EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 14, 1996

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[English]

The Chairman: I call our meeting to order. Good afternoon, everyone. Welcome back.

We have the pleasure to hear from the Canadian Council on Social Development. We have with us Katherine Scott and Richard Shillington, research associates from that organization. Welcome.

As you know, our responsibility in this committee is to improve Bill C-12, an act respecting employment insurance in Canada. We are waiting for what I'm sure will be excellent suggestions by many of our witnesses in order to help us in fact improve the legislation.

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In the format that we use in this committee, we encourage the presenters to give us a summary of their major points, and we really enjoy the question and answer session thereafter because the members can then focus in on key areas of legislation that have an impact.

So without further ado.... I don't know who is going to start. Is it Ms Scott or Mr. Shillington?

Ms Katherine Scott (Research Associate, Canadian Council on Social Development): We would like to thank you all for having us come here today to speak on our research findings.

Given the short notice, we were unable to prepare our submission in French, and we would like to apologize for not being able to do that. We'll present the presentation in English instead.

The Canadian Council on Social Development has certainly had a long history of speaking out on an important social policy issues. Today, we welcome the opportunity to speak out on the Bill C-12, the new act to introduce employment insurance in Canada.

We believe the current system is in much need of reform, actually. Successive governments over the years, and more employees and employers, have turned to the UI program for a variety of things including the pursuit of training, regional income redistribution, job creation, etc. We believe the program has moved further away from its key function: that of protecting employment earnings against short-term and unemployment. We feel the new act, however, does not represent so much of a new direction, but actually will exacerbate some of the existing problems in the current legislation. So what we'd like to do today is to address two central questions that we believe any employment or unemployment insurance system must address.

The first, and we think critical, question to ask about UI is whether or not the program itself is on a sound financial footing. We believe the second key question to ask of UI is whether the program meets its stated objective, which is to protect workers from temporary loss of earnings.

Looking at the first outcome, we believe the UI fund is clearly adequately funded, that it's on a sound financial footing. At the moment it's headed towards a $5 billion surplus. We believe this begs a question about what target the government has in mind when it has been asked to cut an additional $2 billion from the fund. Certainly since the time when Minister Martin announced the UI reform, the previous reforms to UI have in fact delivered $2 billion worth of cuts. The fund in 1995 stood roughly at $13.5 billion for expenditures, I believe. So there is actually not a need to cut the UI program, but that seems to be driving this further restriction on eligibility and entitlement that is represented in the new legislation.

On the second question, is UI in fact meeting its central objective in protecting workers earnings? Well, clearly it's not. In 1990, over 75% of the unemployed in fact drew UI; they were covered by the unemployment insurance program. Today only half of the unemployed are covered. In five years, that's a significant drop. So we feel that the direction taken in Bill C-12 to further restrict the program in fact takes the program in a non-justifiable direction. It's moving it further away from what UI is supposed to do.

What we'd like to do today is present our research that we've conducted over the past two months on four central provisions of the act, or sections of the act. Specifically, we'll address eligibility and the conversion of weeks to hours. We'll look at the calculation of earnings - the twenty-week averaging rule. We'll look at the maximum insurable earnings and the provisions and the amendments to that particular section of the UI act. And lastly, we'll turn to the family income supplement and the high income threshold. We'd like to evaluate each of these provisions basically on two criteria.

Firstly, does this provision enhance the economic security of Canadians? That's something that certainly was highlighted in last week's federal budget, so we'd certainly like to evaluate whether these provisions meet that goal.

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We'd also like to draw on our very extensive research to ask whether provisions in the UI act actually facilitate a modernization of the program. The labour market has substantially changed. We'd like to ask whether these provisions help, facilitate or match the realities that exist in the labour market.

I'm going to turn to my colleague, Mr. Richard Shillington, who is our senior researcher at the council. He will look at the first three provisions that I outlined, and I will conclude with the discussion of the family income supplement and the CCSD's opinion of it.

Mr. Richard Shillington (Research Associate, Canadian Council on Social Development): Thank you.

I'd like to speak first for a few moments about the conversion from weeks to hours. I assume everybody knows what we mean by this: the eligibility criteria is no longer going to be based on the number of weeks worked in the last 52 weeks - in the last year - but will be based on the number of hours worked.

I'm going to be speaking a great deal in reference to the tables that are at the back of our submission. If you can find table 2, this will be the first table I'll refer to.

In that table we have some analysis, based on StatsCan data, of the distribution of the labour force based on the number of hours worked per week. There are a couple of points that I'd like to emphasize. First of all, you're looking at the number of people who worked fewer than fifteen hours per week. This is important, as you know, in this change in legislation because these people now pay premiums for the first time, and this has been put forward as a benefit of the change.

I'd like to point out that many of these people will not be eligible to receive benefits, and as we get into our analysis you will see this. In fact, according to the HRD figures, I think a substantial proportion, if not the majority, of these people will not have enough hours in the year to receive benefits. So while they're going to be paying premiums for the first time, they won't be able to work enough hours in the year to receive benefits.

The structure of the change from weeks to hours, as you know, is such that anybody who works fewer than 35 hours per week on average is going to have to work harder to be eligible for UI, and will receive fewer weeks of benefit than people who work 35 or more. People who work more than 35 hours per week will find it easier to be eligible for UI benefits, and will receive benefits for a longer duration. So what's important in looking at this table 2 is that the people on the left-hand side of the page are going to find it harder, while the people on the right-hand side are going to find it easier.

In particular, you should note that women are more likely to work fewer than 35 hours per week. We have 5% plus 25% working, respectively, less than 15 hours per week or 15 to 34 hours per week, particularly among older women - the 55- to 64-year-olds. About 42% of those are working less than 35 hours per week. They are going to find it harder to qualify, and they're going to receive benefits for fewer weeks than they would under the current rules.

When I first heard about the proposals to go from weeks to hours, it had an appeal. You heard arguments about insuring every hour of work. The more I think about it and the more I understand the implications of the proposals, however, the less I like going from weeks to hours. I really wish it wasn't on the table, frankly.

If you would please go to table 1, I'll try to walk you through it in enough detail so that you understand what the table says without taking more time than necessary.

People who work fewer than 35 hours per week will have to work more weeks to become eligible. So if you look in the last column, the top three charts on the page refer to a high-unemployment region, a moderate-unemployment region, and a low-unemployment region. If you look at the very right-hand column, the plus-16 means that somebody who works 15 hours per week in a high unemployment region is going to have to work an additional 15 weeks over what they would have to work under the current legislation to be eligible for UI. Somebody who works 55 hours per week will have to work 4.4 weeks less.

A concern about this is that while this has an element of fairness in terms of insuring every hour, I thought we were in an economy in which we were interested in discouraging people from working forty to sixty hours per week in order to encourage more employment through the sharing of the hours that are there. This provision certainly is going to reward those people who work more than 35 hours per week, and will make it very difficult for those who work substantially less than 35 hours a week to receive benefits.

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I go to table 3. Not only are people who work high hours going to find it easier to become eligible for UI compared with people who work less than 35 hours, they're going to receive benefits for a longer time. If you compare UI, the current system, and EI, the proposed system, you'll see in each case the person who is working more than 40 or 35 hours per week actually gets rewarded in three different ways through the UI proposals, compared with somebody who's working shorter hours.

First, their earnings are higher. So a higher amount of money is actually being insured. Secondly, they're being rewarded because it's easier for them to become eligible for unemployment insurance. They have to work fewer weeks to get onto the system. Thirdly, they get rewarded because they can collect benefits for a longer period once they are eligible.

This all seems to run counter to the sets of proposals we've seen circulated from the advisory group on hours of work and distribution of work about discouraging the phenomenon we're all aware of, that those people with jobs are working very hard, and there are many people who don't seem able to find a job at all.

That's the commentary I have on the weeks to hours in that respect. I also want to speak about new entrants and re-entrants and the tightening of the rules around that.

We're concerned that the tightening of the rules around new entrants is going to mean in the future we are going to treat as new entrants people who are not actually new entrants. You have to have worked a certain number of hours in the last two years, including any time you might have been in receipt of unemployment insurance, to be treated as a regular claimant rather than as a new entrant.

With the tightening of the rules, we're going to have people who haven't left the labour force at all but who are working in an area where jobs are scarce and they're having a difficult time becoming eligible for unemployment insurance.... They're going to be treated more like new entrants. This is in part because of the reduction in the duration of benefits as well.

By reducing duration of benefits, you ensure that claimants will be on unemployment ensurance fewer weeks. If they apply a year or two later, they're more likely going to be treated as new entrants because they didn't have as many weeks on unemployment insurance.

We're just highlighting this. If we really wanted to treat these people as new entrants, people who do not have a lot of labour force attachment, then we'd better be clear that's what we want to do, because this is going to capture a lot of people who are not out of the labour force at all. They're just working in an economy where steady jobs are increasingly scarce.

About the 20-week fixed period, we've been asked to speak to this, although if you read the newspapers there's some evidence that perhaps the government has already abandoned this proposal. But we know how this works. Somebody who applies for unemployment insurance.... Instead of having their average earnings based on their last 12 weeks of employment, it's going to be the 20-week fixed period previous to their last week of employment.

When we first saw this proposal back in September, I was immediately concerned about the possibility that this would have some unanticipated negative effects in some particular circumstances. I imagined somebody who had worked for 20 years full time and was laid off in August and then perhaps decided to start their own business, went back to school or did something such that they wouldn't be eligible for unemployment insurance, then at Christmas took a week or two weeks of employment, then for whatever reason made a UI claim early in January....

You're all nodding your heads. You know what the impact would be. We would be putting a clerk in a Canada employment office in the position of explaining to this large fellow how in fact his average earnings after all those years of employment was actually $50 or $100 per week because he had made the intelligent choice of working for a week or two at Christmas.

I understand what's driving this. The idea here was to try to reduce the benefits that are being paid to some people. But we have to be very careful, I think, to put in legislation rules that average Canadians can understand, so the average Canadian can make intelligent choices.

