[Recorded by Electronic Apparatus]
Thursday, January 18, 1996
.1035 
[Translation]
The Chairman: Order please.
I would like to start by wishing all of my colleagues on the Standing Committee on Human Resources Development as well as everyone associated with our work a happy and prosperous new year. Welcome.
[English]
Today we begin our hearings on Bill C-111, An Act respecting employment insurance in Canada.
We are pleased to welcome as our first witness on this legislation the Minister of Human Resources Development, the Hon. Lloyd Axworthy.
The minister has with him a number of officials, whom I ask him to introduce at the beginning for the record before beginning his opening remarks, which will be followed by questions from the committee members in the usual rotation.
I understand that we have approximately an hour and a half, or perhaps a little longer if members are willing to deal with this important piece of legislation. When the minister has finished, I would like to retain the committee members for a very brief in camera session to deal with future business of the committee.
Let me begin by welcoming Mr. Axworthy and inviting him to begin his opening remarks.
Hon. Lloyd Axworthy (Minister of Human Resources Development): Mr. Chairman, with me today are the Deputy Minister of Human Resources Development, Jean-Jacques Noreau;Ms Norine Smith, the Acting Deputy Minister, Insurance; and Ms Karen Jackson, Director General, Labour Market Policy.
[Translation]
First of all, I would like to wish all of the members of the committee a happy new year. I hope that your work will be constructive and positive. I would also like to thank the members of the committee for their assistance in response to the government reform of the social safety net.
I look forward to your recommendations on the Employment Insurance bill. This bill is very important for all Canadians and I wish the members of the committee Godspeed.
[English]
This is a fundamental restructuring of the unemployment insurance program, which has been in existence for over 50 years. It represents a cornerstone not just of the social security reform that we introduced but also of the government's jobs and growth agenda.
Nearly 15 months ago, in the green book, we laid out the crucial linkages between modernizing social security and helping Canadians find and keep work in a period of quite substantial change and dislocation.
We said then that for most Canadians the best social security was a job. That is the fundamental undertaking of the new architecture that you see in the legislation that is before you today. The design is predicated on the whole idea of doing a far better job of connecting unemployed Canadians with work opportunities.
What we said in the green book over a year ago, and what Canadians confirmed to us and to this committee, is that today's UI program is no longer up to the task. The technological revolution sweeping over the economy is reshaping, reconfiguring, and redesigning our jobs. As a result, the change has meant that many thousands of Canadians have been left behind.
Therefore, problem number one is finding a much better way to deal with the consequences of very substantial change, which has placed a very heavy burden on our employment system.
The second problem is that the UI system has been badly undermined over the years by extensive use by employers and individuals across the country. In too many cases the practice has turned into a permanent income supplementation program as opposed to an employment insurance program to help deal with the problem of jobs.
.1040
In some entire communities the unemployment insurance system has stifled job creation and economic development. We clearly need a strategy for preserving and sustaining these communities for future generations and have to help them rebuild their economic lifeblood with jobs and income from jobs, clearly saying that benefits are no substitute for the opportunity to work and have a meaningful livelihood. As a result, we are striving in this proposed legislation to provide a major tool for the management of the economy and the promotion of work and to help many Canadians deal with the adjustments they must face in their daily lives.
It is important that we are also seeking to use the savings to invest actively in the future of unemployed Canadians and their communities. Unemployment insurance is the linchpin of a broader social reform. It very much fits the pattern of change we have set in place on a number of fronts over the past year. The overarching theme in all these cases has been to look for ways to expand opportunity through more careful spending and partnership with other players.
Just to give you a sense of that...in the last year we have made a major change in the student loan and assistance program. For the first time the federal government is offering a grants program, $13 million this year, rising to $15 million in 1998-99, particularly to provide for low-income students who have serious needs. We have developed a major internship program to help young people make changes in the transition from school to work.
In this forthcoming year some 25,000 young Canadians will have an opportunity to have work experience in partnership with the private sector. Youth Service Canada has close to 200 projects under way. We have financed over 21 innovative strategic initiatives in the territories and with aboriginal groups to develop ground-breaking approaches to social programming, which in many cases has helped to serve the development of this program.
We have created eighteen human resources sector councils. It's an innovative approach to helping develop a capacity in the private sector to assume greater responsibility for training and human resource development. These sector councils involve everything from the setting of world standards for occupations to supporting the design for course curricula and beginning to develop major programs for internship.
In short, the green book set in motion a shift towards what we believe is a much more contemporary 21st century model of a social safety net, helping us to make the transition from those programs that were designed really in a post-World War II era. I'm not coming here to argue that this legislation will meet all the needs and interests of every individual social advocacy group, every business group, every union, or all regions of the country. Our aim - and I think it really reflects the spirit that this committee expressed in its report - is to find a balanced package, something that provides fairness and equity, not necessarily meeting every special-interest need.
It is important to note that it has been well received by Canadians. A recent public opinion survey showed that after a very strong start, approval for this package is continuing to increase across the country and enjoys support in every region. The public appears to agree strongly with a number of specific measures in the bill. Close to 70% or more of Canadians support the move to an hours-based system, the employment benefits package, the family supplement, and the reduction of benefits to frequent users.
The reality is - and Canadians have told us this in many ways and it has been reflected in this legislation - that we must have change of this scale and magnitude if we are to protect employment insurance for future generations. We need a good employment insurance program in this country. We need to preserve it for those who want to scrap it or to fragment it so it no longer is a national program.
[Translation]
Finally, unemployment insurance is a national system for redistributing assistance which aims to cushion regional slowdowns. Premium payers in one part of the country help workers in another part of the country where unemployment is higher. For example, every year unemployed Quebeckers receive 1.3 billion dollars more in benefits than Quebec premium payers contribute to the system.
[English]
At the same time, if this kind of social insurance program is to survive, we have to operate according to very solid risk management principles. We have to limit and control our liabilities by providing the right combination of incentives and supports that will move more unemployed people off benefit rolls and back into jobs.
.1045
Let me now run through the main features of the bill.
In a nutshell, unemployment insurance has three core characteristics.
First, there is a restructured income benefit, one that still provides basic income protection in the event of job losses but is more closely tied to work programs. As a whole, this income benefit will be somewhat smaller in order to meet the requirements set out in last year's budget and to create savings to reinvest in active re-employment measures.
Second, we are introducing new employment benefits aimed at giving those who need it direct support to return to work. The reinvestment in people out of this program will enable us to provide 400,000 unemployed Canadians with additional help to find jobs. Moreover, it will contribute to the creation of between 100,000 and 150,000 new job opportunities.
Third, the legislation embodies a new collaborative relationship with the provinces to respect fully their responsibilities for education and labour market training. We are pioneering a new approach to running our federation in a way that helps put people first.
Let me deal now with the specifics of these three elements.
The first point to make about the new income benefit is that because eligibility is now based on hours worked, not weeks, it becomes more flexible. That means it is far better suited to the needs of today's workforce. The new system credits every hour on the job.
A by-product of this hour system is that it will be far simpler and cheaper to administer.
Some commentators have said that it will be more difficult to qualify for UI benefits. Those commentators are wrong. We are achieving savings without making eligibility more difficult, and that is the key reason why this structural reform is different from previous changes to the Unemployment Insurance Act.
The core feature of this new system is that it will be more inclusive. Because income benefits will be based on all hours a person has worked in the past 12 months with one employer, two employers, or however many employers, it will provide coverage to a lot of part-time workers and multiple job holders who previously could not insure their work. Potentially, up to 500,000 part-time workers will have their work insured for the first time.
Another misunderstanding needs to be cleared up because some say that this reform will treat seasonal workers unfairly. Again, this is simply false and not the case. We have deliberately not made eligibility more difficult for seasonal workers. In fact, the hour system provides new incentives and opportunities for seasonal workers.
It is important to remember that under employment insurance legislation the way one qualifies for benefits based on a minimum number of hours worked is calculated differently from the way the level of benefits is calculated.
It is worth noting, for example, that in New Brunswick, to take one province, 87% of UI claimants work more than 35 hours a week. All those people qualify more easily for benefits in the future. A further 10% work between 30 and 35 hours a week, which means they will need to work only several hours more a week to qualify. This suggests that 97% of people who draw UI benefits in New Brunswick today either work enough to qualify, will qualify sooner, or are within a stone's throw of qualifying.
It is a similar story in other areas. In fact, it is worth noting that, according to our estimates, under this program 270,000 seasonal workers will be able to add to their benefits from what they have now, by an average of two additional weeks of benefits.
It is true, however, that to obtain the same amounts of benefits seasonal workers, as with other workers, have to work a couple of more weeks a year to collect the same level of benefit. All workers will have to work more to avoid a lower benefit cheque.
Seasonal workers receive far more in benefits than they and their workers give in contributions. We estimate that even under the employment insurance legislation, areas where there is a high concentration of seasonal work will still have a very favourable benefit-to-contribution ratio.
For example, people in the logging and forestry industry will receive on average $4.12 in benefits for every dollar of contribution. Those in the agricultural sector will receive $2.50 of benefits for every dollar of contribution.
