Human Resources Committee on May 8th, 2008
Evidence of meeting #29 for Human Resources, Skills and Social Development and the Status of Persons with Disabilities in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was money.
A recording is available from Parliament.
On the agenda
- Andrew Jackson National Director, Social and Economic Policy, Canadian Labour Congress
- Georges Campeau Professor, Mouvement autonome et solidaire des sans-emploi (réseau québécois)
- Pierre Céré Spokeperson, Conseil national des chômeurs et chômeuses
- René Roy Secretary General, Fédération des travailleurs et travailleuses du Québec
- Roger Valois Vice President, Executive Committee, Confédération des syndicats nationaux
- Claude Faucher Vice-President, Centrale des syndicats démocratiques
- Robert Blakely Director, Canadian Affairs, Building and Construction Trades Department, AFL-CIO, Canadian Office
The Chair Dean Allison
I'd like to call the meeting to order, pursuant to Standing Order 108(2), study of the Canada Employment Insurance Financing Board.
Once again, I want to extend to our witnesses our thanks for their being able to respond in such short order in terms of dealing with the short timelines and being able to come here today.
Based on what we decided at pre-committee, each of you will have a bit different time in terms of presenting. I believe our clerk has indicated to you what that is. We felt it was important to get more in, and that's why we've asked some of you to come in with a little shorter presentation.
I'm going to start with what the MPs have as far as a witness list goes and move through it that way. I realize you may not be set up around the table that way. We'll do that. We'll hear all your testimony and then we will start with a first round of seven minutes, followed by a second round of five minutes, and continue in that order.
So without any more preamble, I want to thank you all again for being here. I'm going to start with the Canadian Labour Congress and Mr. Jackson, who's been here before.
Sir, welcome back. You have seven minutes. I will let you know with a hand gesture that there are one or two minutes left, in case you need some help with the timing. Mr. Jackson, seven minutes, sir.
Andrew Jackson National Director, Social and Economic Policy, Canadian Labour Congress
Thank you for the opportunity to appear.
I might just say, as I had the opportunity to say to you earlier, Mr. Chair, that we really appreciated the recent report of the committee on employability issues. It was a very constructive document and quite an important reference point moving forward.
With respect to the EI Financing Board, I must say I'm a little unclear on process. I appeared before the finance committee yesterday on the bill. We have a number of specific suggested changes to the legislation. I hope it's appropriate to address those with you as well as with them.
This legislation incorporates a lot of what is in the present EI Act, a lot of which we wouldn't particularly like but which really represents no change. As I interpret it, what is really achieved in this bill...I think the intent is to make sure that any future surpluses generated from the EI system, moving forward, would be available to reduce premiums or perhaps to increase benefits rather than be swallowed up in the general government accounts.
I think that's a rather narrow purpose. From my point of view, the key problem and concern is that the past accumulated surplus of $54 billion will just sit there in an EI account, again integrated into the public accounts. In a sense, we're moving from an EI surplus of $54 billion in one account to a new EI account with $2 billion passed over to it—both of which are integrated into the public accounts, by the way. As I understand it, no cheque will actually be issued for that $2 billion by the Government of Canada; it will be made available to them. But if they draw on that $2 billion, the money will have to be repaid to the government. How that moves us forward is a bit unclear, to say the least.
It's important to flag the point that the accumulated surplus was built up from the mid-1990s. Over the first part of that period, the rationale for the surplus was that it was there to backstop the EI account. The rationale that is now being used by the Government of Canada before the Supreme Court to defend building up that surplus has shifted to the general right of the federal government to levy a payroll tax.
This is not in dispute, but I think it is important to flag the fact that the Supreme Court will be holding hearings next week into the legality of collecting that huge surplus through EI premiums. If the previous federal government had intended to reduce the deficit and the debt through a payroll tax, it could have done so. It chose to do it through the EI premium, which is properly constructed as a social insurance program premium. But nobody would have chosen it as a form of taxation to reduce the deficit and the debt.
The key point I would make is that the EI surplus was built up, in significant part, on the justification that it was there to backstop the EI account, that it was there to cover deficits if we entered a prolonged recession. We know that $2 billion is not enough to accomplish that purpose.
