[Recorded by Electronic Apparatus]
Thursday, March 28, 1996
.0918 
[English]
The Chairman: I call the meeting to order.
I would like to welcome the representatives from the Canadian Union of Public Employees. We have Morna Ballantyne, executive assistant to the national president; Phyllis Diesenhouse, instructor, Toronto Board of Education; Denise Hill, president, airline division; Alex Taylor, teaching assistant, Carleton University; Cathy Remus, research officer; and Richard Balnis, research officer.
First of all, welcome to the committee. As you know, we've been given the task to improve Bill C-12, an act respecting employment insurance in Canada. We have benefited a great deal from interventions made by Canadians who have appeared in front of the committee and also those individuals who have sent in briefs.
Yesterday afternoon we had the Minister of Human Resources Development here to address the committee, and we were quite pleased with his openness to deal with some of the amendments that the committee had put forth, particularly as they relate to the issue of the gap, the divisor and the intensity rule as it applies to a family with low income and with dependents. The minister indicated that he viewed those amendments as very progressive measures to make Bill C-12 a fair bill for unemployed Canadians.
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I want to be clear with the group that our major purpose here is to improve this piece of legislation. We want to come out of this committee with a bill that will be better and fair to those individuals who access unemployment insurance. We are fully cognizant of the fact that the unemployment issue in this country is an important issue that needs to be addressed, because it touches not only the unemployed person but also his family, his friends and his community. So it is within that spirit and within that framework that we will be hearing your comments, and we hope that we will also get the benefit of some of the suggestions on how to improve Bill C-12.
I think you are probably experts at appearing in front of the parliamentary standing committees, so you know how this works. We are going to listen to what you have to say, and then we will engage in a question and answer session. May I add that this is the part that members of Parliament really like, because we can focus on some of the issues that we feel we need to know more about.
Welcome.
Ms Morna Ballantyne (Executive Assistant to the National President, Canadian Union of Public Employees): Thank you very much, Mr. Chairman.
I'm the executive assistant to Judy Darcy, who is our national president. Judy regrets not being able to come here herself. Unfortunately, she's in New Brunswick at a convention of our members in New Brunswick.
The Canadian Union of Public Employees is Canada's largest union. We represent approximately 460,000 members, and our membership is very diverse. So what we decided to do today is something a little bit different. What we wanted to do was include in our delegation to you front-line workers who are members of our union, who come from different sectors within our union, to speak very directly, personally and specifically about the impact of the legislation on themselves and on their co-workers in their particular sectors.
So our presentation will be very brief. We've provided you with a written brief.
[Translation]
I apologize to francophone committee members. We were unable to get our brief translated into French, but the translation is being done at the moment and we will send you copies of it as soon as possible, perhaps tomorrow.
[English]
Some of us are bilingual and can try to answer questions in French.
I would just like to explain very briefly our delegation. Cathy Remus is senior research officer in our research department, and was in fact involved in preparing the brief. She will not read the brief, she's just going to highlight certain points of the brief.
Then we are going to be hearing from a front-line school board worker employed by the Toronto Board of Education. Her name is Phyllis Diesenhouse, and she's with our Local 3452 in Toronto.
Then we're going to be hearing from Alex Taylor, who is a university worker here in Ottawa at Carlton University, a member of Local 2323.
Denise Hill is the president of our airline division, representing 8,000 flight attendants. As you can see, our membership is very diverse. I heard a comment earlier that at least one member wasn't aware that flight attendants were also part of CUPE.
Richard Balnis is a research officer who works in our federal sector, particularly with our airline division.
I should say at the outset that we tried to focus very specifically on issues that are going to impact on CUPE members. The Canadian Labour Congress, which we are affiliated to, has presented a written brief, and you may be hearing from the Canadian Labour Congress, although I'm not sure if your schedule is going to allow it.
I just want to put on record that we fully support the proposed amendments and positions put forward in the Canadian Labour Congress, and our submission should be seen as complementing and supplementing that submission.
So, very quickly, I'll give the microphone to Cathy.
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Ms Cathy Remus (Research Officer, Canadian Union of Public Employees): I'm just going to take a few minutes to walk the committee through the brief and highlight some of the major points in the brief, to leave as much time as possible for you to hear from our members who are here today, and for questions from you.
Our brief is set in the context of what is happening to public sector workers today in Canada, where we're seeing huge job losses at all levels - federal, provincial and municipal, and an expectation that these workers will be able to turn to the private sector to make up for those jobs and find jobs in the private sector.
We outline in the brief some of the reasons why we are not as optimistic as the federal government seems to be about the likelihood of that happening. Both job creation forecasts that have been put forward by the private sector and the projected unemployment rate show us that in the next few years the situation doesn't look like it's going to improve tremendously. Therefore, the people in our sector who are facing unemployment are looking for a strong unemployment system now more than ever and are very worried about these changes making them not eligible at the time they need an unemployment insurance most in their lives.
The three issues that we focus on are the stricter eligibility requirements, including the shift from weeks to hours; the penalty for repeat users, which affects large numbers of our members; and the overall reduction in benefits.
In terms of the shift from weeks to hours, our analysis shows that this is actually going to disqualify a large number of people who currently qualify for unemployment insurance. We've looked at the impact analysis provided by HRD, which says that the overall impact is essentially neutral, that there will be as many people who newly qualify under the new rules, part-time workers, as there will be people who are disqualified by the rules.
When we look at these numbers, we have some questions, and we'd like the committee to actually ask HRD to look at this more closely. In CUPE, among CUPE members alone, we know of a greater number who are going to be disqualified by these new rules, because they don't work enough hours, than what is indicated in the impact analysis. So that's something we would like HRD to look into more closely, and the committee needs to be aware of the numbers that are going to be disqualified.
The issue of frequent users affects a number of our members, including in the education sector, and we're hoping to have a chance to hear your concerns about those issues and debate them with you today. We think there are good reasons for these people to remain eligible for unemployment insurance, which we look forward to sharing with you.
The third issue is the overall reduction of benefits. We argue that this doesn't make sense at this time, for the reasons I mentioned earlier, in terms of the need for public sector workers for a strong unemployment insurance, as well as the fact that the program is in surplus. We find it difficult to justify the kinds of cuts that are being contemplated in terms of benefits.
The last pages of our brief list the amendments that we would recommend. As the chairman pointed out, in terms of improving the proposed legislation, we have our wish list here at the end, which I'll just quickly go through.
The first amendment is that the government's target to cut 10% of program costs should not be accepted. We don't think this is necessary and we don't think it makes economic sense right now.
The second one is that the UI surplus should be directed back into the program and not used to bring down the deficit and debt. We think the program could be improved in traditional ways, as well as new innovative ways, if we were to direct those funds back into the program.
The third amendment is that program revenues should be protected and therefore that premiums should not be reduced; fourth, training employment programs should be funded from general revenues and not from the income insurance fund; fifth, anyone currently eligible and still paying premiums under the new program should not be disqualified by the new rules; sixth, there should be no penalty for repeat users; and last, stakeholders should be given a say in issues related to the funding, design and spending of the UI program.
.0930
These suggestions are detailed throughout the brief, but I'd like to now turn it over to Phyllis to give you her perspective.
Ms Phyllis Diesenhouse (Canadian Union of Public Employees): Members of the Standing Committee on Human Resources Development and Mr. Chairman, I am a seniors day instructor with the Toronto Board of Education. I have worked with the continuing education department part-time for eight years, teaching crafts to people over sixty - quilting, sewing, knitting, painting, etc. Their ages range from 60 to 100 years. Many of these seniors live in single rooms downtown and this program is a lifeline relieving their isolation, helping them to socialize, recover lost skills and gain new ones. These people are my friends.
There are 6,000 participants in the program. I work in community centres, church basements, adult day care facilities, nursing homes, etc. I have a teaching certificate and I am an educator, not a recreator nor rehabilitator.
My projects are geared to the cognitive level of my students. I need to be a gerontologist, craft instructor and special education teacher all at the same time.
I am telling you all this because I would like you to understand the specialized nature of my job. I speak for 100 other teachers who do similar work, and 500 ESL teachers who work part-time for the same department with immigrants. Our local is 3452 CUPE.
Our contracts with the board are three months long and are renewed each time. We are not on yearly contracts. We are classified as instructors, not teachers.
In the past few years I've had to fight to continue to do my work. Our program has been cut 35% due to financial constraints within the board. Our summer program has been cut out. We are laid off for three months in the summer and six weeks at Christmas. The province has been looking at a $400 million cut in education, and adult education has been a specific target.
I work part-time. However, with shopping for craft supplies, travel from one centre to another - I teach at 10 different places each week and travel amounts to at least an hour a day - and preparation of my projects, my job is considered full-time by the board.
This non-teaching time is compensated for in my pay. My reported hours to UI - that is teaching hours - are 16 per week. I actually work 25 hours a week. I only record my teaching hours for UI, not my travel time or preparation time, because these are the hours I'm paid for.
I used to work 44 weeks a year, not relying on UI. With the cuts to our program in the last two years, I have had to use UI at Christmas and in the summer. This is not a choice I want to make.
The entrance requirement you are looking at for UI in Toronto is 595 hours. My hours add up to 550 per year. None of us part-time teachers, 600 of us at least in our local, will qualify for UI. We cannot continue to do the work we love without UI.
Finding other jobs in this field is difficult, if not impossible. We are a specialized group, as I said, and will fall between the cracks. This requirement of 595 hours to qualify will also blindside our programs as we will have to look for full-time work doing other things.
We have fought very hard to maintain our program for seniors. It saves money, renews people's faith in themselves, and keeps them in the community while still living at home. We are barely making a living doing this kind of work now.
I made $15,000 last year without UI. We are not asking for a handout. We pay for UI. With the new requirements, we'll still be paying for it out of our salary and not be allowed to use it. UI does not have a deficit but a surplus. I know I am reminding you of something you already know. I don't want to be dependent on UI; it's not my choice. But in a time of cutbacks to our program, that's what I've had to do.
I am asking you, when you create this bill, to be aware of the impact these changes you are discussing will have on teachers, and vulnerable seniors and immigrants.
My job situation reflects the reality of the job market for thousands of Canadians. We work part-time, with no job security, at jobs that are fulfilling to us and give service. We used to have jobs with security and benefits but we are taking the hit to continue to do our work.
.0935
I personally do not want to leave my work to retrain for some other career to make up the hours for employment insurance. I have a job I love, and the realities out there make me need UI the way it is now. If you want this fund to help the rest of us who already have useful work and want to maintain it, then either exempt us from the new hour rules or don't make the proposed changes.
UI helps us considerably now just the way it is. I hope the economy will get better and we won't need it. Right now it provides vital assistance at the right place at the right time. Thank you for your attention.
Mr. Alex Taylor (Canadian Union of Public Employees): My name is Alex Taylor. I'm a teaching and research assistant at Carleton University. We have two central concerns with these changes.
The first of those concerns relates to an ongoing dialogue that we've had with the former Minister of Human Resources, Mr. Axworthy. I would like to address one of the comments thatMr. Axworthy made in a letter to us.
He's referring to graduate students here, and the sentence reads: ``For individuals in this situation, unemployment is a predictable occurrence for which they can prepare and plan.'' Presumably what Mr. Axworthy means by predict and plan is one of two things. The first way is some kind of financial planning, whereby you earn lots of money in the winter and use it to tide you over for the summer. Presumably the second way in which we could plan would be to get a summer job. I'd like to take you through a brief budget exercise for a graduate student, particularly for a graduate student at our university.
I make $6,600 over eight months as a teaching and research assistant. That salary is capped by provincial regulations and by federal regulations. I'm allowed to work only 260 hours per year. If I work more than 260 hours per year, I lose my full-time status as a graduate student. If I lose my full-time status as a graduate student, I lose all of my scholarship money. I also lose half of my teaching and research assistant salary, because I'm not eligible for the full amount.
On top of that $6,600, I receive a $3,500 scholarship. This means that my total budget for eight months is $10,100. Last year I paid $4,300 in tuition. This year I'll be paying $5,100 in tuition. This is substantially more than what an undergraduate pays for a student population that uses proportionately far less of the university's resources.