In many parts of Canada it is not uncommon that on average a worker may pay about $260 in premiums and receive on average over $12,500 in benefits. Over five years such a worker would pay $1,300 in premiums and receive $63,000 in benefits.
That simply shows that there is a continuing commitment to support workers in those areas.
.1050
There are other ways in which we have structured this legislation to operate more fairly in the current system. A key feature of the new system is the innovative family income supplement, which will top up benefits to reflect family circumstances.
The supplement, which will be based on the child tax credit, will enable low family incomes to qualify for EI income benefits as high as 80% of insurable earnings, compared with the basic benefit rate of 55%. This supplement will benefit 350,000 claimants across Canada. For example, the number of people in Atlantic Canada who would be eligible for a family supplement would be about 54,000. In Quebec the number of users who would be eligible for the family supplement is about 118,000.
As a result of this new supplement program, low-income families will see their benefits increase - I want to make this point, increase - by 7%. Low-income parents who head single-parent families will find that their benefits increase by an average of 11%.
So all those who are out there saying that somehow this is an attack on low income have it all wrong. They have turned it on its head. The result is that low-income users will have higher levels of benefits than they now do. That is the result of the family income benefit.
It is also a basic fact of the system that the people who pay for UI, and now the proposed EI system, are those who pay into it year after year but who rarely or never use it. That is because statistics show that almost everybody who uses the system even once never pays enough premiums to pay back the benefits fully. The premium payers have watched their potential benefit levels decline over the past decade while their neighbours use it year after year.
One reason why we were reluctant simply to cut benefits across the board yet again was to avoid further eroding the confidence of the vast majority of people who are the premium payers and potential insurees. The alternative was to introduce the intensity rule. I can tell you we did so with some reluctance, but it is important because it will reduce benefit levels in a modest way the more someone uses the system in a five-year period. We believe this will encourage more work in the system.
In addition, apart from the family income supplement, the low-income family rebate, and expanded coverage for part-time and multiple job holders, low-income claimants will also be allowed now to earn up to $50 a week while on claim without any form of penalty. Again, it comes to the central principle that the importance here is to add to income - not necessarily benefits, but to add to the actual amount of money that people earn. That is why the program has to be assessed in those terms.
I also believe this is a fairer program for employers and therefore will aid in the job creation area. We have already announced that the premium rate for workers will be reduced from $3 to $2.95 for every $100 of insurable earnings. This will translate into a reduction of the premium rate for employers from $4.20 to $4.13.
At the same time, companion legislation, Bill C-112, will reduce the maximum insurable earnings from $8.15 to $7.50 per week. This will substantially reduce premium costs for employers equivalent to a further premium rate increase of 15¢ per $100. The total premium reduction is intended to stimulate job creation. In fact, about $1.3 billion of reductions in cost to the system will redound to the benefit and therefore will help stimulate job creation.
We also believe the switch to the hours-based system means EI will be far simpler to administer. Independent estimates put the administrative cost saving for employers at an additional $150 million per year.
Those making the case that this package picks on lower-income people are ignoring not only the family supplement but also the quite stringent clawback rules that we are putting in place for hiring claimants who use the system year after year. Depending on the actual number of weeks of benefits received in the past five years, claimants could be required to pay back from 50% to 100% of their EI benefits received while on claim.
I also believe a strong case can be made for the fairness as it applies to some groups in our community, particularly young people and women.
[Translation]
Some have expressed concerns that the reform will hit women and young people hard. Once again, I point out that the reform will clearly affect men more than women. For example, two thirds of the claimants who will receive the family income supplement are women, and single mothers will receive a supplement of roughly 11%.
Of course, young people will be affected by the increase in requirements to participate in the labour force. This measure is aimed at preventing young people from beginning a regular pattern of UI use. Having said that, young workers are actually less affected by the reform than other age groups. In fact, two thirds of the 82,000 new claimants who will be in a position to collect EI benefits are young people.
.1055
[English]
There's also much better fairness for part-time workers, which was a major concern expressed by this committee in its green book examinations. Under EI, part-time workers as a group will pay $6 million less in premiums than they do today. The break comes in the form of a full rebate for all workers who earn under $2,000 a year. Fully 380,000 of the 500,000 part-time workers who will now be eligible for insurance under EI will qualify for this premium rebate. So will 330,000 of the existing 1.9 million part-time workers who already pay UI premiums. In fact, we estimate that 920,000 low-income workers will now be eligible for the premium rebate program brought in under this proposed legislation.
This is the case despite the fact that EI will also widen the insurance coverage and particularly deal with what many commentators in front of your committee, as I read the transcript, talked about: the so-called glass ceiling, the artificial establishment of a 15-hour work week, which means that many employers simply provided a threshold of 14 or 12 hours of work so they would not pay premiums for part-time workers. Under this legislation we will dismantle this job trap, which has forced many part-time workers into working only smaller hours in weeks when they might have wanted additional work.
Let me now turn to the most important part, in a sense, of this restructured insurance system. That is the new employment benefit measures. They are intended actively to reinforce the pro-work features of a redesigned income benefit.
The employment benefit consists of a simple set of five basic back-to-work measures: positive, direct help for people to return to work.
Members of the committee will remember that last summer we introduced a major reorganization and overhaul of the department's service delivery network from coast to coast, establishing a network of community job centres, including new points of service, with the addition of on-line electronic kiosks dispensing the latest information and developing new community partnerships at the local level. The EI legislation completes that overhaul of the delivery of job measures.
The five employment measures will replace a grab-bag of 39 different programs, all in the aid of simplicity and directness.
In the past, too many people came to our employment centres looking for a job but we sent them away with a program. This new system changes that. It's now basic, results-oriented back-to-work measures. We'll determine its effectiveness not by the money spent or the programs applied, but by the results in terms of getting people back to work. From now on our employment centres will be evaluated on how well they are getting their clients back to work. That's their number one job.
I want to emphasize that as a result of this legislation and the previously announced reforms in the administration of the department, we are now shifting to a more community-based control, a decentralization of services, and increasing the number of contact points for users by using the new technology, such as the Internet. As well, we are moving to ensure that the federal government is a full partner in a community-based job-building strategy.
Before anyone receives a re-employment measure, he or she must go through two steps.
Our first line of attack in combating unemployment is information. With the introduction of an electronic labour market exchange on a national basis across Canada and the related labour market information, we are substantially beefing up the department's capacity to give people the information they need when they need it about where the jobs are, how to get them, and how to apply for them.
Following on from this basic job market information, the national employment service will advise clients who need further help by referring them to basic programs such as career coaching, job-finding clubs, and resumé-writing circles.
Clearly, though, for people who can't find jobs just by getting access to information and providing this kind of life skills service, we need to provide more direct employment measures.
First, these five active measures will serve clients who have collected UI in the previous three years. What we're doing here is quite substantial, but I don't think it has been recognized.
.1100
This means we are now extending employment benefits to people who've exhausted their usual benefit up to a three-year period, and in fact we're extending the right to employment benefits to any parents who have left the workforce to look after their children up to a five-year period. I think it's noteworthy to recognize the difficulty many women have faced in re-entering the workforce after working at home for some time. This means under this new legislation fully 900,000 women will now be eligible for re-employment measures. Our estimate is that on an annual basis about 10% of women who have been out of the workforce, looking after their children, will avail themselves of the new employment benefit measures. That's a very important measure.
We also estimate, Mr. Chairman, that people who've exhausted UI benefits account for somewhere between 25% and 40% of existing social assistance rolls at the provincial level. We will now be in a position to extend to all those people the opportunity for employment benefits to get back to work. So it will have a very substantial positive impact on the social assistance caseloads of provincial governments. I think it addresses, again, a problem this committee dealt with during its hearings a year ago.
I want to emphasize that this is not a ``one size fits all'' program. Its support will be tailored to an individual client's needs. First, the wage subsidies can help level the playing field for people facing disadvantages in the workplace, including many women. Wage subsidy pilot projects that have been conducted over the past year have yielded - I want members to listen to this - a 70% to 80% improvement in job retention, including fourteen to fifteen more weeks of work and up to $5,000 a year more on average income. That's a very substantial increase in the workability programs for these individuals.
Income supplements will get people off UI faster by increasing the incomes of people who might not take lower-paying jobs. They will help unemployed single parents get back on their feet and gain new skills and experience.
We have been conducting, as members know, a major pilot project in New Brunswick and British Columbia called ``self-sufficiency programs''. It again has shown the validity.... I think the numbers are that in the first year of operation about 22% of recipients of the income supplement have been able to get back into full-time employment, as compared with 2% or 3% of people in the pilot category who did not receive that kind of income supplementation.
Our self-employment program, which is the third measure, will allow people to start up their own businesses. In our current program we have already helped 34,000 people start their own businesses. They in turn have hired an average of one more person. So in the existing program for self-employment over 68,000 jobs have been created as a direct result, giving people the means and measures to start their own entrepreneurial development.
I see two of the distinguished members of Parliament from New Brunswick. At Christmas I received a package from a self-employment group in Moncton. It included everything from a can of maple syrup - it was all checked with the conflict of interest rules, by the way - to a small teddy bear. There were computer disks. There were some incredible woodworking examples. All these were demonstrating...all now based on new businesses that had been started by people who had been laid off in the past year. I think you can repeat that example right across the country.