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There's a huge problem with this one, which I gather the government has come to recognize. It will have the effect, as we know, of reducing the average earnings that people apparently have.

Table 4 at the back is our estimate, the best we could do with the data that was available to us on the impact of this 20-week provision.

Essentially, what you have here, for every economic region in the country, is the proportion of UI claimants who had worked less than 20 weeks when they applied. So these people would all have their average earnings reduced by this provision, and therefore would have their average benefits reduced. You can see that it varies from 55% or 60% in some places to 3% or 4% in other places. This is the minimum effect, because obviously some people will apply for UI who have 20, 25, or 30 weeks, but they have a discontinuity in their employment. I don't have data on that, but it could be substantial. This is absolutely a minimum of what the effect of that provision could be.

It has the same effect of reducing benefits. It has the same effect as if you had left the current rules in place and simply said that, instead of being 55%, the benefit rate will be 20% or 25% for people with 10, 12, or 14 weeks of employment. That would be a more honest way of laying out the provision. Leave average earnings to be calculated in the normal way.

We have a recommendation in this regard. It is simply to calculate average earnings based on the last 20 weeks with work.

I think the argument that has been presented in the department's literature about why you would want to do this really doesn't hold. The argument has been that after they had qualified for unemployment insurance and they had their 16 weeks, they would not take a period of part-time work because that would reduce their average earnings. Once somebody had 20 weeks of employment, the same thing would exist in this case. Once they had 20 weeks, if they were offered an additional one or two weeks of part-time employment they would still be in the position of not wanting to take that because it would reduce their average earnings.

I don't think this has really addressed that issue. It's only addressed the issue for people who have less than 20 weeks of employment.

So I'm very concerned about the capriciousness of this provision and somebody making decisions as a Canadian citizen and all of a sudden losing 70%, 75%, or 80% of their UI benefits because they had worked for one or two weeks.

In reducing the maximum insurable earnings, you're reducing the amount of income that is being insured. If unemployment insurance is essentially a program of insurance against unexpected loss of employment income, then you're reducing the amount of income that's insured. That's regrettable just from the point of view of consumer confidence and an economy that depends on consumer confidence to be strong and vital.

I have another, even stronger, concern about the maximum insurable earnings. It's about the effect of reducing the maximum insurable earnings on the incentive for overtime versus job-creation.

We know that the way we currently fund unemployment insurance - and the same argument actually holds for the Canada Pension Plan - encourages employers to give people overtime instead of hiring new people. If you have an employer, they could hire ten people and pay them $30,000 a year or have five people and pay them $60,000 a year and have the same total payroll bill. Their unemployment insurance contributions would be far less if they had five people and paid them $60,000, because you pay unemployment insurance up to $39,000 and not above that.

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If I'm an employer and I have an employee who's already earned $40,000 this year and I give them overtime, then I pay no unemployment insurance contributions on that overtime. Certainly for large employers, the very large corporations, this is a consideration. By reducing the maximum insurable earnings from about $44,000 to $39,000, you've increased substantially the number of employees who are at that maximum. Therefore you've substantially increased the incentive that's already in there for employers to use overtime rather than hiring new people. I'm not sure that's the direction we really should be going in in this country.

Ms Scott: By way of conclusion, we wanted to address the family income supplement. As many of you may know, the Canadian Council on Social Development has weighed in on issues of child tax benefit and children's benefits in the past, and we're a very strong proponent on behalf of low-income children and their families and we continue to be. We certainly are pleased the government appears to be taking up the concerns of children, most recently in its budget.

On the face of it, it would appear we might be in support of this particular measure to introduce the family income supplement, which, as you know, is a top-up of up to 80% of the benefit level for families that have incomes under roughly $26,000 a year. Those are the parameters of the child tax benefit system, again depending on the number of children in the family.

By way of analysis, we'd like to say that while we're in support of the government's intent to support certain poor children and their families, we don't believe the UI system is the vehicle to deliver that support, in large measure because we strongly believe the unemployment insurance system should be operated at closer to strict employment insurance principles.

In our analysis, we roughly estimated that under the current provisions, the 60% rate for certain claimants with children, claimants who have incomes roughly under $20,000 a year.... From our data we suggest roughly 500,000 claimants currently have access to the 60% benefit rate. Those numbers were in 1993. According to the government estimate, 350,000 claimants will be eligible for the new family income supplement. That's roughly 16% of all claimants with family incomes under $26,000.

When you look at how many poor children are potentially affected by the program, again we estimate that in total over 250,000 poor children will potentially receive some benefit from the new family income supplement. That again is roughly 20% of all children in households with incomes under $25,000, $26,000. So 20% of poor children may potentially benefit from the new program. Obviously these 20% of children are an important goal, but we come back to whether support for children in these working-poor families should be delivered through the unemployment insurance system. We feel in fact the government has much more effective vehicles at its disposal as anti-poverty vehicles. We would argue strongly that the government consider augmenting the child tax benefit as at least one measure to consider addressing the needs of all poor children in these families and not to use the UI system in this particular manner.

The other point we'd like to raise on this, and our other concern, of course, is that this program is family income tested. This is a completely new departure for the unemployment insurance system, which to date has been based on insurance of individual earnings. We feel introducing a family income testing component to this component of the program is opening the back door at some point to the idea that unemployment insurance might be family income tested, in a way we feel is inappropriate. Similarly to how the minister, Paul Martin, has indicated he feels income testing is inappropriate for CPP, we feel clearly family income testing is inappropriate for unemployment insurance.

In effect, you already have income testing in the UI system through the clawback. As you know, right now there exists a 30% clawback on regular and special benefits, maternity and parental leave, a point that often is missed. At the current level, which last year was roughly $63,000, $64,000, we estimate 38,000 UI claimants in 1993 were affected by the high-earners income clawback.

The proposal, of course, is to drop it to roughly $48,000, $49,000. We estimate that 190,000 workers will be subject to the clawback, and if we freeze the threshold until the year 2000, as perhaps they will do, then 240,000 potential claimants will be affected.

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So we believe there's already an income-tested component to the program, and we would urge the government not to introduce family income testing through this particular program, in addition to what currently exists.

We strongly believe that there's not only a place but a need for programs that ensure the income of all Canadians. We would hope that the recommendations, which are summarized at the back of our brief on page 13, are useful in directing the members of this committee to consider amendments to the legislation, which I understand the government is prepared to entertain.

Did you want to speak on this?

Mr. Shillington: No.

Ms Scott: We'd like to conclude there, and we'd be happy to take any questions on the research we've provided. I understand that it's probably a bit more detailed than you expected, but hopefully we can answer your questions.

The Chairman: Thank you very much.

We'll have one 15-minute round. We'll start with Mr. Crête and then we'll go to the Liberals, Mr. Nault and Mr. Scott.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): Thank you for your presentation. I would have to say that it is the equivalent of the motion that we moved in the House yesterday calling for the minister to be sent back to do his work. Your proposals truly constitute a fundamental criticism of the bill.

Thank you very much, particularly for focussing on one aspect, namely the shift from weeks to hours. I have to admit that there was some information that we did not have and that now, you have made the issue clear for us.

In my opinion, you have illustrated one very important point rather convincingly, that is that this whole policy runs counter to the goal of full employment. Whereas the government made a commitment to establish a full employment policy and to develop Canada's human resources to their fullest, this bill is completely counterproductive. Quite clearly, it has the opposite effect. I would like you to comment further on this.

What struck me the most was this: a business that decides to hire fewer people and to pay them a higher salary would have substantially lower costs to bear than if it hired more employees at a lower salary.

Add to this the current tax credit policy, for instance in the area of research and development, and the bill packs a double punch. The current employment situation soon becomes very clear indeed.

Another observation is that we are moving in the same direction. It seems that we are accelerating the process already under way with the reform. Could you comment further on this?

[English]

Mr. Shillington: First of all, regarding the maximum insurable earnings and the reduction of maximum insurable earnings, we have a proposal in here that would speak to the issue of the incentive that's in place right now for an employer to pay overtime rather than hire somebody new, which is substantial.

The employer's contribution to unemployment insurance would be about 4.5% of salary and CPP contributions would be another 2.5%, soon to be much more. That's a substantial proportion of salary, and I think our recommendation could speak to that. Some people might think it's radical, but I don't think it's anywhere near as radical as the changes we have seen on the benefit side. We would simply say that for the employers, there are no maximum insurable earnings. The employers would pay a percentage of payroll without a limit; they would just pay x percent of payroll.

We could reduce their contribution rate so that you would get the same amount of money out of employers; we're not asking them to contribute more in aggregate than they do now. If you did this, the employer would be indifferent. The employer would pay the same contribution to UI whether they hired ten people at $30,000 or five people at $60,000.

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That would be at least a small step in removing an incentive that's in there now for employers to use overtime to address their labour market needs rather than to hire new people.

You made some comment about the overall level of benefits paid, and I'm sure you're familiar with the figures. The benefits now, in 1995, are about $13 billion and something, down from the peak of $18 billion to $19 billion. Obviously this program is paying out in benefits far less than it used to pay.

It draws into question this: if the issue two years ago had been to find $2 billion in unemployment insurance, then, depending on what the reference point was, we've done it. It's now paying $13 billion, $2 billion less than it did two years ago.

I don't know what the target is in this, but if unemployment insurance is important for when people are unemployed, then you would expect that unemployment insurance would pay high benefits during these days.

[Translation]

Mr. Crête: In recommendation number 7 on page 12 of your brief, you state that the government should eliminate the intensity rule because it discriminates against workers in areas of high unemployment and other non-standard workers.

Could you describe for us a non-standard worker? Are we talking about men or women? Do they work in specific sectors of the economy?

[English]

Mr. Shillington: I'm embarrassed, because CCSD released a report just last week or the week before on temporary work, an important part, but I haven't read it.

