is the case today.
We do not have to look too far back, only a couple of years in fact, where one of the biggest issues affecting small and medium-sized businesses was the shortage of labour. Our members were absolutely paralyzed in many cases, particularly in Western Canada, where they could not find the workers they needed to put their products and services to market.
Employment Insurance, to the extent that it serves as a form of income support that people choose to stay on longer than is necessary, does worry many small firms. Therefore, any steps that are made on a temporary basis to make the system more generous worry them deeply.
They are worried about rates, because they know the cost of those benefits will be borne by the very people who are being asked to create jobs. At the same time, they worry about having people who might otherwise be employed on some form of passive income support. For those reasons our members do not favour making the program more generous.
For the most part, employers have favoured these measures that the government has taken over some of the other suggestions, such as reducing the number of hours for eligibility. Those would be more dangerous, from our perspective, than these changes. That does not mean we are in love with all of the changes, but we see them as less harmful than some of the proposed alternatives.
I would note that temporary measures quickly become permanent, and it is often difficult for governments to pull back on measures created on a temporary basis. Reducing things like the number of hours of eligibility, for example, worries us deeply, because when the economy turns around, government would find it difficult to move back from that position. We do not necessarily love the patchwork quilt that exists in Canada now in terms of the hours of eligibility across Canada, but we are loath to see any policy changes that might upset that balance.
The Chair: Would anybody else like to comment on that?
Mr. Cirtwill: In response to the proposed changes floating around the conversation, it comes back to the importance of differentiating between a response to a cyclical issue, which is the recessionary downturn, and the issues that are of concern to the members of the CFIB around frictional structural unemployment and the difficulty of attracting workers over the long term. Do we need to respond more aggressively? Are there additional stimulus steps we need to consider for Employment Insurance over the short term? Perhaps the waiting period is the most reasonable one to discuss. Again, it is a question of being explicit about how long you are waiving that requirement and about where the funds will come from. I agree wholeheartedly with Mr. Kelly that the big issue around many of the proposed changes is how to turn the taps off when the recession comes to an end. One of the benefits of Bill C-50 is that it has an explicit timeline. It is too generous, but at least it is explicit.
The Chair: How to turn the taps off when the recession is over is an interesting poser. How do you know when the recession is coming to an end?
Mr. Cirtwill: There is a technical definition: two quarters of positive growth.
The Chair: It is okay now to start turning the tap off.
Mr. Cirtwill: I would suggest that taking it to 2011 will probably be 10 to 12 months too long.
The Chair: Do you have a concern about the second dip in the economy that is being discussed?
Mr. Cirtwill: I tend to be in the square root camp that believes we will have a dip, a stop, and then it will sit for a while.
Senator Mitchell: Thank you for the interesting presentation. I am setting aside for a moment the question of the debt owed and who paid the $57 million. It is a compelling argument that businesses and employees are owed that.
I am interested in knowing where you would get the money. Are you suggesting increased taxes? Are you suggesting that we bump this government's deficit from $56 billion to $113 billion overnight? Are you suggesting that you do it incrementally, perhaps?
Mr. Kelly: The $57 billion was not taken from Canadian workers and employers overnight. There would not be any expectation on our part that it be paid back in any lump sum. The governments have looked and continue to look, in good times and in bad times, at the tax system to determine whether there is room for reducing taxation in different areas. We must remember that EI is a form of tax. This fact is often overlooked, even in the current discussions. The government has committed to not increasing any taxation, except it does seem to be fairly silent in terms of what will happen to Employment Insurance premiums, which are expected to rise, including their own estimates that show that Employment Insurance premiums will rise. This is a form of tax. There are no illusions that it will be paid back overnight. That is one reason we complimented the government's budget action: the $2.9 billion in enhanced benefits that was announced, which may be higher than that, was some form of repayment of the EI surplus back into the fund. If the government were to pick up the cost of these other benefit enhancements through the general revenue fund, it would serve as another contribution toward paying back the $57 billion that was taken in surplus.
We would like to see the government put in enough money to ride out such recessions in the future. We figure that putting at least $10 billion to $15 billion into the EI fund to start it up instead of $2 billion would allow us to go through periods like this without having to turn on the taps of premiums, risking the job creation.
Senator Mitchell: In the absence of that, which you know will not happen, this government will increase taxes in order to make this program work. It will be increase taxes on small and medium businesses and on individual workers.
Mr. Kelly: It is hard to argue that. Unless something happens in the coming months, it appears that the government will be increasing payroll taxes. As our presentation noted, payroll taxes are the worst form of tax to increase in times when you are counting on employers to create more jobs.
Senator Mitchell: I believe I heard the Prime Minister say exactly that, but there he goes.
I have tremendous difficulty believing this main study and going from 46 per cent in New Brunswick to 6 per cent. I would love to see a copy of the report and analyze it if I could get that from you, Mr. Cirtwill. I do not believe that Employment Insurance at $1,400 per month — $350 a week — makes people not want to work. I would like to see the evidence to support your comment that people are not only receiving $350 per week from EI but also receiving money under the table. I find that to be the kind of aggressive argument that had better be defensible because it is so corrosive of a proper policy debate. Do you have evidence that people on EI take extra money under the table? If you do, could you give me some names, because we would like to turn them in.
Mr. Cirtwill: I will answer it this way: First, the numbers are 20 per cent and 6 per cent — a 14 point gap. Second, it is not that they do not work, but rather it allows them to take seasonal work. You cannot think of it as a replacement of income, it is a supplement of part of income. In terms of the black market and operations outside the taxable environment and employment, there are any number of studies that give you estimates on the size of that economy in Canada. Whether there are regular EI participants, I cannot give you individual names.
Senator Mitchell: You certainly implied that.
Mr. Cirtwill: No, sir, I did not.
Senator Mitchell: In the context of discussing EI, you said that they are taking money under the table. That is very aggressive.
Mr. Cirtwill: Senator, I said that in an environment where you can combine EI and seasonal wages and the opportunity of making money under the table, it actually allows you to be better off than taking a full-time job. The simple fact is that there is a sizeable underground economy in the province of New Brunswick, sir. Can you guarantee me that no one receiving EI is participating in that? We are having a silly debate.
Senator Mitchell: I did not make the assertion, you did. It raises another question. What if we did not have EI at all?
Mr. Cirtwill: People would go to work.
Senator Mitchell: What would happen to seasonal positions?
Mr. Cirtwill: Most seasonal jobs would stop, sir.
Senator Mitchell: What would happen to seasonal companies and businesses?
Mr. Cirtwill: They would go out of business.