That leaves me with $5,000 to live on for an eight-month period. Rent and utilities cost me $3,600 over that time period. That's $350 per month in rent plus about another $100 in utilities and various other expenses. My budget's now down to $1,400. I have to pay for food, obviously. At $5 per day, which is not very much, that works out to about $150 per month. Over eight months, that's $1,200. That leaves me with $200 for books, clothes, and bus fare.
Clearly, there's not a lot of manoeuvring room here to be saving for the summer. Saving for the summer means not paying rent, not paying tuition, or not buying food. I simply can't do it. I don't make enough money, and there are no means for me to make more.
This is exacerbated by current government policy of cutting post-secondary funding, as well as cutting agencies like NSERC and the SSHRC, which directly fund my scholarships and my research. These agencies took a 15% cut last year and a 3.4% cut this year. On top of that, the provincial government, Mr. Harris' government, has been making substantial cuts in education.
With respect to jobs, it's great if you can get one, but one-third of our membership last summer didn't. What are they supposed to do? We're not eligible for welfare. We're full-time students. If we're not eligible for UI and we can't find a job, basically what that means is that we have to quit school. Most of the people in my local have already spent five or six years in school.
.0940
This leads me to my next set of remarks. This set of remarks concerns Bill C-111 as a job creation measure. The federal government has promoted this document as a job creation measure on the basis of three arguments. These three arguments we like to call the three great myths of unemployment.
The first of these is that unemployment insurance causes a culture of dependency and that it generates disincentives to work. I would challenge the policy-makers in the federal government to show me what empirical evidence they have to support this claim. I myself have extensive experience in social sciences research. I wasn't able to find a single reference to support that statement, and there's nothing in the document to indicate that the federal government has done any research at all to support these claims.
The second great myth of unemployment is the mismatch myth. The mismatch myth goes like this: there are lots and lots of jobs out there, but our university graduates currently don't have the skills to take them.
There are basically two arguments that are required to support this statement. The first argument is that you have to show there are a large number of well-paying jobs that go unfilled. That simply isn't the case. In fact, for most full-time jobs, there are hundreds of applicants.
The second argument that's required to substantiate the mismatch myth is that there is a well-quantified subset of skills that today's graduates lack. Again, that's not the case, and I would point to the figures for engineering that were collected by the University of New Brunswick. Engineering, which is normally considered to be a set of job skills that's in high demand, has experienced a drastic reduction in the number of students that they've been able to place in jobs following graduation. Over the last 10 years, placement in engineering has dropped from 91% to 68%. As you can imagine, for other disciplines, such as the basic researchers, social scientists, or people in the faculty of arts, the situation is much worse.
The third myth of unemployment is the trickle-down myth. This seems to be in large measure the government's macroeconomic job creation policy. The trickle-down myth goes like this. If the government gets off the backs of private industry by cutting its taxes, by lowering the unemployment premiums it has to pay, and so forth, it will free up capital in order that the private sector can create jobs. The trouble with this is again the problem of empirical substantiation, because in fact the private sector is not creating jobs right now. In fact, in the current economic climate, there doesn't seem to be any relationship between the profitability of private enterprise and job creation.
Given this, I put this to you. Just what does the federal government plan to do in order to create jobs, particularly jobs for people in my age group, particularly summer jobs for people in my age group so they can finish their education? Most of all, what do you plan to do with the people who have already graduated and can't find work?
Thank you.
The Chairman: Thank you, Mr. Taylor.
Ms Hill.
Ms Denise Hill (President, Airline Division, Canadian Union of Public Employees): My remarks have been distributed to the committee, so you should have them in front of you.
I'm Denise Hill. I'm president of the airline division of CUPE, and I'm also a flight attendant.
The airline division of CUPE represents 8,000 flight attendants at Air Canada and Canadian Airlines, as well as their partners Air Alliance, Air Nova, Air Ontario, Canadian Regional Airlines, and Inter-Canadien and independent carriers Air Transat and First Air. The HRDC booklet that accompanied the original Bill C-111 confidently stated that everyone knows what an hour of work is. The government then thought it could just plug this concept into the old UI Act and create its new system.
.0945
For most workers, it is easy to know what their hours of work are. For flight attendants and pilots, this is not the case. In fact, the move to this hours-based system will penalize flight attendants, because the legislation has not taken into account the impact on workers with non-standard methods of pay calculation.
Our pay system and work rules date back to the 1930s. It is the result of a contract imposed by the employers on airline workers in the United States under the Railway Labor Act, which was then copied in Canada. The original principle was that you would be paid only for each hour flown. This was of great benefit to our employers. They would not have to pay for cancellations or for time spent at work on the ground before and after a flight or as a result of delays. It has also meant that all time spent away from home, at the behest of our employer during multi-day work assignments, would receive no recognition or compensation.
Over time and through negotiations, an elaborate credit system has emerged to give recognition to our realities of cancellations, delays, time spent on the ground, and time spent away from home base. As a result of this history, an hour of work has three possible meanings for flight attendants: first, flight hour pay, which is pay for each hour flown; second, flight hour pay credit, which is pay credited for non-flying work duties; and third, duty hours, which is actual time spent at work.
A couple of examples will illustrate these concepts. A flight attendant flies from Toronto to London, England, spends 36 hours there, and returns. She'll be away from home for 54 hours, be on duty for 18 hours, and receive 15 hours of pay.
A flight attendant flies from Toronto to a number of Canadian points over a three-day period with daily duty days of 14 hours each. In this case she is away from home for 72 hours, is on duty for 42 hours, and will receive as little as 15 or as many as 30 hours of flight pay, depending on the actual number of hours flown in the day.
A reserve flight attendant, used to cover personnel shortages or cancellations, is paid 65 flight hours per month for being available to do this work. Theoretically, she may actually not fly at all but still get this guarantee pay.
In general, then, for each flight hour paid to flight attendants, flight attendants generally work between one and a half to four duty hours or an overall average of two duty hours. In addition, as employees on a continuous operation under the Canada Labour Code, many duty hours could occur in one week, like 60 or more, with very few or none in the next week.
For unemployment insurance purposes, under the old UI legislation, this pay system was not a problem, because eligibility was based on weekly insurable earnings and not hours of work.
Subsection 10(2) of the old act, which does not appear in the new Bill C-12, allowed for the fluctuation in hours from week to week of flight attendants. Paragraph 44(q) of the old act, which does not appear in the same form in Bill C-12, allowed for regulations to allocate earnings to weeks and determine the average weekly insurable earnings in the qualifying weeks of claimants, which regulations 58(2) to 58(4) then did.
With these provisions, a flight attendant's pay stub, which reports only flight and flight credit and not duty hours, made sense to UI officials, because a record of employment needs to report only insurable weeks of earnings and not total duty hours or work hours.
Unfortunately, Bill C-12 does not adequately deal with these work realities of flight attendants. The deficiencies are as follows. There is no definition of work in the legislation. An hour of insurable employment, which speaks of earnings that ``are calculated by time or by the piece...or otherwise,'' fails to capture the distinction between these three types of hours or pay in our work.
Paragraph 7(4)(b) is premised on a 35-hour week, something that does not reflect the continuous nature of our work.
While subclause 54(z.1) allows for regulations to allocate hours of insurable employment to a qualifying period, it does not specify which of our three types of hours should be allocated.
Clause 55 allows for regulations to establish how many hours of insurable employment a person has or permits the acceptance of an alternative method of calculation. This alternative method can be established by agreement with the employers or employees and altered or rescinded by the commission at any time.
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While this provision attempts to address our problems, it is unfair. It leaves our fundamental rights of entitlement to bureaucratic agreements, possibly made with our employers only...that may continue to fail to recognize the particular realities of our work environment.
Because of the move to hours and the loopholes in the legislation we have identified, flight attendants, through no fault of their own, may not qualify for benefits any more. If they do qualify, they may receive less benefits, even though they continue to work for their employers for many years.
Whether an accidental or deliberate oversight, these loopholes, we believe, must be closed to protect the existing rights of flight attendants, and Bill C-12 must be amended appropriately. At very least, any alternative agreements reached under clause 55 must have the agreement of the affected employees. In addition, hours of work must recognize all duty hours worked by a flight attendant for employment insurance purposes, not just flight pay or credit hours.
The Chairman: Thank you. You've obviously given us a lot of things to think about. Thank you also for bringing in some of the real challenges real people face with this particular bill.
We're going to move to the question and answer session. We'll start with Madame Lalonde.
[Translation]
Mrs. Lalonde (Mercier): Thank you for your well-researched presentation, which illustrates the need for all classes of workers to be organized. If you were not unionized, we would not have heard your representations about your various work situations. Through you, we have also heard from people who are passionate about what they do, who are trained and for whom the unemployment insurance system is essential if they are to continue to make an outstanding contribution to society.
When the bill came out, in addition to the fact that its main objective was to make cuts totalling roughly two billion dollars, it included a change from weeks of work to hours of work for calculation purposes. At first glance, some people thought this seemed fairer, but, as time goes on, we see increasingly that the result is just the opposite. The fact is that for many people one hour of work is not the same as one hour of employment or one hour of wages.
It is probably accurate to say that new jobs tend not to be paid by the hour. Hence, provisions about calculating on the basis of hours is inappropriate. Ms Hill, in your presentation you mentioned that the only way of correcting this would be through negotiations between your employer and the department. For you, this would raise a number of important issues. Hence, your presentation to the committee is extremely important.
Before asking you to explain one of your recommendations, I would like to point out - particularly to Mr. Taylor, because he may not have noticed the point in the bill that I find the most outrageous - that the salary level for paying UI premiums has been reduced. It has been reduced from $42,400 to $39,000. Do you realize that this measure removes $900 million from the funds?
.0955
This is a crucial point. Some reforms need it, but rather than dropping the ceiling from $42,400 to $39,000, some thought should have been given to having university professors contribute, precisely because they use UI less often. That is even a good reason for paying a full premium on $50,000, for example. But rather than do that, the bill is such that people with much lower incomes will be penalized and will not be able to count on unemployment insurance.
There's something illogical and incomprehensible about this bill, and it needs to wonder what the government's real intention is. If its real intention was to help people like you, the government would have tried to better distribute unemployment insurance, by making capital intensive businesses, and not just SMEs, pay their fair share. I would welcome any comments you might care to make on this point.
I would like you to explain one of your recommendations, because I've not seen it before. You say
[English]
that anyone currently eligible and still paying premiums under the new program should not be disqualified by the new rules.
[Translation]
Would you please explain what you mean by that.
[English]
Ms Remus: I know that perhaps sounds a little vague, but the issue we were addressing there, which we actually address in some detail inside the brief, is the issue of the number of part-time workers who will be disqualified by the new minimum hours required.
We have with us today people from three different categories who are examples of this. We don't think it was the government's intention to make it more difficult for part-time workers. The government talks about making more part-time workers eligible for UI, and to an extent that has happened, but what has happened at the same time is that a whole bunch have been thrown out. So there's no improvement in the situation for part-time workers even though we all realize our economy is moving towards more and more part-time and temporary work.
It's difficult for us to say what the threshold should be. We don't know if it's possible to say 595 hours is too much in Toronto, it should be less. We don't want to propose a number, because we have found examples where the numbers proposed don't work, and we don't want to fall into the trap of not recognizing that there are other people out there who will face the same problem.
[Translation]
Mrs. Lalonde: Could I ask you to give us some concrete examples? It is important that we realize what the defects of this bill are. You used the words "concrete examples", did you not? I would like you to give us some in writing, if that is not too much to ask, so that we can be aware of them at all times and use them. If you have any other examples, it would be extremely important to pass them on to us.
Mr. Taylor: I will speak English, because my vocabulary in French is not strong enough.
[English]
A concrete example of the problem we face is simply this: under the new legislation it is impossible for us to be eligible, because by provincial legislation we are forbidden from working more than 260 hours in a academic year. We can never qualify. We're still going to be required to pay premiums. I would like to add that none of us wants to be on UI. We want jobs during the summer and we want jobs when we graduate.
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The Chairman: Mr. Johnston.
Mr. Johnston (Wetaskiwin): Good morning.
Your first suggestion for amendments seems to indicate that you don't support a cut in the premium rate. You say a reasonable, stable premium rate would make the program sustainable without cuts to benefits. I have two questions. You obviously would like to see the fund a self-standing, separate fund, and you don't support increases to premium rates. Would any of you like to comment on that?