Ms Scott: We didn't bring it, either.

Mr. Shillington: I should be able to answer your question.

Certainly what we mean by non-standard work is the increasing frequency, prevalence, of part-time work, short-term work for six weeks, contract work, self-employment - all of these jobs, which were less prevalent a decade ago. To the extent that these jobs are short-term or part-time, because of the movement to hours people in those positions are going to get less coverage from unemployment insurance under the proposal than they would have under the older system.

On the intensity rule, one of the things that I have a bit of a problem with is the lumping together, in the description of repeaters, of people who might have had three years of working in an industry where there was a planned lay-off every August and after three years this person was a repeater. I have a problem with lumping them together with someone who is young. We know the labour force faced by the Generation Xers who have had three years of moving, three or four different jobs, and have not planned their lay-offs, who have been laid off various jobs. Those persons are going to be treated in the same way. It bothers me that the intensity rule draws no distinctions between these two types of people.

Ms Scott: I will follow up by saying that, according to our estimates, fully one-third of the labour force is now non-standard, if you define ``standard'' as being the historical 35-hour-a-week, full-year, full-time job. Fully one-third now have part-time, temporary, or contract work.

Our studies find that of course many of these people are doing these jobs involuntarily. They would take a full-time job if one were available and they were able to do it.

[Translation]

Mr. Crête: I have one final question. Would it be possible for you to forward to the committee copies of the report on part-time work to which you alluded? It may be of interest to us.

[English]

Ms Scott: Certainly. I'm sorry; I was thinking to bring copies of our work, but it slipped my mind as we were racing down. I'll certainly bring it in and table it with the committee. It will be no trouble at all.

[Translation]

Mr. Crête: Let us say that you are forgiven because of the quality of your presentation.

My final question is more delicate. As far as the unemployment insurance system is concerned, people often talk to us about repeat claimants and about the steps we could take to control fraud more effectively.

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Obviously, the government's bill takes the position from the outset that repeaters defraud the system, but I sense that you do not share this view.

However, is there anything that we can do to ensure that in five or ten years' time, this argument is much less relevant? First of all, we have to see how prevalent this problem is right now, but are there any arguments that we could invoked and that would not necessarily penalize workers in general?

[English]

Mr. Shillington: I'm happy to call an abuser somebody who is committing fraud: somebody who's collecting unemployment insurance benefits that they're not legally entitled to, and somebody who is taking money under the table. Let's all agree that it's fraud and it should be dealt with. But if somebody is collecting unemployment insurance benefits they're totally legally entitled to....

When I first read the headline in one newspaper that talked about unemployment insurance abuse, I wondered whether or not they would call somebody who contributed maximum RRSP contributions every year for five years somebody who's abusing the RRSP system, or somebody who used the capital gains exemption to the maximum every year an abuser of the tax system - again, not allowing any fraud. They were simply people who were taking advantage of the system that was there.

I think the unemployment insurance fund has been subject to a great deal of abuse by all three levels of government, who see it as an easy source of money to pay for training, because we don't want to pay for training out of the consolidated revenue fund any more; let's pay for it out of the unemployment insurance fund.

I think the federal government is guilty of that as well as the provincial and municipal governments, looking for ways of getting people eligible for unemployment insurance benefits instead of using social assistance or other appropriate measures. We cycle people through unemployment insurance rather than provide benefits to get them out of the situation and rather than address job situations.

I think it is used by employers who now can lay people off without worrying very much about what happens to them, or as we all know, lay people off every summer for retooling.

I don't think the unemployment abuse is limited to the employees at all. But to the extent that this legislation wants to bring down sanctions, they are only on the backs of the employees.

In fact, one of the interesting effects of this legislation will be to move more money from the Unemployment insurance fund into consolidated revenue. I point out particularly the increased vigour of the tax clawback, which is going to move hundreds of millions of dollars from the unemployment insurance fund into the income tax revenue of the federal government, because that clawback goes into the consolidated revenue fund.

So I think the unemployment insurance fund has been seen as a cheap source of money by a lot of people.

[Translation]

Mr. Crête: Could you explain to me in further detail what you just said about the clawback.

[English]

Mr. Shillington: Right now, people with incomes over $63,000 pay back one-third of their unemployment insurance benefits. But they don't pay it back to the unemployment insurance fund; it goes into consolidated revenue for the federal government. I've forgotten how much money that is right now, but we all know that is going to grow substantially.

Ms Scott: As I've said, by our estimate 190,000 will be subject to the clawback under the new $48,000 to $49,000 income threshold.

[Translation]

Mr. Crête: You estimate 190,000 claimants?

[English]

Ms Scott: Yes, 190,000 claimants. If it's frozen at the year 2000, roughly 250,000 claimants will be paying back a portion of their UI benefits into consolidated revenue.

[Translation]

Mr. Crête: You say that the three levels of government also take advantage of the system somewhat because of the restrictions they face. Provincial governments want to get people off social assistance and move them over to the UI system so that they no longer are responsible for paying their benefits. Don't you feel that one solution to this problem might be to have one single level of government responsible for this entire area?

[English]

Mr. Shillington: No, I haven't thought about it at all. If it's a serious question -

[Translation]

Mr. Crête: I didn't say which level. I asked you if you thought it would be good idea to assign responsibility to a single level of government.

[English]

Mr. Shillington: I know. If it's a serious question, it would require a great deal of thought.

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[Translation]

Mr. Crête: I know what my answer is, but there may be others. This is a very serious issue. Everyone in Quebec would like manpower to come under Quebec government jurisdiction. A report prepared by nine Canadian provinces and the federal government in which all social assistance areas that should come under federal jurisdiction are identified is currently making the rounds. Therefore, this is a serious matter.

[English]

Ms Scott: I feel the council perhaps would come down on the side of consolidating income security in the hands of the level of government that could ensure equitable distribution of income across the country. For this same reason UI went to the federal government in 1940 by constitutional amendment, and we feel it continues to be most effectively delivered at the federal level.

The Chairman: That's a very serious answer.

We're going to move to the government side and Mr. Nault, followed by Mr. Scott.

Mr. Nault (Kenora - Rainy River): Thank you, Mr. Chairman.

I was looking at your tables, and one thing struck me as very interesting. There is no analysis of what you call non-standard jobs, meaning people who have more than one job.

I happen to know many people who work two or three jobs, and quite frankly I know very few who would be happy to have only fourteen to sixteen hours in order to collect UI - which is of a very low rate in the present system. So in fact I would certainly be interested in knowing whether you have a chart that suggests more clearly to Canadians that in fact there are probably thousands if not millions of Canadians who work in part-time jobs, and not just one in a year.

I happen to have a sister-in-law who has three jobs. Unfortunately, every one of those three jobs is less than fifteen hours a week. So my question, of course, relates to that. You're suggesting that going to the hourly rate is a disincentive, is a bad thing. But people like my sister-in-law, who happen to be unable to collect UI, will now fall under this. Do you have statistics - I think they are very important to this debate - on how many employers use the fifteen-hour minimum as a tool of making sure they don't have to pay into the system? I think it's an important answer to get on the record.

If you have the information - you don't have it today - I'd like to see it, because it suggests here that people who work fifteen hours are the ones...they only exist in that way. Quite frankly, I know very few people who fall in that category. We should, of course, have another category that covers multiple jobs. Where is it in your graph? I think it gives a false impression that there are a whole lot of people out there who are working fifteen hours a week and are surviving on it.

Mr. Shillington: I'm not aware of that data. I do believe there are officials in HRD who could give you that information, based on their analysis, and that is a valid point. There is an advantage in going to hours for those people who are working.... What you could do is just remove the fifteen-hour minimum from the current UI legislation, and they could then be insured. If you wanted to leave it at weeks, just remove that minimum and the employment now will be insured.

Mr. Nault: Isn't that what we just did?

Mr. Shillington: You removed the fifteen-week minimum, but then you also went and converted the whole system to hours. If you had simply removed the fifteen-week minimum, I think those people would have been covered without what I consider to be the job disincentive of going to hours holus-bolus.

Mr. Nault: Well, let me make the point. You're hinging on the fact that you don't like hours, not on the fact that it's a disincentive for people to get more employment or to get into the system. I'm trying to turn it around on you, because you're making it suggest that the reason people work fifteen hours or less in a job is that they can't find another job. There are many employers in the country who use that as a tool. Quite frankly, that's an incentive for employers to have people working at fourteen hours. Places like Loblaws and Safeway are famous for it. I mean, it's part of their program now.

Mr. Shillington: That's right. I don't know how often that happens; I'm sure there's data around but we don't have it readily available. But if you just simply remove the fifteen-hour minimum, you would make that employment insurable.

I draw your attention to our first proposal. It says that if you want to stay with hours, you just cap the insurable hours at forty hours a week. We ensure your employment, and we will insure the people who have three ten-hour jobs or twelve-hour jobs, but we're really not all that keen on insuring all the hours of somebody who is working fifty or sixty hours a week because of the employment incentive that this puts in place.

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I think that's inconsistent with the report from the advisory committee on hours of work and distribution of work, which again tries to address some of the issues - you're right about people working fewer hours in multiple jobs - without putting a reward or incentive into the system for people who are working 50 or 60 hours a week.

Mr. Nault: That's my point. You have made it very difficult because you've skewed the debate. You've made it sound like we're pushing people to work overtime. I wish there was so much work out there that people could work all....

I would like you to give me a list of all those brave people who are working thousands and thousands of overtime hours. There are some, but I would like to know the other statistic, which is those who have multiple jobs, who don't fall under the system now. I beg to differ with you that when you look at those statistics they outweigh the other argument you've made, probably ten to one. I find that very hard to believe.

We'll get into that. We don't have the statistics, so this is a philosophical discussion now. I think it's sort of a moot point until we look at the statistics.

Ms Scott: Actually, HRD has put a number on how many multiple-job holders it expects will benefit under the new system. I don't recall it off the top of my head.

