EVIDENCE

[Recorded by Electronic Apparatus]

Monday, April 15, 1996

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[English]

The Chairman: Order, please.

We are going to go via video-teleconferencing to Vancouver, B.C., for three presentations: first, the Affiliation of Multicultural Societies and Service Agencies of British Columbia, followed by the Fraser Institute, and then the Business Council of British Columbia. Then we will go through video-teleconferencing from Toronto, Ontario.

We have a witness, Holly Whittleton, executive director of the Affiliation of Multicultural Societies and Service Agencies of British Columbia.

Welcome. We look forward to your comments related to Bill C-12, an act respecting employment insurance in Canada.

I would also kindly ask you to introduce the individuals who are with you.

Ms Holly Whittleton (Board Member, Affiliation of Multicultural Societies and Service Agencies of British Columbia): Thank you very much for the opportunity to attend the hearings today.

I would like to introduce my co-presenter, who is Harpreet Bachra. Harpreet is the director of employment for Surrey-Delta Immigrant Services Society, British Columbia.

We are co-presenting these comments today on behalf of AMSSA, which is an umbrella organization serving 78 immigrant-serving organizations in British Columbia.

To speak to the impact of Bill C-12 without seeing the global picture, we would be speaking to issues in isolation. The global economy and rising unemployment should in fact shape the new legislation to take us into the 21st century. Worldwide unemployment is at its highest since the Great Depression of the 1930s; the number of people who are unemployed and under-employed is rising sharply, as millions of job seekers find themselves the victims of a high-tech revolution.

Computers, robotics, telecommunications, and other technologies are fast replacing human beings in virtually every sector and industry - manufacturing, retail, financial services, transportation, and agriculture. Even government has converted to automated kiosks in malls for savings and greater access.

Many jobs are not coming back and many more are destined for extinction. While some jobs are being created, they are, for the most part, very low-paying, temporary employment. These jobs will form a permanently displaced group of poverty-class workers, who will be information age illiterate.

Training to compete in this new economy is essential. Bill C-12 has eliminated the very successful, community-based training models, which prepared individuals for the new economy through hands-on skill training.

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Under this new legislation a whole sector of the population will be blocked from accessing training and employment services. We are here today to speak on behalf of immigrants and government-sponsored refugees who will fall into this category.

The new re-employment measures under the human resources investment fund are limited to those individuals who are in receipt of or who have had attachment to UI over a three-year period. For many immigrants who are now new to Canada with little or no English, lack of Canadian work experience and no long-term attachment to the labour force, this legislation will seriously impact on their ability to access and receive services.

We have identified the following issues and their impacts for your consideration.

Number one is the accessibility to training and employment services. Bill C-12 requires that an individual be in receipt of EI or have had attachment to EI in a three-year period to access training programs. In a recent survey through MOSAIC's employment services database, I identified that in a two-year period we had over 2,800 applicants for various employment programs. Of the 2,800 applicants who applied for service, only 400 were in receipt of EI and 200 were in receipt of social assistance. The remaining 2,100 applicants were the regular or CRF clients.

Immigrant-serving agencies have historically had a very difficult time in filling the EICs in our project-based training, labour market language training and our severely employment-disadvantaged programs. Our recommendation is that the government allocate a portion of the $1.9 billion release of CRF funds for employment and training initiatives for immigrants.

I'll now pass this over to Harpreet.

Ms Harpreet Bachra (Member, Affiliation of Multicultural Societies and Service Agencies of British Columbia): Thank you, Holly.

Our second point is the elimination of federal initiatives skills training. The re-employment measures lay out a framework that does not encourage skills development or training. Historically, project-based training and labour-market language training models included considerable portions of training time for skills acquisition. The new measures seem to eliminate this by focusing on those individuals who are skilled and job ready and able to market themselves to targeted wage subsidies.

Many immigrants require hands-on training or skills training and language upgrading components to equip them for a knowledge- and technical-based society.

Over ten years ago wage subsidies were utilized by the federal government and were eliminated under skills training initiatives through the Canadian jobs strategy. Underground blacklists of employers grew as there were many who would utilize the subsidies and not keep the employee on payroll after the subsidy was over. In response to that, many employment counsellors using the subsidy would write the subsidy for a period of time to enable the client to qualify for unemployment insurance. A vicious cycle occurred.

In the job creation category we recommend the creation of programs that provide holistic training and that include skills training for the future, not for minimum wage jobs, as well as programs for life skills training, a work experience component, and in the case of immigrants a language upgrading or job-specific language component.

We also recommend that the federal government play a leadership role and enter into federal-provincial agreements regarding labour market training and adjustment.

I'll pass it on to Holly now.

Ms Whittleton: Number three is language and cultural barriers. The reduction of full-services offices through the evolution of Canada Employment Centres into human resources centres and kiosks, the interactive computer systems, will limit accessibility for immigrants. We have determined that a linguistic capability of a LINC level four - or exams level - will be necessary to operate the automated system.

Many of our clients have beginners level English and will not be able to read or understand the screen or directions. Our recommendation is that the federal government, before embarking on these new initiatives, consult with immigrant-serving agencies to establish cultural sensitivities and linguistic capabilities.

Ms Bachra: Our number four point is about seasonal workers. Bill C-12 assumes Canadian workers set their own wages, schedule their hours and weeks of work, and plan and control their own lay-offs. In the Fraser Valley and Okanagan Valley in B.C., the majority of orchard and farm workers are immigrants. Not only do they have to find work every day or week, but they are restricted to the amount of hours they can work within the day. The environment and weather and light conditions dictate when these workers can prune trees or pick fruit. The working season is extremely short for orchard workers, somewhat longer for farm workers in the Fraser Valley. The farm workers and orchard workers will have to depend on optimum weather and light conditions to log enough hours to qualify for EI.

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Recently, we arranged a focus group with farm workers who were attending some language training upgrading at our agency. When I asked them about the conversion of weeks into hours, they were initially very excited. But when the reality kicked in, they were a bit disappointed that even though they will be working 12 to 15 hours in a good day when the sun is shining, it will not be in the best interests for the employer to write 12 to 15 hours due to the labour standards problems.

The majority of these clients reported that they work on an average between 12 and 13 hours. The maximum they can earn is between $20 to $25 per day. Since this is piecework, most of the time when the crop is small they can only get $5 to $7 for 12 to 13 hours of work.

Our recommendation is that the government be sensitive to the working conditions of these workers and not cut back access or level of benefits.

Ms Whittleton: Our number five point is the lack of stated commitment to employment equity. Since the inception of employment and training programs in Canada, there has been an ongoing commitment to employment equity to the designated groups. Employment equity was a principle of both the Canadian jobs strategy and the labour force development strategy.

Under the new training legislation there is no mention of employment equity and in particular no mention of visible minorities and women. Our recommendation is that the federal government and HRDC reaffirm its commitment to the principle of employment equity in the new training legislation and strengthen the enforcement of equity targets.

Also, we would suggest that you incorporate Dorothy Riddle's recommendations on designated group policy in the HRIF measures.

Ms Bachra: Our number six point is cost-effectiveness and success rates of immigrant-serving programs. The overhead costs of community-based agencies are comparatively lower than those of public institutions. In addition, we have the cultural and linguistic capability and offer support services such as settlement adjustment services, family counselling and critical incident interventions. Due to these reasons, immigrant-serving agencies have 85% graduation and employment rates for our clients.

The number seven point is about massive lay-offs in the employment training sector. The training sector has experienced massive lay-offs due to elimination of project-based training, labour market language training and severely employment-disadvantaged programs. It has been estimated that in Vancouver alone there has been a job loss of over 3,000 individuals employed in this sector. The loss of culturally and linguistically sensitive program staff has had a profound effect on the human resources in our agencies.

Ms Whittleton: Number eight is the political allocation of funding. This is of great concern to immigrant-serving agencies in British Columbia. There is a growing concern in many immigrant-serving agencies that the act of blocking of designated funds by politicians will impact program offerings to immigrants. Each program approval at the operation level of the Canadian jobs strategy requires the concurrence of the member of Parliament for the constituency. In many areas of British Columbia funding concurrence has been blocked or delayed. This results in program delays to clients and lay-offs of employees.

Here is our recommendation: as handlers of the public purse, immigrant-serving organizations are highly accountable for the funds downloaded to our organizations. Success rates and financial accountability are key to the approval of a new program or an existing program. We suggest that the local HRDC and immigrant-serving agencies have the expertise to determine the needs and target groups for funding allocations.

Number nine is the decentralization of the Vancouver Canadian jobs strategy's office. The decentralization of the Vancouver Canadian jobs strategy's office to three district offices will strain our existing human resources. In Vancouver we are able to act as the central office to receive consistent quality information from designated developmental project officers. Policies and procedures are very clear and the needs of our clients are established in a very consultative manner. If the decentralization of this office occurs, we would have to approach three district offices to establish what we've been able to establish from one office in the past.

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In addition, we will lose culturally and linguistically sensitive staff from these offices. A further concern is the time that will be required to contact the three offices to establish priorities and policies. This will place an additional strain on our already reduced human resources.

Our recommendation is that you look at re-evaluating the October 1996 closing of Vancouver's Canadian jobs strategy central office.

That finishes our statements to you. If you have any questions we would be more than willing to answer them.

The Vice-Chair (Ms Augustine): Thank you so much for your presentation. You will notice that we have made a change in chairs. I am the vice-chair, Jean Augustine, and I'm sitting in forMr. Bevilacqua, who had to leave while you were presenting. I apologize for him.

We will have some questions now, starting with the Bloc member. We will then be going to the Reform and the Liberals. Could we start with you, Mr. Crête?

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): The translation was not very good because of poor sound quality. So I'll be basing my questions on the document you tabled with us.

In this presentation you refer to language and cultural barriers with interactive computer systems. Would you please elaborate on the kind of problems that this will create for your clientele?

[English]

Ms Whittleton: Thank you. We talked about linguistic and cultural difficulties with the kiosks, which is I think what you're referring to. We have a number of clients who are newcomers to Canada, who have less than beginners level of English, who may need to access that service and who will not be able to understand the directions that are given to get into the program at the kiosk or to understand what may be coming up on the screen at the kiosk. Our concern is that those clients who have LINC level three or less will not be able to understand what's required of them once they're at that kiosk.

[Translation]

Mr. Crête: I don't know whether you consider that generally speaking the reform is to the advantage of the groups you deal with or whether you have any significant changes to propose. If so, what would these changes be and what form would they take?

[English]

Ms Whittleton: I'll speak to that and I'll give Harpreet an opportunity.

We've had much discussion. Before we got hooked into the hearings, we were discussing a call I had this morning from a Canada Employment Centre officer who was asking us if we have a program for a government-assisted refugee. We now have programming for individuals in receipt of social assistance. Those clients must be in receipt of social assistance for a seven-month period to qualify for provincial training. We also have training now for those individuals who are in receipt of EI or who have had attachment to EI over a three-year period.