Ms Remus: It's correct that we wonder about the wisdom of reducing the premium rate at this time. To us it makes sense that the program be sustainable, and it looks now as if it could be. There's a healthy surplus. The surplus is building.
The other reasons why we don't support the idea of reducing the overall expenditures under UI are both economic and moral reasons. Taking $1.9 billion out of the economy at this point is taking it out of the communities where unemployed workers spend that money, and we're not sure the government has fully looked at what kind of impact that's going to have in those communities.
Then there are the other arguments about the economic benefits of UI. It maintains consumer confidence during periods of unemployment. It maintains a trained and active workforce for employers. For example, in the case of Phyllis's very specialized instructor skills, if she were forced to find work where she could not use her skills, not only would that be a waste of her skills but it would put the board of education in a troublesome spot in the fall when they had to hire untrained staff.
People do not choose this annual lay-off, but it's a reality because of the economic situations the employers face. We think these workers deserve support during those periods.
Mr. Johnston: But to get back to the specifics of the premium rates, you don't seem to support a reduction. Do you support the status quo or an increase in premium rates?
Mr. Taylor: I don't see anything wrong with the premium as it is, frankly. What we're really opposed to is the reduction; and the reason we're opposed to the reduction in the premiums is that it's being touted as a job creation measure.
To quote from the document:
- This reform will create 100,000 to 150,000 jobs per year... In addition to the transitional Jobs
Fund, other elements of the reform will directly foster job creation
- The first point that's listed under that heading is lower business costs as a result of the reduction
in the premium rate and the maximum insurable earnings.
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Mr. Johnston: As I read it, the reduction was to the employee, not the employer.
The minister, when he appeared before us yesterday, told us that over the last four to five years an average of around 120,000 - that was the number he used - people per year drew funds that they weren't entitled to from the UI fund.
How would you people react to some sort of a self-directed fund that you would pay into and your employer would pay into at about the same rate as you do now, but the account would be specific to you and you could draw on it sort of like on an RRSP? We had an actuary suggest, through teleconferencing, that this is something that could be looked at, an account set up specific to each person rather than a pooling of funds.
Ms Ballantyne: We would not support such a fund.
On the issue of premiums - and I guess this is anecdotal evidence more than it is anything else - there is very strong support among our membership for a social unemployment insurance system. I have never - and I would like to ask the others here if they have - heard a worker complain about UI premiums being too high. In fact, particularly at this stage, I think workers would be prepared to pay more into an unemployment insurance program and other social insurance programs if there was some guarantee of a social return.
The kind of plan you're suggesting would in fact make the problem of unemployment and unemployment insurance an individual one. We don't believe that unemployment is an individual problem. It is a social issue and should be resolved through a social program. As in all social programs, there is an equalizing impact.
As I explained before, we have a very diverse membership, and our income levels are very diverse. The income levels of our members vary from minimum wage up to $60,000 to $70,000 per year.
To get back to the point of the maximum insured earnings, there is strong support that everybody should share, contribute to a social program, which then would be directed to regions in the country that may be experiencing high rates of unemployment through no fault of the people who live in that particular region.
So we think that would be the wrong way to go. It is completely contrary.
You give the RRSP analogy. As a union and as a labour movement, we have always supported a social pension, a larger pension fund. We would strongly prefer to have the Canada Pension Plan be the pension plan that everybody has access to and that everybody contributes to, rather than have to rely on private forms of pension savings. So I would say that we would not support that direction.
Mr. Allmand (Notre-Dame-de-Grâce): You and several other unions that have appeared before us have said that the cuts aren't necessary because there is now a surplus in the fund and in fact at the end of this year there'll be a surplus of about $5 billion.
In response to that, the government says that surplus, if it is $5 billion at the end of the year, is really only a current account surplus, which is required, first, to cover the deficit that was in the fund in the previous years when we had more serious unemployment and, second, to build up a more reasonable reserve to cover the next downturn and thereby avoid what happened the last time. It was an increase in premiums during a period of higher unemployment. I agree with that: when the unemployment rate is up, it's the wrong time to increase premiums.
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I'd like to know how you respond to that, because we've had many witnesses saying that, but then we have the government saying what I just said, and I want to hear what your response is to the government's more or less rebuttal or rejection of the argument that in fact there is a real surplus. They say it's really a current account surplus, which really must pay off the deficit of the previous years and build up a sounder reserve.
Ms Remus: My understanding of it is that the government did have to contribute to the UI program. But again, you don't blame workers for that. You blame the managers of the program, the people who set the premiums, the people who were in charge of financially managing the program at that time.
I think we agree that we would like the program to be self-sustaining. We don't want the government to have to come in and contribute money to it. But we are not convinced this cut is necessary in order for that to happen. We think this cut is happening for political reasons, not financial reasons - that there is some mileage to be made out of looking tough with the unemployed right now, in spite of the unbelievably difficult situation they're finding themselves in.
If the government were really concerned about this, we wouldn't be reducing premium rates right now. There is no pressure, except from some industry groups, to reduce premium rates.
If we want the program to be self-sustaining in the long run, let's find the premium rate that will allow that to happen.
Mr. Allmand: So you're saying that as is the case under the present law, the commissioners, the government, have the right to set the premiums in order to build up the proper premium. You're saying if it went into such a deficit position several years ago it was because the premium wasn't set properly.
Ms Remus: Yes.
Mr. Allmand: My second question: could you accept the hours of work proposal if there were changes in the rules on entry and the calculation of benefits? I put aside the problem of the airline attendants, which I heard for the first time only this morning. That's a very special case that must be dealt with. Could you accept the change in hours, in principle? We knew many cases of people who never got unemployment insurance because certain businesses kept them under the fifteen hours a week. We want to bring them in. What's hurting a lot of instructors in Toronto, for example, and perhaps the research assistants, is the ways of calculating benefits and eligibility based on the hours system.
Several amendments are coming forward here. If we were to correct some of those things, could you accept the hours proposal in principle, the airline attendants aside?
Ms Remus: The brief actually says we like the idea in principle and we like the idea of including part-time workers who haven't been included to date. It's when you actually get to see the numbers being proposed for hours that you figure out what the impact will be, and that's where it didn't work for large groups of our members. But if there were a way to fix that, definitely.
The Chairman: Mr. Regan.
Mr. Regan (Halifax West): Thank for coming before us today. You've dealt with some of the issues about eligibility and the points my colleague Mr. Allmand referred to a moment ago. I want to move on to some other areas of the legislation.
Your brief mentions that there is a reduction in the system of $1.9 billion. My understanding is that it's $1.2 billion, because $800 million - and I don't know why it's 8% of $7 billion, what the difference is exactly - is being put back in, of course, into active measures, as you're probably aware.
As I understand it, the main means of making this reduction in the cost of the program is through the clawback, the gap, the divisor, and the intensity rule. I think it's pretty much in that order.
As you are probably aware, members of this committee have brought forward proposals to remove the problem of the gap and improve the situation with the divisor, make it fairer across the country, and also to exempt low-income families from the intensity rule. I haven't heard you mention anything about those proposals, so I don't know how aware of them you are. I need to hear your input, because if there's no support for them, they're not going to pass. There's no question in my mind that unless we hear support for our amendments we're not going to get them through, because the cabinet will say, if there's no support for them, why should we bother doing them? So I'd like to hear about that.
I'd like to hear also about the thing I think is the biggest take out of the system, which is the clawback for high-income users. After talking to workers and people generally in my area in Nova Scotia, I know they've always felt people who make $50,000 or $60,000 a year every year, and also every year take $10,000 or $20,000 out in UI, shouldn't be able to do that year after year after year. They don't believe the system should be designed for that kind of an individual.
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I haven't heard any union coming before us yet expressing any support for that measure. Maybe you agree or don't agree that there has been an increase in cost over the last ten years, but the cost of the UI system has gone from $9 billion to $20 billion in ten years. It is costing employees and employers more and more because of that over that period of time. The government feels it has to deal with this situation, and I would prefer to see it done at the higher end. I think the public would prefer to see it done on those higher-end users. I'd like your view on that, first of all.
Secondly, don't you think it makes sense to fund employment assistance measures from the EI fund, in light of the fact that with workers' compensation programs, for example, they pay out of the funds for things like safety training and education? Shouldn't a modern insurance program pay for those kinds of things out of that kind of fund?
Last, our figures from the government show that 350,000 low-income families in this country will benefit from the family income supplement, particularly now that they're going to be exempted - I hope - under our proposals from the intensity rule if it gets some support. That would mean 7% increases in the benefits for two-parent families and 10% for single-income families.
So I'd like your reaction to these different questions.
Ms Remus: There were a lot of questions there, so let me know...I'm not deliberately avoiding any of them.
First of all on the clawback, the issues of differentiating between low income and high income are laudable, I think. There is no doubt that some of the measures are meant to buffer the impact on the low income, and the impact analyses show how that happens. So yes, we support that.
You get into the definition of what is high income. I don't know how many people really believe $39,000 a year is high income.
Mr. Regan: Where would you put it, then? Is it $50,000, $60,000...?
Ms Remus: I could give a personal opinion but that needs be determined; it raises the issue of the slippery slope of how low high income will go.
The other issue here is: doesn't it make sense economically that people in every income group need to be able to sustain themselves economically through periods of unemployment? If you have somebody who is high-income and who loses his or her job and goes on unemployment, the impacts of having to give up one's home, mortgage, etc., are just as great on somebody -
Mr. Regan: This is about someone who, every year, is using it as an income supplement, not the person who loses his job after several years of work. It's the person who is in that higher bracket and every year is taking it.
Ms Remus: I'll try to go through and list the answers. We like the idea of trying to buffer low-income recipients. We don't like the way the intensity rule is being applied, either for the clawback or the reduced benefits, because we don't believe an intensity rule is necessary or justifiable. We don't believe people choose to be unemployed and have reduced income every year. Nobody chooses that; they do that because they don't have other options.
You asked for support or a comment on the amendments that have been proposed. Unfortunately, I don't know what they are in detail. The brief does talk about our concern with the divisor as well, so I suspect we're on the same wavelength with that one. I'm not sure what you mean by the gap. As for intensity, for low income it's great. But as I said, we don't support the intensity penalty for anyone, not just those with low income.
The Chairman: Mr. Taylor.
Mr. Taylor: It's the feeling of our local that it's not the workers' fault, that what's happening here is that employers take advantage of the UI system. They employ people for eight months and then lay them off for four or whatever the case may be. It's our sense that the appropriate response to this would be for the government to penalize employers who do this. What you should be doing is telling employers that if this is how they want to operate, you're going to ask them to make up the shortfall by increasing the UI premiums that they have to pay.
The Chairman: Thank you, Mr. Taylor.
Mr. McCormick.
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Mr. McCormick (Hastings - Frontenac - Lennox and Addington): Mr. Taylor, I just want to clarify something for my information. You're not allowed to work more than a certain number of hours during the academic year. During the summer when you are allowed to work - and that's a question - will going to the hours base assist you or people in your situation?
Mr. Taylor: If we have a summer job, then we don't need UI. It doesn't assist us, because the problem arises when we have a teaching assistant job in the winter but we don't get a summer job.
Mr. McCormick: Mr. Taylor, I'd like you to think about one other thing. You mention that trickle-down economics does not work, but the specific re-employment measures that are here and have been experimented with in the last couple of years have worked in many areas of this country, if not necessarily with this particular union.
For example, documented tens of thousands of jobs that have been created through the self-employment assistance programs have made a difference. These people have created companies that have hired employees. I know everyone is not cut out to be a self-employed business person, but it has worked in great numbers.
Mr. Taylor: It hasn't worked for my age group. I'll tell you that right now. Government figures for unemployment in my age group are nearly 20%, and that has been fairly static for the last little while. According to any of the government or private sector projections I've seen, it's not expected to improve.
You say that these things have worked, but in fact the general consensus among economists is that they don't work, that trickle-down economics doesn't work and there is no empirical evidence to support those statements. If it does work, could you please show me the documentation, the empirical evidence, that suggests it does?
The Chairman: That's a fair question, Mr. Taylor.
I will move for a couple of seconds to Mr. Nault, to clarify a point raised earlier.