Senator Mitchell: Do you want fisheries, forestry and agriculture to go out of business?
Mr. Cirtwill: No. Let us be clear. Many seasonal companies can mix and match their employees so they end up being able to employ them year-round. There are many fishing companies and agriculture companies that operate year- round. To assume that entire industries depend entirely on the seasonal capacity is just silly. It makes no sense to me that you are making this case.
The Newfoundland fishery has not expired. It is there; it is more sustainable. The companies that came out the other end are better and stronger today for the lack of constant investment and help from this table and others around this city.
Senator Mitchell: It is important to be able to imagine what it is like to be someone else. If you were someone else and you had lost your job and you had two children and you could not find a job, what would you do? That is what EI is about. It is about sustaining economies like the economy that sustains you in your job, my friend, because they pay taxes.
Mr. Cirtwill: Did I ever say that anyone should not get EI? Did you hear that anywhere in what I just said?
Senator Mitchell: I just feel that that is the logical conclusion of what you argue.
Mr. Cirtwill: Well, you would be absolutely wrong, and clearly your logic is flawed.
The Chair: That seems pretty clear. We will move right along.
Senator Eggleton: My quarrel is not with Bill C-50. I believe Bill C-50 is a good provision. It is what it does not provide for that concerns me, when I hear that more than half of unemployed Canadians do not qualify for EI. Some of those people actually paid into EI, although many of them have not and for various reasons do not qualify.
In this recession many people who are suffering cannot collect. Even for people who can collect, there is a waiting period and there are changes from one region to another in terms of how many work weeks are required. The benefit level is far below what they are accustomed to for income, and it is a pretty difficult burden for many. What do we do beyond Bill C-50 to correct this problem?
Mr. Cirtwill, I have heard you talk about the criteria for dealing with a stimulus in terms of this kind of measure. I heard you talk about experience rating. You must have some ideas about how EI should be reformed. What would you do with EI to make it better? Would it involve an increase in premiums or would you take that out of tax revenues? What would you do about the many people who currently do not qualify for EI?
Mr. Cirtwill: To be clear, if you are taking it out of EI premiums, you are taking it out of tax revenue — full stop. Mr. Kelly was polite enough to say that EI is a form of tax, but EI is a tax that is distributed.
Senator Eggleton: It is not general revenue.
Mr. Cirtwill: Well, you have been treating it like general revenue for a long time.
Let us get back to the question of what I would do to make EI better in these times. First, what scares me the most about Employment Insurance and this recession is what is being labelled in United States "the jobless recovery." I have a 30-minute walk to work every day and I cannot go 25 feet in the city of Halifax without seeing a help-wanted sign. At the local gas station there is a sign on the pump handle that says "No Resumé, No Problem."
The fact that we have a clear and challenging problem with small businesses finding employees at the same time as we are seeing jobless numbers go up scares me. We need to find a way to make those jobs more attractive to people. That may require a massive increase in the working income tax benefit or changing EI to get back to an experience- rated system to allow people who currently would not qualify to qualify more easily. All of those things should be on the table and should be discussed.
The current problem is that the only conversation we are having is about stimulus measures that are intended, on a short-term basis, to respond to the immediate challenge, and we have an opportunity before us to solve the bigger problem at the same time.
Mr. Kelly: No one in the employer community glamourizes the plight of the unemployed. No one is happy when someone is collecting Employment Insurance rather than working, and no one believes that people are rubbing their hands together saying, "Hooray, I am getting Employment Insurance; I don't need to get back to work."
We are concerned and we do want people back to work. Employers need them to be employed. Our members are struggling at this point in the economic cycle to ensure that they can create those jobs and ensure that those people are well paid and well trained.
Far better than confining the debate to what we can do on passive income support, we need to change the debate and look at how we can get Canadians back to work in the jobs that exist now, how we can help to stimulate growth in new jobs in the economy, and also how we can do a better job of training people for the jobs that exist today and the jobs that will exist tomorrow.
We have put forward some practical approaches and have borrowed from an approach from the previous government — the new-hires program in Employment Insurance. This program was tremendously successful and provided an EI holiday for employers when they created new employment in their workplace. It was administratively very simple. We did not need a team of people or a massive amount of start-up time to get the money flowing. If your payroll went up for any reason, you were able not to pay the premiums on that additional amount in your payroll. If your EI premiums were $600 a month and with the number of employees you have hired now they would be $750 a month, you would not have to pay that additional amount.
That returned dollars to employers and allowed them to put that money back into employment and not pay it out to government in the form of a payroll-based tax. We think something like this could be designed around hiring and training. Our research study showed the massive investment that small employers make in informal, on-the-job training without any form of government support, whereas other forms of training have large amounts of funding. We believe that this would be a way, building on a program that the previous government had in place in the early 1990s, to help employers create jobs and train their staff. This is the kind of measure we think would do more to help long- term unemployment rather than putting it back into the benefits equation. Unfortunately, the idea has not been accepted to date.
Senator Callbeck: Thank you for coming this evening.
I read in the conclusions of the CFIB that you want to avoid selective changes to enhance benefits. What is your position on what women entrepreneurs have been asking for for years, which is to be able to pay into a fund so that they could draw maternity benefits?
Ms. Pohlmann: You are asking about parental leave. We have asked our members about that, and we asked about the principle that was put forward by the Conservative government in their election platform on whether there should be a voluntary system for parental leave for the self-employed. Our members across the country supported it to a small degree. They are not heavy supporters of it, but they are more in favour of it than opposed to it.
In principle, we are not opposed to it at all, and we think it could be looked at. Our concern is how it would work in practice. We are waiting to see what proposals might be coming out on this type of an initiative before putting our support behind it. It is difficult to know how a voluntary system could work in principle and practice.
Mr. Kelly: Another point on parental leave for the self-employed is who would pay for it. That will be the big question. Quebec currently has a system that does exactly that, but it is in part paid for by the general employment insurance tax base in the province.
If it is a purely voluntary system, one concern is that probably the only people who will join that system are those who are expecting to use the benefit. In any type of insurance system in which the only people who pay into it are the people expecting to draw from it, the premiums have to be gigantic in order for it to be self-funding. The alternative is that it is paid for through the general EI tax base, and of course the cost of that would be rather significant in the years ahead.
As Ms. Pohlmann noted, there is general support among the self-employed and small business for a measure like that. If we are really being honest about it, the parental leave component is a social program more than it is a core form of employment insurance. We feel that perhaps an initiative for parental leave or for maternity leave might be better funded through general revenue than through the EI tax base. At the same time, there is overall support for such an initiative.