I would just point out that our concern is certainly not about those under 15 who are being brought in. That recommendation has been around for a long time, and we've roundly supported in our own work that these are low-wage workers and their earnings should be insured. We just want to point out that many of those who have single 15-hour jobs certainly won't qualify.

Our concern is for the large number in the 15 to 34 group who have previously been insured under UI. The 1.5 million workers in that group will now find it more difficult to qualify under this new system. Our principal concerns are about eligibility and, as Richard said, incentives that exist in the system for overtime work. There is certainly data available on that.

Mr. Nault: Again, your charts are very misleading because you go with the premise that 20 weeks are needed to qualify in all your regions.

Ms Scott: No.

Mr. Nault: Quite frankly, that doesn't exist in the real world here in Canada.

Ms Scott: Excuse me, sir. In our table 1, each of the high-employment regions has factored in that there are fewer weeks required in each of the regions, and 20 is the highest number of weeks required in an area like Toronto, or somewhere under 6%. We have factored that in, sir.

Mr. Nault: In every single case the length of claim is factored in at 20 weeks.

Ms Scott: Is that for the duration?

For instance, under 20 and 24 in table 3 under length of claim in a high unemployment region, 12 weeks of work are currently required to qualify for the program. The length of claim, if you worked 12 weeks, under UI is 26 weeks down the board, regardless of the number of hours you work per week.

Under the new system, many of those folks who work only 12 weeks won't qualify, and you can see what happens. If they worked 24 hours in that time, this is how long they would be eligible for weeks of benefits.

Mr. Nault: Okay.

Before I go, Mr. Chairman, I would like to deal with the whole issue of my shock at the Council on Social Development for their interest in moving this particular program to a purely insurance program. Quite frankly, this seems to me to be very right wing in nature, and is a very skewed view of how the world really works.

I understand what your interest is. You would rather see us go to a total insurance program. There would be no help for low-income individuals as there is in this bill, which is a form of social program whether we want to admit it or not. We are targeting low-income individuals.

For example, some 33% of the families we will now be targeting, to reduce some of the benefits they receive under the act now, make over $45,000 a year. So we will be taking some of that money from those high-income earners under the new system. In the scheme of things that may not seem like that much money for some people, but we're talking about when they're collecting UI. We will be moving that to the low-income families to increase what they will receive by some 7%.

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Now, I find it very difficult to believe that you want us to scrap that. That's basically what you've suggested in your brief: to go to a total insurance program, which is insurance and has no benefits to anyone else built within it.

To finalize my question, here are the five areas I wanted to ask you. We've also targeted under part II of the act, which you didn't talk too much about, wage subsidies, earning supplements, self-employment, job creation, partnerships, skills, loans, and grants. Are you telling me as well that you think we should just scrap all those?

This is very interesting, because most countries in the world are just going in the opposite direction. They are saying in their countries that the workers and employers of those workers should be paying for training. You're saying we should be paying for training in some other kind of system through general revenue. In this particular program, 98% of men and women and employers and employees are going to be present in the system and paying premiums.

I don't understand your argument. That means 2% are out. They're paying into the system, but you don't want us to take some of that money and put it back into training or supplements to low-income Canadians and that sort of thing. Can you give us an explanation as to why you would come up with a conclusion like that?

Mr. Shillington: Let me address the issue of targeting benefits to lower-income unemployed people. If we wanted to increase the benefits for low-income unemployed people, I think we would be at the front of the parade saying that this is an excellent idea. Let's look at ways in which we can increase the unemployment insurance benefits to low-income people.

Mr. Nault: Well, that's what we just did. So why -

Mr. Shillington: I don't think anybody's benefits are going up from this -

Mr. Nault: They are. There's a 7% increase for low-income people.

Mr. Shillington: Should we fund this out of a general tax revenue, should we fund this out of the tax system in general, or should we have this funded primarily from higher-income families who are unemployed? We're going to take money from some unemployed people and we're going to give it to some other unemployed people.

I have a job and a good income, right? Now, if there's somebody else who happened to lose their job who had the same income as I, then I think I should actually be part of this. If you want to give more money to those in poor families who are unemployed, then I'm absolutely with you 100%, but I'm happy to contribute along with an unemployed person.

We're really back to again talking about the battle we talked about all through 1980s, which was universality. We had this whole debate about whether or not we were going to take it from all people or just higher-income families with children, if we were going to give more money to poor families with children,

If we accept as a principle that unemployment insurance should be income-tested and retargeted toward lower-income people, is that principle going to be applied more broadly to other government programs? Is that where we want to head as a country?

Mr. Nault: What you're coming at me with, of course, is your own political philosophy of how the country should run, which is in your brief, obviously.

I'm asking you, based on the legislation that's before you, are you opposed to us targeting low-income Canadians, versus the system we had before, or are you advocating the Reform policy of going to straight insurance, which is basically what you said in the brief?

You want insurance to be straight insurance, and maybe the government in its wisdom will go to another program somewhere else. Now that's not on. What we're doing is trying to target the low-income Canadians who are on UI. We're targeting money that we think we can siphon off from higher-income Canadians in the system. That's the issue that we have in front of us.

Mr. Shillington: I'll try to be as clear as I can. We are opposed to income testing unemployment insurance benefits, yes.

The Chairman: Sounds pretty clear to me.

Mr. Scott.

Mr. Scott (Fredericton - York - Sunbury): Thank you for coming. I enjoyed your presentation. I have a couple of questions.

First, I very much welcome your conclusion with regard to the gap, dead weeks, or whatever you want to call it, in terms of the calculation. I'm as hopeful as you that the government is going to see the need to fix that and will have some ideas about how that might be done that aren't inconsistent with what you've just suggested.

Having said that, I'd like to touch on a couple of things. First, you say very specifically that under the section on duration, overtime workers are the largest winners. What you describe as overtime workers are known as seasonals where I come from, because they basically have very short seasons and they work very long hours. Consequently, they are able to accumulate a large number of hours in a very short period of time.

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I don't have any difficulty with - in fact, I'm a big fan of it - the Donner report and the work on redistribution, but I think it should be annual, not weekly. If you have an annual limit, then I think you get to people who are hoarding a lot of work over a whole year. But if you apply a weekly limit of 40 hours for seasonals, what's happening is you're restricting their ability to do a great deal of work in a season. People are working seventy hours, and because of the conversion from weeks to hours they're able to get what would be the equivalent of two weeks of credit in one week. It's very important to our part of the country.

When you think about limits, think about annual limits, not weekly limits. It's a very important point for our part of the country.

Both observations you make about overtime workers.... If you just replace overtime workers with seasonal workers in some cases it's important to point out that eligibility will be easier, because you're able to get a large number of hours in a period. Before, if you worked 15 hours or 70 hours, it was one week. Now, because it's hours.... The average, in the numbers I've seen....

I know in my own constituency it's probably going to be three weeks less to get in. That makes the program much more accessible for people who very often are found needing two or three weeks in the end. That's where the governments come into play and work weeks and all the things that you talk of and that I think are very much dehumanizing to people, to have them go through that exercise and trying to find those weeks. So the opportunity to make it a little easier is probably well received.

Also, duration is extended, on the average, two weeks per seasonal. Duration is very important. This new gap has replaced what used to be considered in Atlantic Canada a different gap all together, a gap which was when you ran out of benefits before your seasonal job started again. This helps fill in that gap, at least by two weeks.

So on the conversion I can't agree with you that it is not a good thing to go from weeks to hours for our part of the country, because it's so highly seasonal that we need every single hour of work we can get to qualify or to be credited.

So I go back to the question of the gap, and I'm very pleased to see you've pointed that out.

On the clawback, could I propose that two functions are being performed by employment insurance. One is to replace income in the case of loss of job. The other is to supplement income, particularly in certain communities, in certain areas, in certain sectors, where you simply cannot put together sufficient income over the course of a year to sustain a family without getting into a debate over what that number is.

Now, what about those people who have high incomes, who have seen this happening and have taken advantage - and this isn't just individuals, more often it's companies, and very often it's governments - of the availability of the income supplement element in the unemployment insurance program to supplement incomes I'm not sure you can justify supplementing. You would make the case that this is a question of universality, but the fact of the matter is that if you really analyse what supplement the income supplement component is.... When UI started, as you know, it was designed to replace income for loss of job. Then it evolved into an income supplement program. So how do you use an income supplement argument to justify giving someone who's making $65,000 a couple of weeks of UI every year? Where I come from that's a hard thing to figure out, because generally we see unemployment insurance as having a significant social program aspect, and that's hard to justify at that level of income.

That's why I would take exception to your suggestion that on the clawback we shouldn't differentiate among regular use, annual use, and loss of job. If you pay into the program and you lose your job, I don't think there should be a clawback, or if there is one, it should be very minor. However, if you're drawing annually, you're appealing to an income supplement argument that I don't think you can appeal to if you have a high income.

Mr. Shillington: Am I understanding that what you're arguing for is essentially that for the people we call ``repeaters'' a clawback is more justifiable?

Mr. Scott: At a high income level.

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My point is that there are two components to unemployment insurance - I'll accept the argument that there aren't, but I think there are - and one is that if you lose your job you have your income replaced. It's used as an income supplement, and we all know that. So what I'm saying is how do you use the income supplement argument at a high annual income level? I don't know how you use that argument.

Mr. Shillington: Let me try to respond, because it is always difficult to come out in defence of high-income people.

Mr. Nault: Please do. We have trouble with it.

Mr. Shillington: The amount of money involved is very small under the current system. I think it's less than $100 million. You can only say that's a small amount of money in this town.

The principle is important though, the principle that unemployment insurance is not supposed to be primarily an anti-poverty program. We have social assistance programs and programs like that, which should be the major programs we use to address anti-poverty issues, and unemployment insurance should not be used that way, any more than we would apply the same arguments for education. Why do we subsidize post-secondary education for the sons and daughters of people who are very well off?

Mr. Nault: That's a good question.