Mr. Nault (Kenora - Rainy River): I want to deal with the issue that Ms Hill brought up relating to flight attendants. We have asked the department to give us an analysis of the changes from weeks to hours and the effects they would have on flight attendants, pilots, conductors, and engineers on the railroad, who all do a form of piecework very different from the normal work week.
My understanding is that under the present system, and then with the new system that is coming in, it will be calculated in the way it is now, that there will be very little change, because there's no reason for it. So I wanted to clarify for you that when the regulations come out, you can expect them to be calculated in the same way as they are now.
As an ex-railroader, I do the same kind of thing as you do. There's no way you can base it on the hours that you sit in a plane or on a train. It's all based on your total weekly income, and that's going to be based in the same way for you.
Because I think it is a concern, I wanted to clarify that this morning.
We expect to see the draft regulations somewhere down the line. We'll have to see what will happen with amendments before we will be able to tell you what the regulations are.
You're not the only people in that boat; there are a number of people who do piecework that you can't calculate in the conventional way. I just wanted to clarify that.
For Mr. Taylor, I just want to let him know that for people in his age group who are graduates, the unemployment rate for people with his education level is 5%. The 20% he talks about are people who don't have a high school education. As you get a college degree, it goes to 10%. As you go to graduate education, it goes to 5%.
I wanted to make sure that would be on the record, because he leaves the impression that people in his category, with his educational background, have a 20% unemployment rate. Those statistics are not factually correct.
The Chairman: Mr. Taylor, a brief rebuttal.
Mr. Taylor: In response to that, the figures you are referring to are based on a moving average, and that moving average is based on employment figures that go back 30 years. If you were to look at what is actually happening today, you would find that a university education is of much less benefit than it was five years ago or ten years ago or fifteen years ago or twenty years ago. When the majority of the people in this room were of university age, getting a university education was indeed more or less a guarantee of having a good job on graduation. That's no longer true.
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So the figures you're referring to -
An hon. member: [Inaudible - Editor]
Mr. Taylor: I find that very difficult to believe. We did a survey of our own membership -
The Chairman: I'll have to cut you off. I think the point you made is self-evident.
On behalf of the committee, I would like to thank you very much for giving us your perspective on this particular problem.
I think you will leave this committee with the full understanding that our task is not an easy one. We need to hear from you. We need to hear from the business community. We need to hear from ordinary Canadians, who pay the premiums.
What's been fascinating about this process is that everybody has a good perspective on this particular bill. We live in an era, as a committee...we've been given certain parameters we have to work within, but our major objective here is to make this particular bill as fair as possible to those individuals who are going to be using unemployment insurance, but also to try to modernize the system to the point that it reflects the new economic reality. Everybody, I am sure, understands the paradigm shift that has occurred in our economy.
Mr. Taylor, one of the issues you raise is the issue of youth unemployment. Youth unemployment is indeed a very important issue, one this government needs to address in a very serious and coherent way. I hope in the very near future there will be measures above and beyond the ones that have already been taken, such as the doubling of funding for summer employment opportunities for young people...and really to look at this particular issue, because if our young people lose hope, our country's future is not going to be as bright as it could possibly be.
I also hope we as a nation begin to get off this trip we're sometimes on, of pointing fingers: unions against government, government against unions, business against unions, and all that kind of thing. I don't think we're going to be any further ahead. I submit to you that our country has not benefited from that adversarial approach. I hope we can find a spirit of cooperation not only with this particular bill but with anything we do as unions, as government, as business, so the quality of life for the people of Canada can in fact be improved. And this is the spirit of this committee.
Thank you so much for your presentation.
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The Chairman: The next presentation is from the Canadian Federation of Labour: Mr. James McCambly, president; Mr. Terry Boudreau, secretary treasurer; and Patricia Parulekar, executive assistant to the president. I don't think I have to explain to you how this committee works. You've attended committee hearings many times.
As you know, we enjoy the question and answer session. If you can give us a quick overview of the major points you would like to stress, the members can in fact focus on certain areas that we need answers to. So welcome, and I'm sure you'll give us greater insight into Bill C-12 and ways to improve it. Thank you.
Mr. James McCambly (President, Canadian Federation of Labour): Thank you,Mr. Chairman, mesdames et messieurs. I first of all appreciate the fact that you're a little behind, and we'll try to give as much time for questions and answers as possible, but I must say at the outset that this time of change of what we've known as the Unemployment Insurance Act is probably the most significant change in 30 years. So it is a pretty important time, and it's very difficult to put it into a short span of time.
I must say that the Canadian Federation of Labour, as you well know, represents people in all jurisdictions of Canada and in most economic sectors. We have some very, very serious concerns and objections with Bill C-12, but we felt that instead of criticizing and just condemning the bill, we would like to give the committee a quick view of what we think would be an appropriate approach that may be a bit different. The degree to which these changes can occur I guess we will discuss in the open period.
First of all, just to give you a sense of where we think this should be coming from, if there's a change in the name from unemployment insurance, we do not think it should be employment insurance; rather, it should be unemployment and training income insurance. We'll get into the matter of training a little bit later in our discussion, but it is an extremely important part of making people qualified to have jobs, retain jobs, or get new ones.
We feel the basic principle of the fund needs to be to provide temporary income support for people taking bona fide training or who are experiencing temporary unemployment. We would suggest that the system needs to be designed for premium payers and not for the convenience of administration.
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Some of it is intact in the proposed bill, but we feel a bank-hour system would be appropriate, one that recognizes all work that might be taken on by people regardless of the length of time. There should be a minimum for the purpose of measuring eligibility and a maximum that can be banked. There should be no limit on the time to accumulate these hours. In our view, it should be an evergreen system for people and not for the convenience of administration.
We suggest that it should be a flexible system to take care of either work or what time a person is working or not working. I have one example that I think is tremendously important, and I've seen it thousands of times in the construction industry, where people have opportunities of employment of half a day, one day, two days, or a week. There is an absolute deterrent for people to take that work when they are on claim, because their claim continues to run. We say a claim should be frozen at the precise time a person goes to work and they should then be given the opportunity to open it up when they finish that work, regardless of its duration.
I have to tell you that I ran into a person I know on the mall yesterday who was laid off from a clothing store and had an opportunity for nine weeks of work at $200 per week, but had introduced a claim. She took the work. It's not very appealing to take that when a claim is started, but at the same time the claim kept running. It's ridiculous. It is an absolute deterrent, and it is the system that is designed to the system and not the person. We're saying that as the system is redesigned and with the technology that's available, surely we can gear it to suit the customer - the employee or the unemployed.
We certainly support a pooled risk system. People lucky enough to find steady employment and jobs will not collect as often or as much as those unable to find steady jobs or temporary or cyclical employment. In this way the risk is pooled, and the notion of going from that to some form of experience rating is where you start to run into some difficulties.
We want to emphasize this matter of providing income for people taking legitimate training or upgrading. Income assistance, we believe, is probably the most important component of training. If you can get income assistance to take training when you're not working - either unemployed or temporarily off a job - you'd be able to do it. The training expenditures from the fund should be approved by independent regulations governing training without the requirement of being unemployed. That doesn't always need to be the case, but it needs to be done.
Everybody is aware that on April 1 the federal government cut off the CRF funding for apprentices for the first two weeks. I am the national co-chair of the national apprenticeship committee. I'm not here representing it, but I can tell you we have a lot of people, a lot of trades, and a lot of apprentices in our unions.
Not funding those first two weeks is absolutely disastrous to the apprenticeship system. We say that you should not hesitate to say that the funding of income should come from the UI account or whatever it turns out to be called. It's understandable it came out of CRF, but that funding needs to be there and you need to address that problem of supporting the funding of apprentices from the first day they're taking their schooling.
I might just remind the Liberal members that the first page of the red book says that apprenticeship is extremely important and should be expanded, and we agree with that 100%. What's happening right now is that without some changes the apprenticeship system is in serious trouble.
With regard to governance of the fund, I think some comment needs to be made on that. We would suggest that we're talking about an unemployment and training income insurance, but the fund, whatever it may be, should be trusteed by an independent board composed of business and labour representatives. Since they pay the premiums, they should have a role in determining its rules, and any use other than income support should be reviewed by them.
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I'm not saying you take away the role of government. I am saying the people who pay the premiums should have a very significant say in what those premiums are used for.
I might add the CLMPC did a study, which you probably have copies of. There was the Chamber of Commerce, the Manufacturers' Association, the CLC, the Canadian Federation of Labour. All of those organizations said basically the same thing. So it's not just the Canadian Federation of Labour saying this. It's a consensus.
In summary, the federation feels Bill C-12 severely penalizes those who are frequently unemployed. It also proposes to open the floodgates to a misuse of the fund. It would legitimize using UI premiums for purposes other than income support for training or for the unemployed, and for purposes not requested or approved by the premium payers.
There's no doubt reform of the unemployment system is needed. The Canadian Federation of Labour supports sensible reform that is designed for the user, not for the convenience of the administrators or the politicians. The result of reform should help every Canadian worker deal with the new realities of the labour market.
The unemployment insurance fund - and there was discussion on this both this morning and last night, when the minister was here - is not broke. It's very likely the only national publicly run institution that has no debt or deficit. Contrary to what some officials have been saying, the fund cannot create a burden on the taxpayer.
The UI fund is financed by premiums from employers and employees and by law must always stay solvent. Any deficits or surpluses are adjusted by increasing or decreasing premiums. So the fund can temporarily borrow from the consolidated revenue fund, but it must repay with interest any money it has borrowed. The notion of the government putting money in was stopped by the Conservatives before the last election occurred.
Some specific comments on the proposals: As we suggested, for the most part the legislation is drafted to punish repeat users by severely cutting benefits and making it very difficult to qualify. We feel that impact is extremely harsh, and unnecessarily harsh.
In measuring eligibility, we would suggest the weeks-to-hours proposal represents two very significant improvements. One is that all hours worked and dollars earned count from day one. The second is that under the increased 35-hour week, people who have extended hours for brief periods have an opportunity to be credited for those additional hours. These changes recognize some of the new realities of the labour market.
About maintaining eligibility, to many workers in this economy 490 hours are hard to maintain. Tens of thousands of people have already exhausted their UI benefits. They've not been able to requalify under the current provisions. They would certainly be unable to qualify under Bill C-12.
As has been stated, the number of people covered on UI has decreased from something like 90% of the unemployed to around 47% or 48%. That in itself tells a story. To go further than that and make it more difficult gets onto what Bill C-12 is all about.
The proposal for re-entrants, where 910 hours of insurable employment is required to requalify, is an enormous barrier to requalifying. We have used the construction industry to illustrate not only that we have a lot of people there...but it is a good source of statistics, especially from the construction commission of Quebec. It's not that the unemployment situation in Quebec is the worst in Canada, but they clearly have the best statistics.
Construction workers from Quebec, as an example, with a few exceptions, in 1994 averaged about 600 hours. We estimate that under the proposed system well over 60% of all construction journey-persons would not be able to requalify for any income assistance. Apprentices will suffer even more. If you take the changes in Bill C-12 along with the reduction of the first two weeks, we feel it would essentially disrupt or destroy the apprenticeship system in Canada. We really should be creating new occupations instead of destroying the existing ones.
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We also conducted a survey within the Canadian Federation of Labour affiliates last August, with a very high response. We asked what percentage of all members were able to find five months, or twenty weeks, of work between September and August. The results indicated that at our twenty-week period 35% received less than twenty weeks. So the twenty-six week requirement to requalify under Bill C-12 would eliminate easily 50% of our membership from being able to use the UI system.
I have to mention one experience that I had a few years ago. A group of business and labour people were visiting from Australia. The issue they were asking us was why productivity in the construction industry is so much higher in Canada than it is in Australia.
The conclusion was that one of the big factors is the unemployment insurance system. There was not a fear of having nothing when the job was finished, whereas there is that fear in Australia. What happens there - and I'm not suggesting it would happen here - is that the job begins to be dragged out, to try to keep the job going when there is nothing at the end of the tunnel.
So don't underestimate the value of the system we've got. It's done some marvellous and great things for this country. So it's not to be criticized in terms of people who don't have regular employment opportunities in order to be able to get some assistance.
I will make a few comments on the divisor rule.