I believe this legislation should be amended to explicitly state that the EI account remains available to the Government of Canada to backstop any deficits in the event of a recession. I believe that would actually reflect what Minister Flaherty has said to us--that if indeed expenditures were to exceed revenues over a year, the Government of Canada would make up the difference. I think that should be explicitly stated in the legislation, so that the accumulated EI account isn't just hanging there in limbo.
Going one step further, our preference certainly would have been that an amount of $10 billion or $15 billion be transferred to the new board so that it could cover a shortfall in the event of a recession, which $2 billion is not enough to do.
The other key concern I want to raise is that the mandate of this new board should be very narrow and confined solely to financing the program and managing the investment fund.
I think the intent of the government in subclause 5(2) of the bill is fairly clear, that the mandate is construed to be very narrow. However, at the finance committee yesterday I was quite taken aback by the Canadian Council of Chief Executives. They were saying that they wanted this new board to take on the role of doing research into the program parameters, to take on functions that are now performed by the department. In our view, all of the basic design features of the program, such as who qualifies for what period, how the premium is divided between employers and workers, should be the role of the Minister of Human Resources and Social Development. I don't believe it's the intent of the government to change that, but we suggest a specific wording that I think is important to clarify it.
So with this new board, there are questions of accountability to Parliament and about its function. I think it's extremely important to be very precise on what the mandate is.
The Chair Dean Allison
Thank you, Mr. Jackson, as well.
We're now going to move over to Mr. Desgagné and Mr. Campeau. You have five minutes between the two of you.
Georges Campeau Professor, Mouvement autonome et solidaire des sans-emploi (réseau québécois)
Thank you, Mr. Chair.
I would first like to thank the committee for inviting us. I am a professor of social law at the Université du Québec à Montréal and my specialty is the Employment Insurance Act.
I have analyzed Part 7 of Bill C-50, in collaboration with the Mouvement autonome et solidaire des sans-emploi. I would not wish to go back over the circumstances that led to this bill. I think it is a response to legitimate demands, because over the last 15 years the federal government has pocketed a portion of employment insurance premiums to fund things other than the expenditures provided for in the Act, at the expense of the protection that the Act is required to provide for premium payers. We would denounce this in the strongest terms.
We would also denounce the fact that these funds have been siphoned off at the expense of protection for the jobless. This substantial surplus — $54 billion — has been accumulated because of cuts made by the government under the Employment Insurance Act starting in the 1990s.
Is the solution what is being proposed in Bill C-50? We don't think so. I am going to summarize our position briefly, because I do not have a lot of time.
The bill provides for the creation of a Board which would be in charge of determining the premiums, and not of managing the employment insurance account. As my colleague from the CLC mentioned, that account would continue to be public and within the government's accounts. This merely determines the amount of premiums, according to very strict rules which in fact have already been in the Act since 2005. Under this bill, the Board will set the premiums and manage a reserve of $2 billion. Because Mr. Jackson has spoken about this aspect, I will not go into it in detail.
This bill does not improve the coverage provided by the scheme, and that is ultimately its worst flaw. In addition, it ignores the $54 billion surplus. As I said, in spite of the bill's pompous title, the Board will not provide funding. Its mandate will be very limited: it will not set premiums or manage the reserve. Ultimately, the government will be responsible for premium levels. I would also like to mention that this $2 billion reserve will be used in the event of a recession so as not to raise premiums, but it will have to be repaid later. It should also be noted that this is an additional amount that will be charged to the account.
This bill has a number of perverse effects. The Board may not get directly or indirectly involved in the coverage provided by the scheme. The bill expressly provides that the Board may not address that question. As well, the underlying philosophy of the bill is to stress the premiums aspect. We must keep in mind that since 1990 we have been dealing with a self-funded program. Obviously, the goal is to maintain a degree of premium stability. The direct consequence of that is that the protection provided by the scheme is going to remain at substantially the same level as at present, that is, about one third of what it was in 1990. We believe that this is a glaring perverse effect, and that is why we oppose this bill.
The third perverse effect is that since 2005, the chief actuary at employment insurance has no longer been doing the accounting. Changes were made to the accounting system in 2005 so that it must now be done on an annual basis only. This means that this $54 billion has disappeared in the accounts. The bill now takes this even farther.