Mr. Shillington: The principle is important and it is a philosophical point, as you have pointed out: it's a philosophical point about the relationship between the government and its citizenry and whether or not the government should become primarily an organization that operates anti-poverty programs or whether it should also have programs that benefit middle-income Canadians.

Mr. Scott: I think middle-income Canadians will benefit. The clawback as it exists, on a regular basis, would actually only claw back completely at $78,000. So basically we're talking about a lot of people up to $78,000 who are going to actually be benefiting on an annual basis from the income supplement. So I think you are benefiting middle-income people. The fact is that starting at $39,000, that benefit begins to diminish.

But I go back to the point that if you track the unemployment insurance program through the thinking behind it, it started to replace incomes due to loss of jobs. It was realized at some point that this would also have an income supplement opportunity that was applied. But I think what has happened is that some people have seen an opportunity.... And I'm not saying that they shouldn't, and people make decisions in their best interests, but also I don't think the government should be restricted in trying to deal with that. We have a lot of people who are making a lot of money who are drawing for two, three, or four weeks every year, on the basis of an income supplement argument that I don't think can fly.

Mr. Shillington: Would you accept the same principle then to apply to something like registered retirement savings plans and that after two or three years people should be allowed to contribute to RRSPs? The tax advantages of RRSPs disproportionately advantage high-income people, people who are not poor and never likely to be poor.

Mr. Scott: My colleagues will tell you that there aren't that many people in the RRSP business who like my position on that either.

Mr. Shillington: Okay.

The Chairman: We're discussing employment insurance now.

Mr. Shillington: That's true, but we're also talking about principles and the extent to which government programs -

Mr. Scott: I'm consistent, I assure you.

Ms Scott: Could I just make a final comment on that. I certainly wouldn't want it to leave this room with any suggestion that the Canadian Council on Social Development is not an enormously strong proponent of what the government can do in its role to prevent poverty, and we have consistently brought these petitions forward, federally as well as increasingly provincially, to suggest that we're very concerned about the future of the unemployment insurance system as a program to the benefit of the great majority of Canadians. We hope that it continues to serve as a key plank in the Canadian welfare state and does not evolve into an income or means-tested program. We feel it fulfils a vital function, that it's healthy, and that it's a terrific thing. We're firmly in support of this program. So I hope you don't go away with the feeling that we believe anything the Reform Party says, in any way, shape, or manner, because it's simply not true.

The Chairman: Ms Scott and Mr. Shillington, on behalf of the committee, I'd like to thank you. But before you go away, I have a very short question in reference to your comments about the MIE. I believe it appears on page 9 and the proposal is number 4, where the government should retain the current level of MIE for employees, that is $42,380 in 1996. I was just wondering whether you are aware that the current UI legislation would, by the year 2000, result in an MIE equal to about 146% of the average industrial wage.

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I'm just wondering if you think this might in fact distort some of the economic activities in our country, when you will have, essentially, employers competing with unemployment insurance for labour. What are your thoughts on that?

Mr. Shillington: My understanding is that the MIE is tied to an eight-year moving average inflation rate. Now the MIE is being indexed to inflation rates that we had six, seven, and eight years ago. That's why right now it's running so much ahead of average industrial wages. In seven years that will fix itself.

The Chairman: In seven years?

Mr. Shillington: I'm not sure. I haven't worked it out. The point is that it is a temporary phenomenon caused by the fact that the indexation is lagged. I'm sure you all understand that.

The Chairman: So you don't feel comfortable with having it represent 146% of the average industrial wage.

Mr. Shillington: If you wanted to bring it more in line with the average industrial wage and we maintained the indexation, it would certainly make me far more comfortable than leaving a system that is de-indexed would.

The Chairman: But you admit to the fact that it creates distortion.

Mr. Shillington: But it's also a short-term phenomenon having to do with the change in the inflation rate over the last four or five years.

The Chairman: That having been said, it does create a distortion.

Mr. Shillington: Right now, yes.

The Chairman: Thanks very much for your presentation.

Ms Scott: Thank you.

The Chairman: We are ready to go on to the next presentation, which will be by the Canadian Restaurant and Foodservices Association.

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The Chairman: Before we hear the next group, the Canadian Restaurant and Foodservices Association, the chair would like to report a request I made to Human Resources Development Canada.

During this morning's testimony, concerns were expressed about the indirect changes to the eligibility requirements for maternity benefits that result from the move to an hours base from a weeks base. My understanding of this particular change was that the hours base is generally very good for women, particularly those working part-time, and that thousands of women will qualify for EI benefits and for special benefits such as maternity, parental and sickness benefits.

However, because of the discrepancies that existed this morning between members on the government side and the presenters, I think it is a very important issue and we as a committee need to understand both the negative and positive implications of those provisions. That is why I have made a formal request to have Human Resources Development Canada provide this committee with an analysis of those provisions by Wednesday, March 20. I think it's important that this committee understand that we're here to improve this piece of legislation and will take all the necessary care to make sure that in fact we come up with a bill that is better than the one that is in front of us today.

Secondly, as chair I stated in my introductory remarks when we commenced these hearings that I will be looking to members of Parliament, members of this committee, to come up with some ideas and solutions to some of the challenges we face, whether it's the issue of the gap, the divisor, or any other issue that arises from the hearings. As a result, I would like to make a formal request, based on an intervention made by Mr. Scott yesterday, that he present to the committee by Wednesday, March 20, the concept he presented in relation to the application of a fixed consecutive period for calculating benefits. That was the concern cited. I would like for him, as a member of this committee, to make a formal presentation to me as the chair. I would like to analyse whether his proposal does in fact have any potential of improving the bill in front of us. I hope the clerk has noted this. I expect that report no later than Wednesday, March 20.

Mr. Nault: Mr. Chairman, on a point of order, would it be your intention then, once you get these proposals, to give it to the department as soon as possible so we and the government - meaning the department - can analyse it? The sooner we do that, of course, the quicker we can give you some numbers on what it means to the changes.

The Chairman: Absolutely, and just to make sure, Mr. Crête, any result or any findings will of course be forwarded to members of the opposition as well as members of the government side so that we can start getting our heads around these issues as we approach clause-by-clause review.

That is sometimes what we do in committee: we try to solve problems. So now I'm sure you're going to give us some more solutions so everybody will have a happy day today.

Mr. Hollands, thank you so much for coming today. Ms Reynolds, thank you.

Mr. Paul Hollands (Canadian Restaurant and Foodservices Association): Thank you so much. It's delightful.

Before I start, I think a copy of my speaking notes was copied and handed out. We have a more formal presentation that will be forwarded next week. My notes cover everything that will be in that presentation, but I'll probably wander around a bit in terms of what's in them.

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The main reason we're here, the principal concern I want to talk about, is to highlight what we think is a glitch in the bill and to bring to your attention what I think is going to be an unintended impact of that glitch on about 150,000 students who work in our industry, in food service and restaurants across the country. The glitch comes from the application of first-dollar provisions. Ultimately what it will mean is reduced employment, less money, and fewer jobs for students in our industry. I want to talk about that, but specifically I'd like to talk about a solution we have. So I come here with a solution today, to see if we can't find a way around what, as I said, is truly an unintended outcome of first-dollar coverage.

I've had a chance to meet most of you and shake hands. I'm executive vice-president and chief operating officer for A & W Foodservices, based out of the west coast, in North Vancouver. We operate about 480 restaurants across the country, from one end to the other, and now in Yellowknife. You know us mainly as A & W restaurants. We also operate a couple of large full-service operations under the Shopsy's banner in Toronto, a deli business.

The Chairman: We do charge for advertising, Mr. Hollands.

Mr. Hollands: Very good. It wouldn't be different from anywhere else in the world, hockey rinks and all.

I am also chairman this year of the Canadian Restaurant Association, which is a large association. We have 12,000 members. We represent about 35,000 restaurants. So I am here in both capacities.

What I want to do in the next twenty minutes is first give you a bit of background on the food service industry, because I think that's important to understanding how this works. I would then like to talk about the nature of employment, and in particular student employment and how that works in our business, relate that to the impact of first-dollar coverage, and then talk about what I think is a fairly straightforward solution to the problem.

Before I do that... I thought you guys are probably getting a lot of noise about the bill and about the proposed changes, and as a Canadian and someone who is concerned about what is going on in our world I certainly would be remiss if I didn't congratulate the government on taking strong steps to modernize Canada's whole employment insurance system. I think it's needed.

We appeared before the standing committee a year ago and we talked about the impact of payroll taxes. They kill jobs. We saw that in our industry when UI premiums went up in the early 1990s. Program costs have to be controlled. They're unsustainable in the long term.

A number of the measures that have been taken are excellent ones. They're tough and I know they're difficult to deal with, but I certainly laud the government for being prepared to deal with the problems.

Let me move on to the industry. It's an interesting industry. The average Canadian eats in a restaurant or a food service establishment about five times a week but doesn't know much about it. It's a very large industry, about $29 billion. It's about 4% of GDP, which is surprisingly high overall. It's very large.

Where it really shows up is on the payroll. The total number of people on the direct payroll in the industry in Canada is about 670,000 people. That doesn't include all the secondary jobs in construction and all those kinds of things. So the industry is a big employer of people.

The industry has grown dramatically over the last 25 years. It has grown in huge multiples. In the early 1990s growth really slowed down. Interestingly, GST was introduced. The impact of GST on our business was profound. We measure our competitiveness in terms of our share of what we call ``stomach'', which is the total spending we get on food, what proportion we get, versus grocery stores. In 1990 I think we peaked out at getting about 42% of the food dollar in Canada. GST actually really put the brakes on it and reduced our share of the food dollar to 36%. Sales dropped. The net impact - and this is the way the industry works - was we lost 46,000 jobs in one year.

That's an interesting statistic. It's about as many employees as General Motors has in Canada. Yet there was no huge outcry. So the industry is fragile for employees. Bankruptcies are up this year.