There's a whole group of people who are in the middle and who do not have access to training at all. In order for them to have access for training, they would have to be either on social assistance or on employment insurance. That's the group that's going to fall between the cracks. We need some sort of a program or program moneys put in place so that client base.... And I referred to that in my document that I went through, in MOSAIC, which is my organization, which is 22 years old.... When I went through the database, I found that over 2,100 of the applicants fell into that category. Only400 in a two-year period were in receipt of employment insurance.

We historically always had difficult times in filling those employment insurance seats.

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Ms Bachra: The same goes for our agency in the Surrey-Delta area. For CRF-funded seats we used to have wait lists of twenty to thirty clients, whereas for EI-funded seats we really have to work hard to fill those seats. So we share that concern.

The Vice-Chair (Ms Augustine): I will move next to the Reform.

Mr. Grubel (Capilano - Howe Sound): Thank you, Madam Chair.

Like almost everyone in this room, I have no doubt about the value of the services the organizations you represent provide. But as people who are the guardians of taxpayers' money, we have to look at the return for the money spent, because as you know, every dollar that goes to you is not available to go to medicare or pensioners or other very valuable services. Therefore, I would like to ask you if you have seen the article in The Globe and Mail this weekend and whether you have seen any of the other papers Mr. Axworthy's research department commissioned on the effectiveness of the kinds of programs you have done.

In the light of the kinds of questions raised there, I put a very specific question to you. Can you share with us any information on the number of people who have found jobs after they have gone through your programs, on how long they have stayed in these occupations and generally the costs per worker placed? This would be some measure for us to understand whether the money that is being spent and that you are asking to have maintained is well spent relative to the other uses for which we face so much demand here.

Ms Whittleton: I'd like to respond to that. I have been following the pieces in The Globe and Mail, and in return on dollar value, I think our graduation and our placement rates really reflect a very high return for the money that is downloaded to immigrant-serving agencies. In Vancouver we look at about an 85% graduation rate and an 85% placement rate. That's excellent return for the dollars.

The effectiveness of the program, of course, is reflected in whether these people get jobs or not, and that's what we're charged with doing: not just offering skill training but making sure they are employed and the employment becomes long term. The length of stay in jobs is determined by each organization, and a database is kept on that by doing follow-up with the client. As for the cost per worker placed, if you're looking at the cost of a labour market language training program that might be 33 weeks in length, the cost for a person to take that program may be about $4,500. In the long run, in what they give back in tax base and contributions to the economy, I would suggest $4,500 is not a lot of money to place an individual.

You have to remember too that we are highly accountable to our local Canadian jobs strategy for placement rates. If the placement rates do not meet the contracted objectives of 75% to 85%, the program doesn't run again. So we are constantly held accountable to the contract that we sign and to make sure those clients do secure full-time employment.

Ms Bachra: I would like to respond to that too. The success of our programs is that our professional staff work with these clients, who are immigrants with foreign credentials, to place them as close as possible to their related fields. We do not try to put them in the first entry-level position, where they will get dissatisfied after a while...and then they'll move on. We work very hard with them in order to place them where we know they will be placed for the long term.

We also do long-term follow-up with our clients. We usually don't look at follow-up in a three-month period, but usually the clients are followed up in a two- to three-year period. In that we see we have over 85% of clients placed in this area.

Again, the placement rate varies according to how long the program is. Some programs are only for three months, where the full participant cost comes to only around $1,100 or $1,000. In some cases the training programs are long, from six to eight months, and there the full participant cost goes all the way to $4,500.

Mr. Grubel: These are very impressive numbers and I'm surprised the standards you are supposed to meet are 35% and 38% and you are meeting 85%. That's really impressive, if I understood you correctly.

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If you have these numbers, including a description of the methodology you used in collecting these numbers, I think the committee would be very pleased to have them. They should probably be in your computer, and if you can print them out to me, I would love to see them.

Thank you.

The Vice-Chair (Ms Augustine): We'll go on to the Liberals, starting with Mr. Easter.

Mr. Easter (Malpeque): Welcome.

Quite a number of the concerns you've raised are not directly related to the EI bill. I would hope they're covered by other aspects of human resources development.

There are a couple of points I'd like to make sure you're aware of. One is that insured participants under the bill are defined as UI claimants in the past three years, and that will include immigrants. They will still have access to the outreach- and employment-type services through employment assistance services, which are a new option under the bill.

That said, one of your great concerns is giving people training and getting them into the job market. Do you see part II of the bill, the employment measures in the bill, as meeting your needs in that area?

Lastly - I'll raise all my questions now - you did make a point earlier that concerns me. You said there was a problem with the political allocation of funding - active blocking of funding by politicians. I'm from the east coast, and I know that doesn't happen in our particular area. In fact, what we're trying to do is to keep politics out of this to a great extent, so it can be handled legislatively. What were you referring to there?

Ms Whittleton: First of all, when we pulled our presentation together we were very aware that a client can have an attachment to EI over a 36-month period. Our concern is those clients who are newcomers to Canada, who will have no attachment because they have no Canadian work experience, no jobs, and little or no English. They are the ones who are going to be falling through the cracks.

We're very aware that if they have been in receipt of EI, there are training programs there for them. However, some of the measures that have been outlined, the five re-employment measures under the HRIF fund - I think that's the second part you're asking about - we do have some concern about. Targeted wage subsidies may prove to be difficult. Historically...I used them ten or twelve years ago in marketing clients, and what I found and what other people found was that as soon as the subsidy was over, the client was gone. I can't say all the employers abused, but there were those employers who did abuse that.

Also, about the kind of training time needed for an immigrant or a government-sponsored refugee, on a wage subsidy the employer may not have the kind of time to give to the client that we are able to give to them in a training program. We can take thirty solid weeks and train them in a language component and a skill component. The employer is not going to have the luxury of time to do that under the targeted wage subsidies.

With some of the other things we are working with, such as skills loans and grants, job creation partnerships, there are still a lot of question marks about how they are going to fit with our client base. A lot of information is still not trickling down to us about how that's going to be applied.

On the third point you brought up, about the political allocation of funds, there is active blocking of designated funds to immigrant-serving agencies. We do know it has happened in the Surrey, British Columbia area, and also on the north shore and in many other regions in British Columbia. What happens is that a program may be approved at the operational level. Once it goes to MP concurrence it is blocked or stalled or it just does not happen.

So we have concerns that it should be able to be handled at that local level of HRDC which is identifying the priorities and that we should be working with the local HRDC in identifying priorities, because I think we know what is needed for the client base. However, it does get blocked.

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Ms Bachra: I would say the majority of that blocking occurs when there are programs for immigrants that have a language complement or a project-based training complement. There are lots of examples of these kinds of blockings in the B.C. area.

Mr. Easter: On that allegation, if we have MPs who are blocking programs that we as a government designed to assist people and there's evidence to show it relates particularly to immigrants, then I would hope there would be a way you could table that information, because that should not be happening. It should not be happening.

I have one other point. I'm sure you're aware that the employment programs, the job strategies under part II, are to be negotiated among the communities, the province, and the federal government. I would hope you're involved in that area. I think you raise a legitimate point about that case.

The Vice-Chair (Ms Augustine): Mr. Allmand.

Mr. Allmand (Notre-Dame-de-Grâce): There seems to be some misunderstanding about the point this group is making. If I understand correctly, a few years ago all employment and training programs came out of general revenue under the Department of Employment and Immigration. With this bill there is a transfer - as a matter of fact, an increase from $1.9 billion to $2.7 billion - in training and employment programs shifted from the general area under the Unemployment Insurance Act. But to access the part II employment benefits you have to have an attachment to the Unemployment Insurance Act. You're making the point that as we shift employment programs to the Unemployment Insurance Act, the people you represent, immigrants, who have no attachment, can't take advantage of the part II employment programs.

That is a serious concern. Also, women who've been at home for years and who go back into the labour force have no attachment. They can't use these programs.

So the more we shift training and employment programs under the Unemployment Insurance Act, the more only those with an attachment can benefit. What happens to those you represent?

Mr. Easter suggested maybe this could be overcome by agreements with the provinces. It can't. The agreements with the provinces will apply only to how they administer this to people with attachment. So some way or other we're going to have make sure under other programs those people....

How many in the Vancouver area would you assess there are, immigrants and women who have been in the home, looking for training and employment assistance, who would not have an attachment to the Unemployment Insurance Act?

Ms Whittleton: About the number of people, it would depend on the number of landings into communities for newcomers coming into the country. We would be able to establish that out of our database, if that's something you would be interested in seeing.

Mr. Allmand: Approximately?

Ms Whittleton: I can only tell you it will be thousands. I laid out that 2,100 people over a two-year period were under general revenue funding and only 400 had an attachment to EI, in a two-year period.

I guess what happens to those people who do not have an attachment over the 36-month period is that probably they're eventually going to end up on social assistance. If they are not able to access training programs, if they have little or no Canadian work experience, or little or no English, they have to access a program to get to step one. If they're not getting to step one, they're not going to be able to break into the labour market, they have no savings to live on, a number of these people coming here from poorer countries, so they will probably end up on social assistance and have to wait seven months to take a training program.

If there is no early intervention it may become a way of life; it could become intergenerational. I don't know. But what else are they going to have to rely on, other than some sort of safety net of social assistance? I'm sure the province wouldn't want to hear this right now, but that's where I can see the bulk of people going if they are not able to take advantage of training programs, get the labour market language training they need, and also get skill training.

The Vice-Chair (Ms Augustine): Thank you very much. Your presentation has given us much to discuss, and if you can get any information to the committee secretariat, as you promised, then we'll be more than pleased to disseminate it among committee members.

Before hearing our next presenters, we'll break for two or three minutes.

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The Vice-Chair (Ms Augustine): Order.

Mr. Lippert, you have half an hour with the Standing Committee on Human Resources Development. We'll give you some time for your presentation, and then we'll go around the room and engage you in some questions.

Mr. Owen Lippert (Senior Policy Analyst, Fraser Institute): As I was coming here this morning, I was looking at my horoscope - I'm a Virgo - and it read, ``You'll get the chance to tackle a long-standing financial or business problem that has been worrying you. It's up to you whether or not to take the opportunity that's being offered. If you don't, it will be a long time before the chance comes around again.'' I'm hoping that all of you there were born in the month of September, as I was.

The Vice-Chair (Ms Augustine): I am definitely a Virgo, and there is another Virgo at the table, Warren Allmand. So we should share that with you.

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Mr. Allmand: The brilliant people.

The Vice-Chair (Ms Augustine): So I think we share that with you.

Mr. Allmand: I have a lot of time for you. Carry on.

Mr. Lippert: The Canadian government spends a great deal of money on Canadians in the process of attaching or detaching themselves from the job market: about $50 billion. Unemployment insurance, as you are all aware, is the largest component of that amount, approximately $20 billion; and it is a legitimate question to ask whether in fact we are receiving value for that money. With the national unemployment rate above 10%, with a variety of other social and economic problems, we can question whether that money is spent the way it ought to be.

