Human Resources Committee on Nov. 3rd, 2009

[The Chair, Conservative, Dean Allison]

Pursuant to the order of reference of Wednesday, June 10, 2009, today we start our consideration of Bill C-280, an act to amend the Employment Insurance Act, qualification for and entitlement to benefits.

I want to thank our witnesses for being here, and the sponsor of the bill as well. We're going to give each of you a chance to speak on it.

Just before we do that, we have some housekeeping. You have before you a couple of budgets for witnesses, which I would like you to pass quickly. One is for a witness today and another is for a witness on Thursday. Could I just have a motion to accept these?

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

I so move.

(Motion agreed to)

[The Chair, Conservative, Dean Allison]

Thank you very much for taking care of the housekeeping. I don't want to keep us waiting any longer. We're going to get right to the sponsor of the bill, Ms. Hughes.

Ms. Hughes, thank you for being here. We're going to start with you. It's usually for seven to ten minutes. Do the best you can. It is your bill, so if you want to speak a little longer than seven minutes, by all means do so. Then we'll go to the Canadian Labour Congress, and then we'll come back to Mr. Hamilton.

Ms. Hughes, welcome. The floor is yours.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Feel free to let me know when my seven minutes are up.

[The Chair, Conservative, Dean Allison]

I'll give you a one-minute signal. How does that sound?

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you, Mr. Chairman.

I am glad to be here today and to see this part of the legislative process come about for Bill C-280.

This is my first time appearing before a committee as a witness, so I hope you will be patient with me.

As you are aware, Bill C-280 would change EI in a few ways that I believe would be of great assistance to a number of Canadians who are eligible to collect benefits or find themselves a little shy of the threshold for entry into the program as a claimant. Bill C-280 would remove regional distinctions for the number of hours required to become a claimant and set the minimum number of hours at 360. It would also see a sampling of the claimant's best paid 12 weeks over the previous year used to set the amount a claimant will receive.

Bill C-280 is the product of converging factors: the economic slowdown that became a recession and the high unemployment that accompanies this type of economic event.

In my constituency of Algoma—Manitoulin—Kapuskasing, we had a higher than average unemployment rate before the current crisis. This trend continues.

When considering EI, it is important to remember that this bill is not a cure-all, but set to rectify some of the inequities we are seeing more clearly now that more people require this assistance. I understand that this bill may require clarification in some areas, and hopefully we can move towards some of that today.

I recall last winter driving in my constituency from one town to another. Basically, I was on Manitoulin Island—if anybody has ever been there. It was a Saturday morning and I was listening to The House on CBC Radio. The guest that morning was Ian Lee, director of the MBA program at the Sprott School of Business at Carleton University.

He was being interviewed about a submission he made to our finance minister on the subject of stimulus spending. In his submission, Mr. Lee had provided a breakdown of typical stimulus solutions and gave the multiplier effect for each one. A multiplier is the value of a dollar spent by the government in terms of the fiscal return on stimulus, or, more simply put, bang for the buck. What surprised me the most was his conclusion that EI offered the government the very best multiplier, far outperforming tax cuts, even payroll tax cuts, which were the most efficient in the tax-cutting category. EI also outperformed infrastructure spending and transfers to the provinces, which in turn outperformed every type of tax cut in the bang-for-the-buck assessment.

The next week my office was in touch with Mr. Lee. He sent us both his submission and the testimony of the Moody's chief economist to the U.S. House, which he based his document upon. Mr. Lee was clear that he had his differences with plans being proposed by New Democrats at the time and that he would like to see EI be a tool controlled by the Minister of Finance. He was equally clear that no other traditional stimulus tool offered as much return to the Canadian economy as employment insurance.

With this in mind, I saw it as imperative that we do something that would help get EI to more Canadians. Difficult economic times seem to me a good time to remove regional distinctions. We had just embarked on spending billions of dollars to stimulate the economy, yet we were not using one of the best tools we had to its fullest. The regional distinctions that reflect a way to manage EI in better economic times now seemed like a hindrance, given the urgency of the economic crisis and the speed at which it was stripping our economy of jobs.

With more people able to collect benefits, we would be able to keep the core of our communities alive. We could help the mortgage payments continue and help the grocery stores stay open. There would be some continuity so that we could have the workforce available when the work returned.

An example of that is readily available in my constituency. Algoma—Manitoulin—Kapuskasing has a large forestry sector. If those laid-off workers migrate to the bigger centres where there could be some work, they may never return. The communities lose. In circumstances like that, communities atrophy. When the jobs come back, the experienced workers aren't there.