Senator Ringuette: I find your comments on this issue very interesting. The premise of your comments is that it would be against experience rating.
Mr. Kelly: Are you speaking to us?
Senator Ringuette: Yes, because of the comments you just made in response to Senator Callbeck's question.
Mr. Kelly: Experience rating for the general EI fund?
Senator Ringuette: Yes, in regard to parental leave for women entrepreneurs. You said it should come from the general fund. Otherwise, the cost would be so high.
Mr. Kelly: I was not taking a position at this stage. We are committed to going back to our membership. We understand that the government is likely to make some announcement on that in the days ahead. There have been media stories to that effect over the weekend. We are waiting to see. Once we have the design parameters around the program, we are prepared to take it back to our tax base. I was just talking about the two alternatives, not suggesting what CFIB's view would be.
Mr. Cirtwill: If you do not mind, I will take a position on that. We have to differentiate here between the Employment Insurance system, which is about workers and the workplace, and parental leave, which is not really about the workplace at all. It is about society and the need of society to have our families replace themselves. It is about the impending demographic shift, our aging workforce and the need to have family supports. The fact is that having women who are able to leave the workforce have children and their spouses support them and to share that burden with the rest of society is a value to all of us. From that perspective, recognizing that the primary beneficiary of any parental leave program is society as a whole and not specifically the worker or the employer, then it makes the case, and in fact there is a theoretical economic argument around this that it should be funded from general revenue and not on a payroll tax basis.
Senator Callbeck: Thank you for your position.
You talked about New Brunswick. I believe you said 20 per cent work less than 26 weeks.
Mr. Cirtwill: As of 1990.
Senator Callbeck: Do you have a breakdown on that? I am wondering what percentage comes from tourism, as we have probably four months of the year that they can work, and what are they going to do the rest of the year? We have a very seasonal workforce in our area. If there are not the seasonal workers, who will be there to look after that business?
Mr. Cirtwill: Remember that one of the nice things about the tourism industry is that it is almost a mirror image of the post-secondary structure we have. Many of the workers in the tourism industry are students. In that perspective, those two mesh nicely. It is not all of them, but it is a relatively decent fit.
I do not see in the appendices of the study a breakdown by industry categories. Certainly, at Senator Mitchell's request, I am happy to give the committee copies of the entire study, since the Canadian taxpayer paid for it.
Senator Callbeck: Thank you.
Senator Gerstein: Ms. Pohlmann, am I correct in recalling that the Canadian Federation of Independent Business issued a release in May of this year, I believe, indicating that rather than examining an expansion to Employment Insurance benefits, which can hurt a firm's ability to find staff, government should consider helping SMEs by making it easier to hire and train new employees?
Ms. Pohlmann: Yes.
Senator Gerstein: That statement was made?
Ms. Pohlmann: Yes.
Senator Gerstein: Would you agree that the government is on the right track with the programs they have set up for training? I understand there is $500 million for training long-tenured workers, an additional $1.5 billion for training for those who do not qualify for the benefits, on top of the $2.5 billion available annually, and an additional $60 million for the targeted initiative for older workers because older workers have invaluable knowledge and experience and potential left. Is that the kind of track you are on?
Ms. Pohlmann: That was based on a report we did in May that talked about the training that is taking place at small and medium-sized companies across the country. We were referring more to the program that Mr. Kelly referred to earlier, talking about EI incentives for training at small and medium-sized companies based on the new-hires program. Our concern with many of the programs put out by the federal government at this time, and this comes up strongly in our Ensuring Prosperity report that just came out, is that over $2 billion is currently spent on the second part of the EI program, which is all based on training. It includes some of what you talked about, but some of that was also extra things that came beyond that. Our concern with that type of training is that there is not a lot of measurement around the effectiveness of that training. In fact, much of that training has been in place going on for 10 or 15 years, and many of those things were developed at a time when the unemployment rate was higher than it is right now. Those types of programs are not necessarily seen as being that effective anymore in getting people back to work. Our suggestion is that perhaps we need to rethink how we look at EI and how the training dollars are being used. We are not sure whether there is proper measurement around some of these initiatives that the government has put forward to see whether they are effective in getting people back to work. We believe the most effective way to get people back to work is to help integrate workplace training, and one way to do that is to provide incentives in the workplace.
Senator Gerstein: You are agreeing that training is part of how you get people back to work.
Ms. Pohlmann: Absolutely.
Senator Gerstein: I would be interested in your views of how the work-sharing program is going.
Ms. Pohlmann: We actually are big fans of the work-sharing program. We have been promoting it strongly throughout this downturn. There was a simplification of the program just at the beginning of the downturn in the economy, as well as some explanation of that program. We know that as a result of the simplification more and more smaller companies have been able to take advantage of it and hold on to their employees through some difficult times.
Mr. Kelly: I will add that we have received some feedback that the program is still a bit above the heads of many small entrepreneurs. The amount of paperwork and the bureaucracy associated with the work-sharing program has, through many calls to our offices, been still rather significant. It has come a long way.
As we noted earlier, the measures that were taken in the January budget on the expansion of benefits were, for the most part, areas that we did not oppose. We think a lot good is going on right now and choices that were made were better than some of the alternatives that the government was being asked to make. The ideas that were being floated at the time were very worrisome to CFIB. None of the proposals that have been put in place to date, including this new one, scare us as much as some of those alternatives that were floated.
On the training side, I should say the track record of the training that has happened through that Part 2 has not been good. In fact, some of the limited amount of research that has been done said that the benefits have been marginal at best from the training dollars that have been expended through the EI fund. These days those dollars are primarily turned over to provincial governments to spend. We are very concerned and in fact suggest that rather than having new money allocated to Employment Insurance for training, we retarget some of the existing training dollars towards new, innovative approaches like the one we suggest.
The Chair: Senator Gerstein, we will, with your permission, expand our panel now. If you have any other questions, Senator Gerstein, you can carry on with the full panel. These people will be staying. Do not worry; they will all stay here so you can ask questions.
Colleagues, together with our witnesses from the Canadian Federation of Independent Business and the Atlantic Institute for Market Studies, joining us are Barbara Byers, Executive Vice-President, and Andrew Jackson, Senior Economist, from the Canadian Labour Congress.
Mr. Jackson, you were not here last evening, but Ms. Byers was. I am sure she has had an opportunity to tell you a little bit about the process here. We try to keep our replies as succinct as possible so that everyone will have an opportunity to reply.