In other words, the self-employment program provides an important new incentive for large numbers of people who, under the old workforce, were simply left on benefits and then, when they were exhausted, left to start their own businesses.
A fourth measure, as you well know, is the job partnership projects. We have been testing in New Brunswick, through the Job Corps, where 1,000 older workers from the forestry industry are now working in major reforestation programs, regenerating a vital local industry that will provide future jobs for a new generation of workers in this very important area.
We will also be offering, as a fifth measure, a new skills and loans grant that can be used to upgrade skills or acquire new ones to take on a new type of job. We will provide this assistance only with direct provincial consent. Upwards of 400,000 people will be receiving the kinds of help that will be available through these five measures.
More than that, Mr. Chairman, I think it is important to point out that these new measures give us the opportunity to establish a new set of relationships with the provinces. As I have mentioned previously, we are committed to working closely with the provinces. The legislation makes it clear that we will work in concert with them on the design, management, and delivery of our five employment measures. In the case of skills, loans, and grants, specific agreement is needed.
.1105
We want to create a new momentum and a new set of working relationships with the provinces in order to eliminate overlap and duplication. We are quite prepared to have provinces deliver directly the EI employment benefits where they have comparable programs. If they have similar measures that can bring results to our clients, then we are ready to use their programs rather than duplicating them.
We are also looking at how we can deliver our services jointly from the same office or develop even new methods of joint delivery of programs.
[Translation]
The reform is flexible. It makes it possible to meet the needs and priorities of each province. We are fully committed to respecting the jurisdictional responsibilities of the provinces for education and training.
Already, I have been speaking with a number of my provincial counterparts about these issues. For example, I met the Quebec minister of Labour, Ms Harel, before Christmas, and there will be another meeting at the start of February. In January, my officials, namely the Deputy Minister, will organize a number of meetings with officials from Quebec.
[English]
Later today, when we finish this meeting, I shall be meeting with Bob Mitchell, the Saskatchewan social services minister, also to discuss a new form of protocol or agreement on the delivery of these employment services. The deputy minister is meeting with provincial counterparts. In other words, we've now engaged every province in a very substantial new discussion about how we can join forces to help people to get back to work. It really is a new way of managing our federalism and a demonstration of a new kind of flexibility that allows us to customize and tailor each program for each program.
I also want to point out something that again is a matter on which this committee commented. It is that if this reform is going to produce the kinds of long-lasting and beneficial results we want, then it must change with the communities and help them to cope and adjust to the change.
For that reason, we are phasing the programming in over a six-year period, to give people time to adjust to these changes and make the most of them.
A key part of that change is to have a fully open, transparent system of monitoring, review, and evaluation.
I have heard or read in the press various commentators, including some from this committee, who have speculated on the impacts, who have predicted what might happen. We are going to call their bluff. We are going to test those impacts in an open way - accurately, visibly, and in a rigorous way - so a full evaluation of monitoring will be presented to this committee after a two-year period.
I am pleased to announce today the establishment of a study centre to be located in Charlottetown, Prince Edward Island, to monitor the impact of employment insurance on communities and individuals in high unemployment regions.
The function of the centre is to gather detailed information and conduct impact analysis so we can obtain a solid base of understanding of how people are adjusting and adapting to the UI system. How is the labour market functioning in these communities? Is enough work being created? That's why we are setting up the monitoring mechanism.
We will be encouraging the full cooperation of provincial governments, unions, business, and other interested parties to join us in this evaluation so we shall get away from the fantasy, the speculation, and the fear-mongering and get down to facts, to find out exactly what's going to happen and have it presented in an open, transparent way before this committee and have it evaluated before the program proceeds after a two-year period.
The work from this centre will provide a key contribution to the report that the EI commission is required to make under legislation. By legislation, we've bound ourselves to report to this committee by 1998.
I also want to comment on the question of the UI reserve. The EI bill proposes to build a reserve in the account to cushion against rising costs in any future recession. We don't plan to have a future recession - we certainly hope to avoid it - but who knows what the future may bring?
This reserve is absolutely crucial to our ability to stabilize premium levels over the course of a business cycle. It's good policy to want to protect benefits from further erosion at a future time.
Let me briefly recall the experience in the last recession. The UI account went from a $2 billion surplus at the end of 1990 to a $6 billion deficit three years later. As a result, the previous government had to increase premiums by nearly 50% during that period. The result of all this was that the unemployment insurance did not perform its traditional and expected role of cushioning and protecting the economy against the impact of recession.
.1110
[Translation]
Thanks to revenue obtained this year, the Unemployment Insurance Fund has a slight surplus of roughly one billion dollars. We have to create a true reserve to avoid increasing premium rates during the next recession. According to the act, this reserve may only be used to pay benefits and administer the act; it cannot be used to finance the deficit.
[English]
In conclusion, Mr. Chairman, I just want to say that over the next few days officials of my department will be here on an extensive basis to provide you with further detail and data on the specific impacts of the legislation, broken down by sector and other categories. We expect those will be tabled at the beginning of the week, when the deputy minister provides you with his full evaluation.
I would ask the committee, during the course of these examinations, to work closely with our officials on a number of questions that have emerged. For example, let me draw to your attention just two that I believe warrant some serious consideration.
As you know, we have tried hard to accommodate seasonal work patterns in the system by introducing a shorter fixed period for averaging earnings; for example, sixteen weeks in the high-unemployment areas. It turns out, according to representations made by some members of this committee, that some seasonal workers have work patterns that don't fit easily into that kind of averaging system. The group we are talking about is seasonal workers whose work is split into two or more parts during the year, with a gap in between. The classic case may be the fish plant worker in New Brunswick, who might work eight weeks during the spring and then another four weeks during the fall, with no work during the summer, under the present system.
I've already said in the House of Commons, as members will know, that my officials are now examining this issue to ascertain the degree to which a problem exists and what remedies might be available. I'm sure this is a matter you will want to examine in some depth and offer recommendations on. I want to make it clear that I myself and my officials will work very closely with members of this committee both to examine this problem and to see how we can provide for a proper response to that concern.
I've also asked my officials to provide the committee with the full evaluation of what that would mean. I would want to remind committee members, though, of an old law of physics I'm sure we all learned in high school: that every action has a reaction, and every fix has its costs. We cannot undermine the work-income features of the reform necessary without unbalancing many of the equitable features that have been built in. We also must maintain the budget framework we've established and - this is very important - avoid adding a new complexity to the administrative framework that would eliminate one of the major advantages of this program.
I'd also like to point out that some new building blocks are in place to meet this problem. Notably, we have made provisions for a $300 million, three-year transitional job fund dedicated exclusively to high-unemployment areas to help them create new forms of work, new economic development, in those areas that may be affected. The fund's sole purpose is to help kick-start sustainable jobs for the future in communities where jobs are now few.
By way of example, we've already started work in many areas of the country, working with local officials, provincial groups, members of Parliament, and local business groups, developing programs that could invest in silviculture, aquaculture, and other local economic opportunities that would substantially extend out.... Where there is seasonal work in the fishing industry, it can now be extended by many weeks, indeed months, by filling in those gaps during that period of time with the right investment of proper economic dollars. We believe we can create a larger employment base in rural communities around which other jobs can cluster.
I would like to point out, because it's been a matter of real concern to me, that one of the areas that have been neglected in job-creation employment in the past has been rural Canada. I think there's tremendous potential there. With the new changes going on in the global markets, with the new changes going on in deregulation of systems, there is an enormous potential for developing new products in rural Canada. But it needs investment. It needs new economic development measures. We believe this $300 million fund is a major down-payment on that kind of job investment in these areas.
We are committed to working with regions, provinces and other local groups to ensure that we can expand the work season with irregular employment patterns. That's the purpose of the fund.
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Another area I would like to draw to the attention of the committee, which has been given some attention by me in the last several weeks, is the proposal dealing with the condition of students.
We believe the $2,000 premium refund for those on low income will provide a major cushion or basis for people who work for a limited number of weeks. But it has been brought to my attention that there are many full-time students in this country who, in order to finance or save for their education, have work earnings above the $2,000 threshold. Therefore they would not qualify for this premium rebate.
I will ask the committee to pay special attention to that problem.
I would like to indicate to you that we have already established a working group, which will include industries, such as the fast food industry and the retail industry, as well as student representatives, to work with us in developing options or examinations. We will certainly share the results of that work with the committee.
I believe we can come up with a solution that will particularly address that issue. I hope the committee can work with us on this particular item to provide a response within this period of time.
I could check with the officials, but I believe the working group will have some analysis available for the committee within two or three weeks. We just established the working group, in the first part of January.
In conclusion, Mr. Chairman, I appreciate the indulgence of the committee, but it's a large, complex bill, so I wanted to take the time to go through it.
I believe this legislation will provide Canadians with a job system for the next century. It's something that's coming on us very fast, that's appearing. It will give people renewed hope for a better and more secure future as part of a dynamic and growing workforce.
I watched a program the other night on one of our national television channels in which there was a worker who had been laid off, and the question was asked by the hostess of the program: what can be done to help this worker? This legislation can help. It will provide a new set of employment measures for workers who are dislocated, lose their jobs, find themselves downsized. It will now give them the tools they need to get back in the workforce, establish new work opportunities, and provide a new way of doing it.