To us it's unacceptable to have a rule that determines assistance levels by averaging time worked and time not worked.
On the reduction of the time period, going from 50 weeks to 45 weeks is about a 9% reduction.
The intensity rule progressively penalizes those who are unable to find a full-time job who use the system for income support. This is the first instance in which the government is introducing a form of experience rating that penalizes workers for conditions that they cannot control. The experience rating principle moves away from the pooled risk system and the shared effort of risks and costs.
On maximum insurable earnings, it's just a matter of facts that it is about a 9% reduction, and that's in a time when the cost of living is increasing. And it isn't frozen until the year 2000.
On the clawback, the tax-based penalties, we're all aware that the current system has a clawback of 30% over 1.5 times the maximum insurable earnings. Bill C-112 would reduce that threshold by 8%, to 1.25.
These reductions are very high, but I want to acknowledge that at least they affect everyone equally and are based on income levels. We could argue that that level is too low, that it's coming down too fast, but at least it treats everyone equally.
The thing you might consider there too, when you look at the provisions that look at the past five years for penalties, is that a person could earn $20,000 or $30,000 or $15,000 for five years and claim UI, and get one very great year of $60,000 or $70,000 and get clawed back 100%. When you start looking at whether or not they've used the fund over the last five years, now they have one decent year and it's gone.
Even though the family income supplement is assisting lower-income earners, we have a problem with the unemployment insurance money being used as a social program. But I won't dwell on that, because the discussion the committee is having on that area is rather interesting. But essentially we do not see the unemployment insurance system as a social program.
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With regard to premium rate reduction, a good deal of discussion is there. I think the higher-level incomes should continue to pay based on their income, not based on what the payout of the fund maximums would be. But the premium rate should not be reduced until the insurance system is established to provide appropriate income assurance for either training or the unemployed. Following that, the government should eliminate wasteful expenditures - particularly those proposed in Bill C-12 - eliminate programs that were never requested by business or labour; and then, and only then, should the government establish rate levels.
We are certain that the 5¢ reduction would be much more than that, and I must say that we have some problems with the notion of going to, say, a $5 billion reserve that is in the general account. However, we have always said that we don't object to there being a reserve provided that we know damn well what that reserve will be used for. If it is going to be used for income assistance to the unemployed or income assistance to those people taking training, then I think there is merit.
But now we get into the five tools, and that's where we have a problem. We don't agree with creating a pool that's going to be used for any kind of notion that comes up from government. So we oppose these new market-distorting expenditure programs, and we especially object to financing them from the UI funds. If it were possible for us to have obtained a court injunction to keep the government from using UI funds for this kind of purpose, we would have done it.
The premiums that employers and employees collect for income insurance is becoming an irresistible source of money for the government to spend on unwanted programs. The UI fund needs to return to a separate account specifically set up for income insurance. Bill C-12 would propose to legitimize its use by suggesting that insurance premiums are the same as the GST, personal income tax or corporate tax. We feel it is really shameful that Bill C-12 takes badly needed income support from the unemployed for unproven, vaguely defined schemes, suggesting that we need them or that they're useful or justifiable or that we want them.
With regard to wage subsidies, we are staunchly opposed to the wage subsidies from the insurance premiums. The legitimately operating employers who pay market-value wages would find themselves competing with employers who use UI-subsidized workers. Government can't pick and choose which employers should be subsidized. The only answer is that wages should not be subsidized.
Self-employment, in our opinion, is another market-distorting spending tool. This form of assistance distorts labour markets by providing funds to encourage employees to take contract or piece work where no UI, no worker's compensation and very little taxes are paid. It's also a perfect tool to promote the underground economy. And for those who would suggest that it is strongly used, I have no doubt about it because it is the easiest way to get money from the UI fund. There are line-ups of people who say they'll hang out their shingles, just give them a year's UI with no questions asked. Across the country, there are people everywhere who are asking. Certainly there are some who have done some good things, but the number of people who would gladly call themselves self-employed is not hard to justify.
I have brief comments on the skills and grants to individuals. It's very hard to talk about what they would do because they're all subject to agreements with the provinces. The loans, I suppose, might in some cases be appropriate in university education, but they're certainly not appropriate for training or upgrading.
There is some indication that the job creation partnerships have been successful, but I guess basically we're opposed to using UI money intended for income insurance for these other types of programs.
I'll just finish with the transitional jobs fund. Obviously there is some merit in that, but we feel it is something that ought to be out of CRF, not out of the UI fund.
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To close, we feel that the bill is really waging a war on the unemployed. I must say that I was taken aback yesterday when I was here to hear the minister speak, suggesting what in my view is a further attack on the unemployed, suggesting that they are the problem and should be penalized further.
There is a huge difference in how one would say what use is and what abuse is on the effect of the system. To me the system has been designed and if people use it, they're not abusing it. If it needs to be changed then change it, but don't blame the people for doing what is in front of them to be able to do. To say that people are frauds and are subject to criminal charges... There may be some, but I'm damned sure I don't think there are 120,000. There is something drastically wrong with saying this many people are fraudulently using the fund. They may, in some people's judgment, be using it, or in their judgment be misusing it, but there is a big difference in saying they are fraudulently using it.
Chairman, I would stop with that. Maybe I've gone on too long.
The Chairman: Thank you very much for your presentation.
We will move to the question and answer session. Madame Lalonde, followed by Mr. Johnston.
[Translation]
Mrs. Lalonde: Thank you very much for your passionate, well- documented presentation.
If we were to remove all the points with which you disagree, there would not be much left of the bill.
In my opinion, you highlighted an important issue that I had not noticed before. You illustrated it with the story about the Australians who came here. I think the government should be very mindful of that.
At first glance, changing from weeks to hours seemed like a good step. However, the more we study it, the more we realize that it hides some unexpected problems.
In the trades and in the manufacturing sector generally, workers generally try to get the job done quickly.
In construction particularly, many workers will be squeezed out of the UI system. You are saying that the government should be careful. Workers are competent, but we must not put them in a situation whereby they will be deprived of benefits if they do their work quickly, as they should and as they would like to. I would like you to talk more about that, because I see it as a macro-economic consideration. This is an important factor relating to productivity.
I would also like you to say more about apprentices. You said they would be very threatened by the proposed system. Finally, you say the entire apprenticeship system will be put in jeopardy.
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[English]
Mr. McCambly: First of all, I mentioned that we believe the system should be evergreen. It should be tailored such that the person is comfortable in the system and does not feel penalized, and such that it is supportive of the person taking whatever work they can get within their experience or ability. I suspect everybody should be looking for that. What that means is we have to get our heads away from making a system that's comfortable to manage and get something that is designed such that persons feel they can work within it and such that they're not penalized.
I can tell you there are hundreds and thousands of people who start to look and think, ``Why should I take this job? I've started my claim. If I take the job my claim keeps running and my time is gone. I might as well use up the claim.'' Anybody would say that's stupid. But it's convenient for the system.
The whole transition, the kinds of things governments and everybody else are trying to grapple with, the change in the economy to short-term jobs - this is not easy. We have worked in every place and every way we can to try to ensure that productivity is high, quality of work is high, skills are high, upgrading continues, technology improvement of workers continues. You have to stay with that. In some industries we're falling behind.
Without being critical of our UI system... It's one of the best. You have an opportunity, we have an opportunity, to tailor this system in a way that will serve us very well. But I think you have to remember who the customer is. I believe it's the worker and the employers who are paying the premium. They are primarily the customers. It's not the bureaucracy. It's not some other objective. I'm not saying there don't have to be corrections.
I'll just say about apprenticeship that I think some reasonably minor amendments could serve a lot of purposes right now, first of all in just taking that gap and filling it up for apprentices for their income. Bear in mind that these people give four or five years of their life at very reduced wages. As I pointed out in the brief, in Canada they average close to 25 years old. They are averaging close to 1.5 children per person. They have obligations. So they really can't stand a week, leaving a job to take in-school training.
I think that's easy to correct if you have the will to do it. Just say, okay, that's a change that has to be made. We have to fill that gap.
Funding the training is probably a bigger problem. Whether that should come out of the UI fund or it shouldn't, I don't know. There are differences of opinion. I think it requires some independent study. I would suggest the government ought to be looking to industry and labour to try to get some answers on that, because there are differences of opinion. The UI fund has been used for funding some training. It's a question of whether that's legitimate or it should be continued.
The Chairman: Mr. Boudreau, would you like to add something here?
Mr. Terry D. Boudreau (Secretary Treasurer, Canadian Federation of Labour): Yes. If you don't mind, I'd like to add a comment on the apprenticeship issue, in addition to what our president, Mr. McCambly, had to say.
One of the reasons we're saying the proposals you're making here could go a great distance towards destroying the apprenticeship system, which we all believe is a very important, very valuable workplace-based training system, is that an apprentice - and I came through an apprenticeship myself, so I speak from experience here - must go to school. They don't have a choice of whether or not they will go to school. They have to take that training. So it's not as though they're leaving their job voluntarily. They must go to school.
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So here we have a system whereby we're basically making them go to school and we agree that they have to take that training. It's a combination of the workplace training and the in-school training that makes the apprenticeship system work so well.
The problem is that if you force them to go to school and then cause them to lose two weeks of income support, it's going to make it very difficult for an individual to stay in that system.
I went through my apprenticeship system in Moncton, New Brunswick, which is a fairly inexpensive place to live compared to Toronto. I know that if I had lived in Toronto or Vancouver or any of the more pricey cities in the country, then I would not have been able to do it.
I just bring that to your attention.
Mr. Johnston: In your brief you mention that Bill C-12 would open the floodgates to misuse of the funds. Would you care to expand on that?
Mr. McCambly: I hope it's relatively clear in there.
I guess it starts with the name. If you change the name from unemployment insurance to employment insurance, what is it that we're buying insurance for? It suggests that there are five tools for which we're now going to buy insurance.
Right away there's $800 million to go to that. Next year it could be $1 billion, then $2 billion, then $5 billion, or whatever. I don't know what it would be in the future. But it opens the gates to say that any program that comes along from government that is deemed to be advisable is okay. We say that it is not okay.
I should say that there probably are links to the likes of the UI fund, to social programs. They have to blend somewhere, but I really think the only way in which to test that water is with some representation from premium payers.
We view at least the first three items of the five tools as being market distortion and not something that ought to come from UI and not something that we would support being there.
Mr. Johnston: So you support a fund that is more or less a true insurance fund that would compensate for a temporary job loss.
Mr. McCambly: You have to be a little bit careful when you say ``true insurance'', because you could ask half a dozen people what true insurance is and get half a dozen answers. We support a pooled risk insurance fund in which the money is pooled.
Some people would get more out of it than others. Those who are lucky enough to have a steady, full-time job would be paying more. But that's certainly the kind of insurance fund that we would support, primarily dealing with income support.
Mr. Johnston: Do you foresee any increase in costs if your recommendations are followed?
Mr. McCambly: I think the premiums could be reduced. Bear in mind that we're in a pretty severe unemployment period. Hopefully that can get corrected. I think premiums can be reduced.
When the Tories were in power, they were putting new costs on the fund. We said, one of two things is going to happen: either the fund is going to go bankrupt or you're going to have to increase the premiums. I'll have to check my memory, but I think the premiums were increased by 20% at once and 7% again. Well, the premiums have been substantially increased.
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We're not concerned about paying the premiums if they're used properly and discreetly, let's say. But I think with our recommendations and our considerations premiums would be reduced.
The Chairman: Mrs. Terrana.
Mrs. Terrana (Vancouver East): First of all, let me thank you very much for coming.
I'm intrigued by your proposal that unions and employers should get together to decide on what to do with the funding. But apart from that, I still get very surprised when I hear group after group telling us we have to use this money only for insurance purposes. I would like to say it's always the same person who pays. The taxpayer is the consumer, is the worker, and often is the employer. So it's always the same person who pays.
After what you heard yesterday... You were here when someone asked where this money would come from if we did not use it from the pool that comes from unemployment insurance, or employment insurance, where the money would come from to train these people, to help these people get another job and start them on a new avenue. I'm very surprised in Canada, which has always been such a compassionate country, such an understanding country - we've always tried to help each other - why we should not be able to use this money, some of the money that is paid by the same people all the time - including the bureaucrats, by the way, because they pay premiums too. Why should we not be able to use some of that money for training?