From the Canadian Centre for Policy Alternatives, Armine Yalnizyan is able to join us again, and we appreciate her accommodating us in that regard.
Senator Ringuette: Please do not take any offence, because in my head, I am still on the first round with our first two panellists here.
I listened carefully, but as a New Brunswicker, I do not agree with the idea that New Brunswickers are pleased to work only 27 weeks and happy to collect, on average, $200 a week on EI. I do not think that any decent Canadian wants to live with his family on $200 a week before taxes.
That brings me to the issue of taxes. I was listening very carefully to both your suggestion and your great fear of hikes in EI premiums. It has already been announced by Mr. Harper that there will be a hike in EI premiums.
If I look only at this Bill C-50 and the numbers that we received from the officials of the department, and I take the $935 million — which I think will be a lot less than that, but let us take that number — considering that we are looking at the group of people of long tenure, I estimate that approximately all the people who will be involved in these additional benefits of $935 million will pay, on average, 20 per cent federal income tax on the benefits that they receive.
Out of the $935 million coming from the hike in EI premiums next year, 20 per cent of that will go back to the general revenue of the Government of Canada. Would you think that it would be a good suggestion to ask the Government of Canada to put that 20 per cent of federal tax on EI benefits back into the EI fund?
Mr. Kelly: You are full of good questions. Thank you also for all your hard work on the credit and debit card side.
Senator Ringuette: Thank you for giving me this opportunity, because I realize full well that there are $40 billion of fees that the small and medium-sized businesses of Canada are paying right now to Visa and MasterCard that, if regulated, would cost zero money to the Government of Canada and create oodles of jobs for all the small businesses.
Mr. Kelly: I think the important principle that the senator is laying out is whether there are ways to return some of the former EI surplus dollars that had been taken from the EI account — or the notional EI account at the time because it did not exist — back into the EI fund.
Yes, there are a variety of ways that can happen without necessarily having to go back to the tax base and ask people for more money. We recognize it has to happen over time. We are not unrealistic enough to believe that every single dollar will be returned exactly as it was taken, but we do want to see a significant amount of additional dollars put into the EI fund.
It is fine for the government to claw back the money that was taken from the EI fund during good economic times if it puts back those dollars during a recession.
Generally speaking, that has been an area where business and labour have been on the same side — that taking money out of surplus dollars should not have happened in the first place and we are hoping it will be returned soon.
Is your specific proposal one that deserves further exploration? Perhaps; but I think there are many ways we could do that.
Senator Ringuette: On only this issue, and taking the $935 million as fact, at 20 per cent we are looking at $187 million that would be going back to the EI fund. That certainly needs to be explored to reduce the increase in premiums that the business community and the workers would be looking at.
Mr. Kelly: Again, our message on that is that the government would be increasing premiums at the worst possible time, just at the time when we are trying to get the economy back on track. At a time when we are trying to send positive messages of stability, workers and employers would be hit with higher payroll taxes. We do not want to see that happen.
Senator Ringuette: Mr. Cirtwill, do you have a comment on that?
Mr. Cirtwill: In terms of your specific proposal, my immediate response is that I get a little nervous when we start talking about taking money, bringing it in, passing it back out, handing it out again and bringing it back in. I think we are making it a little more complex than it needs to be.
If we are talking about taking that money back to make the EI fund more generous to make it easier for people who already qualify or to make the benefits larger, I would go back to a point made earlier by Ms. Pohlmann that many small business people still feel they are in competition with the EI fund to get employees. I suspect that if the benefits were enriched, that concern would become more severe.
Senator Ringuette: I do not follow that logic.
Senator Oliver: I have two short questions. The first question is to Ms. Pohlmann. Is the new-hires program still running? If it continues, what changes would you like to see?
The second question is to Mr. Cirtwill. A number of your comments appeal to me because you described well what is happening in society today. There are many help-wanted signs to be seen wherever one walks. At the same time, there are reports that the unemployment rate is rising. I live in rural Canada. One of the businesses in my area is the Christmas tree industry. The labourers on that tree farm come all the way from Mexico. What changes would you like to see in the experience rating system that we have to help to improve this kind of situation that you so carefully described?
Ms. Pohlmann: The new-hires program no longer exists. It existed for two to three years in the late 1990s. It was set up to encourage hiring at the time. There was a separate program for youth hires to target the younger generation because the unemployment rate was so high. The program was hugely popular because it was administratively simple and it worked, which encouraged employers to hire and allowed them to retain some of the income. It ended after three years. We believe that same concept could be transferred to the discussion today and be just as effective.
Mr. Cirtwill: In terms of the experience rating exercise, the easiest reference is seasonal industries. When you talk about controlling EI benefits and/or premiums, seasonal industries come to mind. I do not have a problem with seasonal employees and seasonal companies having access to an employment insurance program. I have a problem with the program being subsidized for them by everybody else. Someone who is in the habit of routinely hiring people on a short- term basis should pay an extra premium for that privilege because, of course, it is a benefit to the company. It allows the employer to employ people and keep them in the community, when otherwise the employees would have to look elsewhere for work. Similarly, a workplace that has a high rate of accidents pays a higher premium because they put employees at risk. If seasonal companies want employees to stay in communities where only seasonal employment is available, then those companies should pay a premium for that privilege.
The Chair: Are there other comments on that?
Barbara Byers, Executive Vice-President, Canadian Labour Congress: People do not choose to not work because they have other options. There are all kinds of reasons that people end up in seasonal industries. If you were to penalize all the seasonal industries, what would you be doing to many of those folks, the employees and the employers? Workers do not choose to be unemployed. That is the reality. During the earlier discussions I was fidgeting in my chair because my background is in social work. I worked for 17 years with public assistance and with kids on the street. I never found anyone who was unemployed or on welfare who really wanted to be there. They wanted a job. People do not stay on EI because they think it is the good life. That is the reality.
We do not think people should be penalized for working in a seasonal industry. The fact is they are working. We cannot penalize them for working at a job that keeps them in their community.
I guess if we want to vacate many of our rural areas in this country and eliminate those small communities, then that is an entirely different discussion. I did not think that was the kind of country most of us wanted to build.
I will comment on the question of money owed to workers and their employers. We likely would agree with business with some slight differences in the sense that we want it all back, and we want it all back with interest. That is the way the rules were. We are also reasonable folks and not about to say, "Give us back the $57 billion immediately." Instead, we suggest that it be put into programs that work for people. In that way, people who need EI on a short-term basis or on a long-term basis can get it.