We are in the position of providing real hope for a large number of Canadians who are unemployed and to increase the security and sense of confidence of those in the workforce that if they meet a change and they have to adjust, then some help and resources will be available to them.
I look forward to receiving the comments of this committee on this legislation. I believe we have the structure, the basic blueprint, right, but we certainly believe that the committee can help us in developing the fine-tuning and any corrections that need to be made. It's clear that there are issues that are worth the committee's attention, and they will call for serious work.
I want to close my opening remarks by again thanking the committee for coming back from its parliamentary break early to start this examination. I believe it is in the finest and best traditions of Parliament that we are going to work to help Canadians to go back to work.
Thank you, Mr. Chairman.
The Chairman: Thank you very much, Mr. Minister.
We will begin our questions to our witness in the usual rotation, beginning with the official opposition.
[Translation]
Ms Lalonde.
Ms Lalonde (Mercier): I would like to be able to have faith in all of the minister's generous comments. Unfortunately, I must say that our reading and analysis of the bill do not lead to these conclusions at all.
Regarding the work of this committee, to ensure that the presentations which will be made by various groups before the committee give us the opportunity to learn the truth, I request that you table with the committee this afternoon all of the impact studies conducted by the departments. We cannot, on one hand, read what we read in the bill, hold discussions with groups that have been working on these issues for years, and on the other hand, listen to the comments you're making without having access to the numerous impact studies at the department.
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I hope that my Liberal and Reform colleagues will support this request. The future living conditions and hopes of millions of Canadians and Quebec men and women will be affected.
We have the responsibility and the right to demand the immediate tabling of all of the tools which will enable us to establish what this bill will be and should be. Otherwise, based on what we know, we will be inclined to support the numerous groups which have called for the withdrawal of this bill.
Mr. Minister, what you have just told us is interesting, but, I repeat, it does not correspond in any way, shape or form to our reading of the bill and our analysis of its consequences.
I hope that you will agree to this request, because these documents are essential. Otherwise, the promises of collaborative efforts are meaningless. We must have these tools immediately; we have already requested them, but unfortunately, we did not obtain them. So I am taking advantage of this important meeting to request them.
Mr. Minister, we consider this bill regressive and unfair for young people, women, seasonal workers, and all newcomers to the job market. It is an anti-employment bill which will create poverty. That is what we see.
Regarding employment benefits, for the time being, the promises of flexibility are just that, mere promises. What we see is an increase in overlap. We believe in the work that is underway, but once again, we are going to wait for the results before getting too excited.
I'm going to go over each of the elements briefly, because I don't have as much time as you did. You realize that I've already asked my first question: Will we receive, immediately after this afternoon session, the set of impact studies on the various clients who'll be affected by the implementation of the bill which is before us?
We consider this bill a regressive reform. We could even say that it is a disguised deficit reduction tax for people who earn less than $39,000 a year. Mr. Minister, why didn't you extend UI premium coverage while maintaining a ceiling on benefits to ensure that increased solidarity among workers and capital intensive businesses makes it possible to provide benefits and assistance to lower income workers and less capital intensive businesses?
In my riding, the small business owners I spoke to are not happy with the reform. People who currently have access to benefits or who risk needing them are very worried. For the information of the public, the maximum insurable salary was reduced from $42,000 to $39,000, which reduced the premiums for workers earning more than $39,000. That reduced UI fund revenues, which, according to the figures we received - and this time we received them - will cost 900 million dollars. To compensate for this regressive reform, an additional 900 million dollars will be collected from people who, up until now, have paid nothing. They will be made to pay from the first hour they work.
Why carry out a regressive reform instead of one which would promote greater solidarity?
When it doesn't fully exclude them, this reform penalizes young people, women, newcomers to the job market, immigrants and seasonal workers by initially making it much more difficult for them to have access to UI. In fact, they will be required to work 910 hours instead of 300 hours over a 52-week period.
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Why reduce the benefit period and why do something opposite to what you said you wouldn't do, that is create two categories of claimants, those referred to as frequent users and the rest?
I carefully kept a document prepared by your officials which shows that most frequent users live in the Eastern provinces, including in Quebec. Does this mean there's a difference in the people who live in Eastern Canada, compared to those who live in the West? No, it doesn't, Mr. Minister. The difference is the labour market.
Rather than punishing people because the labour market is poor, should we not rather be looking for solutions, measures to stimulate economic development and job creation? That goes for Quebec, but it also applies to the Atlantic provinces. You know that we wanted to do everything we could to achieve this objective. In our view, this bill excludes those earning less than $2,000, and that is most unjust.
In addition, we understand the bill would - and if we're wrong you can provide us with the figures - necessarily increase what the provinces have to pay for welfare by making it more difficult to qualify for UI and by reducing the benefit period. Here again, the poorest provinces could feel the greatest impact, and this will happen just when the Canadian Social Transfer will be having a serious effect on social assistance funding for the have-not provinces. The government cannot be unaware that what it does has a spin-off effect on the provinces.
The proposed reform, which according to us seeks an increase in the number of hours of work, runs counter to the reform that the Quebec government is trying to introduce, which would involve reducing the number of hours of work. Given that the two systems have to work together, it is evident that this reform is some kind of a mess, because the left hand, the federal government, is disregarding what the right hand is doing.
Finally, the provisions in the bill regarding employment benefits are vague as to their implementation. You say you intend to negotiate with the provinces, and I have no reason to doubt you. However, you will also appreciate that the federal government has not shown much flexibility in the past. Thus, we will wait a little before believing that what you say is what in fact will happen. I say this particularly because, if I understood your comments a few moments ago, you said that the provinces could provide the benefits if they had the same services.
Finally, Mr. Minister, when it is mentioned that the unemployment insurance fund was in a deficit position at the end of the economic recession, it should also be mentioned that this situation occurred at exactly the same time as the cuts resulting from the federal government's withdrawal from the unemployment insurance's account. The federal government used to contribute two billion dollars annually, and two billion dollars for each of three years is exactly the amount of the deficit that had to be made up by workers.
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I would add that these cuts, which are the real objective behind the bill, will amount to a total of two billion dollars by about the year 2000. They will be added to the 2.4 billion dollars in cuts from your department this year, next year and subsequent years.
We are talking about cuts on top of cuts. I would like to believe your generous words, Mr. Minister, but I'm waiting to see the impact studies. Thank you.
The Chairman: Thank you, Ms Lalonde. Ms Lalonde spoke for 12 minutes and I will allow the minister to take as much time as he wishes to answer the questions. I will add on additional time to the two other parties as well to ensure fairness.
Ms Lalonde: Thank you for your generosity, Mr. Chairman.
The Chairman: I will now turn the floor over to the minister.
[English]
Mr. Axworthy: A number of assertions were made by Madame Lalonde to which I would like to respond.
First, on the question of looking at the studies, I'm sure Madame Lalonde knows that this committee has already received 20 evaluation studies that we've tabled. She might not have had a chance to read them - I know she has been occupied in other enterprises - but the reality is -
[Translation]
Ms Lalonde: No, that's not true.
[English]
Mr. Axworthy: - that the studies have been made available, provided by independent academic evaluators, on the activities related to the unemployment insurance system, and we've been releasing these for members of the committee and they've been released publicly.
In terms of specific impact studies, as I said in my remarks, beginning on Monday, according to the schedule set out by the committee, officials of the department will begin meeting with the committee and taking it through those impact studies. They are detailed and complex, and we want them to be given in a way that is fully understood. The deputy will start on Monday. I'm not sure, but I think two or three days have been scheduled.
The Chairman: Tuesday.
Mr. Axworthy: Pardon me; it starts on Tuesday, and for the next two or three days our officials will be there to go through these, chapter, verse, and scripture.
So I think the allegation made by Madame Lalonde is nothing more than grandstanding.
The information provided will be more than has ever been made available before, already, through the evaluation studies we've done. Secondly, all the impact studies will be given to the committee. That gives plenty of time, because, as I understand the scheduling, there is then almost a full week when the committee won't be meeting, and then a full hearing starts. So the committee has a period of fully two weeks in which to look at those impact studies and be able to share them with the experts and people who have actually developed those programs.
So we're being as open as we possibly can be in sharing all the information we have with the committee. So let's put that little issue to rest.
Mrs. Lalonde will have so much to read and so many things to examine that I hope it won't deter her from her other broader ambitions, on which we all wish her well during this interesting course of time. But they will be made available.
[Translation]
Ms Lalonde: That's not the point.
[English]
Mr. Axworthy: Secondly, the one area to which I take some real exception is when Madame Lalonde makes large rhetorical comments about this program being unfair, without looking at the specific measures in the legislation. This is unfortunate, because this is a very serious piece of work.
I suppose I should check the communications system, but let me give an example, which I thought I had addressed in my earlier remarks. It is that we have introduced a number of quite innovative measures to ensure not only protection but also added support for those who are most vulnerable and who are in the low-income category.
The family income supplement, to be available to 350,000 claimants, actually provides additional income benefit for those on low incomes - not less, but more.
[Translation]
There will be more money for the disadvantaged, Ms Lalonde.