In the course of my presentation I will make some suggestions. First, make unemployment insurance a strict insurance scheme, not a federal incomes policy. Barring that, and if necessary, transfer unemployment insurance to the provinces and merge it with the other set of payroll taxes for disability. In either case, Ottawa should take on the role of reinsurer, helping to ensure Canadians make it through unforeseen job crises, rather than its current position.

One of the things worth examining here when we say make unemployment insurance an insurance scheme is that the history of the unemployment insurance program in Canada was that it did start out as an insurance scheme. From the background materials I'm sure you're familiar with the history of the bill in 1935, and then the bill that was finally accepted, the 1940 Unemployment Insurance Act. It did start out as an insurance program. But over the years it began to expand into something else. Indeed, it's been the constant refrain of all the committees that have looked at unemployment insurance that in fact it is trying to be both an incomes policy and an insurance scheme and not performing up to expectation in either role.

I'm sorry to do this, but there are a couple of issues about what an insurance scheme is that we need to go over in order to answer the question of why there is no private unemployment insurance. It comes down to two concepts: one, moral hazard; and two, adverse selection.

Moral hazard is simply something that says if you're insured against something, there will be a higher chance you will actually incur that event because you're not bearing the full risks of not insuring it. This is the explanation why restaurants that are insured against fire burn down more often than restaurants that aren't insured against fire.

Adverse selection is simply saying if you offer an insurance policy, the people who will most likely need it the most will be the ones most likely to sign up for it, and those who feel they don't need it will be the ones who won't deal with it.

There are a number of ways in which you can deal with both moral hazard and the adverse selection process. For moral hazard you could have co-insurance options, including deductibles and below-100% income replacement, which has really now become built into unemployment insurance. You could have experience rating, much as with car insurance, where the rates depend on your driving record. In this case your unemployment insurance premiums would depend on your employment history. There's a faint echo of that in the bill you've put forward, but for a number of reasons it clearly is inadequate in the proposed bill. We can perhaps get into that later. Then of course you can require that recipients actively seek work and take a job if offered.

With adverse selection, of course the one way you could deal with that, and the way unemployment insurance does, is to make it compulsory - although now you're probably receiving some heat from various and sundry groups that say, look, you're making unemployment insurance less compulsory, people are being pushed out of it for a variety of reasons, to save money.

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The thing, then, is that if we're going to make unemployment insurance an insurance scheme, we have to get back to finding a set of insurance principles that will address that.

Very briefly, I'd like to read from one of your predecessors, the 1962 committee on unemployment insurance, that gave a clear statement of what insurance should be:

A plan of insurance must have an actuarial basis. There must be a definition of the risk insured against and the conditions under which indemnity will be paid; the area of insurance must be limited to contingencies, not situations that are certain to occur; there must be some possibility of estimating the rate of occurrence of the contingency; the amount of the indemnity (under unemployment insurance, the rate and duration of payment) must be determined; and the premium or contribution must be calculated which is needed to provide a fund sufficient to meet all probable claims.

For an unemployment insurance plan to be genuine insurance, it follows that (1) the insured person, to have an insurable interest, must be subject to the risk of losing something of real value; (2) the actual occurrence of this contingency must be easy of verification and of proof that it falls within the scope of the insurance contract.

Under unemployment insurance, as regards (1), the contingency is loss of employment and the earnings therefrom. A person who is not normally in insurable employment to a substantial extent and within a recent period of time has nothing of substantial value to lose and cannot have an insurable interest. As regards (2), there must be a ready means of determining when an insured person is unemployed and whether he meets the minimum conditions for the receipt of benefits.

From your proposed changes, it looks as if you're trying to break out and get back to those insurance principles, but I would say that you have not gone far enough. In part, the reason why it has not gone far enough is essentially in the nature of the unemployment insurance program itself. Over the 55 years, it has become prone to political pressures. Those have been well intentioned, but their focus has not been on running an insurance program but instead upon the equity and redistributional possibilities of having a very large sum of money drawn from employees' pay-cheques.

As a result, you see regional variations. You see all sorts of other things put in under unemployment insurance in order to get that pot of money and use it to serve some purpose other than employing it against unemployment.

That political pressure on the unemployment insurance fund has led to the current situation.

We now recognize both that premiums are too high and that, frankly, there are groups of Canadians who rely too much on unemployment insurance, perhaps the most drastic case of that being in Newfoundland.

No one is served by a situation in which half of the 19-year-olds of Newfoundland are unemployed and are either on unemployment insurance or trying to get on it. That is simply not an economically or socially healthy consequence.

A number of things could be done. In looking at that solution, we should start by making the comparison with the United States. If we make a comparison between Canada and the United States, a number of things come to mind very quickly.

One is that Canada, with one-eleventh of the labour force of the United States, spends on unemployment benefits nearly 70% as much as the United States does.

This was not always so. Before the big change in unemployment insurance, both countries spent roughly 0.9% of gross domestic product on unemployment benefits.

Let's say you couldn't get the figures for unemployment in Canada. You could reasonably look at what unemployment in the United States was and you would find, when you were able to look at the Canadian figures, that in fact they were roughly similar.

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After 1971 you start to see a divergence. Canadian figures do start going higher, and unemployment is higher in Canada than it is in the United States. Several professors have looked at that, such as Professor Craig Riddell, at the University of British Columbia; now MP Herb Grubel; and my own employer, Mike Walker, of the Fraser Institute.

First of all, to look at the entitlements and then the design of the program, yes, the entitlements are higher; but that can't explain the whole fact. You see two major design differences between unemployment in Canada and unemployment in the United States. One is that in the United States the programs are state-run programs. The second is that they use an experience rating. I mentioned before the car insurance analogy. In the United States, how often you use unemployment insurance is reflected in the premium you pay.

Clearly, if we're looking to redesign unemployment insurance and we want to be bold, we want not just to tinker at the edges, not just to ensure unemployment insurance becomes almost an icon in the history of Canadian government of a program that's been studied and not changed, you would have to look at a series of bolder steps. I would argue one of the steps you might take is to take unemployment insurance, put it into the provincial sphere, and allow the provinces to meld it with their workers' compensation deductions.

This is not terribly un-doable, but there are some problems. First of all, the 1940 unemployment insurance bill required a constitutional amendment, because unemployment insurance was considered a provincial responsibility. In fact, it may be the one thing in the Constitution that could be changed.

The other problem, you might say, is, gee, this will lead to different coverage across the country. Yes, indeed it could, but it would be reflective of local conditions; and indeed it might very well end up in a situation where you're able to stop what is now happening, where various provinces are trying to compete to get hold of the pot of UI money under the guise of the provincialization of job training in order to satisfy all sorts of other interests, many of which I think are more political than anything else.

On the question of training, I'd just direct your attention to the most recent Economist, which I think has brought to light very conclusive evidence that job training is not a panacea for employment.

So if you had the provinces in charge of that fund, they would be less prone to raiding; and if they did raid, they would pay a penalty that would be instructive to other provinces. You may not be willing to consider that as an option, though I think on an efficiency basis it is.

If you are not, then I would recommend you focus your attention on bringing insurance principles into the unemployment insurance program, or ``employment insurance'' - it's actually a bit of a contradiction, being insured against the possibility of employment, but I understand there may be other considerations in the naming - relating benefits and duration of benefits to the premiums paid, and making sure those premiums are experience rated. Also, I think you'll ensure the system has integrity and, if it is to remain a national or federal system, it has integrity through which it deserves the respect of Canadians, rather than being something that is looked at as just a way to grab other benefits that are totally unrelated to work or the loss of work.

I've probably filled in as much as I can. Just as a parting note, this is not really a terribly complex issue. It's a simple issue, a simple issue of insurance. But as one of the founders of the Fraser Institute said, the hard thing about simplicity is recognizing it when you see it.

Thank you very much.

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The Vice-Chair (Ms Augustine): Thank you very much for your presentation.

Mr. Grubel said that he didn't recognize you.

We'll now go to a round of questioning. We'll start with the Reform Party, and then come to the Bloc, and finally the Liberals.

Mr. Johnston (Wetaskiwin): You suggest that you'd like to see employment insurance or unemployment insurance as strictly an insurance scheme that's handled by the provinces. How do you suppose the provinces would react to that?

Also, what is your opinion on a tax sheltered account, something similar to an RRSP account, which could be drawn upon in times of lack of work?

Mr. Lippert: Your second question is more interesting than the first. The second question is actually a very interesting question, but I should answer the first one first.

Right now the provinces are very anxious to get the federal government out of job training. Is it the fact that the provinces have some inherent love of job training? No. They want to get their hands on the UI money that's now being involved in job training. There has been resistance by the federal government to letting the provinces get their hands on that pot of money, which is why, despite promise after promise that Quebec and the federal government will reach an agreement on job training, it never happens. While the federal government is quite happy to give up the responsibilities, it doesn't want to give up the cash, and while the Province of Quebec doesn't mind taking on the responsibilities, it really wants its hands on the cash.

In a situation where that happens, I suspect that the provinces, except perhaps for some of the smaller ones, will be quite keen to do that, and of course that will impose upon them the discipline - if it was an insurance program - of in fact not being able to get their hands on the money as they thought to.

So I'd say that initially they would embrace it and then maybe they would think about it. But in fact there are efficiencies to be had through the melding with the WCB program, workers' compensation.

Going to your second idea, that in fact would be the most logical conclusion of all, saying: let's go beyond the provinces; let's get right to the worker himself or herself; let the employee set up a program in which he or she is saving against the possibility of unemployment; and if the federal or provincial government wanted to contribute to that RREP or RRUP, or whatever - registered retirement unemployment plan - then in fact you could make the decision.

We think every Canadian deserves x amount to go into an account to help them save against a rainy day, and that would be an idea well worth pursuing.

The thing there, though, is that it wouldn't be run by the government. Though there may be a requirement to have one and the government may contribute, it could actually be run by the private financial sector itself, which would probably be the most efficient way of doing that.

The problem you may end up with, though, is the same one as you had previously with the adverse selection problem, that people who don't need it won't do it and the people who would use it would use it the most. But it's a good idea and one worth developing.

The Vice-Chair (Ms Augustine): We have four Liberal questions. I'll ask that they be very brief, and I'll ask you to make your responses very brief so we can get this done within the next seven minutes.

Mr. Scott.

Mr. Scott (Fredericton - York - Sunbury): I'd like to explore your contention that the reform of unemployment insurance necessarily requires us to return to its original intention rather than perhaps meet new realities of the contemporary labour condition in Canada and that somehow the fact that we don't necessarily agree with your objective suggests we don't recognize a rather simple solution.

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The fact of the matter - I would put forward the possibility, at least - is that when UI was originally conceived there was a notion that unemployment was a cyclical problem and essentially we were buying time for the economy to recover for most people so they could then re-enter the labour market. We were simply insuring them against that.