The Board is told not to take into account the $54 billion credit balance in the Employment Insurance Account. Mr. Jackson just talked about the dispute between the union centrals in Quebec and the Attorney General of Quebec regarding the constitutionality of this surplus. In that case, at the trial level, Judge Gascon said that regardless of the constitutionality of the manner in which the funds were diverted, the Consolidated Revenue Fund, the Canadian government, is still accountable to the Employment Insurance Account for that money.
The efforts to divert attention from the surplus are ongoing. In my opinion, that is a glaring perverse effect. In view of all of its perverse effects, we recommend that this bill be rejected because it entrenches a self-funded system, as I am fond of explaining, and most importantly because it could keep protection at current levels. As my colleague Mr. Jackson said, the Supreme Court of Canada will be hearing a case next week that will address exactly the same question as led to the creation of this Board: the government's use of premiums for other purposes. It would be wise to wait for the Supreme Court to say whether the government had the authority to do that. Afterward, we will be able to provide an opinion.
The Chair Dean Allison
Thank you, Mr. Campeau.
We're now going to move to Mr. Céré and Madame Caya. You have five minutes, please.
Pierre Céré Spokeperson, Conseil national des chômeurs et chômeuses
On behalf of the Conseil national des chômeurs et des chômeuses, I would like to thank you, Mr. Chair, and all the MPs from the Standing Committee on Human Resources, Social Development and the Status of Persons with Disabilities. It is not easy to finalize the list of invited speakers, but we have to thank you for this invitation.
Yesterday, Mr. Jackson and I appeared before the Standing Committee on Finance to talk about Part 7 of Bill C-50, the creation of the Canada Employment Insurance Financing Board. It was not until the end of the meeting, at about 5:15, that I understood that Bill C-50 would probably pass in its present form, without amendments, because the government is making it a confidence issue. It sometimes takes a while to understand; that is how life is.
When I got up this morning, I almost wanted to sing along with Dalida, Paroles, paroles. But we have done our homework all the same, Mr. Chair. We have studied Bill C-50. And in particular, we have compared it with the current employment insurance legislation and found that there are not many differences. I am going to give you a few examples.
Paragraph 66(1)(a) of the current Act, which would be slightly amended, for example to include the Financing Board, says that the premium rate should generate just enough premium revenue to cover payments that will be made. That is what the current Act has said since 2005. The intention is to balance revenue and expenditures by creating the Employment Insurance Financing Board.
Subsection 66(2) of the current law says that the annual variation in the premium rate may not exceed 0.15%. We sometimes think that it is the Financing Board that would impose that requirement. It is already the case. Subsection 66(3) says that the Governor in Council may substitute a premium rate if it considers it to be in the public interest. That is also already the case now. We could keep going with this list for quite a while.
There are not many differences. There is however one difference between the current situation and the planned establishment of the Financing Board: the creation of an independent account. That would mean that workers' and employers' contributions remain in the fund and can no longer be siphoned off and used for other purposes. This is a significant difference.
We know that from 1995 to March 31, 2007, the government confiscated $54.1 billion from the fund. That is the official figure. The announced establishment of the Crown corporation for the sole purpose of managing the fund and setting premium rates is not bad news in itself. The independent account is not bad news. Very little else has changed, however. Most of the provisions of the bill were already in effect and under the Commission's responsibility. It would even be possible to envisage — and I am not proposing this — the establishment of an independent account under the control of the Commission, and this would do the job. In either case, with or without the Financing Board, under the Commission's responsibility or not, this would still not solve all the problems. Some of these problems have been raised here.
What do we do about the $54 billion that has been diverted and confiscated, when it should have been used to protect workers? The employment insurance scheme was severely cut in 1995-1996 and before, and a necessary and unavoidable improvement has to be made.
We have no illusions regarding the proposals that might be made. Section 80 provides that if the Employment Insurance Account is in deficit, the Consolidated Revenue Fund, the government, could lend it money, which the account must repay with interest. What's sauce for the goose is sauce for the gander. The government owes the Employment Insurance Account $54 billion, and Bill C-50 should provide that the Consolidated Revenue Fund owes the Employment Insurance Account $54.1 billion. In other words, if the Employment Insurance Account is in deficit, the government should not lend it money, it should repay it out of the $54 billion.