[English]
That's the reality. So to make the claims you made simply flies in the face of the reality of the bill.
Similarly, we've established a new acquisition of earnings program. Up to $50 a week can be earned without any deduction from UI claims. Again, this is an opportunity for those people to make more money while on claim without having it taxed back.
Secondly - and I'm trying to get the figures - she made a claim that we exclude people under $2,000. It is the contrary, the opposite. In fact, all part-time workers are now brought in under the bill. What we are providing is a refund for them - and this is the first time we've done it - a full refund for those making less than $2,000; they get their income back.
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That means over 900,000 part-time workers who currently pay into the UI system and get nothing back will now have a refund. In fact, low-income part-time workers will pay less in premiums under this legislation than they do under the existing legislation. That's the reality.
So to make these gross allegations flies in the face of the hard facts in the bill.
It's also important to recognize that we may have a philosophical difference here, but I happen to believe the $800 million that we acquire in savings and that will be reinvested in employment measures is a very effective way of helping low-income workers get more work, get back to jobs, get retrained, and get back into the workforce, and that is a more effective way of helping those who have interrupted seasonal work, or whatever the case may be, to get better employment than simply having a benefit program. That's the message we heard from Canadians. It's the message we heard from this committee. As I have said, 70% of Canadians endorse the idea of having an active employment benefit program.
I use the example of all those who have been faced with unemployment, who find themselves out of work and having to face adjustments in their family. All of a sudden we are now in a position, working with provinces, local communities and others, to develop a new employment strategy for them in their own local communities - really to work with them to develop the kind of tailored, customized program that will create new jobs, get them back into the existing workforce, and provide longer-term security for them. They know a major support will be available to them.
To make the claim that this is somehow offloading onto the provinces.... Let me repeat that the family supplement takes care.... Many of those who are now drawing down provincial social assistance are those who are on the existing UI program and who don't get enough income. Through the family supplement, we replace that.
Secondly, by making exhaustees, those who have exhausted UI benefits and who are going on social assistance, now eligible for employment benefits - a wage supplement, self-employment, a job program, a skills grant...those people who have exhausted their benefits will now have some real, significant, tangible measure to get back to the workplace rather than simply being left to their own devices.
That is one of the reasons why we worked with the provinces - every single province, including the province of Quebec, where we have an $80 million program under the APOR program - to test out various ways in which we could help people on social assistance get back into the workplace.
One example that comes to mind was in the province of Newfoundland, where we had a program for long-term unemployed youth. Using the models we put forth here in these employment measures, they worked for sixteen weeks through a wage subsidy-style program. At the end of that time they received a voucher, such as we're proposing in this legislation, to go back to school.
Some 90% have taken advantage of that. Those are people who before had no hope. They were on the street, not doing anything. Now 90% have not only acquired the experience of working for a long period and of what goes with it, but they now have, in a sense, a bonus so they can get back into the school system or start their own business or get back into employment.
That's what we're talking about: restoring hope. I find it quite strange that in a sense a reactionary position is being taken that somehow the old system works so well that we shouldn't reform it.
Mr. Chairman, I have news for you. It wasn't working very well. There were lots of problems with it. It doesn't really befit the Bloc Québécois, which likes to talk about being progressive, simply to dig its heels in and defend the status quo. In fact, Mr. Chairman, if one is looking at who is progressive and who is regressive, I would say this is a progressive reform and the position taken by the Bloc is the regressive position.
The Chairman: Thank you very much, Mr. Minister.
I now turn to the Reform Party, Mrs. Brown.
Mrs. Brown (Calgary Southeast): Welcome, Mr. Minister.
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Mr. Minister, in your closing remarks you mentioned the nature of the bill as being very large and complex. I can only urge you, if at all possible, to return to the committee prior to the clause-by-clause consideration because of the nature and the number of the questions that need to be addressed. I hope you will give due consideration to that request. It would be very much appreciated.
Mr. Axworthy: Agreed.
Mrs. Brown: Thank you very much.
The second thing I would like to say in the preamble to my questions is that I see in here an inherent change in the definition of what insurance is. On page 9 of your presentation today you talked about EI, employment insurance, as being a tool for those who could not insure their work. But unemployment insurance really has always been an assistance in time of job loss, a tool to provide transition support, not necessarily welfare support.
As I read in the summary statement of the bill itself, the last paragraph of the page was interesting, where we're talking about employment benefits such as wage subsidies or earning supplements in order to help eligible unemployed people get back to work. In the next breath this document addresses reduction of dependence on income support. I found those particularly contradictory in the context of this particular piece of proposed legislation.
I'm going to address my first question today on the job creation figures that you have mentioned, actually since the bill was first brought forward in December. We had our briefing by your department on December 1, and at that time we asked if any of those job creation figures could be corroborated by research. We indeed were told that although no out-of-department research had been undertaken, there was an in-house component to the job creation figures that had been so described. We indeed were assured at that time that those figures would be forwarded to us.
Since then we haven't received anything from your department. Even after Jacques Blais was contacted to pursue the issue, those documents and those corroborating figures have not been forwarded to us.
I guess the question is, does the research exist, and if so, why haven't we been provided with it?
Here we are at committee talking about God knows how many jobs being created out of these changes, yet at this point there doesn't appear to be a single shred of evidence to corroborate the job creation claims. We wouldn't want anybody to think those figures have perhaps just been made up.
I would like to address specifically six times when figures were mentioned. The press release for the bill stated that change would create 100,000 to 150,000 new jobs. During your December press conference you stated that the changes would create 150,000 to 200,000 jobs. In the briefing deck the nickel rollback was supposed to create 12,000 to 25,000 new jobs. Also, according to the briefing deck, the jobs fund - that's the job fund of $300 million - was going to create 15,000 jobs. So that totals 40,000 to that point. Today you again mentioned 100,000 to 150,000 new job opportunities on page 8, and then the 58,000 jobs created by new businesses on page 21.
I really am at a loss. You have thrown so many figures out that, quite frankly, I don't know what the basis of those figures is, or if indeed there is any basis for them. So I would like you to give some explanation of that.
The second thing I'd like to address comes down to the scope of amendments that you suggested we would be permitted to entertain over the course of our hearings, and it has to do with seasonal workers. I was astounded as I was reading the document. On page 114, part VIII of this particular bill, you have what I have called the Atlantic premiers clause. It's situated just at the end of the bill. It looks as if it might have just been an add-on in that last week of the discussions that you had with the Atlantic premiers.
You've talked about self-employed persons engaged in fishing and that being a seasonal industry. Well, Mr. Minister, there are other seasonal industries that you mentioned today - agriculture, logging, and construction - yet I could not find anything in the document that had specific legislation for those industries.
So my question is how and why you came to the conclusion that the fishing industry would need to have specific legislation to deal with the issue of their employment and the seasonality of that employment?
Further to the question of seasonal employment, I found to be most interesting the studies that were done both out of house and in house with respect to the eligibility criteria. The out-of-house evaluations have indicated that fourteen weeks indeed was a reasonable expectation in terms of weeks of work for eligibility. Yet in the bill itself it was determined that you would move that eligibility period from ten to only twelve weeks. If the research indicated that fourteen weeks was indeed a criterion that was acceptable, then why did the bill push it only to twelve weeks? I would like you to address that particular question as well.
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There is another point I'd like to make, Mr. Minister - and I do appreciate having this time,Mr. Chairman. It comes down to the actual costs that are inherent right now in this process - this is a process question, actually, related to information - and the training sessions that are going on right now.
Our research has indicated that, for example, a full-page or almost full-page advertisement such as what appeared in The Globe and Mail.... This is before the amendments that are going to be in place. Hopefully we'll be able to have several amendments on this. They would cost up to $40,000 for something such as this, a full-page advertisement in The Globe and Mail. The Citizen is $8,100. Some of the lesser newspapers in the country are $3,000 a page and $8,500 a page. There was an extensive cost factor in the actual announcement of the employment insurance bill before we had even started the hearing process. I'd like to ask why we would be going through that particular part of the training before our actually having hearings here.
Also, the Guide to Employment Insurance.... This is a pretty spectacular document, well laid out, yet, Mr. Minister, we haven't even come to talk about possible amendments. So here we've had very extensive and expensive advertising, costing hundreds of thousands of dollars - perhaps even millions; we're not sure - and the actual materials you are taking out at this particular point in training sessions with your client services directors across the country to various and sundry offices.... I know this has taken place in one of my colleagues' offices in Vancouver. A client services officer was there on December 14, and that was indeed before these hearings began.
Those pretty much sum up the questions I would like to ask this morning. Once again, I'm delighted to have you here, Mr. Minister, and I look forward to when you return.
Mr. Axworthy: Mr. Chairman, I'll just confirm that if it's the wish of the committee, I'd certainly be prepared to return to the committee to answer more specific questions. As I understand it, your process is that you'll be meeting with officials next week. Then there's a week off. Then you'll be hearing from a variety of interest groups. So at some point it would be appropriate. But it's up to the committee to request it. I wouldn't want to impose myself on the committee in any way.