I come from Atlantic Canada. Many of us realize that in many cases unemployment is a structural problem and it requires a structural solution. So we've accepted the fact that it's not enough simply to bide time and give people income while waiting for the economy to recover and for the market to re-engage these people. There have to be more active measures.

I wonder why UI reform, to meet your expectations, necessarily has to go back many years in the way it deals with the contemporary labour condition and why it shouldn't be reformed to deal with those changes, recognizing that in fact unemployment is not cyclical and that active measures need to be taken if people are to get jobs, and that's why it has been changed from unemployment to employment, rather than for whatever other mischievous things you might think we had in mind.

Mr. Lippert: First of all, I would say unemployment insurance, or employment insurance, if that's the new term, should have a neutral effect on employment. Currently it does not. The evidence suggests currently it's contributing to unemployment, because people are changing their behaviour in order to receive benefits. What we're now seeing is a generation of people who have changed their behaviour in order to receive those benefits.

That would be one thing. Premised on that, I would say about your suggestion that unemployment is not a cyclical problem, it's a structural problem, that in many ways the only reason it is a structural problem is that you've created structural incentives, or should I say structurally bad incentives, not to go to the greatest length possible to find work.

Let's take for instance your part of the country, the Maritimes. Clearly there is a poverty issue in the Maritimes. No one would deny that. I might say it's due to a set of perverse incentives. Others might have other suggestions. I think in either case it's better to deal with the poverty in the Maritimes as a separate issue, as a distinct issue, bring to bear the policies and whatever it needs to deal with that, and not mix it up with unemployment insurance. What you have is a bait-and-switch. We have ``oh, my goodness, we're going to bait you with all these troubles in the Maritimes'', and then a switch. The answer is to set into motion an unemployment insurance scheme across the country that is perverse in its outcomes.

So if the problem is in the Maritimes, I can understand that. Deal with the Maritimes individually. I think the problem when you look at it will be one of transition. I don't think the Maritimes want to continue their present state of dependency. They do want to take the steps necessary towards employment. It's just a matter of getting from A to B. Right now we're headed up in the middle of the air. You have to show them that at the end of the day there is an economic future, but it is not an economic future based on ever larger sets of federal transfers.

Mr. Scott: I have to mention that colleagues with whom you have some familiarity were drawn aback by the reference that the Maritimes might be considered distinct. I think there's some understanding that would give us special status.

Some hon. members: Oh, oh!

Mr. Scott: A range of Maritimers are screaming at me at this point, saying we have that status now.

Just one quick point. When you suggest perhaps there should be an individual-based insurance program that would insure against unemployment - and you also made reference to automobile insurance in terms of pure insurance - I would assume if I were responsible for my automobile insurance and I had an accident... I like the idea of pooled risk. If my house burned down, my guess is that I'd never be able to get another house insured if I have to pay for it by myself in an individual program.

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I'm fearful of your abandoning or suggesting the abandonment of pooled risk. You can appreciate why I would feel that way, coming from where I come from, but I mean even in the context of other people who would find themselves forced to draw upon a program to which they were contributing.

Mr. Lippert: I have nothing against pooled risk. Pooled risk is vital. That is the argument for why unemployment insurance may in fact be an example of where risk pooled by a public body is acceptable.

I have some questions about that, but there is certainly an argument that can be made - and economists have made it - that, given the nature of the business cycle, you need to pool that risk.

Any insurance program is run on an actuarial determination of pooled risk. So it doesn't violate that principle at all.

Mr. McCormick (Hastings - Frontenac - Lennox and Addington): I have just a short comment. This legislation is affecting individuals, real people in the real world. How would you say to the 19-year-old man in Newfoundland that you refuse to offer him opportunities but you're not going to share at all?

Do you not feel that the results of offering these active measures, rather than passive measures, might help? Could this not possibly pay off in the future?

With all due respect, if your institute was on the Rock, in Newfoundland, would you go to work tomorrow?

Mr. Lippert: On the first question, about the 19-year-old, right now you've given an incentive for 19-year-olds not to seek, to go along with the way things have been. I would say that there is an aspect of near negligence there, that in order to give that 19-year-old a short-term benefit you're sucking him into a system that will slowly erode his long-term prospects.

In terms of active measures, yes, there are a number that might be taken. But look at The Economist and other materials: those kinds of job-training-for-job-training's-sake programs do not work effectively, or at least are not cost effective.

To tell you the truth, if I had a 19-year-old from Newfoundland in front of me right now, I'd say: do your best to find a job there, around your family, but if not, you're going to have to move to find those opportunities, as many others have before.

That sounds cruel. I'm cognizant of how hard it is for people to move, but people do move towards economic opportunities.

Frankly, often it is because of a political rather than an economic interest that people do not seek opportunities in other locales.

Would I go to work? Yes, I would.

The Vice-Chair (Ms Augustine): Mr. Regan.

Mr. Regan (Halifax West): Mr. Lippert, the first point I want to make - and I want to ask for your reaction to this - is that in the bill there's a provision that first-time entrants and re-entrants to the program would face a significantly higher, in fact about a double, eligibility requirement in terms of hours. That seems to respond to the kind of concern you have about entrance into the program of that 19-year-old person in Newfoundland or in other Atlantic provinces.

I'm interested also in the case of the person who perhaps is 50 or 55 years old and who's worked their whole life as a labourer, or perhaps as a fisherman. You're telling them that they should go west, young man - or not-so-young man any more in this case. I'm wondering what you would tell that fisherman, for example, about how he's going to learn skills and so forth and work in the new economy, for instance, in B.C. or Alberta or some other place, when he has perhaps a grade 4 education. How do you propose we should deal with that individual, and do you agree that doubling the entrance requirement for new entrants and re-entrants creates a significant obstacle to entry into the program, the kind of obstacle you're looking for?

The Vice-Chair (Ms Augustine): That's a big question, but I'm looking for a brief answer.

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Mr. Lippert: Briefly, on the recommendation you allude to, I looked at that. My initial impression was that, yes, they're starting to get the hang of it. In fact, they are now putting into place regulations that would not necessarily penalize, but average out repeat users.

Then I started looking at some of the fine print. First of all, it doesn't even kick in for quite some time. The counting of the 260 weeks doesn't go back beyond July 1995. If you look at the income indexing formula, it would mean that for a lot of people who are repeat users but who had a child or whose income fell below that 30% mark, that doesn't apply to them.

So it's a tough-looking rule, but you'd have to get into the nuts and bolts of it. My suspicion is that, in practice, it really would never be implemented, except in the very unusual case of rich-income singles who happen to be chronic unemployment users, which would seem to me to be almost a non sequitur.

As for the older individuals, I do not underestimate the experience of a lifetime of work. These are individuals who have tried hard and have probably done well. I think you should not count them out with the fact that they may be 50. In fact, if anything, a 50-year-old person is probably far better able and capable, both emotionally and in terms of the work skills - maybe these are work skills that really count, such as getting along with other individuals, working for a boss and working hard - to make those tough but necessary choices.

The Vice-Chair (Ms Augustine): Thank you. Mr. Allmand.

Mr. Allmand: I'm not clear on your position with respect to training. In answering a question earlier, you said that the provinces would be interested in taking over unemployment insurance because it would give them access to moneys for training.

Surely, if, according to your proposal, you return to pure unemployment insurance principles, it would not cover training; it would be simply coverage for income during your unemployed period, and training would be paid out of general revenue.

Wouldn't you agree that with a pure unemployment insurance system - by the way, the original program in the 1940s and up until the 1960s was purely unemployment insurance, while the other measures only came in later - you would have no training? That's if we moved to your proposal.

Mr. Lippert: Yes. I agree that in fact unemployment ought to be strict unemployment insurance. The changes that really made the difference were in 1971, I believe, by my read of it.

That said, the provinces will be tempted. If they do control it, they will be tempted to run training out of it. I would encourage them not to do that. The fact is that it's just a recognition of political reality, I guess, that they may not do it right away, but they may in fact continue to emulate the record of the federal government in trying to fund training out of it.

I would agree that it would be a mistake, but it's also the recognition that their interest right now in job training vis-à-vis the unemployment insurance fund is precisely to get hold of that money. You are quite correct, sir, to point out the fact that it would be difficult to keep provinces on the straight and narrow, but you would think that the record of success for those provinces that do would speak to other provinces to clean up their act.

The Vice-Chair (Ms Augustine): Thank you very much for participating with us. I apologize for asking for the answers to be brief, but within the half-hour, we do have to look for shorter responses. We appreciate your remarks and we wish you a good day. Thank you.

Mr. Lippert: Madam Chairman, thank you very much.

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The Vice-Chair (Ms Augustine): Welcome to the meeting of the Standing Committee on Human Resources Development. I am Jean Augustine, vice-chair. We have before us the Business Council of British Columbia. I recognize Mr. Tim McEwan.

Welcome to the committee. I'll ask you to introduce the others with you today.

Mr. Jock A. Finlayson (Vice-President, Policy and Analysis, Business Council of British Columbia): Thank you, Madam Chairperson. I'm Jock Finlayson and I'm vice-president of the Business Council of British Columbia. With me today are Gary Johncox, the vice-president of human resources of MacMillan Bloedel Limited and a member of the Business Council employee relations advisory group; my colleague Doug Alley, the vice-president of human resources of the Business Council of British Columbia; and Tim McEwan, a policy analyst working in the area of labour market policy and human resources. We're grateful for this opportunity to appear before the committee through the auspices of modern technology.

I'll go briefly through our comments on Bill C-12. That will take about ten minutes. Then we'll be very pleased to take questions from yourself or any other members of the committee.

By way of background, the Business Council is an industry association that represents approximately 150 large and mid-sized enterprises doing business in British Columbia. Our members are drawn from all sectors of the provincial economy, including forestry, manufacturing, construction, retail, energy, oil and gas, financial services, telecommunications, and chemicals. In total, the member companies and associations represented in the Business Council employ approximately one-quarter of all paid jobs in British Columbia.

Briefly, the Business Council is supportive of the direction established by the government with Bill C-12, An Act respecting employment insurance in Canada. Our organization favours the maintenance of a strong national unemployment insurance system that has as its key objective the provision of temporary income support to people who unexpectedly find themselves without work.

We also agree the system should have a role in providing carefully targeted and well defined employment benefits to assist unemployed Canadians who need skill upgrading or other types of assistance at a time of labour market change.

We note that since the passage of the original unemployment insurance act in 1940 this piece of legislation has undergone very considerable change. On the whole, most of the changes made since the 1960s in particular have tended to move the system further away from the basic principle of providing temporary income support to unemployed people. The changes have also added a whole series of additional objectives, which this program attempts to meet.

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This change over time has had a number of unfortunate effects for the Canadian economy. It has created disincentives for some people to accept available work; it has added to the impediment that exists to labour force mobility within the Canadian economy; it has made it too attractive for some employers to rely on short-term lay-offs as a human resource management tool; and it has encouraged short-term labour force attachment and a high incidence of repeat claims by many individuals.