Let us say for example that you paid home insurance premiums and auto insurance premiums. You had a fire in your home and an accident with your car. You went to your insurance company to make a claim, but they said, "Did we not tell you? We spent that money on something else. Too bad, no insurance money for you." I wonder how many of you would sit here and say that it was okay for the insurance company to spend the premiums paid in for insurance on something else. This is workers' money and employers' money. It should be put there for programs for people during periods of unemployment.
The Chair: That is a rhetorical question.
Andrew Jackson, Senior Economist, Canadian Labour Congress: On the Maine versus New Brunswick issue, I would point out that rates of poverty in Maine are high in a North American context. The population of rural Maine is extremely thin on the ground, for anyone who has driven across the state. The EI system sustains seasonal industries in Atlantic Canada that do not exist in Maine, U.S.A. Those smaller groups of people who survive in Maine do so on much lower incomes than do people in rural Atlantic Canada. With less EI, there would be many fewer people who would be left much poorer, if you want to advocate that trade-off.
Mr. Kelly: There is one piece that some might find controversial in CFIB's most recent research during more buoyant economic times. Of the members, 22 per cent said they had difficulty hiring someone because the potential employee would rather stay on Employment Insurance than go to work. More disturbing is that 16 per cent of employers reported to us that they have had employees ask to be laid off so they could collect Employment Insurance. That is troubling.
Armine Yalnizyan, Senior Economist, Canadian Centre for Policy Alternatives: Thank you, Mr. Chair. Sometimes we get trapped in the minutia of our discussion. I remind everyone that we are in a recession, the scale of which we have not seen since the 1930s. It is the job of governments to provide automatic stabilizers in the system. When exports dry up, business investments dry up, and consumers no longer spend because they have run out of work, the only thing left is to support purchasing power through programs of income support. Otherwise, you will continue to see the economy contract further for an unnecessarily long period of time, creating an unnecessarily deep downturn.
We are caught talking about Employment Insurance as if it is a pure insurance system. It was designed in the 1940s to provide automatic stabilization to the economy, and that is a categorically different issue than private insurance systems.
We need to remember that the purpose of this program is to minimize the volatility of the economy. When 56 per cent of the economy is driven by consumer spending, you need to be able to sustain consumer spending when nothing else is growing. There is a serious issue with our slowdown in expenditures, all the things you are talking about with respect to green shoots and businesses being able to hire again. You will not hire people if people are not buying what you are selling.
What might happen in the event we move toward greater experience rating is that it would raise the taxes on those industries that have more regular experience of seasonal downturn. If you are raising taxes, using your logic, you will be making it more difficult for those industries to hire people. You might find actual downsizing of those industries that do have only seasonal employment, because you have raised taxes.
If the solution is to let those industries swing in the wind and let people move to where the work is, we are essentially saying that workers should be nomads and move to Alberta when there is work there, and suddenly go back to Newfoundland when there is no work in Alberta, and then there is no work in Newfoundland. It is not a sustainable strategy for most people or communities, let alone families.
Senator Oliver pointed out the skills mismatch, that you have this unnerving experience of help-wanted signs at the same time that unemployment rates are going up. It is unnerving that we would be importing people to deal with our labour needs at a time of rising unemployment. That said, we have to understand that what happens in periods of rising unemployment is that people are losing good-paying jobs, at $30 an hour, and are being asked to do jobs at minimum wage, which is what these types of jobs are. People rightfully stop and think, "Is that all I can do?"
We have forgotten what caused this crisis and blame it on the workers and the scale of the wages that they are expecting. The widespread expectation is that people will accept any job, at any price, anywhere, and that is deeply economically destabilizing. I do not know the answer to the problem, but that explains in part why you are getting two stories in one.
The Chair: Senator Oliver, did you have a follow-up question?
Senator Oliver: No, but I do appreciate Ms. Yalnizyan's explanation, and it is of assistance.
[Translation]
Senator Chaput: My question is for Mr. Charles Cirtwill. If I have understood correctly, this evening you are representing the Atlantic Institute for Market Study, right?
Mr. Cirtwill: Yes.
Senator Chaput: What is the mission or mandate of the Institute? Your evidence was very solid and intriguing. I am trying to understand how your institution works? Do you have a committee of researchers? Is the Institute a non-profit organization and is it registered in Canada or the United States? Does your team consist of researchers from Canada and the United States? How do you produce documents and write for publications that cite your institution's approach? How does it work?
[English]
Mr. Cirtwill: The Atlantic Institute for Market Studies is a registered charity for educational purposes, both in Canada and in the United States. We are set up as an independent public policy research centre. We bring in researchers not only from Canada and the United States but from around the world to do research on areas of particular interest to us. All of our publications are available free of charge to anyone who wants them. There is a research advisory board that reviews materials and ideas as they come forward. All of our research is peer-reviewed by at least two experts in the field before it is published and released. The board of the institute has a formal bylaw in place that does not allow them to have influence on staff or researchers in regard to the direction or the conclusions of the research. The contracts that we sign with our authors keep me from having influence or say on the research conclusions.
Senator Chaput: Do you receive donations? Where do you get the money from?
Mr. Cirtwill: About 60 per cent comes from philanthropic foundations such as the Max Bell Foundation and the Donner Canadian Foundation; 30 per cent comes from corporations or individuals; and the rest comes from events and sale of materials. The one thing we do not do is take money from government, although occasionally we will sell a table at an event if the government wants to hear a speaker. We also do not allow companies to give monies for specific studies. A pharmaceutical company could not fund research into drug policy and a private school could not fund any of our work in education.
[Translation]
Senator Carignan: My question is for Mr. Kelly and Mr. Cirtwill. Yesterday, we heard from Ms. Byers and Ms. Yalnozyan. They made a distinction or saw a categorization of workers based on the fact that assistance is being given to long-tenured workers. They stated that the bill makes a distinction between the good unemployed and the not-so- good unemployed and that it favours the good unemployed.
If I understood correctly, you indicated that the bill targets long-tenured workers, and that this bill does achieve its objective because the geographic distribution of long-tenured workers is in the regions and in the types of industries most affected by the crisis. Is that right? What do you think of this issue of the good and not-so-good unemployed? Do you have statistics on the geographic distribution of long-tenured workers and, if you do, could you provide them to us?
[English]
Mr. Cirtwill: What I have for statistics is available to just about anyone else, from Statistics Canada, around where the spikes in unemployment have come from during the recession, the manufacturing sectors that have been particularly affected and the industries that have not been particularly affected. For example, you will see significant rises in unemployment in manufacturing in Southern Ontario, and major impacts in Quebec and Alberta. The one industry that has continued to grow throughout the recession is the one that seems recession-proof, and that is the public sector.