Let me deal now with some of the specific questions raised by Ms Brown. On the proposed job creation numbers, we have done an evaluation, and officials will share that with you specifically in terms of the methodology. But we've used the figure consistently that we expect about 100,000 to 150,000 jobs. You can't be totally accurate, because there are margins. But by modernizing the program itself...there's an estimate of about 15,000 potential employment. That's based on a macro-economic model that shows how the unemployment rate reduces as you change entrance requirements, thresholds, and so on.
A major area, of course, is the employment benefits: $800 million from operation will be reinvested in developing measures for re-entry into the workplace. Many of those measures actually have a job creation stimulus to them. I've mentioned the self-employment measures and the testing we've done over the past year for self-help employment, where 34,000 people have actually started their own businesses, and our evaluations show that on average they hire another person.
In the case of the wage subsidy, not only is it a re-entry method; it's also a job creation method. We find in particular oftentimes many small businesses don't have sufficient cashflow to hire a new person, an additional person, even though they may require them, particularly where a learning curve is involved. There's a period of six or eight months when a new worker doesn't have full productivity and has to get up to full speed, and oftentimes particularly small businesses are not prepared to cover that cost. That's where the wage subsidy, in effect, opens up a new job opportunity.
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We also look at the savings, the reduction of the MIE and the premium reduction, which creates about a $1.3 billion additional cashflow. Again - and I'm sure you're going to ask these questions of the small business community when they appear before you - they indicate that their major objective in terms of job creation has been to bring down the costs to them on the payroll side, the payroll tax, to help them create new work.
As we have also pointed out, we have introduced a $300 million direct job fund, and we're low-balling the estimates on that. We say 15,000, but if we're able to achieve some leverage out of that, where we actually work....
I'm going to use an example. We've been looking at the idea of setting up small investment funds in local communities to help self-help employment get developed, such as the Calmeadow model that's been used in many places or the investment funds that are being used by community futures groups across the country. That becomes a way of leveraging private capital to match up with our capital so that in effect you get a 3:1 or 4:1 ratio on that capital.
So the 15,000 figure is a low figure based upon the direct output as opposed to.... If we can get additional leverage from provinces, from local communities, from the investment banks and caisses populaires and so on, I think we could increase it more. But I will ask the officials to give you the full evaluation on that area.
On the question you raised about what you called the Atlantic premiers clause, I should point out that the specific regulations affecting fishermen also are available to the freshwater fishery in the prairie provinces and they're also available to the west coast fishery. In particular, I'm sure your colleagues in your own caucus who have come from British Columbia - many of them have made representations to me - are very anxious that those measures be applied to the B.C. salmon fishery, because, as you know, there's been a major shutdown there over this past year.
So it's not simply the Atlantic or Quebec, it's also the prairies and British Columbia. I suspect even the Great Lakes fishing community takes advantage of it.
Now, the point is that the reason there's a specific area is that there is already a special section for self-employed fishing people in the old act. It's not something that's being introduced in this bill.
Mr. Chairman, this probably is not a topic within this legislation, but in the last several years there has been an enormous expansion of self-employment in this country. In fact, when certain unions use the figures about how much coverage UI has of workers, one of the reasons for that is that a large number of new workers are self-employed workers and they're not covered and have not been covered under the existing act.
I would hope that once the committee dispatches this legislation and it gets back to the House it may want to look at that self-employment issue as a further topic. I think it's worth doing. But at the present time, the only self-employed category is for those in the fishing industry, and we will be tabling the new regulations for that before the committee within a week or two.
On the question of the advertising, there's an interesting contradiction between you and Madame Lalonde. Madame Lalonde was emphasizing the need for more information to make sure Canadians really knew what was in the act. Well, that's what we were providing. Because this is legislation that affects 2 million or 3 million Canadians and they all have a stake in it, we wanted to make sure they knew what the basic proposals were and could get access to the information so that those who had some interest in making representation - writing members of the committee, writing me - could do so with some knowledge.
Just to give you an example, as a result of the information campaign, we've now had over 60,000 calls on the 1-800 number asking for information and over 80,000 hits on the Internet system. It shows that there is a large degree of interest by Canadians. They want information, they want to know what's going on, and they want to know whether in fact they can make that information known.
Now, the good news is that once they get the information, as our analysis shows, they basically like what they see, and that to me is positive. But the reality is that for this committee to do its work, we had to disseminate information to a broad base of Canadians on the basic proposed legislation so this committee could then get any reflection or response as a result. They couldn't respond to what they didn't know. Now they have a better understanding. As a result, I think you'll find that they can give you their learned response.
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That's why the information campaign was started.
Mrs. Brown: I would like to look at the UI surplus account. Isn't it the case that this money is included in general revenue and that the finance minister is using it when he calculates his deficit figures? I guess the question is, doesn't this Liberal math really mean either that there is no UI surplus or that the deficit is actually some $5 billion higher than what we're being told?
It might be suggested in this instance that perhaps there was only that rollback of what I've called that wooden nickel because the money is being used to pad the deficit projections and that the government just can't afford the loss to the treasury, because without it you will not make your deficit target of 3% of GDP.
Mr. Axworthy: Let me just point this out for the record, because an important question has been raised. In 1983 the Auditor General of Canada, in his report, said the following:
- ...transactions of the UIA should be consolidated in the Government's financial statements,
with employee and employer contributions included in reported revenues, and benefits and
administrative expenditures included in reported expenditures.
It means that in times of deficit the Government of Canada is expected to finance the UI surplus, which we substantially had to do during the period of three or four years during the 1990s. As a result, when the fund was in a deficit of $6 billion, the Government of Canada was borrowing $6 billion to make sure there was a proper pay-out.
That's why we are recommending in the legislation the necessity to build up a reserve fund to provide for an offset so we won't have to go into further deficit financing to pay for it in a time of recession and also to make sure that we won't cut back benefits or jack up premiums during that period of time, which was the experience in the 1990s.
The most serious consequence of that was that at a time when the country was going into recession, the UI account, rather than acting as a cyclical economic measure, in fact made the recession worse. It pushed the recession further, because rather than putting money into the economy, it was taking money out of it. It totally reversed its role.
It's important to remember some of the work of this committee. In a presentation, the Quebec labour organizations - CEQ, CSN, and FTQ - stated.... I'd like to quote, because they contradicted themselves in the statement they made two days ago. They kind of reversed themselves. At that time they said that in order for UI to fully play its role as a stabilizer, they felt it would be advisable to set contribution rates in such a manner as to allow a surplus to accumulate during periods of expansion - which is what we have now - thus avoiding the necessity to increase contributions during periods of recession.
That's also advice we received from business groups and others. You have to build up that reserve fund to provide the stabilization in the system.
That's why the surplus is being established at this point in time. It was a recommendation of this committee, based upon recommendations made by Quebec unions, among others, that it be done. It is also in keeping with the practices put forward by the Auditor General.
The Chairman: Thank you very much. That concludes your round. I understand you have a plane to catch.
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I now turn to the Liberals. I'll begin with Maria Minna.
Ms Minna (Beaches - Woodbine): Thank you, Mr. Chairman.
Just to pull off on the last question, about the reserve, the committee did, Mr. Minister, receive a great many submissions throughout the hearings on the reserve. It was an important element.
I want to go back to two things we've been very involved with in the last little while. One is the platform on which we ran in the last election, jobs and growth. The other is the experience I had and the committee had when we went across the country during the hearings. I have a lot of questions about the specifics of the bill, but the one overriding one I found came up over and over again during the hearings from the people who were presenting was the need for jobs growth: creation of jobs; how we address the issue of job creation through this bill. Over and over again people said the best possible social assistance, whatever the mechanism is, is a job.
We said that during the election. We were elected on a jobs and growth agenda. That was what we ran on and that was what we discussed quite aggressively. Those two themes of jobs and growth and creation of jobs, giving people some security with having a job to go to, were not only our platform but were reiterated throughout the hearings across the country.
We all know the current economic situation is such that while we see large corporations producing very large profits, the domestic market is very flat and we're not producing jobs. The economy is not producing jobs at the rate we had hoped, despite the fact that the economy is supposed to be doing better.
We also know the engine of job creation, to some degree, is small businesses. That's a whole area we have discussed: aiding small businesses and the creation of jobs domestically in Canada. The export business doesn't seem to be doing that much, especially with the restructuring that's been going on.
Over the last couple of years we've also talked - and it's become quite evident and we've all repeated it over and over again - about the fact that we have a deficit of skills that don't match the jobs that are coming in. How are we going to be dealing with that to be able to match the deficit of skills that exist in our economy with what jobs are on-line? But in addition to that, how do we deal with what I would consider the chronically unemployed; that is, those people who have lost jobs, who are not likely to get, necessarily...? Not everyone is going to be able to be retrained and upgraded and educated to pick up those higher skills - and these are the people I consider to be the chronically unemployed - and how are they going to be able to get jobs through this kind of process?
There are two more areas: youth and unemployed. As we all know, youth have a very high unemployment rate in the country. It's taking young people longer periods to get into the workforce once they graduate. Again, I would like to understand how this bill assists in the area of employment, job creation, or aiding young people entering the job market.