Many of these problems that I've identified stem from a tendency on the part of past governments to use the unemployment insurance system to pursue a wide range of social and economic policy objectives that we would argue should not be at the centre of an unemployment insurance system.

We see Bill C-12 as being a positive initiative that goes some distance toward establishing a more focused and cost-effective employment insurance system for Canada. We feel, however, that a number of elements of the bill require careful review and thinking prior to bringing it forward to the House of Commons.

Let me now comment on four or five of the elements of the legislation. Our comments are selective. We're not dealing with the entire set of provisions in the bill; we're going to deal just with a number of areas of key importance to our organization.

First, the shifting of eligibility from weeks of work to hours of work: In our view, shifting to an hours-based rather than a weeks-worked method for determining eligibility is a sensible step, and we applaud the government for moving in this direction. In our view, this will increase work incentives and should also reduce the administrative burden associated with maintaining the system.

Although we support the move to an hours-based regime, we are somewhat disappointed that the legislation does not adopt a key proposal that we recommended to Minister Axworthy when he was previously in this portfolio, a proposal also endorsed by many other employer groups in Canada. In particular, I'm referring to the notion of a uniform, Canada-wide entrance requirement of perhaps 20 weeks or 700 hours in order to become eligible for benefits under the program.

In our view, basing eligibility for benefits on the regional unemployment rate, as this bill will continue to do, is not sound public policy. Structuring the program in this way tends to discourage mobility and promotes repeat use and unstable employment.

The evidence in Canada suggests that workers and employers would be able to adjust over time to a uniform 20-week or 700-hour eligibility requirement.

We note that Canada remains the only major industrialized country that maintains a so-called variable entrance requirement in its unemployment insurance system. We encourage the government to have another look at that issue prior to passing this legislation.

The second issue is the maximum weekly insurable earnings. Under Bill C-12 the maximum insurable earnings will drop from $815 to $750 per week. This move responds to concerns, voiced by a number of employer groups and others, that maximum insurable earnings have tended to rise much faster than average wage levels over the past 10 or 15 years. This has tended to increase program costs and to push the maximum weekly insurable earnings out of alignment with wage trends and patterns in the economy.

We support the decision in this bill to reduce the maximum weekly insurable earnings and hope that it will continue to be part of the legislation.

The third issue I'd like to touch on briefly is the benefit formula and duration. We also support the change in the benefit formula under clause 14 of Bill C-12. This measure will more closely tie insurance benefits to earnings. Income benefits henceforth will be based on an individual's earnings over a fixed 16- to 20-week period. We support this proposal and again applaud the government for including it in the legislation.

The key attraction of it is that the more the claimant earns over the rate calculation period, the higher his or her benefits will be in the event of a job loss. This means that there will be a tangible incentive for individuals to seek additional hours or weeks of employment, something that is not always true under the current rules.

The bill also proposes to reduce the maximum length of time benefits can be collected from50 to 45 weeks. We are also supportive of that measure.

Turning briefly to the so-called intensity rule, an aspect of the legislation that I know has attracted a lot of criticism and comment across the country, the bill proposes that for every 20 weeks of benefits collected over the past five years, a claimant will face a one-percentage-point decline in the normal benefit rate, which is 55%, up to a maximum decline of five percentage points.

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As we understand it, the aim of this new intensity rule is to reduce the frequency of claims. We see it as a small step in the right direction and support the intensity rule as found in the legislation. If anything, we would be supportive of seeing the intensity rule toughened further, so the reduction would go beyond the 50% mark, perhaps down to 45%, relative to normal benefit rates.

To turn finally to the question of unemployment insurance premiums, we welcome the government's decision to make small cuts in the employer and employee premiums early this year. In the case of employers, they're falling from $4.20 per $100 of insured earnings to $4.13; in the case of employees, from $3 to $2.95. We also note that under Bill C-12 premium payers will enjoy a cost reduction, thanks to the lower level of maximum insurable earnings provided for in the legislation.

As a result of this small reduction in premiums and other changes made in previous years, it is estimated the new employment insurance account will generate a very large surplus, in the range of $5 billion, by the end of calendar year 1996. We accept the government's argument that some form of surplus is needed in order to obviate the need for higher premiums in the event of an economic downturn. We note, however, that the appropriate size of any surplus remains open to debate. There is an obvious trade-off between the size of any surplus in the account, on the one hand, and the beneficial impact of lower unemployment insurance premiums on job creation on the other hand. At a minimum, we see no justification for a surplus any larger than $5 billion being accumulated in the account.

As a general matter, we note that payroll taxes are a significant burden to job creation in Canada. It's something that's been documented by many academic studies, as well as by a report from the Bank of Canada last year. The 1994 job study produced by the Organization for Economic Cooperation and Development found there was an inverse relationship between the level of payroll taxes and non-wage benefits and the rate of job creation among industrial countries. Unemployment insurance premiums are a large component of the total payroll tax burden in Canada, and we believe government should be looking for every opportunity to reduce that payroll tax burden. More particularly, we would strongly support further reductions in unemployment insurance premiums beyond 1996.

Finally, let me say a word on the employment benefits provisions found in Bill C-12. We support the decision of the government to collapse the current lengthy list of employment programs into five new employment benefits, dealing with wage subsidies, earning supplements, self-employment assistance, direct job creation projects, and training and skill development. As we understand it, the government plans to earmark $800 million a year to finance program activities in these areas.

While we support the consolidation of the grab-bag of existing programs, we're skeptical that all the new programs will prove to be effective. Based on past experience, it is not clear that federal training and job creation programs produce money well spent. There is perhaps a continuing risk of wasteful spending and poor outcomes. A report from the Auditor General of Canada last year found that many federal labour market programs have failed to achieve cost-effective results. Some of the evaluations done by Human Resources Development Canada have reached similar conclusions.

We suggest, therefore, that more work and analysis are necessary before committing the sizeable sum of $800 million a year to the new employment benefit programs. We suggest that pilot programs be tried in a number of areas to determine which sorts of program designs are most effective. In general, the business community feels training and skill development initiatives, including those aimed at unemployed Canadians, are likely to be most successful when they are linked closely to the realities of the workplace. In our opinion, this argues for a strong focus on partnerships as well as an industry-driven approach, wherever possible. We also feel the government should be setting clear targets for the expected outcomes of all of its employment development programs and it should then evaluate on an ongoing basis the success of each program in meeting the established targets.

In conclusion, the Business Council shares the view of federal policy-makers that it is necessary to streamline the unemployment insurance system, reduce costs, improve the functioning of the labour market, improve the quality of services provided to Canadians, and reduce current disincentives to long-term labour force attachment. We therefore judge Bill C-12 to be a positive initiative. On balance the reforms proposed will strengthen incentives to accept work and upgrade skills. They should also have the effect of mildly discouraging repeat use and excessive dependence on the program.

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Having said this, I want to add that our enthusiasm for the legislation would be greater if the reforms proposed were more far reaching, but overall we are supportive of Bill C-12.

Thank you for the opportunity to comment on this legislation. We will now be pleased to take any questions or comments from the committee members.

The Vice-Chair (Ms Augustine): Thank you. At this time, I'll call on the Bloc to begin.Mr. Crête.

[Translation]

Mr. Crête: My feeling in listening to this brief is that we don't learn much from history. If the recommendations you are making had been in effect during the 1991-1992 recession, people would probably have had to put bars on their windows to be able to continue to sleep and eat at home. We should remember that social programs were put into place following a great economic depression in an attempt to introduce some balance into the economy and avoid the polarization of society into two groups of rich and poor.

On page 2 of your brief you say that the present system would incite certain workers to remain in areas with poor long-term economic prospects. Let me remind you that if an assessment of the economic potential of several Asian countries had been made five or ten years ago, they might have been considered as having no future but the situation has changed very quickly since then.

What would enable a government to determine that certain regions have a poor economic prospect? What right would a government or people working for a government have to make this type of assessment? In my opinion, Canadians have reason to be pleased with the existence of the Maritimes and Eastern Quebec and have long profited from the natural resources in these areas. I'm all the more surprised at the position of British Columbia since it has had to deal with busloads of welfare recipients coming from Alberta and I'm sure that province does not appreciate the situation.

So tell me who can decide that regions within the country have poor economic prospects.

[English]

Mr. Finlayson: Let me deal first with the issue of income and equality. There was a reference in your question to the gap between rich and poor.

I think that is a real problem. I don't think we should be loading onto the unemployment insurance system the policy responsibility for dealing with a very broad and deeply rooted problem like income and equality. In principle, this should be an insurance-based program.

We have many other programs in Canada, including equalization transfers and a progressive income tax system, that are utilized to try to mitigate the degree of inequality that exists in our society. So we don't think it makes a whole lot of sense to make that an exclusive objective of the unemployment insurance system. It should certainly not be the main objective.

Dealing with the very difficult issue of regional economic development, clearly, in a free society, people have the right to live where they wish, and it's not the government's job to be forcing people to move or, for that matter, to stay. But all of us, as individuals and as businesses, respond to the incentives that are created through public policy. There are number of areas of public policy in Canada that have encouraged people, we think, to stay in regions, and also in industries and occupations, in which, perhaps, the outlook for long-term employment and economic self-sufficiency is not so good.

It's difficult to predict in advance where growth in the future will come, but we do know that it is good for our economy in the long run to encourage the mobility of people and of capital and businesses within our economy so individuals will go to areas and pursue careers and opportunities that make the most sense for them.

We see this legislation as moving a small step in the direction of improving that, which is one of the reasons we support it.

We don't think it's a good policy, frankly, for government to be encouraging people to be immobile. Government shouldn't be forcing them to move or forcing them to switch occupations, but public policy should be designed to create incentives for people to do what is, in the long run, in their best interests, for themselves and their families. That really is the test we should use in evaluating any piece of legislation such as this.

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[Translation]

Mr. Crête: I have a question about the intensity rule. It seems to me that your brief implies that those who make frequent use of unemployment insurance deliberately set out to do so because people in some areas of Canada are less inclined to work than in other areas.

[English]

Mr. Finlayson: To allay concern about any moral judgment on the behaviour of people, again I'll go back to what I said a moment ago. The point is not to express criticism or praise of individual behaviour, but simply to note that people respond in rational ways to the incentives that exist for them in their own lives, and that response includes how they behave in the area of employment and the labour market. So I'm not suggesting that people who are repeat or frequent users of unemployment insurance are all doing that as a matter of deliberate choice. There may be some who'll do that, but I wouldn't by any means want to suggest that it's the majority or all of them. There are complicated reasons for why there would be repeat use of unemployment insurance.

If, however, people are encouraged to remain in industries or occupations or regions where the likelihood of stable employment is less, then it follows, sort of logically, that there will be a higher incidence of repeat use in that situation.