Regarding good versus bad unemployed, I am not sure I would agree with that characterization, although I would agree with the statement that this bill is targeted at a specific group of unemployed people who in fact have received several other helping hands along the way. I cannot speak to why the government has focused a lot of its efforts on that front. I have a sneaking suspicion that it is an attempt to target employees whom the government, from its perspective based on whatever analysis it has done, perceives to be more immediately affected by the downturn.
That said, I am most concerned that I am not entirely sure that with the response to date we have done enough for all of the other unemployed. There are things we should be thinking about and perhaps doing much more quickly. However, I would share Mr. Kelly's fears about the slippery slope. We have to be careful about what we do and how we pay for it.
Certainly, one of the suggestions made earlier was waiving that two-week waiting period for all unemployed individuals. That makes a lot of sense in an economic downturn.
One reason I advocate for experience rating is that, like Ms. Byers, I have a big problem with people paying insurance premiums, losing their jobs directly or indirectly because of the recession and then not being able to claim it. It is totally unacceptable in society that we would have people pay into EI who cannot get it back out.
I would also suggest that many categories of workers are not allowed to join the program in the first place, and we need to find a way to bring them on board.
Mr. Kelly: Adding to that, senator, we are not convinced that this particular piece of legislation is required at this particular point in time. Again, we were more supportive of some of the measures that were taken in the budget at the beginning of the year where the government announced some benefits that were extended to all Canadian workers. I do not know that I would agree that this bill creates categories of good workers and not-so-good workers, as was perhaps suggested earlier.
Under this bill, you could still collect unemployment insurance quite often and still qualify for this. In fact, I believe that to get the maximum benefit enhancement of 20 weeks, you would have to have 12 working years out of the past 15. That would mean you would have three years potentially in that period of time where you would not be working, whether it was a parental leave, a period of unemployment or perhaps some form of other income support you would have received during that period of time.
It does not create those two categories of workers because it allows people who have claimed EI to still receive this additional top-up. Our major concern is whether there are better choices governments could make to help create more jobs, train employees today and support them that way instead of through passive income support.
The Chair: Mr. Kelly, you skipped over the two other requirements. In order to get to the 20 weeks, you could not have drawn more than 35 weeks during the time you were working, and that is cumulative, and you must have been paying more than 30 per cent. They are both qualifiers as well.
Mr. Kelly: I am sorry; I do have those in my notes today. This system would still apply to a large number of Canadian workers. I think the estimates were that 190,000 people would benefit; far more than that would be eligible for benefits under this program. It is not the worst program we have seen. There are more dangerous ways of enhancing EI benefits than this, but there are other policy choices that we would prefer over this.
The Chair: Would anyone else like to comment on that?
Ms. Yalnizyan: As I mentioned yesterday in testimony, the HRSDC suggests that one third of the long-term unemployed will be eligible for this program. They include those who have been laid off since January. That means two thirds of those who have been laid off since January will not be eligible; and it does not include those who were laid off as the "shock troops" of the recession, people laid off in the opening months of the recession, which number in the hundreds of thousands.
Senators, we are looking at a measure that addresses the fact that within the coming months we will have hundreds of thousands of people running out of benefits. We are looking at a very fragile recovery and the potential for a double dip recession. If hundreds of thousands of individuals who are supporting their families are left without any income support, you can well expect a wave of economic dislocation, the likes of which we have not seen in decades, because they have nowhere to turn other than to their friends and families.
I also mentioned yesterday that the level of unemployment insurance support covers roughly less than half of those who are unemployed currently, which is a level we have not seen since the 1940s. We need help, and any measure that the government chooses to introduce is welcome. However, Bill C-50 is far from appropriate to the scale of the problem that we are looking at currently.
I think I am not alone in saying that this is not a game, that we need help from the government to restore the strength of the system as an automatic stabilizer, and yes, it would be temporarily. We can look at long-term reforms down the road, but we are looking at a scale of a problem that is about to hit the decks that nobody is prepared for. We were not prepared for this scale of downturn. We knew for over a decade that we were not recession proof, and we are talking about whether this is enough for a particular group of unemployed. Yes, it will help some. You can write a piece of legislation that would help one person, and that would be an improvement. You have targeted 190,000 or a sub-group of that — it is a drop in the sea of what needs to be done — and you know you can fix it. You have the tools to fix it, and I would urge you to consider how your report can speak to your colleagues in both chambers of Parliament to be able to do exactly that, namely, take the steps required so our recession does not need to drag on.
Mr. Jackson: We distributed a short summary of a study from this summer over some particularly hard hit communities in Canada, which people could look at. Certainly, our impression on the ground was that many people would be running out of benefits this fall, so if the average duration was probably in the area of seven or eight months, anybody who lost their jobs in late 2008 and the first part of 2009 is on the brink of running out of benefits now. We think extending benefits is very timely, and we can argue about the scale of it.
When you look at this from a community perspective, when you are extending EI benefits, you are directly targeting that assistance to the victims of the recession in the hardest hit communities in the country. That is not true of most of the economic package, and rightly so. I am not sure I would make the case that infrastructure spending should privilege the very hard-hit communities.
Looking at communities such as Welland, Campbell River, Sault Ste. Marie and Oshawa, all of which are very hard- hit communities, this program will keep people going through this winter and spring. Hopefully we will come out of this and the jobs will be appearing, but we know it will be a long wait, and I think the government has rightly recognized that. We can argue about the scale and whether the glass is a quarter full or three quarters empty, but it will be urgently needed on the ground in many communities.
[Translation]
Senator Carignan: My question is about the statistics. You stated just now that there is no correlation between the many jobs available at present and the individuals who are looking for jobs and that this could increase the unemployment rate.
Could you provide committee members with statistics on available jobs?
[English]
Mr. Cirtwill: I would have statistics from my own institute, but I can supply you with a series of studies done by Statistics Canada and another by a local company in Atlantic Canada called InNOVAcorp that looks at the brain drain and job skills gap. They have been doing it for any number of years.
I cannot recall whether the Canadian Federation of Independent Business does that or not, but it seems to me the last time I looked at all of those studies, which was four to six months ago for most of them, they were not showing any significant decline in what is called the "average time to fill" or, in other words, how long a job stays open before an applicant fills it. In fact, most of the trend is upward, so the jobs are sitting empty longer, even as unemployment spikes to levels that, depending on who is talking, we have not seen in 40, 20 or 10 years.