It is not just you who have presented that. Everybody has.
I have a second question. The second question has to do with increasing premiums. I keep hearing we should increase the premium and nobody would complain. Well, I don't agree. There would be a lot of complaints if we had to increase the premium.
So I want to leave you with these two thoughts. Maybe you can give me the rationale for not wanting to use this program to help those people who need it.
The Chairman: Before the witnesses answer that question, Mr. Easter, could you also pose your question?
Mr. Easter (Malpeque): No problem. Thank you, Mr. Chairman.
First of all, President McCambly, welcome. There is a lot of meat in your presentation, and some constructive criticism.
You suggested that yesterday the minister said the unemployed are the problem. I want to be clear that is not what he suggested. But I would ask the chair about the number of fraudulent cases, whether maybe the department could prepare a paper on those numbers so we have them in front of us. The minister said it is somewhere around 120,000. Let's have a look at the numbers and see what they're for, if we could get that from the department.
You're highly critical of the changes. I see this issue from both sides. I don't think there's a more important issue we as a government are going to deal with than this one here. You're right, it is an important system. I come from Atlantic Canada. I'm also an employer. So I see it from both sides.
We have to maintain credibility in the system. I'll tell you the number of people concerned about this system on the employers' side at the moment is unbelievable. We get complaints about how many dollars we spend from Atlantic Canada for the benefit we get out. For your industry, for each $1 you put in it's somewhere around $4 in benefits that gets out. We have to recognize that.
You talked about the changing workforce, and that's what this bill is about. We have to recognize that changing workforce. There are more part-time workers, whether we like it or not. We have to move to the hours system. More people will be accommodated under this system. Because of the pressure we face in incomes, we have to try to use incomes at the upper levels to ensure people in the seasonal industries and in the lower-paying jobs have income during their off-season. That's what this bill tries to meet.
What's your response to that?
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Mr. McCambly: First of all, to go back to the idea of using the fund for payment of financing training, the fund has been used for that. I don't like the notion of loans and grants in terms of training, but I think the question goes back... We objected over the years to using the UI fund for financing training. In our view, what's the difference between taking from general revenue the financing of people going to university, and then saying that you're going to take it from the UI fund for somebody who is going to a technical school? Training is training.
I say that if you want to have a training tax, if this fund is going to be for training, then call a spade a spade. Let's put aside a portion that would be for training and then tax people or create a payroll tax to cover training. But let's not disguise it as something else. There have been different views on whether there should be a payroll tax for training or whether there shouldn't. I think the fact of the matter is that it has been used as a payroll tax for training. So I just say that if this is the case, then let's identify it and make it that in its own right.
I think I covered the matter of premium reduction. I think the premiums can be reduced with the changes we're talking about. I don't really buy the notion, except in the case of very small employers, that higher premiums have a great effect on how many people would be employed if somebody is perhaps paying minimum wage.
With regard to credibility or the amount of... Atlantic Canada is one thing, and I know there are changes. I guess if there are problems with the way in which people are currently using the fund because of the way the fund is designed, then look at changes. I know that in Atlantic Canada some people say there are changes needed. There's no doubt that it's not serving the purpose that they'd like to see it serve, so I say change the rules. Let's not start saying we're going to penalize people because of what has happened. Let's decide what interests it should serve, and then we can debate that and deal with it from there.
When you talk about experience rating - construction workers taking out $4 for every $1 they put in - I've always said that if you show me 10 or 100,000 full-time jobs, I'll get you 100,000 construction workers who will take them and pay the rate, because it's not easy to create and maintain people in the construction industry. I like construction myself - and I think others do - but it's not the best job in the world. You go out when it's fifty below zero or twenty below and the wind is blowing. You think it's a nice job? It's not that great. So there is a need, I say, to recognize that some people are going to get more out than others. It's a fact of life. Don't penalize them for it; you've got to get the right balance.
The Chairman: Is that your answer?
Mr. McCambly: Did I answer that? Did I complete your -
A voice: yes.
The Chairman: Mr. Easter, that was your final question.
Mr. McCambly: I can only remember about two questions at once.
The Chairman: That's okay. We can only remember two answers.
On behalf of the committee, I'd like to thank you for your thoughtful presentation. You've certainly provided us with an important perspective on Bill C-12. We're going to of course amalgamate all the different points of view to come up with something that is going to please as many people as possible, or at least develop a common ground of agreement so that everyone can feel comfortable.
It's been an interesting experience listening to your presentation, and on behalf of the committee I'd like to thank not only you but also your membership, which I'm sure was part and parcel of preparing the brief.
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Mr. McCambly: I thank you too.
I just want to say that a great onus is on your committee, because you are the last to review this, with a commitment to have it implemented by July 1. The changes you might be able to make are very important. A lot of people are looking to you and depending on some significant change that might make it better for them.
The Chairman: We'll do our best.
By the way, a construction job is not such a bad job. I worked there and it wasn't so bad.
Mr. McCambly: Oh, I know. I like it too.
The Chairman: Take care.
The next presentation will be from the National Automobile, Aerospace, Transportation and General Workers Union of Canada, Canadian Auto Workers-Canada.
Welcome. As you know, we're trying to improve Bill C-12. We're looking to Canadians and organizations such as yours to give us some input on ways and means by which we can improve Bill C-12.
You understand the committee process, I'm sure. You are going to make a presentation and give us the highlights of your presentation. Then we'll have a question and answer session.
You may begin.
Mr. Sym Gill (Director, Pensions and Benefits, National Automobile, Aerospace, Transportation and General Workers Union of Canada (Canadian Auto Workers-Canada)): Thank you, and good morning.
My name is Sym Gill and I'm the director of pension and benefits for the CAW. With me this morning is Laurell Ritchie, who is a national staff representative and who works in our work organization and training department. We also have Dave Tremblay, who is the vice-president of our Local 707 at the Oakville Ford plant and is also the co-chair of the unemployment insurance committee of our CAW council. That committee has had a large role in putting forth the contents of our presentation.
I obviously don't intend to read the entire presentation. I do want to read a couple of pages. Then we're going to move into highlighting various sections of our presentation in relation to the bill.
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We are the country's largest private sector union, representing some 205,000 workers from British Columbia to Newfoundland, north to the territories. The membership includes those working in a very wide variety of sectors, including auto assembly, auto parts, airlines, railways, mining, aerospace, fisheries, electronics, hospitality, telecommunications, and other manufacturing and service industries. Needless to say, we have a great deal of experience in UI issues in all those sectors.
These members are also participants in the unemployment insurance system. Many have had to claim benefits when they've been placed on temporary or permanent lay-off.
Sometimes lay-offs are occasioned by workplace- or sector-specific circumstances, such as seasonal lows. At other times they're occasioned by economic policies at the regional or national level, with the free trade agreement and NAFTA being the most devastating examples.
Some of our members have also turned to UI for parental or sick leave benefits.
The vital importance of this social insurance program to the working people within our union is recognized by the rank-and-file-led UI committee within the parliament of our union, the CAW council.
We appreciate the opportunity to be here today to make our presentation and to have some direct engagement with members of the standing committee. It's an opportunity that we believe should be extended to all who wish to address the very serious consequences of the bill. Our understanding is that some very significant organizations still have not been able to establish the opportunity to present their views to the committee, including an allied union of ours, the Fishermen, Food and Allied Workers, as well as other national organizations.
We have previously expressed our strong objections to the refusal to travel outside of Ottawa for hearings and to require those making presentations from selected regions to do so via video-conferencing, denying many Canadians the opportunity for a more direct, less restrictive exchange.
We urge you to withstand the considerable cabinet pressure to rush the examination of Bill C-12. The process must be an accessible and democratic one. Everyone who wants to speak should be heard.
The enormity of the decisions you are charged with and the scope of change suggested by this omnibus bill cannot be overemphasized.
For over 50 years our UI social insurance program has played a critical role in the economic stability of our country. Before its introduction there was the Great Depression of the 1930s, a haunting reminder of the terrible consequences for the larger economy when the unemployed fall into abject poverty.
At a time of growth of joblessness, we need the security of a strong UI system more than ever. As a society, we spend far too much time in worrying about stability for the money markets and not nearly enough in worrying about stability for Canadian workers and their families.
We believe the government is courting economic disaster with its ill-thought-out Bill C-12 and cuts of at least $2 billion.
The proposed legislation seems all the more puzzling with a cumulative UI account surplus in excess of $5 billion for this year.
The changes would be profound, making Canada's UI system unrecognizable in a few short years. This would not be a case of restructuring Canada's legislation to conform better with our needs and realities. Rather, it would be about subordinating our programs to prescriptions developed elsewhere, notably by OECD bureaucrats.
If indeed this government wishes to modernize UI and develop a 21st century employment system, as its promotional guide states, why would it not liberalize the rules and entitlements in keeping with the realities of the modern-day labour market and get on with genuine job creation, which is the real task in front of us?
Instead, it appears as if the government is intent upon tightening the screws and punishing people for taking the only kinds of jobs this economy is creating at present.
On the insurance side, the legislation provides for tougher qualifying rules, shorter claim periods, and lower benefit levels. On the so-called employment benefits side, for those who no longer qualify for insurance benefits, there are to be low-wage tools like subsidies and supplements and repayable training loans for workers willing to mortgage their future. None of this creates net new jobs growth or changes current trends such as part-time and precarious employment.
We fail to find any rationale for the proposals. We must assume that the explanation lies in the federal government's obsession with deficit and devolution strategies. We are deeply concerned that the government is preparing to sacrifice our UI system on the altar of these deficits and devolution at our collective peril.
I want to turn to highlighting some of the other issues in our brief.
One of the things we have to deal with is the question of optics, of appearance. It seems to us to be very ironic that the UI account is currently generating a multi-billion dollar surplus, even as it becomes a favourite cutback target of federal governments. And I'm not talking about just the current government.
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Consistently, we're developing a very large surplus. When Mr. Martin tabled his March 1996 budget the projected $6.4 billion had been cut somewhat, but it's been revised down to a $5 billion surplus because of the drop in revenues arising out of the previous premium cuts. Predictably, employer lobby groups want premiums reduced again. Also predictably, it appears to us, the federal government wants to hold a surplus in the account for what we consider to be deficit optics.
It is our view that the surplus accumulated largely as a result of slashing entitlements to unemployed workers must now be used to restore those entitlements. A substantial reserve for the next recession should take second priority. I should point out that the recession for unemployed workers is here and now. It is not in the future.
On the issue of devolution, and especially in relation to the employment benefit sides, we believe what that will entail is shaping a Canadian UI system that will be much like the one in the U.S., a system that will have disastrous results for the unemployed. Block funding to the provinces in terms of unemployment benefits, without national standards, is rife with danger, as we believe it is in other areas, such as health and education. Lost in the significance of the $7 billion cut that is already on the books for health, education, and social welfare transfers for the provinces and the collapse of the Canada Assistance Plan is the fact that the provinces are now prepared to take dollars from wherever they can get them, including UI, for some pick-up on provincial welfare costs and some of their other costs.
We don't have to look very far to see what happens when you devolve a system like UI to subordinate governments, or governments not at the national level. If you look at the U.S., and study after study has shown this, there's a widening disparity in UI coverage, caused by virtually unlimited state control over UI program design. In 1994 the UI recipiency rates among the officially unemployed ran from some 64% in Rhode Island to just 18% in South Dakota.
Left to their own devices, and without a sharing of the risk of unemployment country-wide, there is a perverse result. The poorest states, with the highest rates of unemployment, are the least able to provide UI benefits. In Louisiana only 19% of the employed receive UI. In fully 29 states, less than one-third of participants receive any unemployment insurance.
We believe there is a real crisis, but the real crisis issues are as follows. As a result of slashed benefit entitlements only 46% of the officially unemployed are in receipt of benefits. This is an all-time low. In Ontario that level has dropped to 32%.
I'm not sure we understand the significance of that. To that end we've put together a graph, which is on page 7 of our presentation. We invite you to look at that graph. It shows the number of unemployed who actually received UI benefits in a given year. If we look back to just 1989, just a few short years ago, 87% of those who were unemployed qualified for and received some UI benefits. As you can see from this graph, there's been a precipitous decline, so we're now down to 46%. Less than half the people who are unemployed actually have an entitlement to unemployment insurance. As I mentioned, it's even worse in our most populous province, Ontario, where that rate is now down to 32%.