Another reason to have uniform and lower entry levels is the way it is difficult to get real-time snapshots of regional unemployment rates in a major economic event such as the one we are experiencing. By the time we recognize that a region is getting hit and go through the steps needed to change the entry level, the exodus in that community may already be well under way.

Finally, I would like to address the fear I have had relayed to me that making it easier to collect benefits will stop people from wanting to work. To me, this is absurd. People aren't that different from one another. Would any one of you want to collect a fraction of what you make now and sit at home? They can't be that different. People go to work for more reasons than just a paycheque. There is a sense of accomplishment and contribution, as well as many other motivating factors.

I believe the abuse of the system is a grossly overstated concern. We have to look at the big picture and not focus on worst-case scenarios; worst-case examples make poor guidelines. We don't think about those in our areas. Our fishery quotas are not based on what a poacher can do. Why are EI eligibility levels any different?

I understand there are some items to be worked out with respect to Bill C-280. I am mostly concerned with getting help to those who are in need, and perhaps staving off the worst effects of this recession.

Before I conclude, I just want to add that I was disappointed to see there is basically only one hour for witnesses and one hour for clause-by-clause. I would hope you would reconsider this and have more witnesses, because the ones we have are just a very small fraction of the witnesses who should be heard on this matter.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you very much, Ms. Hughes.

We're going to move over to the Canadian Labour Congress. We have Ms. Byers and Mr. Jackson. Welcome back to committee. The floor is all yours for seven minutes.

[Barbara Byers, Executive Vice-President, Canadian Labour Congress]

Thanks very much. Merci beaucoup.

The Canadian Labour Congress welcomes and urges all parties to support this important bill. The bill would modestly increase EI benefits to 55% of earnings--as now--but calculated on the basis of the best 12 weeks over the previous year. We welcome the proposed move to the best 12 weeks, but we continue to urge a benefit rate of at least 60%. Members should recognize that the average benefit today is a very low $348 per week, barely enough to support even a single person above the poverty line. The maximum benefit today is $150 less, per week, than it was in the last recession. The bill would expand access to regular and special benefits to 360 hours. As members are aware, the CLC has long called for such a uniform entrance requirement of 360 across the country.

The current serious recession has amounted to a stress test for the current EI system, the first test of fast-rising unemployment since the new hours-based system was introduced in the mid-1990s. At one level the EI system has responded to the crisis. The number of regular EI claimants rose by almost 500,000 between July 2008 and July 2009, as unemployment soared. The proportion of unemployed workers collecting benefits has risen modestly over that period from 41% to 45%. That is because the system does become a bit easier to access, with a lag as the unemployment rate rises in a region. The duration of benefits also increases in line with rising unemployment. Yet the fact is that many workers, especially women and young workers, have fallen through the cracks. Between July 2008 and 2009 the number of unemployed workers who were unemployed but not collecting regular EI benefits rose by 220,000 or by 32%. The proportion of unemployed workers collecting benefits has jumped for men but has barely increased for women. The proportion of unemployed workers collecting benefits remains very low in many parts of the country, and in July of this year it was below 50% in the three western provinces, and also in Ontario, where it stood at just 40%. Again, as has already been pointed out, part of the reason is that it is difficult to gain access when jobs suddenly disappear in what used to be a low unemployment region.

Entrance requirements in terms of hours worked continue to exclude many unemployed workers from benefits. HRSDC research shows that about 10% of all unemployed workers in recent years worked before becoming unemployed but didn't have enough hours to qualify for benefits. That amounts to about 160,000 unemployed workers in any given month today and a much higher number over the course of a year. HRSDC and Parliamentary Budget Office costing of proposals to temporarily drop the entrance requirement to 360 hours from the current range of 420 hours to 700 hours shows that this change would bring in almost 200,000 more workers into the system over a year, at a cost of about $1.1 billion. This is surely an affordable change on a permanent basis since the cost would fall as unemployment falls. The change would provide limited but still important benefits for a limited time period to many vulnerable workers, again, especially women and young workers. If implemented today, it would be an effective form of stimulus and support for hard-hit communities. The CLC believes that the 360-hour threshold should also replace the 910-hour requirement, or about six months of full-time work, imposed on new labour force entrants and re-entrants. This serves to exclude many recent immigrants and may account for why so many unemployed workers in Toronto and Vancouver are ineligible for benefits.