The primary, crucial and unavoidable issue, and the only one that deserves to be fought for, is the improvement that must be made to the employment insurance scheme.
A few days ago, we got the Monitoring and Assessment Report. One figure struck us right off: the beneficiary-contributor ratio. The way in which the government has assessed the coverage of the employment insurance scheme since 1940 is called the beneficiary-contributor ratio. At the moment, it is 46.1. In other words, out of every 100 workers who have paid employment insurance premiums, 54 will not be entitled to benefits if they need them.
This is the issue! It is eminently political. I invite parliamentarians to debate it. Either everyone closes themselves off in their own truths, their own discourse, their own way of seeing things, or we try together to find a solution we can all rally round to improve the employment insurance scheme and provide the workers of this country with better protection.
Thank you, Mr. Chair.
The Chair Dean Allison
Thank you, Mr. Céré.
We'll now move to Mr. Blakely from the Building and Construction Trades Department.
Welcome, sir. You have seven minutes.
Jim Abbott Kootenay—Columbia, BC
Thank you, sir.
First, let me thank you for the report your committee put out in April, and particularly for recommendations 1.6 and 1.7, which deal with relocation and the ability for our industry, which is 12% of Canada's GDP, to be able to meet its manning needs by helping people get from place to place in the country. Thank you very much for that; we're obliged.
In principle we're not opposed to the idea of a crown corporation holding assets. In the past we've urged that as an industry, construction could run its own EI program; leave it to us and we'll run it. We are, however, opposed to the creation of the Canada Employment Insurance Financing Board. If you look at the proposed legislation, what is that board constrained to do? It sets the premium rate, invests the money, manages the money, and maintains the reserve--and it does this on a break-even basis. It isn't even clear that the $2 billion seed money is going to be part of a reserve.
The board of directors that is to be appointed as senior executives, the seven wise men from the financial and insurance sectors, have no power over EI. They are obliged to manage the EI premium rate within fifteen one-hundredths of a percent from year to year. Why bother giving them even that power? If it's fifteen one-hundredths of a percent, it is going to take seven years for them to change the premium by 1%.
If you look at a 15-year history of what has taken place with the EI premium rate, in 1994 the EI worker premium rate was $3.08. Today it's $1.74. This board has no ability to change anything. They could simply have something marked out in the fifteen one-hundredths of a percent and have Vanna spin the wheel and that would be close enough.
The character of the board concerns us. We participate nationally in a number of programs with government as a management and labour consultium. Someone needs to be on the board to represent the people who are paying for this money. The seven wise men, these men of property and wealth to whom God in his infinite wisdom has confided the direction of the wealth sector, are not likely ever to be on EI. The representative nature of a board like this with a constituency is important. The seven wise men with the ability to move fifteen one-hundredths of one percent are seven wise rubber stamps.
The board is to work on a break-even basis. The Auditor General, the chief actuary, and a number of other people have told us that the amount of cash in there needs to be $10 billion to $15 billion as a starting point. Will any significant downturn in the economy break the bank? With the ability to ratchet the rate up at a very responsive fifteen one-hundredths of one percent, how will the EI fund ever recover?
What is left is program restraint: there isn't enough money, so we'll just pay people less. It's why, in the past, we've seen up to 70% of EI claimants being unable to access benefits.
Nowhere in this implementation bill does it suggest that the Government of Canada will guarantee payments. A number of people would like to see an ironclad guarantee, because we've already paid it. We do not see this crown corporation as a flexible, responsive policy vehicle.
Insurance is a contract of indemnity against the happening of a specific specified event. I pay money into EI so that if I'm unemployed I can get a benefit. Without the ability of this board to be flexible and look at where the economy is at any given moment, it cannot deliver on that contract of indemnity.
What is going to happen with part II EI funding? We're the construction industry; we train over half of Canada's apprentices. We need to know that the money that is going into training will stay there. We need to know that the industry adjustment programs that are being funded will stay there.
Will training suffer at the expense of benefits? Will training simply not take place if the seven wise men can't determine how much money there needs to be to actually make the program work?
The EI fund grew from contributions from workers and employers. They deserve to understand that the Government of Canada will guarantee their benefits and will guarantee the part II training that is going on. People paid the money into EI not as a deficit reduction tax, not as a discretionary spending pots for a series of successive governments of Canada. People have paid money for value, and they deserve to receive value in benefits and in training. Training is the way of the future.