Finally, I get back to women. There are a lot of questions I have around how the bill affects women. The one that comes to mind first is, how does it assist women to get back to the workforce? But also, has a gender analysis been done on the impact of the bill for how it affects women particularly? As you know, there were a lot of requests during the hearings by presenters all across the country, asking for a gender analysis to be done on government policies whenever they are presented to ensure that the impact is not negative but rather positive.
I guess really I'm trying to get at the jobs and growth agenda broadly, with all these subtexts in it. I could come up with a few other examples, but I won't go on forever, because I would like to hear how we are dealing with that issue of jobs growth in general through this bill.
Mr. Axworthy: Mr. Chairman, I thank the member for the question. I think it's a very important one.
First, there has been a reasonably high degree of job creation over the past years. I think the number in the last figures we received from Statistics Canada is about 465,000 full-time permanent jobs created in Canada.
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We shouldn't forget the figures. When we came into office, the unemployment figure was over 11%. It's now 9.4%. It's a reduction of almost two full percentage points during that period.
What's interesting about that is that some groups have been particularly helped by that. For example, older workers now have an unemployment rate of just 7%. It's down substantially from the 10% they had in 1994. There's been more of an increase. For women the unemployment rate has decreased from 10.5% to about 8%. So, again, they've had a substantial area. In December alone, which is the last period for which we have figures, about 32,000 full-time jobs were created for women in Canada. So job creation is taking place.
Much of it is taking place in areas of the economy that almost didn't exist ten years ago. It's a brand-new area and, as a result, one of the deterrents to that job creation growth is the skill deficits we have.
I want to take you up on one point. I share your concern about the kind of almost automatic downsizing that seems to take place. Oftentimes it is caused by legitimate reasons, but there's a kind of movement in that way, and I don't like it very much. I think a lot of Canadians don't like it.
I am really hoping that we can address more seriously the need for a better partnership or understanding with the private sector about the need to look at jobs, not just investment. It is okay to have good investment and lower interest rates and higher trade figures, but if it doesn't translate into jobs, then there's a missing link in that equation. It's something that needs to be addressed.
I share your concern that whether in fact it is done... My colleague, the Minister of Labour, is working on new proposals in the Labour Code to deal with things such as job sharing and other areas, which could be quite constructive. A year ago we initiated a task force that came out with recommendations in this area.
These things have to be looked at, frankly. In some ways I'm as unsettled as you are about what I'm seeing taking place in that area.
I think this legislation will help, because it squarely targets jobs and work as the purpose of the legislation. There's a strong message in this bill that we're moving away from an unemployment system to an employment system. We want people to create work, and it can't be done exclusively by government. It has to be done by unions, business, and others, who have to rethink their own methodologies of creating work.
I hope we can get away from.... There's a little bit of attempting on the part of some to create schisms or conflicts between business and government. I think cooperation and partnership are the operative words, not creating some kind of conflict between the two of them, which too often is the case.
I think legislation aids in this area because of the messages we are shifting. Clearly, the underpinnings of the program, in terms of the income benefits side, to provide incentives to work, the shifting to an hour system, mean that from now on every additional hour you work gives you a better benefit base. It extends your benefits.
The old system was what I call a threshold system: once you jumped over the jump bar, you were in the system, and it didn't matter what you did after that point in time. You got your benefit.
Now, by every additional hour, you can improve your benefit. That's the key to it. There's a really strong employment incentive. This is so for employers as well, as we know from some of the studies we tabled with you.
One of the practices that has emerged in all industries, in all parts of Canada, was that industries were using the UI system as a way of supplementing their wage base and going through a series of voluntary lay-offs that seemed, by some magic, to correspond with the UI period. Under this legislation, that will no longer be encouraged. In fact, it will be discouraged. There's now a deterrent for using the UI system simply as a way of supplementing what you should normally be providing by the way of work.
As a result, a lot of people would shut down, provide extended lay-offs, and so on during this period of time. We address that practice in this legislation.
Secondly, we provide well-tested measures for re-employment that not only stimulate jobs themselves, which is the self-employment measure...but also, in the highest unemployment areas where there isn't an infrastructure for job development, we hope to help create that by the economic development fund we've put in place, to work with these local communities, community future groups, economic development units, provinces - I hope members of Parliament will become engaged - to see how we can extend the work in these regions.
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Thirdly, for a lot of people who have been unemployed and left on the sidelines, we now can provide case-by-case management, not only for ourselves but.... As you know, I went through this last summer, when we introduced the changes to the department. By decentralizing our operation, by changing the onus of responsibility for our own public servants in our department, to get away from how much you spend or how many people you get back to work, and judging their results - not their inputs but their outputs - it gives them the opportunity to develop quite extensive partnerships at that local level, with provincial agencies, with local agencies. This case management approach means we can enlist local business, local unions, local community organizations, in the job management business, helping it take long-term unemployed workers and give them mentoring support and individual measures that will enable them to go back to work.
I'll use one example of a reconstruction that took place and that I'm quite excited about. A long-standing social agency in London, Ontario, was the Immigrant Women's Centre, which provided assistance for transition for women of families who had just arrived in Canada. They took a look at what we were proposing and came in with a proposal this summer. They said, we're now going to set up a one-stop shopping centre in London where we're going to bring in eight or nine different groups, dealing with aboriginals, dealing with youth, dealing with women; we're going to bring in the municipality and the province and the feds, we're going to bring in the unions and the business community, and we're going to provide an integrated approach for people getting back to work, using your new measures. So they have reconfigured or remade themselves to become a major partner in developing a local jobs strategy for that community.
That's taking place right across the country right now. It's very exciting to see the kind of stimulus this has.
That's why rather than taking a look at simply the income benefit side and worrying about it, a lot of groups should be looking at the employment benefit side and what that does to help their own constituency. I really would make the case for a lot of those who are deeply concerned, who represent the unemployed workers in this country, that this gives them a real opportunity to provide real help. Rather than simply providing an income benefit base, which was not working to get them back to work, this is a new opportunity to reinvent employment measures of a really substantial kind.
Ms Minna asked me about the gender analysis. A gender analysis will be tabled next week.
The Chairman: Mr. McCormick.
Mr. McCormick (Hastings - Frontenac - Lennox and Addington): Mr. Chair, I thank the minister and staff for being here from the department. I do want to take the opportunity to wish a happy, healthy New Year to all my colleagues who are here.
Mr. Minister, I think the EI bill will help focus on the employment opportunities that exist in this country. There are more opportunities than the press often reports, and this certainly can add to the confidence in this country.
I find it very unfortunate the opposition parties don't focus on adding to the confidence. They continually tackle everything that's good. I think we could all gain much more by working together a little.
Now the self-employment assistance program.... I have a small business background in eastern Ontario. I'll always be a small business person. I'm glad to see most facets of government and the world have finally recognized the contributions being made.
The self-employment assistance program has been very successful. You mentioned, and I'm glad to hear it, that you had maple syrup for your western grain flapjacks this cold winter season. There's a great need there for more programs.
Mr. Axworthy: Actually, I put it in my Special K, Mr. McCormick.
Mr. McCormick: I have a three-pronged question on small business.
We need much more money poured into our local communities to further this self-employment assistance program. Will more opportunities be made available?
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Also, small business is drowning in paper all of the time. Somebody said, ``So you're going to change the unemployment insurance. Are you going to put the burden on us?'' What will happen here? Will there be any less of a burden on small business, especially as it pertains to paper?
Another part of the economy that's affecting our legitimate small businesses is the underground economy. Many of us think it's much larger than most departments of the government want to recognize. How will this employment bill address the underground economy, and what benefits will it provide for legitimate businesses? How will it help in that way, Mr. Minister?
Mr. Axworthy: On the first question, you're quite right that one of the important elements in promoting further the self-employment development is better access to capital. I'm not talking about $50,000; I'm talking about $500 loans just to buy a new computer or whatever the case may be. That's one of the measures we see under the jobs fund, working in the local communities with the local caisses populaires, credit unions, banks, and financial institutions to set up community-based investment funds that will be eligible for providing that kind of equity financing.
In fact, we have a pilot project going on right now with Calmeadow, which has been looking at non-collateral loans in dealing with aboriginals and other groups. We'll be looking at that as a model, again at the local level, to provide that kind of financial help.
Let's say that a fish plant wants to extend so that it's not dealing simply with one species of fish but can extend into processing other products. It might need just a couple of thousands of dollars to provide some new equipment. This community investment fund would be of assistance to that.
The other thing on the self-employment side goes back to my earlier point when I mentioned the Immigrant Women's Centre in London. The self-employment measure has really been operated in large degree with partnership arrangements. For example, we've used the YWCA and YMCA extensively across the country. This is the group sponsoring the one in Moncton. We can provide a lot more. Community colleges and local business groups can provide that kind of mentoring for the self-employed person under the EI legislation, to get their job started and provide that kind of support system along the way.
Thirdly, another necessary link is to get them better business information as to what's available and what kind of support they need.
So those are the elements we're looking at.
I want to make sure this comes from the bottom up, in that we'll be setting out certain guidelines for officials to work with, but if there's a community investment fund, it has to be rooted in that community. It can't be imposed from the top. That's one of the areas we'd like to look at.