We welcome the fact that the 360-hour requirement in this bill would apply to maternity and parental benefits. We have long supported a more generous and inclusive program that recognizes new realities in the job market and in society as a whole. Maternity and parental benefits allow parents, especially women, to better balance the demands of work and family care, helping to promote equality in the job market while also contributing in a central way to the well-being of very young children.

Changing the entrance requirement from the current 600 hours to 360 hours would bring more workers, especially mothers, into the system. In recent years, about 20% of mothers with paid jobs in the year before the birth of a child have not received maternity or parental benefits. We note that the current 600 hours is higher than the regular EI entrance requirement in those regions with over 8% unemployment, and it certainly excludes many women who paid into the system and deserve to benefit.

In conclusion, we urge your support for an important and progressive piece of legislation that will benefit many unemployed workers from coast to coast to coast.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Ms. Byers.

We're now going to move over to Mr. Hamilton, who is the mayor of Elliot Lake.

Welcome, sir. The floor is yours. You have seven minutes.

[Rick Hamilton, Mayor, City of Elliot Lake]

Thank you very much.

I'm here today to provide my personal opinion as a municipal leader, the mayor of the city of Elliot Lake. I'm also a member of a local District Services Administration Board and will be dealing with Bill C-280. It's my first time as well, Mr. Chair, to present before a committee. I thank you for the opportunity of doing it. It's a new experience for me.

At the outset, we'd like to state that EI benefits should flow to those who require this assistance while unemployed, and these benefits need to provide a reasonable standard of living at a time when those most affected really do need it. Any increase in the qualification for benefits or in the duration and amount of those benefits has a direct impact on municipalities, as we are the gatekeepers of the social assistance system, particularly here in Ontario, either directly or through the District Services Administration Board, which is the case in my municipality.

The recent downturn in the economy has sent the financial woes of municipalities, especially those in northern Ontario that rely on base resource industries, into a tail-spin. Many of the communities have seen significant plant closures, layoffs, and cutbacks similar to those that were experienced in Elliot Lake in the early 1990s. At that time we lost 4,500 direct mining jobs. It was quite a devastation.

We survived this devastation through a number of means. First, we were provided at that time, twice, with what we called EI requalification programs, to permit many of our laid-off workers to extend benefits, thus preventing a large-scale migration of workers from EI to social assistance benefits at that time. This allowed us to mitigate the devastating impacts and provided a much-needed stimulus to allow us to reinvent and revitalize our local economy from a mining-based theme to a retirement- and tourism-based economy that presently is thriving. This revitalization has been successful for a number of reasons, including EI programs enshrined at the time.

The cost of Ontario Works, or OW, benefits to municipalities, and by extension to the property tax payers, was significant even with this program in place. I would not want to imagine the impacts without enhanced EI benefits at that particular time.

There is a move afoot here in Ontario to upload Ontario Works benefits from municipal tax rolls to the province, but at the same time there will be an offset to some degree from the Ontario municipal partnership fund transfers from the province. This is in early stages, so the impacts on municipalities remain to be seen. Notwithstanding this, the best we can expect would be a zero base from the uploading, so any increase in the Ontario Works caseload would have a negative financial impact on municipalities. We believe that EI benefits are certainly better than having the OW benefits. Again, suffice it to say that EI benefits for laid-off workers would better stimulate an already damaged local economy than would benefits paid under the Ontario Works program.

As I understand, the recent downturn in the economy has affected every municipality to varying degrees. The north remains economically challenged because of this recent economic downturn, as well as the traditional nature of business that resides here in northern Ontario. Northern Ontario is resilient, but not immune to any of these impacts.

So Bill C-280 has a net effect of addressing many of the concerns I have as a municipal leader. First, lowering the threshold to 360 hours and seeking to award benefits based on the best 12 weeks of earnings in a year will go a long way towards ensuring that those benefits flow to my constituents and therefore permit them to survive in a more advantageous financial situation. Failing this, they may not either qualify or receive benefits and may have to rely on the Ontario Works system, which of course is much inferior.

I know that other mayors have raised a red flag on this issue as well. As I understand Mayor Miller from Toronto said, we are quite concerned; the fact that the most vulnerable haven't been protected with appropriate changes to the EI program is very problematic for cities. I personally share this view with Mayor Miller.

In closing, I'm here to speak to the merits of EI changes as outlined in Bill C-280. I thank you very much for the opportunity of addressing the committee today.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Hamilton, for travelling to be here today.

We're going to start with the Liberals.

Mr. Savage, you have the floor for seven minutes.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Chair.