If you look at the neo-conservative agenda in the United States, there is a school of thought that says that if you cut off or curtail money to a program, the program withers. When the program withers, you then say, “It's not doing what it should do anyway. Why don't we just do away with this?” I don't like to think this is something that could happen here in Canada, because it's not the Canadian way, but this looks like and smells like and feels like a curtailment of the EI system that Canadians have paid for and enjoyed. We would urge you not to implement these provisions of the budget implementation process.
Those are my comments. I hopefully kept within my time.
The Chair Dean Allison
You're pretty close. Thanks, Mr. Blakely.
We're now going to move to the last group. What we decided here was that there were three or four union groups from Quebec who would present. I have Mr. Valois, Mr. Faucher, and Mr. Roy. They're going to all have 10 minutes.
I don't know how you gentlemen are going to split your time up, but I'll let you know when you have two minutes left, and we can go from there, but the three of you guys will have 10 minutes.
Welcome, and we'll start the clock.
René Roy Secretary General, Fédération des travailleurs et travailleuses du Québec
We have 20 minutes! That will be enough to persuade the federal government to change its mind.
Thank you, Mr. Chair, and thanks to the committee for inviting us. We represent four organizations, although there is no CSQ representative with us today. The FTQ, the CSN, the CSD and the CSQ represent about a million workers in Quebec.
Because we are an umbrella group for four organizations, we have prepared a document that I am going to read to you calmly. I will then give my colleagues the floor. I thought we had only 10 minutes and I had started to make cuts here and there.
As union organizations, we are involved almost every day in supporting employees who, despite themselves, become unemployed when a plant closes down or they are laid off. In recent years, we have repeatedly called for improvements in the employment insurance scheme. The current program, which has been substantially amended since 1990, is increasingly poorly adapted to the new realities of the labour market and no longer meets the income protection needs of unemployed workers.
In Quebec, the overall rate of eligible workers has fallen from 81 percent in 1990 to fewer than 50 percent today. It is with that in mind that we have chosen to speak with one voice on behalf of all of the workers we represent, nearly a million people.
In its last budget, the government announced the creation of the Canada Employment Insurance Financing Board. The bill being considered today provides that the objects of this new Crown corporation, which is to be independent of the government, will essentially be to set the premium rate, manage amounts paid to it under the rules provided in the Employment Insurance Act, and invest its financial assets with a view to meeting its financial obligations.
In addition, section 5 clearly provides that the Board shall not have any involvement in benefits and entitlement. In other words, it has no powers in relation to the design and delivery of the program. That responsibility will remain with the government, which also retains the power to intervene and set a different premium rate from the rate set by the Board, if it deems it necessary.
In order to carry out its objects, the Board will have to establish three committees: an audit committee, an investment committee and a human resources committee. On this point, we welcome the fact that the Board will have to produce quarterly financial statements and an annual report, which will be public. The Board's operating costs will be paid out of revenue in the employment insurance account and will thus be paid entirely by premium payers.
To begin with, we would point out that creating an Employment Insurance Financing Board as a Crown corporation, independent of the government, is certainly a step in the right direction. We have to applaud the government's commitment to creating a separate account and guaranteeing that premiums will be used exclusively for the employment insurance program. However, we believe that there are several important questions that remain unanswered.
Before we comment on the objects and purposes of the Employment Insurance Financing Board, we would like to make a few recommendations regarding the governance structure of the Board.
Under Bill C-50, the Employment Insurance Financing Board will report to the Minister of Human Resources and Social Development. Its board of directors will be composed of seven people, including the chairperson. Those people will be appointed by Governor in Council, on the recommendation of the Minister, from a list established by a nominating committee. The nominating committee is to be composed of a chairperson appointed by the Minister and the two members of the Employment Insurance Commission, the Commissioner for Employers and the Commissioner for Workers.
The Bill does not specify whether there must be formal consultations with employer and union organizations in preparing the list. We are in agreement with the financial and management qualifications. However, the bill does not mention that the board of directors must be representative in terms of premium payers.