The real crisis, we believe, is the high national unemployment rate we have. More than 1.5 million jobless Canadians are actively seeking work, up from the previous year's 1.514 million. Furthermore, the jobs that are being created, to the extent that they are, are of an increasingly precarious nature. They're either short-term or part-time jobs. The statistics we've seen show that for 1995 there was net new job growth of 88,000, but of those over 90% were less than full-time; 90% were part-time jobs. A recent Statistics Canada report has confirmed that more than one-third of the workforce is in non-standard jobs with non-standard hours.
We want to register our concern about what has happened with benefits. The impact of cutbacks in recent years has been repeatedly and seriously underestimated by the federal bureaucracy, giving us no warning of what we call the current crisis in beneficiary rates. The majority of the unemployed no longer receive UI. This is the Americanization of our system that we warned of just a few years ago during the free trade debate. A populace province like Ontario with only 32% of its officially unemployed receiving UI in January is now worse off than many impoverished American states.
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We believe the real issue is unemployment and underemployment, and we believe our attention is being diverted from this real crisis. It's a crisis that cries out for the creation of decent jobs for those who want to work. We have a recovery that is a jobless recovery, and it continues even in the face of record profits being earned by various sectors in our economy.
The banks, with $5.2 billion in profits last year, are embarking on another round of lay-offs. The federal government itself is engaged in a massive reduction of its own workforce and offloading onto the provinces and municipalities, in terms of cuts to transfer payments, which will result in even further lay-offs as we have all witnessed in recent months.
We see the consequences of this, and we see this in our workplace as represented by the CAW. In companies like Alcatel, McDonnell Douglas, Northern Telecom, CN, CP, Marine Atlantic ferry... These are just some of the recent examples of firms that are in high-tech, high value-added sectors of our economy that have been shedding workers and downsizing. That's just to emphasize the fact that to the extent we're having any kind of recovery, it is really a jobless recovery.
I'd like to turn to the insurance benefits themselves and just make a few comments on them. First of all, on the duration of benefits, it seems to us that this is a time when long-term unemployment is increasing worldwide as a result of economic restructuring and technological change. The average length of unemployment in this country has more than doubled from 12.3 weeks in 1980 to 25.6 weeks in April 1995. That's from a Conference Board study.
At the same time as that is happening, we're talking about cutting the duration of benefits. We're moving in the opposite direction to the reality that unemployed workers are facing. There is no reasonable justification for slashing the maximum entitlement under this bill to 45 weeks, and that's going to affect an estimated 300,000 unemployed workers who live in the poorest regions of our country. We will comment on the effect the hours system will have on this in a few moments.
We'd like to deal with the issue of benefit levels. The first point I would like to make is that there's been a continuous reduction of benefit levels, at least since 1979. That has had no impact on the high unemployment rates we've had. We have had our experiment of cutting benefits as an inducement, thinking that they're somehow too generous, and thinking that will get people to accept jobs and go back to work. That's a strategy that hasn't worked. We've had a cut in benefits for a continuous period of time, and it has not led to a drop in unemployment.
We now have a new set of reductions in benefits, and basically we view, much as the previous speakers did if we understood them correctly, that this is part of a process, intended or not, that attacks the victims. It goes after frequent users, in terms of the intensity rule, it goes after those who are laid off and happen to have incomes that are above a certain norm in terms of the clawback - the initial clawback and what we call the super clawback. These are all items that attack the victims. They penalize those who have been victimized.
Again, to remind you, workers do not make decisions to be laid off. Employers make decisions about hiring, firing, and laying off. Workers are the innocent victims in the vast majority of cases in which they end up being unemployed. What we're doing with this bill is actually penalizing those who have been subjected to lay-offs. Nowhere is the ``blame the victim'' attitude clearer in its impact in this legislation than on seasonal workers. Seasonal industries are vitally important to the Canadian economy, both for our gross domestic product and for direct and spin-off job creation. The government's own task force on this subject stressed this point. We would refer you to the Fishermen, Food and Allied Workers brief, which hopefully you will hear, for a much more detailed analysis of the impact of these measures on seasonal work, especially in the east coast fishery.
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I'll now deal with the intensity rule. Again, this is only one of the penalties for seasonal workers and other frequent users, and it ignores the reality that it is employers who make the decisions to lay off or to offer work.
On the calculation of benefits, the fixed-calendar calculation for determining benefits is going to be a serious problem in seasonal industries both when they're out of season and when they're in season, because it fails to recognize the up-and-down nature of many of these industries and the lack of consistent earnings even within a seasonal industry; and it penalizes workers for that inconsistency of earnings. One week you may earn $50, $60, or no dollars. The next week you may earn $300, $400, or $500.
This fixed-calendar calculation of benefits is also a problem in other industries with high and low seasons that affect employment levels. That's true whether it's auto parts plants, airline reservation departments, or a variety of other groups.
During a slow season it's not uncommon to have reduced work weeks, and even sporadic full weeks, of lay-offs, which often can turn into major lay-offs. On page 12 we provide you with an example of what happens at VIA Rail, one of our rail units. I won't go into it, but it's an example that shows you there may be very perverse and unintended consequences from the legislation in terms of behaviour of workers.
Under the VIA Rail system, when there are slow periods for the off-train staff, they are frequently able to move to part-time work instead of full-time work. But under this legislation, if that part-time work may result...or where there is a more serious slowdown or more lay-offs...and because they've moved to part-time work that will reduce their UI entitlement, they will be very reluctant to do so. What is going to happen is that the workers who have in the past have moved to reduce work as a voluntary form of work-sharing will be reluctant to do so and we'll end up with very perverse results.
We want to deal with the clawback issue. Again, we think the clawbacks ignore the purpose of premium-funded UI, social insurance stabilization, which we believe is the stabilization of workers' earnings for the benefit of the individual and the larger economy. UI is not a minimum-income program. It serves a quite different purpose.
We reject the clawback that deems $39,000 or $49,000 is excessive earnings and the reinforcement that gives to a cheap-labour agenda. It is curious that the same logic is not applied in the form of any clawback on the banks' and other lenders' excessive earnings for the public debt.
We reject the suggestion that unstable employment is a fault of the individual rather than of job markets, as the frequent user penalty seems to imply. We also reject the erosion of the entitlement model with the turn to means-testing UI, as is done with welfare. We reject that outright.
About maximum insurable earnings and the change that is being proposed, we recognize there are savings to workers who are earning at or above the maximum insurable earnings. But the price for these savings, we believe, is much too high. The price includes an immediate decline in maximum benefits, from $465, which it is now, until the legislation gets implemented, to only $413. That will affect about one in four claimants; 25% of claimants will be affected by that reduction.
Of course we all recognize that with the freezing of the insurable earnings there will be a creeping decline in the value of UI benefits. With the freeze until the year 2000, and if we assume a moderate increase in wages of 2%... Without that freeze, by the year 2000 benefits would be about $493. Instead, they will continue to be $413. That is part of the price workers will pay for the measly amount of savings in current premiums.
The price also includes significant new costs for many employers and workers, especially in cases where supplementary unemployment benefit plans have been set up. In many of those plans the formula is to provide a top-up to UI based on a percentage of pay. Once you reduce the UI portion, the impact in terms of cost to employers and workers is immediate. The duration of UI benefits and the frequent-user penalties will also add to these costs.
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This shift of adjustment costs to the private sector not only will hurt the employers and workers who provide the best adjustment programs but also will exacerbate collective bargaining, because it will result in it fighting over a much smaller pie, because these additional costs have to be absorbed.
We'd like to turn to the hours system and to provide you with our comments on that.
Part of what's been lost in the discussion we've heard on this issue is that over three-quarters of Canada's part-time workers already participate in the UI insurance system.
In the bill, the government seems to suggest that a new hours system must apply to everyone in order to give coverage to the small minority of part-time workers with less than 15 hours weekly. We believe that this extended coverage for a minority of part-timers is really a smokescreen for the introduction of harsh new conditions for the majority of part-timers who already participate in the UI system, as well as many full-time workers working less than 35 hours.
Anyone who's working 15 to 34 hours will be worse off with the proposed hour system, including full-timers with reduced work-weeks. This runs counter to everything we know about the job market of the 1990s.
I'll give you one example: part-time jobs that are scheduled for 24 hours weekly. If we look at Vancouver, Toronto, and Halifax, where the regional unemployment rate is in the 8% to 9% category, these workers will need 25 weeks of work to quality for UI, instead of the current 17 weeks. As a result, more of these workers will be ineligible for UI. How does the hours system help these part-time workers?
For those who do have the requisite 25 weeks before lay-off, entitlements will be reduced. With 25 weeks of this 24-hour job, benefits will run out a month earlier than under current conditions. How does the hours system that causes this result help these part-time workers?
We note that women are 69% of part-timers, those who work 30 hours or less. This hours system is even worse if such workers are applying for pregnancy, parental, or sick benefits. Again, it is worse for new entrants or re-entrants.
I will draw your attention to the chart we have prepared on page 16, just to provide you with the examples. What we show are the current situation and what is proposed under the government legislation. We show the results on the right-hand side.
Those who are working 15 hours weekly will need, depending on the unemployment rate, between 28 and 47 weeks of work, which is more than double the current requirement. We've already indicated that if you're working 24 hours weekly, you'll need 1.5 times the current requirement.
For those who are applying for sickness, pregnancy, or parental benefits, those with 15 hours will now need 47 weeks of work instead of the current 20. Again we ask, how does the extension of the hours system help these part-timers by imposing these very severe penalties on them?
I'll leave these charts for you to look at and to come back to, if you so wish.
At this point I'll ask Laurell Ritchie to highlight our concerns about the part II issues in terms of the employment benefits sides of the legislation.
Ms Laurell Ritchie (National Representative, Work Organization and Training, National Automobile, Aerospace, Transportation and General Workers Union of Canada (Canadian Auto Workers-Canada)) : The employment benefits side is what we might call the sleeper in the proposed legislation, just as the hours system is the sleeper in part I, the insurance side. If we have seen the future, this would appear to be it, because over time the government seems intent on beefing up this part of it. It is a little-understood piece of the government's proposal. Even where it is understood to be an important piece, some of the consequences have not been fully understood.
We know that very crucial negotiations are going on behind closed doors right now with all of the provinces. To some extent, this is the real activity that's happening around Bill C-12.
With the multi-billion-dollar UI surplus, on which we and others have consistently focused, we have a situation where there is what we call a UI cookie jar that the government is now dipping into for programs previously funded by the consolidated revenue fund. First it started to go in for training - courses and so on. Now there's the suggestion that modest child care - I think child care advocates would say it's not real child care, it's babysitting pin money; but that aside - using those funds for that purpose, and even potentially some of the provincial programs that are called ``trainfare'', and some verging even on workfare, under these agreements may well end up being funded out of UI, in part. Of course this is happening as these programs are abandoned by the federal government and as it moves away from CAP funding and the kind of national standards that are possible through those vehicles.
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I'm going to make one passing reference here to a couple of sessions I have sat in on with HRDC officials. In each instance when the question has been put, what happens here with these five benefits, these three measures under the employment benefits side... If a local board, for example, were to say - this is an exaggerated example - we want to use all those funds for employment earning supplements or wage subsidies, and we're going to give them all to people who have been on social assistance for three to four years now, the response is always ``We would hope they wouldn't do this, because we don't think it makes political sense, but theoretically, yes, that's what could happen here''. This, I suppose, is the clearest example of where we start to have some real problems with how UI funds intended for income maintenance seem to be deemed a cookie jar.
Really, three features are happening here: the shift of the costs of retraining onto those who have lost their jobs - that is, the purchase of community college and other publicly available programs is coming off the table and people, either in the form of grants or in the form of loans, having to pay for their own training now; now more than ever employers would be able to draw on the UI account for programs - I'm thinking here of wage subsidies in particular, which used to be paid out as benefits to the unemployed worker - and finally, it is really fuelling the drive to a privatized and commercialized training and education system. We are elaborating here on 5 benefits and 3 measures, but basically this replaces 39 federal training programs, reduces them to these 5 tools and 3 measures, and the $2.7 billion funding would not be coming from government coffers under this legislation, of course, but from the UI account.