So we support this intensity rule. It's a relatively minor change in terms of the percentage of reduction in the average benefit rate. We think it's a step in the right direction. We understand the sensitivities around it and the difficulty of going any further than Minister Young has proposed in Bill C-12.

In our comments on the intensity rule we're not making a moral judgment on the behaviour or actions of individuals.

[Translation]

Mr. Crête: Am I to conclude that in your view, the government has no responsibility to ensure that people have the possibility of living in certain areas of the country and that you consider humans as nothing more than workers acting solely out of economic considerations?

[English]

Mr. Finlayson: You won't be surprised to hear that that isn't the way I would put it.

First, the employment insurance program is one program. It's a $15-billion to $16-billion program; it's a very important one. There is a whole range of other programs at the federal level, and even more at the provincial level, that provide income support and assistance for people in a variety of circumstances. So I don't think it makes a lot of sense to load primary responsibility for income support across the whole Canadian economy on this one federal government labour market program called the employment insurance program.

Again, I think it makes the most sense in the long term. This is a piece of legislation that's designed to change the employment insurance system for the next five or ten, or perhaps fifteen, years, and we need to look at it in that long-term context. It's not going to change anything overnight.

This is a piece of legislation that aims to increase the incentives to work that people will have. It tries to increase in a small way the incentives people have to be mobile. We are convinced that in the long run that will be good public policy. We recognize that it's going to pose some problems for individuals who've become used to the program as it's been traditionally structured, but we note that a lot of the changes that are proposed in it are gradual. Various transitional funds have been put aside as part of the legislation to try to mitigate its effects.

Overall we see it as being a balanced and credible effort.

The Vice-Chair (Ms Augustine): Mr. Grubel.

Mr. Grubel: I welcome the Business Council of British Columbia.

I really enjoyed your excellent presentation, Mr. Finlayson.

My colleague and I, independently - we just compared notes - heard you say at the beginning that your council supports retraining and skill enhancement programs, but later in your presentation you discussed evidence that says they are not cost effective. I wonder if you could clarify this for us.

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While we have the line open like this, maybe I can just ask this question. If you had a choice, would you prefer these retraining and skill enhancement programs to be run by the federal government or by the provinces, assuming that the financing remains the same?

Mr. Finlayson: On the general policy position we have regarding training and development in employment programs, Mr. Grubel, there is a lot that's new or that will be new in this legislation in terms of these employment benefits. We're not really in a position to evaluate those definitively. We do know from the past, however - and this is why we're cautious about having expectations that a lot of these programs will be very effective - that the results of a lot of training and job development programs at the federal level have not been very good. Looking specifically at the five components that are included in the legislation under the heading ``Employment benefits'', we'd be very skeptical of the policy rationale for using wage subsidies. We're certainly skeptical that direct job creation projects by government are a good use of public money. On the other hand, we think the component of the employment benefit package that proposes to provide support for people to get training and to invest in training and skill upgrading could have some promise.

So we do suggest a cautious approach to the spending of this money. We did put forward the idea of pilot projects being run to see which programs will be effective before we commit large sums of money to them. Overall, I guess we'd probably prefer to see less money spent on employment benefits and a greater reduction, frankly, in the premiums that stand in the way of job creation.

On the federal-provincial question, we are currently doing some work around the whole subject of decentralization and federal-provincial power sharing or modernizing of the federation. We're not in a position yet to publicly state what our recommendations would be. We do see some benefits, I think, in integrating training programs and skill development programs as closely as possible, not only with the workplace but also with education policy and education programs. Since that falls under provincial jurisdiction, there might be somewhat of a bias in favour of doing a lot of this kind of program activity at the provincial level.

Mr. Grubel: Just as a quick follow-up, would you agree with the fact that the answer provided earlier by the representative for immigrant training groups was really quite incomplete on evaluating the merit of those programs? She suggested that 85 out of every 100 people that they train find jobs afterwards. Would you agree that the question really ought to be what the number is, relative to the 100, who would have found a job if they had not received that program? It might have been that instead of 85 finding a job, 80 would have been employed, and that the net benefit of all those expenses was really only a gain of five extra people who have found work. Would you agree this is the way in which one should look at the effectiveness of those programs?

Mr. Finlayson: We did not have an opportunity to hear the other presentation so I hesitate to say too much about it. In general, though, we would agree with you that it is the incremental effect of any of these programs that needs to be measured, not the aggregate effect of how many people would find work.

I would also note that in looking through a large number of evaluation studies that have been done on federal training and employment programs, and also in looking through the report of the Auditor General from last year, a lot of the programs that have been looked at don't even have the success rate that you're referring to - in the case of these immigrant programs, the 85% - recognizing that in the long run it is really the incremental jobs and the incremental benefits that need to be measured. Of course, that's very difficult to measure in these kinds of evaluation studies, but conceptually I agree with the way you've put it.

Mr. Grubel: It's very strange that international studies show the same result. It is just very difficult to get these net benefits high enough in relation to what it costs for that small increment. Yet I'm surprised that you are expressing optimism that in this case experimentation will come up with something. Why don't you just say you are extremely skeptical that anything can be done, or even come down negatively on it?

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Mr. Finlayson: We're not a research organization. You heard from the Fraser Institute earlier. They are a think-tank and a research organization. Maybe they've had more time to look at all the hundreds of studies that exist, not only in Canada but, as you correctly point out, internationally. We haven't done that.

We know from our own experience that one wants to be very cautious and skeptical about the benefits of these programs. I don't think there's anything wrong with trying some pilot projects to see what works. It's certainly conceivable that some training and job development programs will be more successful than others and there may be a number that in fact have very good results. A degree of experimentation, it seems to me, is quite appropriate to try to determine that, and it's certainly appropriate to use pilot programs and experiments before committing huge sums of money to Canada-wide programs.

That was really the point I think we were trying to make, perhaps not clearly enough: that we should have an appropriate degree of experimentation and a number of pilot projects out there to see what works. Then if the government wishes to spend money in this area, it will be well advised to channel the resources into those programs rather than into ones that have less effective results. We're a little concerned that won't happen here, but in fact we're going to have a sort of rolling out at the national level of these five new employment benefit programs, with no particular guarantee they're going to produce good results. We're concerned about that.

The Vice-Chair (Ms Augustine): Mr. Nault.

Mr. Nault (Kenora - Rainy River): Thank you, Madam Chairman. I have two questions. I'll put them together.

The first issue that strikes me as being very interesting in this whole debate is that your Business Council has come out very strongly in favour of maintaining a strong national employment insurance scheme, whereas a variety of groups across the country, even a few regional parties, have suggested these particular programs should be turned over to the provinces. Can you tell me, first, why the Business Council favours having the federal government maintain this program, and what benefits you see from the federal government doing so? I think it's important to put that on the record. Since you're from B.C., with a disproportionate amount of people in the opposition, maybe they're having problems representing their constituents when it comes to this particular issue, federal versus provincial jurisdiction.

That's one question. The other one deals with the fact that in your presentation you deal with some disincentives that were built into the system over the years. One of them is that it has made it attractive for some employers to rely on short-term lay-offs as a human resource management tool. I think that's a very important recognition of the behavioural change we're looking for as it relates to this, and it deals specifically with the corporations, big and small, that you represent.

I'd like to know, based on that assumption, whether you would agree as well that the phenomenon of part-time employees has gone up significantly because of that use of the UI system, or way to get around the UI system or around paying premiums by having employees work less than fifteen hours, and whether the reason why you support first-dollar coverage is that you'd like to change that behaviour. I think it's important to get that on the record.

The last one is this group here suggests it represents the retail sector, and the retail sector and the service sector have been asking us for an exemption for students. I'd like to know what your position is on the interest in an exemption for students on first-hour coverage under the proposed UI reforms.

Mr. Finlayson: I'll deal briefly with the national versus provincial employment system. Then Mr. Johncox, my colleague, will speak about the matter of disincentives. Then I'll come back to the retail sector.

We haven't looked at changing the basis of the employment or unemployment insurance system so it becomes a provincial system. In theory you could do that. In the United States the individual states play a much larger role than the provinces in Canada in delivering unemployment insurance benefits. On the other hand, it's probably beneficial for our labour market overall to have some national programs in a number of these areas. One of the benefits of a national unemployment insurance system is that it does provide some incentives or lubricants for the mobility we want to see generated in the Canadian economy.

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The other key factor in the Canadian case is that the degree - this is not a criticism but a constraint on moving to a provincial model - of interregional transfer from one part of Canada to another under the current system is very sizeable and substantial. If we were to move away from that by creating ten or more separate provincial unemployment insurance systems, it would be a revolutionary change in labour market policy and would probably be extremely disruptive to the labour market in some ways.

In addition, you can rest assured that a number of the provinces would want no part of provincial unemployment insurance systems. They wouldn't want to see that develop at the provincial level. So it would be almost impossible, as a legislative matter, to move in that direction.

We haven't looked in detail at the benefits of the federal model versus a provincial one, but we're certainly not calling for a change in the existence of a national unemployment insurance system at this time. We think the key challenge is to fix some of the defects of the current system and hopefully get better results on a nationwide basis.

Mr. Gary Johncox (Vice-President, Human Resources, MacMillan Bloedel Limited): With respect to disincentives, I think I am probably fairly representative of most large employers in the country. The timing and the length of a temporary closure, from our perspective, is usually quite clear. We're going to do that for market reasons, maintenance reasons, and for a whole host of business reasons. But what inevitably happens is that we are strongly persuaded by our unions to take a shutdown that best ensures an unemployment insurance entitlement by their members and our employees.

So that becomes a labour relations issue of some intensity, particularly if the shutdown is going to cross over from one week to another. We are usually persuaded to go along with the union's wishes on that matter.

So, yes, to answer your question briefly, I think there is a disincentive built into the existing system. That, however, is going to be largely removed if the government goes ahead with its change from a weekly system to an hourly system. I expect that tension will disappear.

Mr. Finlayson: Very briefly, on the retail sector's exemption for students from first-dollar coverage, we have not looked at that specifically. Our retail members have not brought that to our attention.

I have read some material that deals with it. It does have some attraction for industries like retail that employ large numbers of young people.

There's a very high youth unemployment rate, which is a terrible problem in Canada. So for anything we could do to help encourage the employment of young people, I think we would want to be positive going into looking at it.

On the other hand, if the effect of exempting students from first-dollar coverage was simply to encourage employers to hire students and lay off other workers, or hire younger employees and lay off older employees, then I'm not sure that we'd be any further ahead.

It's something we'd be prepared to look at. We haven't analysed it so far. We're not in a position to take a public position on it today.

The Vice-Chair (Ms Augustine): I want to say how much we appreciate your presentation and your engagement with us this afternoon. We thank you.

For the committee members, we'll take a short, two-minute break before the next presentation.

Thank you very much for participating with us.

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The Vice-Chair (Ms Augustine): Order.