That's the macro-look at the business. I'll take you down a level and look at the micro-side of the business. It's really different from manufacturing or processing. Where that comes from is that it's a very high-labour business. In fact, of every dollar I get in our restaurants, I give 30¢ back to the employees directly who work in that restaurant. So 30% of total revenues ends up in payroll. I don't think there's another consumer industry that comes close to that. Manufacturing and those kinds of things are down in the 8% to 10% range in terms of their percentage of total payroll. So that's how the business works.

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It's an industry that's largely dominated by small operators. They're independents, they're entrepreneurs, and they start up their own businesses. And while there are lots of big chains like us and McDonald's and other people, and they're highly visible - and there are also a lot of highly visible full-service, big restaurants - the industry at the end of the day is dominated by what we call mom-and-pop operators. That's the way the business works.

Profits in the industry are skinny. They're about 5% of sales. It may seem like a fair amount of money, but the reality is average revenues are about $360,000 a year. That's about $18,000 a year in profits before we get to tax. So in the end, it's a fairly skinny-margin business, particularly for the vast majority of operators in it.

So that's how the industry goes together. It's big, it's labour-intensive, it's had a pretty rough ride in the early 1990s, and we're very susceptible to what goes on with labour.

I thought I should turn, then, to who works in the restaurants - those 670,000 people. We have a large component of highly skilled people. Most people look at food service jobs and think they're all not very good, but there is a high component of skilled people. And then we have a large component of unskilled people. So there are two poles in our business. We have a big component of full-time workers and we have a large component of part-time workers. Of those part-time workers, the highest proportion is made up of students. There are about 150,000 students who work directly in this industry.

Here are a couple of little sidelights. One out of three Canadians gets their first job in the food service industry, which is amazing. You'll see in my notes the names of a couple of people who did. Lloyd Axworthy had his first job in the food service industry.

Mr. Allmand (Notre-Dame-de-Grâce): That explains a lot.

Mr. Hollands: In fact his family was a franchisee of ours very early on. David Collenette was another one. So a large number of people got their start there.

Here's something interesting about student jobs: Research that we've unearthed indicates that students who work a moderate number of hours a week get a better grade-point average than students who don't. They have better rates of course completion. They have more money to fund education later on in life. It generally gives them a better crack at employment down the road. They almost always work part-time, and that's because they can't work more than that. If you think about my business - and we have lots of students - we take very seriously the responsibility we have. Students want to work, and frankly we need them as part of our business, but we have to be extremely sensitive to what's going on in the rest of their life. We work very hard to schedule hours to reflect their need for studies, because education is the top priority for most of the students in our business.

That brings me to one of the rationales for the change to an hours-based system, which, as I understand, is to encourage more full-time and fewer part-time jobs. I understand what's going on there. While I think in general that it's a laudable principle, it isn't going to change what happens in this industry. The reason for that is the way people eat. People eat at very specific times of the day. In a business that has a high labour component, that has a very dramatic impact on what you need to run your restaurant. Let me use some examples.

If you take almost any business, it's open at least 16 and sometimes 24 hours a day, seven days a week, and business goes up and down. I'll use our own business. We have a good breakfast business, so from 6 a.m. to 9 a.m. we're busy, but then we're very quiet from 9:30 through to noon. From noon until 2 p.m. we're as busy as crazy, and then at 3:30 you can fire a cannon off in one of our restaurants. It picks up again at four or five, and then it's kind of steady through the evening. So you can see how this doesn't lend itself to full-time work in our business. It just doesn't work. And this varies according to location.

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A full-service restaurant will do lunch, maybe a little in the morning, and then will not do business until perhaps 7 p.m. or 8 p.m., or much later in the evening, depending on the clientele or the location it has. Again, it varies with the day of the week. In our business, downtown locations get quiet on the weekends, and the suburban locations get busy as people's habits change.

So the nature of the way in which people eat means that in our business there will be peaks and we'll need a high level of part-time employment, regardless. In our business that will always be the way.

If it's an operation in a tourist area, then we do more business in the summer than in the winter. Again, that lends itself to students.

Students are generally limited to non-school hours and to vacation periods, and food service employers tend to hire part-time students to fill those. They hire them for weekdays if they're not scheduled at school, evenings, weekends, and so on.

So that's the nature of what's going on. We have a mixture of full-time and part-time, and we will continue to have a high mixture of full-time and part-time. Also, of those part-timers, as the world continues I think we will have a large number of students.

Let me get to first-dollar coverage, because that's the next piece up.

Because we have a lot of part-time employees under 15 hours a week, we've calculated the impact of first-dollar coverage on our industry as being about $35 million a year. I know that the UI program is $18 billion and $35 million doesn't seem like a huge number, but on average for our industry it's a 10% increase in UI premiums.

Depending on their ratio of under 15 hours to over 15 hours, some restaurants will increase premiums by 70%. So the average is 10% and the highest is 70%, depending on your mix of employees. Ultimately this will alter the whole cost structure in the business a little bit, and ultimately it will create changes in our business that will result in a negative impact on part-timers, particularly those who are students.

The best way to explain that is to go back to the P and L statement of our business. We get $1, of which 30¢ goes to labour. So if we have an increase of 10 points in UI, our labour costs are going to go up. That's the reality. That might just be bad news for us. It's a hit. But I can tell you what's going to happen in the industry.

First, prices aren't going to go up, because in general we've found that the market is so price sensitive that people aren't getting away with price increases any more. You almost can't take a price increase in our industry. Rent's fixed, loan payments are fixed, food generally is fixed - tomatoes are tomatoes, lettuce is lettuce, and those kinds of things - so really the only place where an operator, after he's faced with this cost increase, can look to see how he can make his business whole again is labour. He can impact on labour. He can schedule fewer labour hours as a result.

Somebody will ask if you are really going to do that. How can it play out? I'll give you a simple example. Labour plays through our business in a lot of ways. Think about a little restaurant that makes fresh french fries. They make hand-cut french fries. We don't do it in our restaurant, but lots of restaurants do. There is a lot of labour in a french fry. You get them in the back door, you peel them, you cut them, you soak them, you blanch them, and then you fry them. It's a lot of work. A lot of man-hours go into making them. The choice a restaurant operator has is to phone up a distributor and ask him to send him a case of frozen ones.

Mr. Maloney (Erie): Are they as good?

Mr. Hollands: I'm not going to get into that. It's one of the great debates.

In any case, they can call up a distributor and get them to send a case of frozen french fries.

You say that they are just replacing labour - except that the problem is that the frozen french fries come out of humungous plants. They make them in huge factories, and there's 8% labour in that french fry, instead of 30% or 40%.

So it isn't just a matter of the guy going to his daily schedule and trimming it; he's saying ``No, I can do that by doing this''. Or he can do it with frozen cookies that he used to bake, or with frozen deserts. He can do it with a million things in his restaurants that will take labour out and get his costs back in line, because in the end he has an economic formula: he can't raise his price and his other costs are fixed.

.1700

I think the net result is that a big piece of the cost of first-dollar coverage, as it currently plays out, will be borne by restaurant employees. I think that is a negative, unintended outcome as a result of first-dollar coverage and I think it will hit in particular the people who I know the government and this committee are trying to help, which are youth and students. That's what we should be talking about.

I think we share the commitment that was laid out in the throne speech. Creating new approaches to assist young people in finding their first job is a real priority, and as an industry we want to do that, but this one won't help. It really won't help. So I'm here today to talk about a solution, which we think can improve the bill.

I need to be clear at this point. One, I absolutely understand the rationale for first-dollar coverage and I support the administrative simplicity - give us anything that gives us more administrative simplicity in life - but we can't do it at the expense of employment opportunities. As an old friend of mine would say, I guess this is where I'm supposed to pull the bunny out of the hat.

What we think is a fairly straightforward and equitable solution to this, one we're proposing and would urge you to recommend, is a student EI exemption. It would allow the government to streamline the system, and at the same time I think it would ensure coverage of permanent part-timers and multiple job holders, which is obviously an issue, and keep student part-timers whole. I think it also sends a soft message that it's important to stay in school. Overall I think it's an elegant solution to the problem that's being faced.

There are a couple of other things in the bill, and I want to speak to them. One is the $2,000 earnings threshold. The problem with this one is that employees who earn less than $2,000 a year will receive a rebate for the premiums paid but the employers won't, so that doesn't take care of that problem. Furthermore, employers already pay 60% of the premium costs and it will drive those costs up further.

Equally important is that the statistics we have say that the vast majority of full-time students earn in excess of $2,000 a year, so it won't help them. A student would have to work less than six hours a week to be eligible for it, so it doesn't fit very many. In fact, it only covers 26% of students in our industry.

The problem is that those who will benefit from this earnings threshold are full-time and part-time employees with really short job tenure, those who don't stay in a place very long, not the full-time students who I think you could deal with. The small business rebate, which is the other piece, is designed to really mitigate the impact but it has some problems in that it's only there for two years and then it vanishes, so we phase it in slowly. It also has more administrative complexities and I'm not very keen on that.

Overall, we think the student exemption would be quite easy to administer. The onus would be on employees to specify on TD-1 forms that they're eligible. We already have some precedent for this in Saskatchewan, where we have a student exemption under the provincial legislation that mandates prorated benefits to employees.

We've looked at the exemptions of students in a number of jurisdictions and think we have a way of defining it that can work well. At the end of the day, though, in order to make it work we'll need to sit down with staff and with this committee to fine-tune this proposal in a way that will make it work well. Joyce Reynolds, who's here with me, actually spent a couple of hours with department officials earlier today, talking about how this might work.

Let me summarize. First, I think there is a glitch. I think it's unintended, and I think it will affect 150,000 students. It will take money out of their pockets and it will reduce employment opportunities for them. Two, it will result in reductions in take-home pay for them, and that's tough, particularly at a time when tuitions and costs of education are escalating. I don't think the threshold and the small business rebate really address the problem effectively. Finally, I believe the student exemption can solve this problem elegantly and very effectively for students.