Is it necessary to point out that the program is funded exclusively by the premiums paid by employers and workers? They should certainly have a say in the management of the employment insurance account. Bill C-50 therefore needs to be amended to guarantee fair representation for those who pay premiums into the scheme in the governance structure.
We are therefore asking that the board of directors be composed of a large enough, fixed and equal number of representatives of employer and union associations, and that they be chosen from lists supplied by their most representative respective associations.
The bill stipulates that the Board is to set the premium rate under section 66 of the Employment Insurance Act. This amounts to transferring a responsibility that is currently assigned to the Canada Employment Insurance Commission. We are not happy to see the government taking advantage of this transfer to put an end to the obligation to receive submissions from the public when rates are set. Even though consultation often took place too late in the process and seldom produced useful results, it nonetheless gave us an opportunity to state our views concerning the premium rate.
That being said, the Board will start fixing the rate in 2009, but will have to follow essentially the same rules as have been used for setting the premium rate for the last three years. We have had occasion to comment on the flaws in the employment insurance premium setting process. We can only reiterate our disappointment that the government is persisting in taking an equilibrium approach. That principle requires that the actuary, who will now be appointed by the board of directors on its own authority, will have to determine a premium rate that will generate just enough revenue to cover the anticipated costs of the program for the next year, without regard to the current balance in the employment insurance account or future interest on that balance.
I am going to ask Roger Valois to continue.
Roger Valois Vice President, Executive Committee, Confédération des syndicats nationaux
I am going to follow up on what my colleague was saying. There are several points in the bill that we find somewhat bizarre. Pierre Céré spoke a little about them earlier. The question of loans we can be made is somewhat odd. We are going to be lent money that has been stolen from us and on top of that we will be charged interest. We find that somewhat surprising, as we do the dirty hands theory that the government is trying to develop. When it introduced Bill C-50, it said it had dirtied its hands when it took the surplus. It wants to use this bill to wash its hands and take the position that the surplus now belongs to it. We do not agree with this.
We recognize one good thing about Bill C-50, which is that there will be a board that will receive premiums and will prevent the government from blithely dipping into the account. That is the only thing positive we see. The question of the 15¢ has already been settled. Mr. Céré was most eloquent on that point. We did not need Bill C-50 to implement what was already in the Act.
The fact that the board being established will not even have the power to make recommendations is what we find most shocking. It will not even be able to recommend anything to the government at all. We will be able to do it by demonstrating. In fact, we have done that. We are saying that there has been enough stealing from the account. The board that is to be created should at least have the power to recommend things to the government. The government is telling us, is telling premium payers, the employers and employees who pay the premiums, that it will reduce premiums to appease us. That's terrific, for employees. That will come to $30 a year. Thirty dollars a year, that's something you can live on, when you're on unemployment! When 10¢ is paid in premiums, the account has surpluses. If we give the 10¢ a week back to employees, they won't be able to buy anything with it at the end of the year!
The is smugly telling us that it is going to reduce the premium rate and give a bit back to the people who pay the premiums, the employers and employees. That makes no sense. That is not the reason for creating a board, I hope. We thought the board would at least have the power to make recommendations to the government and stop the stealing from the account. We start in the Supreme Court on the 13th. We and the FTQ and the aluminum union will be arguing that our money has been stolen.
The board that is being created is a step forward, because at least we are saying that premiums will be channelled and the government will be prevented from getting its hands on them. But we are concerned about this $2 billion. Once that amount is exceeded, what will they do with the money?
Claude Faucher Vice-President, Centrale des syndicats démocratiques
Are there 30 seconds left?
The Chair Dean Allison
You have 30 seconds left.
Vice-President, Centrale des syndicats démocratiques
I think, first, that the $54.1 billion surplus should be used to improve the scheme, the eligibility criteria and the benefits paid to people who are unemployed. We should also take this opportunity to create a new program, an income support program for older workers who are in great need of it. The surplus should also be used as a way to stabilize the premium rate. There is currently a crisis in the forestry industry, and a crisis in the manufacturing industry is looming on the horizon. We will be needing this money.
The Chair Dean Allison
Thank you, gentlemen, and thank you for keeping that within the time.
I want to clarify a point for Mr. Blakely. As I have discussed with my researcher, although it's expressed as a percentage, it really works out to be about 15¢ per 100 in terms of the way that is represented.