[Translation]
Senator Carignan: Could you send us your own studies? Those we have compiled with our own search engines are fairly accessible, but yours may be more difficult to obtain. It would be appreciated if you could forward them to us.
[English]
Mr. Cirtwill: It might be a couple of days, but I will send them to the committee.
The Chair: With respect to undertakings for documents, if you could send them to our clerk, he will see that they get to all senators in both official languages.
Ms. Pohlmann: I was going to follow up on the statistics. We do an ongoing survey of our membership asking about high priorities for their business. Something we call the "shortage of qualified labour" has been on that particular survey going back 25 or 30 years, and we aggregate this particular survey every six months. It is done face-to-face, and it is usually based on 20,000 responses.
The most recent survey we have is from January to June of 2009, and 42 per cent of our members still say they have an issue with a shortage of qualified labour in this country. The number has come down a little bit. It was closer to 55 per cent or 58 per cent a year ago, but it is still 42 per cent, and that is significantly higher than it was in the 1990s when we had a much higher unemployment rate. It was at 25 per cent at that point. A good chunk of our membership is still looking for qualified labour.
Mr. Jackson: I am trying to restrain myself. One must bear in mind, on the alleged shortage of workers, what wages employers are prepared to pay. Quite often "shortage of workers" means a shortage of skilled workers who are willing to take jobs at minimum wage or close to it. You cannot talk about labour shortages in the absence of what people are prepared to pay.
Mr. Kelly: Certainly not. Small businesses are under no illusion that they pay the same wages that large employers do. There are jobs at all different points of the wage spectrum within that category. In fact, fewer than 10 per cent of the positions that are open in small businesses pay anywhere within 10 per cent of the minimum wage. The vast majority of those jobs are at least 10 per cent above the minimum wages in that category.
Will a laid-off auto worker who is used to making $70,000 or $80,000 a year want to work in a small town in Alberta at a job that pays $10 or $12 an hour? I agree that it will be a big challenge for that individual to make that kind of an adjustment. We must remember that there are loads of jobs in good times and in bad in every region of this country, and they are often overlooked by employees. Small firms also provide stability that is often missing from positions in larger companies.
While we encourage governments to look at bills like this to see what kinds of income supports are needed in weaker economic times, we cannot forget that coming out of this we must be prepared for the skills and labour shortages that we were experiencing only a few years ago. The demographic realities of Canada dictate that we will have a tough time filling all the positions that Canadians need for the future.
Senator Ringuette: You have just highlighted the central issue. Whether we are from the political spectrum, the business community or the union community, we must acknowledge that our country has no human resource strategy. That is the basic problem. That is why we are now faced with a bill that pertains to only 3.75 per cent of the unemployed in this country. We are here arguing about a piecemeal approach that will take into consideration only 3.75 per cent of our unemployed.
Ms. Byers, yesterday you told us that it was impossible for your organization to get numbers from HRSDC. I have a hard time with that. We are talking about human resources and spending billions of dollars, be it on training, EI benefits, parental leave or other things. We can spend billions of dollars, but when we have no direction, we have no strategy for the current situation and for the aftermath of the recession.
Mr. Kelly, I am looking at the statistics on page 8 of your survey that was done in 2007 when the Canadian economy was in full growth. Your asked, "During the past year, did your business have any difficulty hiring people because they would rather stay on EI benefits?" Twenty-two per cent said yes. However, not that many people were on EI. There were 247,000 temporary foreign workers on visas in Canada, half with no skills and none of them paying any taxes to provide social programs and to buy products and services on a long-term basis.
The bottom line is that we have no human resource strategy in this country, and we are in a pickle.
Mr. Kelly: Senator, one of the biggest shortcomings, I agree, is that we would not be in anywhere near the crunch we are in had governments over the last 10 to 15 years not taken that $57 billion out of the EI account. We would have all the resources we need in the EI account to pay for additional benefits where they are necessary to ensure that we would not have to run up premiums as a result of higher unemployment. I will agree with you to an extent. For many years federal government deficits were retired using Employment Insurance premiums as one of the largest sources of revenue to accomplish that goal. Had that money been left in the EI account, we would be far better off today. We would not have the worry that we do about increasing premiums. In that area employers and employees are on the same page. What we might do about it after the fact is a debate that I am sure we will have. I think we would all agree that the surplus dollars would have put us in a much better position than we are in today.
Senator Ringuette: Do you agree that the fundamental issue is that Bill C-50 deals with 3.75 per cent of the unemployed in this country and that this is a hit-and-miss process because we have no national human resource strategy?
Mr. Kelly: The words we used in our recommendations are "avoiding making selective changes to enhancing benefits." Your point is that we are doing this on a piecemeal basis.
Senator Ringuette: Yes.
Mr. Kelly: Governments need to respond based on the circumstances that exist.
Senator Ringuette: And Bill C-10 was doing that.
Mr. Kelly: I am sympathetic to where the government did come from. The case that is made is that someone may have been paying premiums year in and year out and not have the income support they need at the end of that process. I believe that that kind of thinking was the origin of this bill. We can understand and appreciate why that was the case. Employees deserve to be assured that they have some form of meaningful income support in these times. At the same time, we must keep an eye to the future, and this is where this measure and others have fallen short.
Ms. Yalnizyan: Reflecting on the conversation of this evening, I am struck by two things. The first is the need to do something, be it training, job creation or supporting the long-term unemployed. The long-term unemployed are roughly 25 per cent of the total unemployed, and that number will rise as it has in every recession we have had. The number of long-term unemployed as a group among the unemployed always goes up during a recession. You have a measure that does this or you have other suggestions. All of them take money. We are all worried about where this money will come from. The $57 billion in surplus is a "would have, could have, should have." We do not have it. If you are going to actually do something about it, you have to put more money in the system and do whatever accounting you want about it being fed back to EI or something else. We need more money, and yet the government is worried, and rightfully so, about the size of the deficit this year.
We brought in an unemployment system in the 1940s. We expanded training programs originally in 1985 with the Canada Jobs Strategy under Prime Minister Mulroney. We brought in things without having the money to pay for them because it was the right thing to do.
The question before you today is what is the problem and how do we solve it, and then you move on to how do we pay for it. We can pay for it. Our economy is roughly five or six times the scale it was in the 1950s. If money was the problem, we would be there yet. It is not the money.
What are we doing to prevent this thing from going out of control, to prevent the economy from stagnating over the long term, and to prepare ourselves for the part that is just over the horizon, which is the labour shortages we have been talking about? We are ill-prepared for anything other than what does the next quarterly statement say, how big is our annual deficit, how big is our annual surplus.