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In the throne speech - and I know the government's stated policy is that we need to do everything we can to encourage youth employment - this is one that has a risk. The risk is it will hurt youth employment.

As I think about my business and about what I do day in and day out, I often look at difficult decisions in two categories. One is a risk I can afford to take; in other words, I'll take a risk. The other one is a risk I absolutely cannot afford to take. As I think about this one for the government, for this committee, this very much appears to me to be a risk you cannot afford to take.

Thank you. You've listened very attentively, and I would be delighted to discuss the issue further with you.

The Chairman: Thank you very much. You touch upon some very important areas. We have to offset the job creation issue vis-à-vis the premiums.

Mr. Crête, you can start. You are going to be using up approximately five or six minutes. Is that correct?

Mr. Crête: Six minutes.

The Chairman: Okay.

[Translation]

Mr. Crête: I am quite aware of the argument that bureaucratic costs are complicating a situation where there were no costs before. Basically, what it means for the government is greater cash flow instead of real gains.

I have a few questions for you. Firstly, could either you or Ms Reynolds give us a few more practical details. How would this exemption work? Have you had any meetings with the department and can you tell us how this could be accomplished?

Secondly, there are other kinds of workers who are not necessarily students but who do the same type of work they do. We may not find them in the large chains, but in ordinary restaurants or neighbourhood eateries which employ people who are not students but who are in somewhat of the same situation. A student might be eligible for the EI exemption whereas another person who works approximately the same number of hours a week would not. Couldn't some other criterion be found, one not necessarily tied to school, one that could prevent discrimination between the different types of workers? Mind you, I am not rejecting your initial solution.

The result will be a loss of revenue for the government. Do you merely see this as a drop in the fund surplus, as a kind of contribution to the overall unemployment insurance fund, or do you have a solution to propose which would allow the government to recover these sums of money? For example, the maximum premium rate could be increased. I'm giving you two scenarios, but these are not necessarily the ones that I would go with. Do you have any solutions to propose? You realize that by making everyone eligible from the very first hour of employment, the government will be able to recover $900 million. Surely there is a not entirely philanthropic side to this issue. How would the government make up the shortfall that would result from your proposal?

Perhaps I misunderstood your final point. Could you elaborate further on the definition of a full-time student? Is it exactly the same from one province to the next? How could we live with this definition?

[English]

Mr. Hollands: Thank you. Those are excellent.

Let me make sure I understand the four questions. One is the practical side of how it might actually be administered. The second one is if you have two workers side by side working similar hours, is there some risk of discrimination between them. Is that a...?

Mr. Crête: Yes.

Mr. Hollands: With a loss of revenue to the government, how would this get funded? The last one is, a definition of a full-time student. Okay, that's very good.

I'm going to call on Joyce to help with a couple of these, and I'll field a couple of them myself. I'd like to ask Joyce to deal with some of the detail on the practical side.

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Ms Joyce Reynolds (Director of Human Resources, Canadian Restaurant and Foodservices Association): We're still trying to work out the details, and that was one the reasons we met this afternoon. The way we see it, the onus would be on the student to declare their student status when they join an employer, and if they are no longer a student the onus would be on them to give written notification to the employer that they are no longer a student.

Mr. Nault: They're history then.

Ms Reynolds: Pardon me?

Mr. Nault: They're history then. Your whole objective is to have an exemption, so if someone says they don't want to be exempted, won't you just let them go? Isn't that the whole objective for you? You want students to be exempt, but if they declare they don't want to be exempt, they'll no longer work at A & W.

[Translation]

Mr. Crête: A new member of the Bloc.

[English]

The Chairman: Sorry, Mr. Crête. Unless you join the Bloc, and I don't know anything about it.

[Translation]

Mr. Crête: We don't need any, since the ranks of the Reform Party are thinning out.

[English]

Ms Reynolds: You also have to understand that we hire a lot of employees for their very first job, so we invest an awful lot of time into training. Once we have invested the time into an employee, regardless of whether they're a student or not and as long as they work to the standard in any individual company, then there isn't a danger that they're going to be let go. There are protections.

Did you want to say something, Paul?

Mr. Hollands: Yes, I was going to follow on that. If someone has come along and said they're no longer going to be a student, I'm going to offer them a full-time job - that's what I'm going to do in most cases. If they're trained and ready to go and I can give them more hours, I'll give them more hours. That's the reality. I have an investment in the employee and they're productive.

The second issue is the issue of discrimination between the two, and it's an excellent question. The reality is we have part-time employees right now who are not students, and we have part-time employees who are students. In our industry we need a lot of part-time employees who aren't students, because they need to work 6 a.m. to 9 a.m., they need to work lunch hours and funny kinds of times.

One of the things I kid about is that the absolutely worst week of the year in my business is the week of September 5, because the students go back to school and I can't find enough employees. I think the chances for discrimination - I can't say they never exist, but the reality of the labour market, the economics of it, is that they're very low.

[Translation]

Mr. Crête: The issue is not the danger of discrimination or of court challenges; the issue is that in the same restaurant, you may have two people with similar working conditions, except when it comes to unemployment insurance. That's my concern.

[English]

Mr. Hollands: That's good, and maybe I haven't addressed it clearly enough, then. We need all the part-time workers we can get for the time when we don't have students, and we need students for the time when students can work. I think there's relatively little chance of trading off, because I need all those part-time workers who aren't students, and other day part-timers.

I don't think it will lead to much in the way of labour market distortions; I just can't see it.

The third question was loss of revenue to the government. Maybe I didn't make this clear; I'll step back on this one. One of the original intentions of the overhaul was that in general it be cost-neutral. That was one of the original ingoing propositions behind the legislation, as I understand it. In this case, it burdens our industry with higher costs.

Now we're not proposing windfall in any way. In fact, one of the things we would look to is to define ``student'' and the exemption in a way to make it affordable within the existing cost envelope. Our view certainly - and it isn't clear, I recognize now, from our presentation - is that the $2,000 exemption and the phase-in period should be eliminated, and those things should help to bring it in within cost. Overall, we think we can work well with the committee and with the department to resolve these issues.

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The last issue is full-time students and the definition of those.

Ms Reynolds: We've looked at education acts across the country, and the Canada Student Loans Act. What seems to be quite consistent across the country is a 60% course load or higher, or three out of five courses. That's the definition we would propose.

The Chairman: Mr. Easter.

Mr. Easter (Malpeque): I too want to get into the student exception, but as a farmer I just can't resist commenting on your point that food prices are fixed. They certainly haven't been fixed in our market in the beef industry lately. It's down about 30%.

Mr. Hollands: It is?

Mr. Easter: We'd love to see those hamburgers cheaper so we could sell more beef.

In any event, the student exemption is an interesting concept. You're fairly clear in your submission that you basically support the objective of administrative simplicity. That's certainly one of the reasons for the government's moving to first-dollar coverage.

I just want to nail down for the record where the CRFA is at. Basically, then, you would support first-dollar coverage for administrative simplicity. One of the other reasons it's being proposed is to get rid of the lack of UI coverage for job holders with multiple jobs. I wonder if you'd support it for that reason as well. The third reason is that for many part-time women there's a fifteen-hour job trap at the moment. I wonder if you're going to be supportive on all those points.

Although it's an interesting concept, I do have some concerns about the others; and I think the parliamentary secretary reacted to that point as well. What about women who want to work part-time? If that exemption is there for students, will the restaurant industry be looking only at students and leaving others in the lurch? What kinds of protective measures can we look at to ensure that doesn't happen?

Mr. Hollands: The reality is that the best protection exists in the fact that the industry needs a lot of part-time workers outside hours when students are able to work. In the business I run I do probably 60% of my business during the day, before I can bring students on. During those day parts we need part-time workers, and they won't be students, they'll be women, people who want to work less than full-time jobs.

Mr. Easter: One of the concerns is.... I'm an employer myself. When you're employing people you look at the tax system, you look at the UI system, and you try to figure out a way to use them to your advantage. That's my concern on this one. I too am concerned about students, but if you open up that exemption, then are you opening up another can of worms you did not intend? As business people we all try to play the system to our advantage. I think we're opening up that loophole, and I guess I'd need to have a little greater assurance then you're giving me at the moment.

Mr. Hollands: I don't know that there's any chance I'll be able to assure you completely, short of having you try to schedule staff in a restaurant for a number of weeks.

Mr. Easter: We don't want that job.

Mr. Hollands: The reality of it is juggling part-time staff on who can work on what day parts is a very tricky piece of work. All I can say is that from my experience this one just doesn't hit my radar screen. I know we have a 15-hour issue in restaurants right now. The same thing could go on. Well, I just know it doesn't go on in the restaurants.

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Mr. Easter: I have just one other question before you go to somebody else, Mr. Chair.

Some people, in their presentations, have spoken against the qualifying weeks toward benefit levels - the difference from region to region based on the unemployment insurance rate. If you're in a high-unemployment region, your number of weeks to qualify is less under the current system than under the proposed system. Does the restaurant association have any position on that? We have it currently proposed with regional variations based on levels of unemployment.

Second, do you have any views about some of the employment measures that are encompassed in the bill as well?

Mr. Hollands: Maybe you could help me by clarifying what you specifically mean by employment measures.

Mr. Easter: I mean the loans, grants and self-employment measures that are in the bill. There are the five areas of wage subsidies.

Ms Reynolds: I can answer those questions.

In terms of your first question, our position is that we would like to have a consistent eligibility period and benefit schedule throughout the country.

Mr. Easter: Are you getting that from the P.E.I. restaurant association too, or is this just an Ottawa position?

Ms Reynolds: This is the position of the Canadian Restaurant and Foodservices Association -

Mr. Easter: I'll talk to your members.

Ms Reynolds: - that was presented to this committee about a year and a half ago.

We also addressed your other question when we previously appeared before the standing committee. Our concern was that these programs were being paid for by the UI program, as opposed to consolidated revenue.