With the skills loans and grants program we have a serious problem, because what the government wants to do is cut insurance benefits, which are an entitlement program, and redirect the money to the benefits and measures side, offering it up, as we said, in the form of loans.
On the self-employment side of this, the message is that people are somehow to create their own jobs, but of course having become self-employed they are no longer eligible under the UI system and become insecure entrepreneurs.
The targeted earning supplements are quite explicitly described as a supplement designed to lower workers' expectations and acclimatize them to lower wages. We give a citation from one of the background documents, a cabinet document, where a worker in the forest industry, in this example, is given a supplement:
- ...of a few thousand dollars for a year or so, providing the needed incentive to accept a
lower-paid job and help the worker adjust financially and psychologically to the new situation.
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We make further comments here on the wage subsidy issue. We do see this as nothing more than part of the low-wage agenda. It certainly has nothing to do with job creation. It merely influences who will be hired, not whether additional hiring will take place.
As others have already mentioned in earlier presentations, with the redefinition of clients covered by these programs, we will in fact have essentially a dumping of a lot of people in this narrowing pool of federal clients onto provincial programs. Among these are included women, youth and recently arrived immigrants.
The final piece that we want to cover at this point is the privatization of training. In the discussions, there seems to be the understanding that this means the programs will be operated by the provinces. But if you look carefully at the wording of the proposed legislation, what we are looking at in many instances is the possibility that this will be going to the private sector. We could well end up with a situation in which the example that we use, XYZ Training Inc. or XYZ Manufacturing Inc., is able to access dollars that previously - and this is not a use that we have been all that comfortable with - went to the colleges on a purchase basis, and that helped to support our very important, publicly funded education infrastructure, one of the things we have been renowned for and that is much admired around the world. Instead, we will be moving in this direction, one that we find reprehensible.
Mr. Gill: I know you want to get to questions, but we just want to make a couple more points, one of which is related to financing, because we know it is an important area of your deliberations. It certainly has received a lot of attention.
In terms of the premiums and payroll taxes, what we would like to emphasize first of all is that Statistics Canada - I'm sure you've seen the new study of payroll taxes, which include premiums for UI social insurance - found that Canada's payroll taxes are the lowest of the G-7 countries, including the U.S. Employers already pay relatively low social security taxes and others. We think it is absurd to suggest that job creation is going to be the end of result of premium reductions in response to the outcry that payroll taxes are too high. We don't believe they are.
Even the OECD has not found any systematic link between the level of payroll taxes and labour market performance. You can find this in your own background studies that HRD has put together. It is clear that there is no link between those two factors. A premium reduction is quite simply a giveaway to the corporate lobby organizations who gain the most from any such reductions.
Finally, we want to just emphasize what we think is sometimes an overlooked aspect of the UI system: its function as an economic stabilizer. In fact, again quoting from HRD publications, the study that was done in May 1995 demonstrated two things: the need for the UI account stabilization through counter-cyclical measures with respect to premium rates; and above all, the critical role of UI as an economic stabilizer. Stabilization evens out the economic impacts of capitalism's business cycles of boom and bust. This is one of the fundamental purposes of UI, and it always has been if you go back to the creation of UI almost sixty years ago.
One of the fundamental purposes is to protect the health of the larger economy during recessions by maintaining dollars flowing within the economy. In other words, a strong UI system is not just about protecting individuals and their families. Again, the HRD study concludes that the UI system, in comparison to other automatic measures, is the single most powerful automatic stabilizer. The major conclusion is that it acted as a powerful and important automatic stabilizer for the Canadian economy in the two most recent recessions.
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In fact, in the recession of the early 1980s, the existence of UI at the level it was at reduced losses to the economy in terms of gross domestic product by between 13% and 14% and, again significantly as well, in the recession of the early 1990s.
Those who would shred the safety net of unemployment insurance entitlements for the jobless may be too smart by half. The push for cheaper labour requires keeping everyone off balance, terrified, and uncertain about whether they will have a job tomorrow and the money for food and mortgage or rent payments if they don't.
In the short term, that may well mean more people desperate to do whatever their employers insist upon, but they will grow resentful and angry, and this instability, this uncertainty has another effect. People become reluctant to make purchases, and investors are reluctant to put more money into productive ventures. The combined effect may very well lead to the possibility that the economy will grind to a halt.
Of course, we've seen in recent media discussions the lack of consumer confidence or the lack of the role of consumers in spending as leading to a continuation of stagnation, and we suggest that this will be even worse if the contents of this bill are carried out.
We therefore call for the withdrawal of Bill C-12. We call for the surplus to be used to begin the process of restoring entitlements. We are calling for the true universal access to UI for those with jobs of under 15 hours weekly and not a cumulative hours system.
We also recommend that this committee take the opportunity to hear testimony from the Center on Budget and Policy Priorities in Washington, a group that has a great deal of experience in studying the UI system in the States and the effects of devolution and cutbacks there. We think you would profit enormously by hearing its testimony.
We are also calling for hearings in respect of Bill C-12, the companion bill to Bill C-111. We're not sure whether that's on the table in terms of legislation for this committee, but in terms of the discussion of it, it should certainly take place.
We are calling for a job strategy, a genuine Canadian job strategy. The problem is jobs - decent jobs - not UI. That is a message we think the government should take to the G-7 job summit in France next month.
Job creation, we believe, is not going to come from UI cutbacks, it is not going to come from employment benefit tools like wage subsidies and earning supplements, and it is not going to come from UI premium reductions. We need to get on with practical job creation measures such as making use of the leverage the government has with the Bank of Canada to keep interest rates low. We have to examine much more seriously the various proposals for a reduced work time such as paid training leave, affordable early retirement, and the reduction of excessive overtime.
We will be pleased to answer any questions that members of the committee might have.
The Chairman: That was a very thorough presentation, and in it we find many answers to our questions. But we'll move to Madame Lalonde and then Mr. McCormick.
[Translation]
Mrs. Lalonde: Thank you very much for your brief which was both well documented and extremely well presented. You made one comment which I think reflects the underlying idea of this whole reform proposal. You spoke about a cheap labour agenda.
The rationale for the reform does not lie in the need to make cuts. There is no need to make cuts, because the government itself decided to forego $900 million a year, by reducing the maximum insurable earnings, which formerly were $42,439. The government decided it was necessary to cut back benefits.
So the focus is on a cheap labour agenda. You are quite right to say that this is a dramatic change that will have socio-economic impacts that will be visible not in the next three months, but gradually, over the years. I don't know whether you can make your message heard loudly enough for the government not to go ahead with its reform.
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I'm struck by the fact that rather than making UI a program accessible to all wage earners, the maximum insurable earnings are being reduced and unemployment insurance is being made into a pool. However, there are fewer people in the pool. The government should have tried rather to broaden the pool. I would like you to tell us more about one particular point. You were the first group to have mentioned it. You say:
[English]
- penalizing those with above-average incomes.
As I said before, the government chose not to get UI premiums from capital intensive businesses, while SMEs have to pay all their premiums. This amounts to a $500 million gift to these capital intensive businesses. Now the government is penalizing workers with higher earnings, because they will be inclined not to use the system.
[English]
Mr. Gill: I certainly don't disagree with what you've said.
We've talked about the cheap labour agenda because it appears to us that this will be the end-result of these measures. In the past we have heard the minister refer to the current system as being too generous. He has said that it provides too-generous benefits. We have seen no evidence whatsoever of that. The studies that have been done by Statistics Canada have shown no relationship between the so-called generosity of UI benefits and the length of unemployment.
Believe me, when I tell you we talked about representing 2,500 workers, the vast majority of those workers strongly prefer to have full-time, steady jobs. They do not want to exist on unemployment insurance. In many parts of this country the level of benefit, which has been dropping, is simply not enough to exist on. It's not enough to maintain a family. It's certainly not enough to maintain a decent standard of living. Workers want to maintain decent standards of living. They don't willingly go into unemployment and suffer the consequences of that.
The other part we should emphasize has started in recent years but it is certainly emphasized much more in this bill. It is the transfer, the use, of insurance funds for other purposes where the federal government has now withdrawn. That is withdrawing funding for vast portions of training and the responsibility for those sorts of programs and instead using insurance moneys for them.
Perhaps that is part of the reason for the introduction of the bill.
It is certainly not because there is a crisis in unemployment insurance. The existence of the surplus and the potential for a huge continuing surplus in future years, which the government itself has admitted is there, tell us that there is not a crisis in unemployment insurance.
[Translation]
Mrs. Lalonde: Where you work, would employees be prepared to pay premiums on all of their earnings, including overtime, if they were told that this was necessary?
[English]
Mr. Gill: That is a complex issue, but I can tell you that many of our workers, including those who until recently have been been in full-time, steady jobs, are insecure. The major issue in collective bargaining is job security.
Our members see unemployment insurance as being an insurance system. They see it as a pooling of risks across the country and a pooling of resources across the country against the chance that they will be unemployed. They have not complained in the past about UI premiums, and I don't think they would complain in the future if premiums had to go up.
The point is that before the cut premiums did not have to rise. It was a question of a very substantial surplus being available.
If premiums do have to be increased incrementally from time to time, I don't think our members will object, because they understand what the UI system is supposed to do.
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The Chairman: Mr. McCormick.
Mr. McCormick: Thank you very much for your presentations.
I'm having a little difficulty with some of what you're saying, of course. I would like to see everyone have a full-time job, and I believe most people would like to have that available. I don't think we're going to have everyone working just with your unions or whomever tomorrow. It would be wonderful if they had these jobs where they could qualify, but we have to address the situations of many other people in Canada. I'm hoping you're going to support this too. I would hate to live in a country where you care only for yourselves and don't care for others.
You start off your presentation by saying we spend too much time worrying about what the money traders say. Yes, I read your president's message to the world last week, when he said how important low interest rates are, as you would say. We can't always have our cake and eat it.
As to the fact that most new jobs are not going into union situations, I'm sorry, again, that they aren't. Perhaps if we can get our economy going more they will. But you don't seem to recognize or support the fact that most jobs are being created today by small business. For these small businesses - and I come from that category - the premium rate does make a difference. Part II has made a difference for small business, and does make a difference in people's lives.
You're talking here, as you wrap up, about how very important the unemployment insurance program is. Correct, it's a vitally important economic stabilizer. We're building up a surplus. The minister said yesterday we haven't agreed yet whether the surplus will stop at $5 billion, $8 billion, or $10 billion. That's not very far down the road. But as you know, the last time we went from a small surplus to a $6 billion deficit in the UI, it did create havoc.
So for the people you say wouldn't mind paying higher premiums, that's fine, if they're working. But I wonder whether you'd want to comment for all the people who aren't working, the people who have left your union, who have fallen through the cracks, and who are not listed on your chart as receiving UI benefits. Do we not have to work together to help those people?
Mr. Gill: First of all, if we gave the impression that we are talking only about union members, we're not. Our concern is, for example, about part-timers, and we applaud the initiative to try to include more part-timers. What we're trying to point out is that the method that's being used to help those with less than fifteen hours weekly is going to punish many other part-timers, many of whom are not members of our union, or members of any union. That's simply the point we wanted to make there. And we certainly were not suggesting that job creation should be focused only on creating jobs in unionized sectors. That certainly was not what we were saying or what we intend.
We're not calling for higher premiums. We're responding to a situation in which a government has seen fit to lower premiums to provide some small savings to certain sectors of the economy and to certain income-earners, but at what we think is an enormous price. If the quid pro quo for reducing those premiums and providing those small savings is reducing benefits to $413 this year, when they should be $465, that is a huge cut in the benefits to people who are unemployed. And if freezing those benefits to the year 2000 is part of the rationale for the savings on premiums, we simply don't buy it. We simply don't agree that is a rational trade-off for individual workers at any level, nor for the economy as a whole.
The Chairman: Thank you very much for your presentation. It was a presentation that covered many angles, and it gave us at least a greater insight into your perspective on Bill C-12. You can rest assured that your points have been duly noted by our committee. We hope the bill that will be reported to the House of Commons will be much improved from the one we have in front of us now.
The meeting is adjourned.