We need a long-term strategy to deal with what is happening now, to prepare us to deal with periodic downturns, which will happen and which are predictable, and to ensure that those automatic stabilizers kick into gear so we do not have to waste committee time talking about whether this was enough, fast enough, for the right people. We know how to design automatic stabilizers. Our parent's generation did it. Surely we have enough smart people in our country to determine how to prevent this from happening next time and how to prepare for the future, as our parents did.
I do not think it is about the money. It is about the will to work together. It is a possibility that this table, as well as others in this country, could design a strategy that prepares us for the future in a way that we all agree needs to be done. There is a large amount of agreement here, but tax cuts will not do it for us.
The Chair: Do you agree with this, Ms. Byers?
Ms. Byers: Yes, I agree with all of what Ms. Yalnizyan said. It is about the political will. I do think it is also about the whole question of a national industrial strategy. The Canadian Labour Congress has been calling for that for a long time. I was trying to consult with Mr. Jackson to figure out under which prime minister we started the call for that. It has been a long time since we have had a national industrial strategy in this country where you bring together the political actors but also the social partners, as we call them at the International Labour Organization, that bring together business and labour to say, "So what are we going to do here?"
There is some reality that we all face. The issue of training has been raised. The easy response for me on the training issue would be to say to employers, who by the way did not train for about 20 years, "Oh, you have a skill shortage. Did you think when you did not train for 20 years that 20 years later, when people were ready to retire, that maybe you would not have the skilled workers you needed?" That does not get us out of the problem; that says we need to put some permanent measures into place. We have been calling for a long time to have a training levy like Quebec has. We agree with that sort of a situation. That is part of the discussion, we believe.
Employers were asked whether they think people do not take jobs because they do better on EI. I could come up with a question to ask our members: Do you think you would be prepared to give up EI if you could be assured that your family had a living wage and some security, or would you be prepared to move to another job if you knew you had some security? Our percentages would be way better on that question if people felt they had some security.
Ms. Yalnizyan is right. We gathered on this last couple of days around a bill, Bill C-50, but really it is about what we will do instead. In December of either 2003 or 2004, I cannot remember which year, there was an all-party human resources committee specifically looking at unemployment insurance. There were 28 recommendations, and all 28 were agreed to by the Liberals, the Bloc and the NDP, and I think about 25 or 26 of them were agreed to by the Conservatives. There were a few that they had some problems with. It was a very good document that, at that time, said this is what we need to do about unemployment insurance. It talked about all the things we are talking about now, looking at the equalization of how people access unemployment insurance, about the benefit levels and how to deal with that.
Looking at people and jobs and training, people will not go into training if there is no job at the end of it. Is it not that they are guaranteed, but they have to know that there is some hope for the training and that they will not just be put into more training. They have to know as well that the job will have some security. Part-time work means full-time poverty for most people. That is the reality. If people do not have some sense that this is a job they can support themselves and their family and community with, then it is hard for people to be able to move there.
I must comment on the question of the public sector. I was also a public sector worker in my past life. We are concerned about what will be happening in the public sector as governments say, "We have big budget problems, so we need to cut jobs." You will not see governments close down whole departments, but we predict, whether municipal, federal or provincial, that they will not fill positions. They will have one person doing three people's jobs, and all those sorts of things. You will not see the plant gate close behind the public sector and the big lock come on that you often see in the industrial sector, but you will see the job losses. That will just add to this whole problem we have, because the public sector is definitely a part of our national industrial strategy, and it is part of our commitment to do something.
I have one last point, which is the question of people paying in and not getting out. You know what? There are people in that position. That is why we have come out with the 360 hours. That is based on 12 weeks at an average of 30 hours, which is the average work week for people. There are people, primarily women, who pay into the EI system year in, year out, and never, ever get to claim because they live in an area where they can never meet the hour threshold. That is why we are saying that where people are employed, whether in New Brunswick, Saskatchewan or British Columbia or anywhere in between, there should be a uniform entrance for all of those people.
Senator Callbeck: On the information that was passed out by the Canadian Federation of Independent Business, looking at the business barometer, I assume the question was asked, "Are you optimistic about your business for the next three to four months," because that is what the employment is; right?
Ms. Pohlmann: I believe the question asked was, "Do you expect your business to improve over the next three to four months?"
Senator Callbeck: If you look at the business barometer, it looks optimistic. If you look at the employment plans, they are not. Does this mean that we will have a recovery without job creation?
Ms. Pohlmann: I think it is fairly well accepted that job recovery usually follows economic recovery, so it is not a surprise to us that it seems that small businesses are on hold now, waiting for things to improve. In their business, this is an expectation index, so they are looking at things will get better. We are heartened by the fact that we have now seen a few months in a row of growing expectation, so we are hoping that over the next few months as they get more confident about the growth of their business they will start going back to hiring people. The other side of this is that 16 per cent plan on increasing, 13 per cent plan on decreasing, but over all, 87 per cent plan on either increasing or maintaining their employment right now.
Mr. Kelly: We should also put on the record that small businesses are often a little slower to hire than larger firms, but they are also a lot slower to fire than larger firms. That does add a degree of stability to the workforce. With 16 per cent still planning to increase their total employment, those are promising signs, but there is no question that getting back to job growth will take a bit longer time.
Senator Callbeck: The other question I wanted to ask was on page 12, regarding the form of taxation that affects the growth of your business the most. It says payroll taxes, yet over 50 per cent of your businesses do not have any payroll taxes.
Mr. Kelly: Are you speaking of the self-employed?
Senator Callbeck: Yes.
Mr. Kelly: The majority of our members that would have responded to that do in fact have employees. You are right when speaking of the larger economy. The self-employed is a large slice of the picture. Self-employment within our membership, though, is a smaller chunk of the overall total, so payroll taxes are still a fairly significant burden for a large number of small businesses. That, of course, includes more than just Employment Insurance, as we note there.
Senator Callbeck: This survey was actually done in October of this year?
Mr. Kelly: This one, yes.
Senator Callbeck: On the barometer.
Ms. Pohlmann: It was done just two weeks ago.
The Chair: Thank you, Senator Callbeck. Our time has run out, so I will not call on any more questions from honourable senators. I know that this discussion could go on for some time.
It has been a very interesting discussion. I would like to thank Mr. Cirtwill, Ms. Pohlmann, Mr. Kelly, Ms. Byers, Ms. Yalnizyan and Mr. Jackson for being here and helping us understand better Bill C-50. I am looking forward to having the opportunity to meet with you again along the way.
(The committee adjourned.)