The Chairman: Mr. Murphy.

Mr. Murphy (Annapolis Valley - Hants): Thank you for your presentation.

You raise the question of exemption for students, and other groups may also want exemptions from paying this. Lots of students may want to pay into the UI system for this reason. I think I'm correct when I say that students can get a lot of hours of work in a year. They may be very cautious when they leave school, after working while going to school for a couple of years. As you're aware, people can come into the UI system after having had three years of work experience.

If I were a student getting lots of hours of work but wasn't sure what might happen to me when I graduated, I think I might want the opportunity to have benefits, after paying into the system. So excluding all students would impede them from having the opportunity to have access to the system.

I don't know how you'll react to that, but that is certainly a problem to me because I'm sure the students would experience that. To exempt them would maybe be unfair. It wouldn't be treating all Canadians the same.

Mr. Hollands: Well, we have thought about that. Our proposal is that students self-declare whether they are students or not on the TD-1 forms. If they think that's an issue for them, they don't declare as students. We understand that they will have deductions and we'll have deductions, and that's the way it will play out.

Mr. Murphy: So it's really a choice you're giving people on that basis.

Mr. Hollands: Yes.

Ms Reynolds: We have talked to all kinds of employee and student groups across the country and they have been supportive of this proposal.

Mr. Hollands: Yes, they have been very supportive.

The Chairman: The last question is to Mr. Nault.

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Mr. Nault: I just wanted to ask this of Mr. Holland and Ms Reynolds. You're a member of a very large group of employment insurance reform business people, a coalition. The coalition is made up of the following organizations: the Canadian Construction Association; Canadian Federation of Independent Business; the Canadian Manufacturers' Association; the Canadian Mining Association; the Canadian Pulp and Paper Association; the Retail Council of Canada; and the Canadian Tourism Council.

So far, we've heard from the Canadian Construction Association. They didn't mention their interest in supporting you in relation to the exemption. Is it my understanding and am I correct in assuming that none of these groups will support your interest in an exemption for students?

Ms Reynolds: Actually, the Retail Council of Canada will be presenting, I think, in two weeks' time. They will also be proposing a student exemption. The Canadian Federation of Independent Business will be proposing a student exemption.

We have certainly talked as a coalition about this. Those that have part-time employees and student employees are supportive. For those that don't have such employees, it's a non-issue.

Mr. Nault: Okay. That's important to know, because if you have a lot of support, they obviously are willing to trade off a tremendous amount of savings on the efficiency side. That's the discussion we'll have to have, of course, because if you're going to have some 400,000 or 500,000 people exempted, which is roughly the number we're talking about, then obviously we're going to lose some efficiencies in the system, which were the savings that businesses were looking for.

The other issue I wanted to ask, of course, relates to that. There will be many organizations coming here and saying that there shouldn't be an unlevel playing field. Why should McDonald's,A & W, and some of these service industries have exemptions from premiums, whereas they, as an industry, have to...? Can you tell me how to respond to those individuals?

Mr. Hollands: Coming back to it, I don't think the intention of UI reform is to reduce a lot of hours and jobs for students. That is the potential outcome of the way first-dollar coverage is going to play now. For the sake of preserving those jobs, those hours at work, for students, this exemption has been introduced.

Mr. Nault: Okay. There's one other question on which it's important to get some information.

Of course I've met with some of the local organizations in the service industry in relation to the student exemption. The department has given us some numbers. For example, they gave us the number of some 1.3 million workers who will receive the premium refund. Of these, 920,000 are currently paying premiums. So if you look at it, some 400,000 new people are going to be receiving a premium refund of some $2,000.

In the meetings I've had with some of your people in your industry, they've refuted those numbers. They said that's not factually correct. They say very few people will get the $2,000, the student rebate, simply because they work too many hours.

I need to get some factual information from your organization that's not in the brief. For example, what's the average amount of hours your students work in a year? You've suggested that they don't want to work 15 hours or more a week because they have school activities and things like that. Therefore, what if we suggest they work an average of 8 hours a week for 52 weeks, so it's pretty easy to figure out how many weeks they work?

Again, the other figure we need to know is the average wage you pay these students. Is it $5, $6, or $7? I think it's important to know whether those figures are factually correct or whether we have some numbers that are not right. We certainly would like to get that.

Mr. Hollands: Sure.

Mr. Nault: If you could do that at some time in the next few weeks I think it would help us in this whole discussion as we get to other witnesses about it.

Mr. Hollands: Sure.

Mr. Nault: The other issue I wanted to ask you about is the one interesting comment you made that students almost always work part-time. I agree with that. It's pretty impossible to work full-time, even though I know some students who do. That's because they don't want to work any more hours.

If I go back to my local A & W this weekend, which I'm going to, and ask that student whether in fact they would like to work more hours, am I going to get the answer you gave this committee, or am I going to get a no? ``They restrict me to 12 hours because they don't want me to work 16 or 20 hours, because then, of course, they'd have to pay premiums. That's the policy of this particular restaurant.''

I've talked to some students who say that what is being said is not completely factually correct, in that there are many who would like to work more hours but are just not given the opportunity. Are you quite sure that when I go and ask these students, one on one - because I'm going to do my own little survey - they are going to say ``Yes, that's right, I need only ten hours a week because I can't handle any more than that''?

.1730

Mr. Hollands: Yes, I'm quite sure.

Mr. Nault: Okay. I'll hold you to it, Mr. Hollands. I'm going to do my own little survey, because I've heard some interesting arguments.

Are the students you talked to going to be making a presentation to us formally, saying that they are in favour of the exemption and that they would prefer it? Would they accept your proposal that deals with their having the ability to opt in or opt out?

Ms Reynolds: Yes. I know that they have applied to appear. I'm not sure if they have an appearance time or date yet.

In response to your other -

Mr. Nault: What? My survey, you mean?

Ms Reynolds: Yes, your survey.

You have to recognize that in the Canadian Restaurant Association we have a code of practice for student employment. Our industry has sometimes been criticized for working students for too many hours, so our employers try to work with the students, schools, teachers, and parents. The student might say that they want more hours, but ask that student's mother or father if they want the student to work more hours.

There has to be a balance, and one of the things we in our industry try to do is make sure that balance is maintained between social and -

Mr. Nault: Now, Ms Reynolds, what you're trying to do is skew my survey, and I suggest you do not do that until I come back with the results for you.

Under the new system of going from weeks to hours, if the students who are already working were to work enough hours in certain areas to get, say, 420 hours in a year, they would not have to go back to the new entrance requirements of 910. Therefore it would be to the benefit of a lot of them to be in the system. Therefore they would already be sort of active. That's what Mr. Murphy was getting at.

Many students who work for you in your industry would fall into that category. If it was explained to them properly, then I think you would get very little support, if you want my honest opinion, on that subject. I don't think they realize the benefits to them in the long run of getting into the marketplace. What would your comment be on that?

Mr. Hollands: Our conversation with students is otherwise. They say ``I'm going through university. I want all that I can have to help me put myself through university.'' I think that has been explained to them well. At this stage, that has been the response.

The Chairman: Thank you very much. That was an excellent presentation.

I understand that you have been focusing on the student exemption. From that, am I to gather that you agree with everything else the EI proposal has? That's important to note.

Ms Reynolds: Generally, we're supportive of the directions in the bill.

The Chairman: Oh, good.

Mr. Hollands: As I said, we're highly supportive of the direction the bill is taking and the fact that the government is pushing hard, notwithstanding Mr. Nault's testing of us. We're very keen on seeing this move forward, and we're hopeful that in the end we will be able to find a solution.

The Chairman: Mr. Hollands, on a note you raised that is very important and to which the members of the committee have a great sensitivity, the issue of youth unemployment is very important to our government and to the members of this committee, regardless of which side of the House they sit on. It's also important to understand that we need to look at the EI package and understand the financial constraints and the parameters we are in.

A student exemption per se cannot be applied just for the students who work at A & W or McDonald's. Sorry, I mentioned your competitor. There are going to be associated costs.

As a member of the business community, you will understand that if we are to take that revenue away from the government, then we need to generate savings somewhere else. The dilemma in which we find ourselves as members of this committee is, who is going to be paying for that type of break?

I would like to know something, and I'll be putting a formal request in - or maybe, Ms Reynolds, you've already been briefed by the department and you know the amount of money we're talking about. Is it in the neighbourhood of $300 million to $400 million?

.1735

Ms Reynolds: That's what we've been told, yes.

The Chairman: We're trying to achieve a savings of approximately $1.2 billion by the year 2000 or 2001. I think we as members of the committee are going to have to put that into its proper context, but I don't want you to leave this committee hearing thinking that somehow we welcome job losses for young people. As a matter of fact, this government will be doing everything possible to make sure the young people have that very important first job.

Mr. Hollands: The only comment I'd add to that is that the issue raises a problem and I think a risk around youth unemployment. It raises an issue in our industry. I think the best thing I can say, as a responsible Canadian and a businessman, is that we need to work together to find a way to try to resolve that issue.

The Chairman: Can I ask you a question? In numbers, how many jobs will be lost if we go ahead?

Mr. Hollands: A conservative look at it is 5,000 to 10,000. It depends on the whole set of assumptions you make around it, but it's that size.

The Chairman: How much does the average student make who works in your organization? Is it minimum wage?

Mr. Hollands: Yes, minimum wage and up.

The Chairman: So what would the average annual salary be?

Mr. Hollands: It varies greatly across the country, but you could use the range of $6 to $6.50.

The Chairman: I'm talking about total income per year.

Ms Reynolds: For the year it's somewhere between $4,000 and $5,000.

Mr. Hollands: We'd be delighted to work the numbers out for you.

The Chairman: Thank you.

Mr. Hollands: Thank you.

The Chairman: The next meeting will be on Monday at 9 a.m., in Room 237-C in the Centre Block.

The meeting is adjourned.

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