Thank you, Ms. Hughes, for bringing this bill as far as you have. Congratulations on that.

I have been to Manitoulin Island, and I can tell you that outside of Nova Scotia it is as beautiful a place as exists in Canada. I've also been to Elliot Lake. I used to work in Sudbury, so I've seen that rather remarkable community as well.

My question is for anybody who wants to comment, but specifically Ms. Hughes, and Ms. Byers, who referenced in her brief the costing of a 360-hour national standard of eligibility. She mentioned that the cost is about $1.1 billion. The government, when they produced their cost on this, you may recall, costed it at about $4.4 billion—which, I think it's understood now, is ridiculous. One of the reasons they costed it at $4.4 billion was that in putting their costing together they suggested there would be a ballpark cost of around $2 billion per year based on what they called the labour market impact, which would create a 2% increase in unemployment. In other words, to go to a 360-hour national standard, they suggested, would increase unemployment by 2% because people would be fleeing their jobs to jump onto, as the minister referred to it, this lucrative system.

I want to ask you about that. Many people don't seem to understand that you cannot collect EI if you voluntarily leave your job. You have to be fired or laid off. Do you believe there are many Canadians out there who are looking for the opportunity to jump out of their jobs, find a way to get fired, so that they can collect 55% of their previous income for somewhere between 19 and 45 weeks?

Anybody...?

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

I want to talk about the costing. Basically, in my opinion, we can't look at the cost of this out of context from all of the stimulus spending we are doing right now.

First, I should thank you, because I know that in the past few months the Liberals were always supporting 360 hours. Mind you, a temporary fix was what you were looking at. But given how effective this type of stimulus is, I believe it would be justified to spend that much. If we have had tens of millions of dollars to spare for advertising for our economic recovery plan, we should have the money available to add to the actual meat of the plan. When you are looking at the dollars it would cost and looking at the economic stimulus it offers, it is well worth the money, and that depends upon how many people would actually need to access it, doesn't it?

[The Chair, Conservative, Dean Allison]

Is there anybody else?

[Andrew Jackson, Chief Economist, Canadian Labour Congress]

The idea that changes in EI rules would significantly increase the number of claimants is a bit of a folk myth among economists. If you go back to the early 1990s, there was a whole raft of studies commissioned by HRSDC on how the EI system functioned. A few of those studies found that in a few parts of the country there were very small impacts on the numbers of unemployed when access to benefits was made more generous, but there is nothing in those studies that would sustain that kind of conclusion about how it would open up. A number of those studies, in fact, showed that there was almost no impact on the number of recipients arising from EI generosity.

In terms of your proposal, it is really important to underscore that in a time of recession, such as now, there would probably be zero impact, since basically any available job is going to find somebody willing to fill it. At the most, you might say that some people might become unemployed and other people who were unemployed would take the jobs. So I don't think there would be any impact at all, except in an extremely tight job market.

I'll send you a summary that I prepared on this some time ago, but certainly the studies that were done by Lars Osberg, former president of the Canadian Economics Association, and Shelley Phipps, a very well-known economist at Dalhousie, strongly disputed the notion that there would be a significant impact on unemployment from reducing the entrance requirement.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

The Parliamentary Budget Officer came to the same conclusion as well, particularly if it were of a temporary nature.

Ms. Byers.

[Barbara Byers]

I just wanted to add that we said that the average benefit today is very low: $348 a week. First, I can't see people rushing to get $348 a week, when you look at it—and remember, that's the average. A lot of the people we would be bringing into the system would be people who are not working full time, so their benefit would be considerably lower.

On a personal note, in my previous life I was a social worker. It was always easy to hit the unemployed or people who had to get welfare. There was a thing that somehow people were doing well on this, when they're not. If you have contact on a regular basis with people in the system, you know that it's not the life that any of them want to lead.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

I agree with that.

Ms. Hughes, you referred to Ian Lee, when he spoke on CBC on Saturday morning, on The House, I think it was. You were in Manitoulin Island. I remember listening to that, and I was probably driving to or from a rink in Dartmouth—Cole Harbour. I remember being struck by his work, which originated in the Senate of the United States, in terms of evaluating different kinds of stimulus.

Clearly, stimulus that's put into what you might call the social infrastructure, particularly EI, is the most effective stimulus because of the fact that the people who get that money have to spend it. It goes into the economy, and I think the number he referenced was a 1.61 turnover rate in the economy, which put it ahead of infrastructure, and, as you've said, far ahead of tax breaks, particularly the kinds of tax breaks that have assisted the more well-off among us.