We are keeping in mind that we have a vote and the bell is going to ring. So we'll have to be very quick.

We want to welcome, from Toronto, the Canadian Manufacturers' Association. This is our final session of the day. We apologize for having you wait. We have been running a bit behind through the sessions today.

Please begin. Use a few minutes to speak to us, and we will use the remaining part of the half-hour to ask questions of you.

Mr. Ian T. Howcroft (Director, Human Resources Policy, Canadian Manufacturers' Association): Good afternoon.

My name is Ian Howcroft, and I'm the director of human resources policy at the Canadian Manufacturers' Association. With me are Sandy Douglas, the chair of the CMA human resources committee and director of employee relations for Consumers Gas, and Susan Houston, a member of our HR committee, as well as manager of employment issues for Dow Chemical Canada Inc.

The Canadian Manufacturers' Association appreciates the opportunity to make its presentation to the standing committee with regard to Bill C-12, the Employment Insurance Act. We provided written comments to the committee on March 25, 1996.

As most committees will be aware, the CMA has had a long-standing interest in involvement with the unemployment insurance system. We also participated in the earlier aspects of this initiative under the auspices of the social security review system.

We are pleased that the government has recognized that the current system is no longer workable or appropriate and that major changes are necessary.

The world in general and the way that work is done specifically have changed dramatically over the last 20 years. It is necessary to reform, change, and adapt our legislation and regulations to take these realities into account.

Before we provide substantive comments with regard to reforming the unemployment insurance system, it's important to note a few facts about the CMA.

This year we will celebrate our 125th anniversary. We are a national voluntary organization with offices in all provinces. Our members produce almost 80% of Canada's manufactured output. Almost two million individuals are employed directly in manufacturing, and approximately three million more people have jobs that depend directly or indirectly on manufacturing.

To look at this in another way, manufacturing directly accounts for 18.5% of Canada's GDP. If one takes into account the indirect contribution to economic activity, the total value generated by manufacturers and their suppliers in the goods and services sectors amounts to approximately 55% of Canada's gross domestic product. These statistics clearly demonstrate the importance of manufacturing and explain why we are often referred to as the engine of the economy.

In today's global marketplace government must do all it can to ensure that it is as competitive as possible. We must cut costs, remove inefficiencies, and create a system that allows our economy to grow in order to support and protect our social programs and other programs such as unemployment insurance, or, as it will be known in the future, the employment insurance system.

The unemployment insurance system has grown far beyond what was originally intended. There must be a recognition that the unemployment insurance system can do only so much. If we can recognize the limits of what it can do, we can design it to deal more effectively with those who lose their jobs through no fault of their own. The system must do all it can to ensure that covered individuals re-enter the workforce as quickly as possible.

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Several years ago the CMA began working with a coalition of other business organizations on the issue of unemployment insurance. A report was produced that contained numerous recommendations and it was submitted to the government in June 1994. Much of what was contained and suggested in that report is still relevant today.

The fact that several major business associations worked together closely and devoted the resources necessary to produce that report shows the importance we place on this issue. Unemployment insurance is an enormous system, as demonstrated by the fact that almost $16 billion was paid out in benefits last year.

I would like to make a few comments on the premium rate. While we recognize a small reduction in the premium rate was provided for in 1996, we do not feel that decrease went far enough. We therefore want to take this opportunity to express our view that the government must further reduce the premiums as soon as possible. It is important to note that at the end of 1995 there was an approximately $1.5 billion surplus in the unemployment account. At this time it is projected that by the end of 1996 the surplus in that account will be approximately $5 billion to $6 billion.

The government has recognized that payroll taxes kill jobs and a positive way to promote job creation would be to reduce such taxes. Consequently a significant reduction in the premium rate for both employers and employees must be implemented. Such a reduction would be a strong signal from the government that it continues to support job creation and is taking the necessary steps to create an environment that promotes job creation and attracts investment.

A significant reduction in the premium rate would still allow for a surplus to be maintained in the unemployment insurance account. In the past we have supported the creation of a surplus, but it must be created over a reasonable period of time. We would never support that surplus exceeding $5 billion, because we're sure that would be a sufficient level to ensure increases in the premium rate don't occur during down economic times. It is counter-productive to create a significant surplus over too short a period. At this time we feel the balance must be tipped in the area of reducing the premiums.

We are also pleased with and support the government's decision to reduce the maximum weekly insurable earnings rate to $750. We're also glad the government has decided to freeze that level until the average industrial wage has reached approximately the same level. We hope the government continues to be of that view.

I would now like to ask Susan Houston to provide further comments on some of the substantive issues covered in Bill C-12.

Ms Susan Houston (Member, Human Resources Committee, Canadian Manufacturers' Association): Overall, CMA supports the direction in Bill C-12. However, in many areas we do not feel these reforms go far enough. The bill still leaves substantial inequities in the system. The CMA has always maintained the position that an unemployment insurance system must be based on insurance principles.

Unemployment insurance should not be primarily a social program, particularly given the fact that it's funded solely by employers and employees. It is inappropriate to use the unemployment insurance system to transfer funds to the poorest regions of the country rather than to help unemployed individuals by creating long-term solutions. This approach only perpetuates the situation and allows the problems to continue and worsen.

The unemployment insurance system has allowed governments to deal with the problem of unemployment by way of passive reliance rather than by providing lasting solutions that would lead to real job creation. If a region of the country has a high unemployment rate, that issue should be dealt with rather than just providing more generous benefits to those who are in the unfortunate position of being without work.

We also recognize there is a human, and consequently a humane, element that must be dealt with. Individuals in areas of high unemployment are required to work fewer weeks in order to qualify, while at the same time be able to receive unemployment insurance benefits for a longer benefit period. Bill C-12 will reduce the degree or magnitude of this situation, but it still does not address the overall problem. The unemployment insurance system should not inhibit labour mobility. If an area experiences high unemployment rates, individuals should not be encouraged to stay where there are no jobs by providing superior benefits. Rather, the system should create an incentive for individuals to seek work where opportunities exist.

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We recognize that almost everyone would rather have a job and be a productive member of the labour market than collect unemployment insurance benefits. Government also recognizes this and even stated in its original discussion paper that the best form of social security comes from having a job. However, the current system allows for individuals to collect more generous unemployment insurance benefits more easily in areas where unemployment exists. This does not make economic sense. Consequently we recommend there be uniform eligibility criteria across the country. Furthermore, benefit duration should also be uniform across the country.

The unemployment insurance system should not be used as a social program by which the government can pursue other social objectives or income redistribution. One example of where this is often noted pertains to fishers' benefits. Independent fishers are not employees and in our view should not be eligible to collect unemployment insurance benefits. We do recognize the serious problems currently inherent in the fishing industry, but we do not feel these problems should be solved through the unemployment insurance system. Rather, special and focused programs and solutions should be sought through the Department of Fisheries, which has the requisite expertise and resources to deal with and hopefully address and solve these issues and problems most effectively.

The presence of social objectives being pursued under the unemployment insurance system bears an exceptionally high premium that's being charged to employers and employees. Again, by returning the unemployment insurance system, or the employment insurance system, to insurance principles and limiting its objectives to what are reasonably possible, the premium could be further reduced. In our view the system would be much improved if such cross-subsidization were eliminated.

We would like to provide specific comments and recommendations on Bill C-12 and the government's direction in creating the new employment insurance system. As was mentioned at the start of our comments, the CMA supports the direction of reducing the cost of the unemployment insurance system. However, we would like to see the reforms go further, to create a better system that is more reflective of today's environment.

We cautiously support the move to an hours-based system from a weeks-based system, since it should ease the administrative burdens that currently exist.

We still have concerns about expanding the system to cover part-time employees. We have always argued that before unemployment insurance benefits should be payable, or premiums due, an individual must have a major attachment to the workforce. Consequently we would suggest that the minimum hours required to receive benefits be increased. In past submissions we have advocated that there be a uniform requirement of 20 weeks of work in order to qualify for unemployment insurance benefits. A requirement to have 700 hours worked would equate to 20 weeks of work, if one uses a basic work week of 35 hours. We therefore suggest that a longer number of hours be used in order to quality for benefits; that is, 700 hours minimum in all cases.

Again, it is also essential that uniform eligibility criteria be used across the country; that is, no regional variation depending on the unemployment rate.

The CMA is pleased the government has decided to reduce the entitlement period, although we would like to see a more substantial reduction from that being proposed. It's proposed that the current maximum period of 50 weeks be reduced to 45 weeks. In previous submissions we argued that the length of the benefits period should be capped at 26 weeks. We also argued that individuals should receive one week of benefits for two weeks of work, with a maximum cap of 26 weeks of benefits. Consequently the CMA still feels a 45-week entitlement period is too generous and should be significantly reduced.

Similarly, we are pleased that repeat claimants will experience a reduction in benefits for subsequent claims. It is justifiable and makes economic sense to tie together usage, costs, and benefits, to ensure equity within the system.

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To create a more equitable system, we also strongly recommend that further study and exploration be given to employer experience rating. Many employers, particularly those in manufacturing, continue to pay far more in unemployment insurance premiums than what is paid to workers at their companies or in the manufacturing sector as a whole.

While we recognize that some degree of cross-subsidization is going to occur under the system, we would like to see the degree of cross-subsidization reduced. One way of addressing this issue would be to provide for some type of experience rating for employers. It is unfair for a company or sector to continually pay more in premiums in order to subsidize the cost of other employers' or sectors' employees. Any type of experience rating program, though, would have to be easy to administer and be cost effective. It makes little sense to spend more in administering an experience rating system than would be returned in benefits to an individual employer or the system as a whole.

Sandy will now continue the presentation with some comments on employment benefits.

Mr. R.A. Sandy Douglas (Chair, Human Resources Committee, Canadian Manufacturers' Association): Thank you, Susan.

Good evening. My name is Sandy Douglas and I am chair of the CMA human resources committee. I am also director of employee relations for the Consumers Gas Company here in Toronto.

The new employment insurance system will also focus more on employment benefits and services. Although this sounds very positive and practical in theory, we must offer some concern with regard to this approach.

Under the current developmental uses programs, approximately $2 billion is spent annually on training and related programs. CMA has long argued that many of these programs are ineffective in returning unemployed workers to the workforce. Before more money and resources are allocated to such programs, or to new and untried programs, a complete examination and audit of existing training programs and vehicles must be conducted.

We already spend billions of dollars on training without realizing much, if any, improvement in our system. A program's success must be determined by the number of individuals who successfully find meaningful employment, rather than by counting the number of individuals who go through the program. It seems that the goal of some training programs is not to ensure the claimant ends up with a job, but rather is to allow for an extension of the benefit period.

The CMA supports training, but it must be for the purpose or result of a job. While we support the direction and the intent of this aspect of the Employment Insurance Act, we feel much more work and study is necessary before hundreds of millions of dollars are poured into the system. It is productive to try to create a system that encourages active participation of covered individuals in the pursuit of a new job, rather than one that creates a system of passive receipt of benefits. We recognize that there are better ways of promoting this and some suggestions may be valid, but before we can support the concrete proposals and the actual spending of resources, there must be some demonstrable evidence that such programs would in fact result in returning people to the workforce.