On the administrative issue, since 1976 there have been about eight different task forces, especially with the small business community, to address the administrative burden associated with the old UI program. The last of these task forces recognized that the only solution was to move to first-dollar coverage on an hourly basis and to remove the weekly minimum and maximum. That we have done. So fluctuations in weekly wages and hours of work will no longer require separate rules of deductibility; premiums will be collected from first-dollar coverage up to the annual maximum; and the reporting requirements will now be substantially simplified so there will be no need for detailed information on a week-by-week basis. They'll simply have to report the first day of work and the last day of work, total earnings and total hours. It means that a lot of businesses that now have to have double bookkeeping for the UI system can simply work it off their general payroll records.
I said in my remarks that we estimate that there is about $150 million in savings. Actually, we don't estimate, but the payroll association estimates that there will be a saving of about $150 million associated with that issue alone. So there's a major plus there. I'm sure the small business groups will appear, but if you have other suggestions coming out of this committee as to how to do that better, we're certainly in that mode of thought.
On the underground economy, one of the major results of the proposed measures will be to flush out the underground economy up to the top. There will no longer be any reason to work but not report. So for people who are now on claim who decide to fix their brother-in-law's recreation room and make $1,000 or $2,000, first, we're increasing the level of what you can earn under EI, and second, every dollar you make and every hour you work is going to add to your benefit. Therefore, all of a sudden it becomes in your own best interest to report every amount and hour and dollar of work earned, as opposed to under the existing system, where there are a lot of reasons you won't do it.
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As you know, under the present system, if you're working at one job at a reasonably high income and you become eligible and you get your benefit and there's work for another two or three weeks beyond that at a lower income, the tendency is not to take the work, or not to report the work you take, because it would reduce your benefit level. This works the other way. This will in fact improve your benefit levels and your duration of benefits. Therefore, we believe the whole expansion of the underground economy will substantially shrink, because in basic personal enlightened self-interest there's no longer any reason to do it.
The Chairman: Thank you very much. That concludes this round. I understand the minister has to leave at 12:30.
Mr. Axworthy: Mr. Chairman, I have a meeting with Mr. Mitchell, from the Government of Saskatchewan, at 12:30. It's one I just can't avoid. I'm sorry.
The Chairman: That's fine. That leaves us ten minutes for another short round of five minutes each. I would urge members to pose their questions in a succinct fashion, and I would also urge the minister to respond in a succinct fashion, so we can get as many questions and answers as possible in what is remaining of our time here.
[Translation]
We will start with a representative from the official opposition.
Mr. Dubé (Lévis): Since I don't have much time, I won't use any of it to wish the minister a Happy New Year. I will come directly to the heart of the matter.
First, you did not provide a satisfactory answer to Ms Lalonde's question about the impact studies. You said that we had them. The studies done by academics that we looked at are not impact studies. Although we won't reveal our sources, we happen to know that these studies do in fact exist. They contain tables and simulations for specific client groups. I would therefore repeat the question Ms Lalonde asked earlier: What are you waiting for, Mr. Minister, to make these very important documents public?
I have been here for two years, and I must say that you have consistently shown that you are not the type of person to go back on positions you took in the past. In the first paragraph on page 19 of the English version of the brief you presented today, you make a statement that I find surprising, because it is quite unlike you:
- After all, many students need all the cash they earn to pay for their education at a time when
governments are pulling back.
Beyond the words, Mr. Minister, there are the numbers. In going over the main points of the proposal, how can you state that the unemployed will not be getting less money, given that you are reducing the benefits ceiling from $448 to $413 a week, when you are reducing from 55% to 50% the benefits paid to frequent users over the same period, when you are reducing from 50 to 45 to maximum number of weeks of benefits in regions which are the hardest it - the figure is even lower in regions where the unemployment rate is lower - and when you are increasing the eligibility requirements for frequent users, who will now have to work 910 hours? You know that this new 910-hour requirement means that a person will have to work half the year - 26 weeks - in order to qualify for UI.
I'd like to tell you, Mr. Minister, about a simulation I had done by the MIL Davie company, which is located in my riding and is one well known throughout the country. The study looked at 482 unemployment insurance claimants. On the basis of what has happened in the last five years, if the reform is implemented and the maximum benefit rate and the number of weeks are both reduced, at the end of the period, around the year 2000, because of frequent users, there will be a total reduction of 1.4 million dollars a year in UI benefits paid to 482 claimants.
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How can you say that your reform will not affect anyone? I mentioned just one concrete example. We need this type of practical simulation, based on real figures for a particular client group, and that is exactly what we are asking you to provide.
That is my question. Is it short enough, Mr. Chairman?
The Chairman: There are two minutes left in your time for the minister to answer it.
[English]
Mr. Axworthy: First let me deal with the suggestion that we're providing a reduction for students.
I want to go back to my opening remarks, where I indicated that, of 1.3 million part-time workers who pay premiums, about 930,000 will actually have refunds now, which they never had before. Of those, 250,000 are students who are actually going to get their money back. Now when they pay into the system, nothing comes back. They'll actually have a refund coming back to them in this case.
Secondly, I want to quote from the work before this committee, particularly the tabling of the seasonal workers task force, which said:
- Something has to be done to stop young people from leaving school to take advantage of the
specious short-term benefits of Unemployment Insurance to the detriment of their future career
prospects.
We increased our money going into youth employment by 15%. We are spending over $230 million this year. Twenty-five thousand young people are being enrolled this year in youth internships through the private sector, and we hope to double that if we can. We really think it is a much better way of helping young people to get the skill they need, the work experience they need, to get them into the workplace.
It's a very strange philosophy for the hon. member to suggest that the prospect and hope we're holding out for young people is to go on UI. That is not the way you're going to build this country, to say that UI is your answer. What we really have to be saying is that good, long-term employment is the answer.
The chairman is signalling to me.
I can't answer the specific example that the hon. member gave. I hope that he will write it down, give it to us, and we'll go over the analysis with him, or he can bring it to the attention of the officials when they meet next week.
That takes me back to the first point, which I hope the hon. member will understand. The impacts will be given to the committee by the officials. Go through them extensively on Tuesday when the deputy minister appears. Nothing is being held back; it's all there.
Mr. Scott (Fredericton - York - Sunbury): I'd like to speak about, and welcome the invitation to the committee to revisit, the question that has become known as the gap. Certainly my colleague from Restigouche - Chaleur and I have become well acquainted with that particular technical problem in the bill, and I welcome the fact that officials and you and the committee will be looking at how to resolve that.
I hope that your invitation in fact acknowledges that it was never anyone's intention to treat insurable earnings that are separated by a period of not working differently from insurable earnings that would be consecutive and at least that it would be the way we would proceed to remedy this problem.
Mr. Minister, if someone is subject to the intensity rule, are they still eligible for the family income supplement?
Finally, Mr. Minister, there's a second gap that probably has not got as much attention lately but certainly historically has been a big issue in our part of Canada, Atlantic Canada. It is the space between when your duration of benefits is exhausted and when your seasonal job starts again. Historically that's been a significant problem, because in recent years in particular that space has been growing.
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Now, can the job partners program be used to fill in that space? Are jobs created using the job partners program insurable? In turn, does that not allow for greater eligibility by virtue of the fact that not only do you fix the problem on the back end of a claim, in terms of the gap between when your benefits are exhausted and when you go back to work...but it also gives you more weeks for calculation of your claim next year? Am I reading that right?
Mr. Axworthy: On what has been called the gap question, as you know, the proposal on the earnings averaging was to provide a work incentive which applies to about 98% of those in the workforce. So in fact it does extend that work season and it provides, as I said in the answer toMr. McCormick, a way of flushing out underground economy activities that are taking place.
But where there is this cycle that takes place in certain regions, I think we can address it. I have asked the officials to look at a series of proposals they can address with the committee during their meetings next week, to go over what are the best options that might be examined. I'm sure some solution....
I would re-emphasize, though, that one of the best ways of filling the gap is to get people back to work during that gap. That's one reason why we have the job fund available: to fill the gap in with good employment. In that case the employment that would be generated out of that jobs fund would be insurable and would be available. Under the employment benefits portion of it, the wage subsidy portion and others would provide insurable work but not the job partnership, because that's a direct government activity and it would be allowed.
I would just use this opportunity to say again that if people start thinking about how this thing can work for them, it means where there are gaps or where there is seasonal work, with three or four months off, you can use the employment benefits portion to fill that in. In the tourism industry, training can be done to improve productivity substantially. In the area of certain seasonal work...reforestation can be done in the forest industry, or redevelopment work in the fishing industry. In construction, work can be done through the job partnerships in the local community. It's in those kinds of areas that I think we'll be putting a real premium on the creativity at the local community level for us to use these systems to help people get back to work.
Mr. Scott: The question about the intensity rule and whether you're still eligible for -
Mr. Axworthy: Yes, I'm sorry. Yes, the family supplement is still out there, absolutely.
The Chairman: In closing, I'd like to thank the minister for appearing before us this morning and all the members for being here.
What we are going to do now is take a short break. As I mentioned to you earlier, we have a bit of future business we need to deal with. So I would ask the members, after a period of about ten minutes to carry out your media interviews and to allow the room to be cleared, to return here for a short meeting so we can deal with further items of business. The meeting shouldn't last any more than fifteen minutes.
[Translation]
We will take a 15-minute break.