So if that's the inspiration for your bill, I commend you for it and I congratulate you on having brought it this far.

Thank you, Mr. Chair.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Savage.

We're going to move to Mr. Lessard from the Bloc. You have seven minutes, sir.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, Mr. Chair.

I would like to welcome Ms. Byers, Mrs. Hugues, Mr. Jackson and Mr. Hamilton. First of all, I would like to commend Mrs. Hugues for introducing this bill, which we intend to support. Later, I will be moving an amendment along the lines of what Ms. Byers was proposing earlier, namely that the benefit level be set at 60%, rather than at 55% of insured earnings. As we continue our discussion, we'll see if the committee might be amenable to this amendment.

I really do appreciate your initiative, Mrs. Hugues, given that it keeps this debate on employment insurance in the forefront. To my way of thinking, it is a crucial debate. When the management of the TD Bank suggests to us that amendments are needed to EI, it means that there are significant problems with the system. As a rule, recommendations to improve the EI system do not come from banking institutions. The TD Bank has recommended that the 360-hour threshold for qualifying be adopted, which clearly shows that support for this proposal is growing.

Your initiative is even more timely today, given the presence of the mayor of Elliot Lake, Mr. Hamilton. I'm very familiar with this working-class, mining region, even though there are not many mines still in operation, because one of my brothers worked in the mines. His health suffered some as a result of his working down in the mines.

I have two questions, the first of which is directed to you, Mrs. Hughes. Given the thought that went into your bill and the discussions that you have had to date, would you be open to an amendment that we would like to move to increase the benefit level from 55% to 60% of earned income?

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you for your question.

Certainly we are prepared to consider amendments. The aim behind the bill really was to generate some discussion. As many of you know, it was initially introduced by my colleague Yvon Godin. Since my bill was drawn earlier in the session, we had a productive discussion. It is a step in the right direction, particularly in light of the economic crisis.

When a member tables a bill, there is every expectation of changes being proposed and we are open to amendments, provided they benefit those who are most in need. Unfortunately, many people do not have access right now to benefits, even though they contributed to the program. EI is a form of insurance and they should have access to it.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you.

I am interested in hearing your comments, sir, on the economy of your city. Having myself served on municipal council, I am mindful of the extent to which responsibilities have been offloaded to municipal governments. Sometimes, because of this shift , municipalities must come to the aid of people who have lost their jobs, by setting up community groups, and so forth.

You talked about the dynamics of EI benefits from the standpoint of the economy of a city like yours. Can you give us some examples of how EI has impacted a community like yours?

[Rick Hamilton]

First of all, the dynamics arose out of devastation. We lost about 4,500 direct mining jobs, and at that time our population was about 16,000 people. If you extrapolate that to any normal-sized city, that's economic devastation, to say the least.

Now, the EI benefits that we received at that time were very helpful. They weren't the only piece of the puzzle. There were other stimuli provided, and one of them was to operate one of the mines for another five years to give us a little bit more help moving along, setting up economic development corporations and such. But for those who had a difficult time finding a job immediately after the mines closed, it allowed them to requalify for benefits to maintain a decent standard of living, so they could find that job or be retrained for something else.

It really made a big difference, particularly for those who I consider to be marginalized workers. Those were the folks in the 45- to 50-year-old range, where they weren't at the end of their work life, but from a competitive standpoint in the open market at that time, it was very difficult for them to compete against the 25-year-old and 30-year-old miners who could transition to another job quite easily.

So, yes, at that time, it was quite the godsend for us. It was very helpful, along with a very large package, yes.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

I see. Thank you very much.

I have several questions that I intend to divide among the witnesses.

My first question is for you, Ms. Byers, or for you, Mr. Jackson. With respect to the contribution rate, it is becoming increasingly apparent that the government plans to divert $19 billion of the accumulated surplus in the EI fund by the year 2015 to offset the deficit.

At the same time, there is no denying that the needs are great. Currently, the contribution rate is being voluntarily maintained at a very low level, namely at $1.76, whereas the government is projecting that this rate will rise to $2.14 in 2011. I'd like to hear your views on this matter. There is something diabolical going on here. Why not increase the rate immediately to $2.14 or to about $2 to beef up EI right away and achieve the dynamic economic spinoffs discussed? I'd like to know how you feel about the government using the EI fund in this manner.

[The Chair, Conservative, Dean Allison]

We're out of time, but I do want an answer. So if you guys could just respond, it would be great.