There is an opportunity to develop partnerships that will be able to best determine the relevant training that leads to employment. The more that training is tied to the workplace, the more effective it will be. There have been a few such successful programs that could be used as a model. Let's build on the successes we have had.

At this point I would like to reference the CMA's on-site program, which places professionals with expertise in occupational health and safety and environmental issues in work-related positions. This program is extremely successful. In fact, 70% of those who participate in the program had a full-time job at the end of the work period. I am confident this is one of the most successful programs - if not the most successful program - sponsored by the developmental uses fund. We would suggest that having demonstrated this kind of success, this program should be expanded, while others should be terminated or improved. It is a case of best focusing limited and declining resources.

Finally, there is also the recommendation to expand employment service coverage to those who have had an unemployment insurance claim in the past three years - five years for cases of special benefits. We have some concerns. It is essential that the unemployment insurance fund be used as efficiently as possible. Logic would indicate that only those who are currently under the system should be receiving such benefits. Consequently, we do not support this recommendation.

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The CMA would be pleased to provide input and assistance to try to develop changes to the overall training system proposed under the Unemployment Insurance Act and what is currently offered under the development uses programs to ensure that we have a system that is result based. It makes no sense to expend resources on training if the result is not a job or the likelihood of a job. Too much money has been wasted on training programs that benefit no one other than the trainer.

In conclusion, we hope that these comments will be of use to the committee as you study the Unemployment Insurance Act and make recommendations to improve this piece of legislation.

The unemployment insurance system is certainly in need of a major overhaul to ensure that it will effectively deal with those who are unemployed in both a compassionate and a productive way. The system should ensure that it does all it can to provide benefits for those who lose their job through no fault of their own and provide assistance to those who can benefit from training or other programs with a real job as the goal or the result.

This must be done within the context of affordability, as high premiums or payroll taxes are a disincentive to creating new jobs.

The CMA appreciates the opportunity to provide these comments to the standing committee.

The Vice-Chair (Ms Augustine): Thank you very much.

We will now do a round of questioning, starting with the Bloc. Mr. Crête.

[Translation]

Mr. Crête: I'd like to know whether the Canadian Manufacturers' Association is willing to do more, so that the required social programs can be implemented if, as it suggests in the brief, the unemployment insurance system is changed to function solely as an insurance plan? I'd like to know to what extent the association is willing to pass on to society a part of the productivity gains that it would expect from such a change.

[English]

Mr. Howcroft: We'd be pleased to work with government in identifying areas where targeted programs can be more successful than is currently provided for under the unemployment insurance system. The example we gave was to deal with the fishers. We felt that the Department of Fisheries could best deal with unemployment problems...[Technical Difficulty - Editor]...in coming up with suggested solutions.

[Translation]

Mr. Crête: You are proposing a uniform national system with 20 weeks. You realize that the implementation of such a system would result in very significant social costs. Your association would expect to benefit in terms of productivity but what is the reaction to the likely social costs when people have no choice but to move or when the choice boils down to survival or leaving home? I'd like to know what your association would be willing to do in concrete terms if the unemployment insurance system functioned solely as an insurance scheme and you were to benefit from productivity gains? Would you be willing to dig deeper into your pockets and pay more taxes to the government because of your increased productivity?

[English]

Mr. Howcroft: I recognize the problem that would result if we were quickly to go to that type of a system. That's why in our submission we advocated that there should be an appropriate or reasonable transition period to deal with this. We focus on the humane aspects of dealing with this in a productive way.

To answer your last question bluntly, no, we would not be receptive to the idea of more taxes. What we want to do is reduce the tax burden, payroll taxes and other taxes that employers in Canada now face. We feel this would help to create a more competitive environment, which would attract investment, which would ultimately lead to job creation. As the government has so eloquently stated, the best social program is a job. That's what we'd like to see: people having jobs. You don't do that by adding to the tax burden and creating a disincentive to investment to Canada.

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The Vice-Chair (Ms Augustine): We'll now move to Reform.

Mr. Grubel: I'm glad you brought up the subject of the surpluses that are accumulating in the UI account. I believe they are based not even on the consideration of what savings might be resulting from this.

I made some calculations. At the end of this cycle of the last budget, there would probably be a surplus accumulated of nearly $20 billion. I calculated that if in fact what you suggested is done, which is that the premiums will be reduced, and in 1997-98, or a year later, there would be no more additions to the surplus, then the deficit of this government would go from $17 billion to $22 billion and it would not hit its target.

So I wonder whether you could comment on the probability of your pressures being really fruitful and bringing about what I think is a necessary reduction in premiums.

Mr. Howcroft: I'm not sure if I can quite hear the full question. The sound here is a little inaudible for me.

The number I have seen for the projection for the surplus at the end of this year is between $5 billion and $6 billion.

We would like to see most of that given back in premium reductions to both employers and employees, as that would be a reduction in the payroll tax, which would again go toward creating a more competitive environment, which would help attract more investment, which would ultimately lead to the jobs that we so sorely need.

I'm not sure if that answered your question, sir, but, as I say, I couldn't quite hear everything.

Mr. Grubel: Yes. It continues for the next two years equally in the budget with adding a surplus of $5 billion each year thereafter. If the government did what you are suggesting, the implication is that its targets would be way off. That's because in 1998-99 the deficit projected to be $17 billion without the surplus from the UI premiums would in fact be $22 billion.

So I hope you are successful in bringing about this change, because I agree with you that it is not correct for employers and employees to make that much of a contribution to the reduction of a deficit that accrues to all Canadians.

Thank you.

The Vice-Chair (Ms Augustine): Thank you. You hear some bells in the background. They are summoning the committee to a vote in the House of Commons.

We have about ten minutes. We'll spend five of those minutes on questions from the Liberal side. So please bear with the sound of the bells in the background.

We'll start on this side with Mr. Allmand. Please keep your questions brief.

Mr. Allmand: I notice that in your brief and your comments you say you support the bill but you think it should have gone even further in several areas.

I don't know if you're aware of the fact that only 46% of the unemployed today are covered by the Unemployment Insurance Act. In 1990 it was 87%.

I guess I have to ask you this. You not only support this bill but you want it to go further. What are these unemployed people to do who have no unemployment insurance, which you want to cut still further? Are they to starve in the streets? Are you suggesting we have more soup kitchens?

What's the solution for these people? The unemployment rate is still around 10%. I come from Montreal, where it's around 15% or 16%, officially. Thank God for unemployment insurance. At least people are buying their groceries, paying their rent and keeping the economy from going even further into a hole.

If you keep cutting, how are these people to live when they're unemployed?

That broke down the system. I can't hear anything.

The Vice-Chair (Ms Augustine): We have some technical difficulties.

Mr. Howcroft: Can I be heard now?

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We recognize the unemployment insurance program has not done all things for all people. In our view that is part of the problem. It has been expanded so much over the last decade or so that it is not able to deal effectively with all these problems that society and unemployed workers feel are the case. We would like to see an unemployment insurance program target those who are covered and who are paying into the system. Other problems should be addressed through other more target-focused programs. We want to limit unemployment insurance to dealing with what it can do effectively and come up with better programs, more focused and targeted programs, to deal with the others in society. No, we don't want to see people going to soup kitchens or to see that social way of addressing the serious problems we face.

Mr. Allmand: In other words, you would prefer or support a program that would be completely unemployment insurance but that would have reasonable rates of support for people who are unemployed while they're unemployed.

Mr. Howcroft: Yes. We feel that's what we have suggested. We want to be fair, we want to be humane, because we recognize the difficulties unemployed people go through and we want to work with government to address these problems.

The on-site program we referenced in our formal remarks in our view has incredible success. That's the type of initiative we'd like to see more of. With a 70% rate of success, I don't think there's another program that can compare. That's the type of program we feel more resources should be placed on.

Mr. Nault: I have two quick questions. One is about the dilemma this committee finds itself in. This morning we heard from the Canadian Labour Congress. They represent almost the exact amount of people who are in the economy you profess to represent, some two million employees and employers; in their case employees. They came before the committee today and said these particular changes are way off-line. Of course, try to keep in mind these employees, or the people they represent, pay premiums as well. They're suggesting, quite frankly, these changes go much too far in cuts. Your presentation suggests we don't go far enough.

What I'm trying to find out overall is whether you see there is a balanced package. For a politician it's always a good thing if both sides, when they're polarized like this, disagree with the government. It means we must have done something right. I'd like to get your opinion on that, because this idea of taking this program and giving it to the employers and employees to administer, which is what some people suggest, I think would be a nightmare if what I've heard this morning and then this evening bears out.

That's one question I would like you to try to rectify for me. The other question is you have given us some advice and suggested, albeit passively, that you are in favour of training programs but they should be targeted and they have to be results oriented. That suggests to me you believe the system should allow for that as a starter, and if we did it right, then it would be of benefit to the employers you represent and to the economy as a whole. Would it be fair to make that statement on your behalf?

Mr. Howcroft: To answer your second question first, yes, that would be our view. We feel there is an important need for training. Our problem is that much of it has not been very effective, given that we have the same unemployment problems we have faced over the last ten or twenty years.

On your first question, again, we would like to see the premiums reduced for both employers and employees. We feel that would be an important incentive to creating an environment that improves our competitiveness, which would help inspire job creation. We've long said employers don't create jobs, it's customers who create jobs. So we have to have a market out there that meets that demand and we end up with that demand, which creates jobs.

Mr. Nault: I would like to have a supplementary to the first answer, which is the one dealing with training. The labour movement has come before the committee suggesting we shouldn't have training in the EI system at all. It should be within general revenue and we should create training programs by that mechanism. Am I correct in assuming, then, you're recommending we use the unemployment insurance fund for training purposes, as we currently do, under these particular reforms?

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Mr. Howcroft: In our view, the moneys collected under the unemployment insurance fund should be used to train only those who are covered by the fund. It shouldn't be used to train just anyone. It's not a social program. It gets back to the insurance principle. We have to target and focus to ensure that we will get the biggest bang for our buck.

Mr. Nault: I agree with you that in fact we are going to be training those who have an attachment to the unemployment insurance system and to jobs in general.

Would you agree that this fund is the right place and mechanism to get into that training?

Mr. Howcroft: Yes, we feel that it is an important aspect of unemployment insurance. We want to encourage active participation, and job training is an important aspect of that. But we want to ensure that it's effective job training with a job as the result.

The Vice-Chair (Ms Augustine): I will disappoint Mr. Regan by asking him to hold his question back. Maybe we will be able to communicate with Mr. Howcroft at some other time.

We express appreciation for your being with us and again apologize for the late start with you and for your wait to speak to the committee. Thank you very much.

This meeting stands adjourned.

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