Human Resources Committee on Nov. 24th, 2009

[Ferne Downey]

We urge all parties, especially considering the current economic slowdown, to work together to ensure that self-employed Canadians, including artists, are able to contribute to and benefit from the EI system. We must harness the full economic potential of this important industry by supporting the very creators themselves and make sure that we are on an equal footing with other Canadian workers.

Thank you very much, Madam Chair. We'd be happy to answer questions when it's appropriate.

[The Vice-Chair, Liberal, Raymonde Folco]

I now turn the proceeding over to Ms. Laurell Ritchie.

[Laurell Ritchie, National Representative, Canadian Auto Workers Union]

I'm here on behalf of the Canadian Auto Workers and our president, Ken Lewenza. We thank you for this opportunity. CAW is the largest private sector union in Canada and represents a wide range of workers, not just auto, but hospitality, airlines, retail, stores, aerospace, etc. We come from a wide-ranging membership.

We're glad to see the government has expansion on its mind, and we've certainly always advocated for the kind of Quebec parental insurance program that provides coverage for the self-employed, but we believe significant amendments are needed to C-56 before it is passed into law and that consideration of Bill C-56 should be suspended until the government has appointed, made public, reviewed, and considered the report from a panel of experts, as was promised.

We are collectively the guardians of a program that was born in the depression of the 1930s. It has been a constant struggle for workers to maintain and expand that program. We take that guardianship seriously, and we need to ensure, even as we expand the program, that we are not undermining social insurance principles, that the financial integrity of the EI program is protected, and that it does not undermine or jeopardize the EI program for payroll employees by setting dangerous precedents, such as voluntary participation, or through the underfunding of new benefits so that additional costs end up being shouldered by payroll employees.

We have to ensure that C-56 delivers and provides sustainable benefits for the self-employed. The risk to sustainability certainly increases with the addition of sickness and disability benefits. There are very big questions about what this does to the projected $24.8 billion EI account deficit by 2014, as estimated by the parliamentary budget officer, short of very significant premium increases. We need to make sure this does not encourage employers to create more forced self-employment and even phony and false self-employment, which we see frequently in certain sectors, from call centres to trucking. Finally, for us, we need to ensure that it does not distract us from the much larger task we have in front of us, which is fixing EI.

In summary, we need to preserve the integrity of the EI program and basic social insurance principles, which include mandatory participation. The opt-out provision encourages what in insurance terms is called adverse selection, which I'm sure you've heard about before. Raising the premium will not solve the problem of people self-selecting in who consider themselves likely to collect benefits, because in doing so the raised premium will make this even more unattractive to more people who know they have a low risk of claim.

The proposed lock-in--that is, once registered you need to maintain those premiums--doesn't solve this problem, because we are still not pooling the risk over the entire self-employed population, but only with other payroll employees. The standard method of reducing adverse selection in insurance programs is to make the purchase of the insurance compulsory, as is done in Quebec. Again, we want to reiterate that the Quebec model is, as ACTRA and others have mentioned, the model that people had assumed would be put forward in this bill, but that is not the case.

We want to make sure that we have a good program design. We're not sure that we have a workable program and sustainable benefit provision for the self-employed. We know from experience that badly thought out program design comes with a heavy price. Benefits can be there in theory but not in practice.

Some examples.... The compassionate care benefits are well intentioned but still, many years after, very few people can claim, given the conditions for them. The EI hours system, to go back even farther, was sold similarly on the promise of new coverage for part-time workers, when in actuality it has diminished their entitlements, and some would say it was more of a premium grab. More recently, the long-tenured-worker training program, the SITI, and the EEITI, which extended EI benefits, are not working. HRSD officials have confirmed that as of October there is less than 1% of the funds set aside in the stimulus bill that is being accessed in the province of Ontario. Then finally we have the very poorly and badly designed funding of EI, the changes that were made most recently to a pro-cyclical funding model instead of a counter-cyclical model, so that we are no longer paying in the fat years, if you will, for the lean years. Indeed, we end up lowering premiums in good times, which is going to mean very big premium increases, regardless of what happens with this bill, after 2010.

By all accounts, and having read the blues for this session, the sick benefit and compassionate care benefits were pretty much an afterthought, based on focus groups and surveys where the costs and qualifications of the program don't even seem to have been presented to the participants. Earlier Statistics Canada studies have shown a much smaller interest group when the actual conditions were presented to people.

The last point I want to make here is we have to ensure that the program is no more advantageous--if we can use that word advisedly--than it is for payroll employees. As one example, if you take a look at proposed subsection 152.03(3), it says that earnings will be deducted from EI benefits if the person receives those earnings during a period claiming EI benefits. The test in fact for payroll employees is paid or payable, so a delayed payment is still allocated retroactively. This is an important point when we're talking about the self-employed.

As business commentator Michael Hlinka pointed out on a CBC program, people will make the calculations, people will arrange for bills, certain categories of the self-employed will be in a position to make arrangements with clients to delay bills. Some categories of the self-employed are uniquely in this position, so we find it disturbing that it is the term “received”.

Further on the same point, in proposed subsection 152.18(2), which talks about other earnings during a period when a person is in receipt of EI, it says 25%. In fact, the pilot projects that exist apply now in all areas, so the law says 25% but the pilot projects would provide it at 40%. It says that it applies there to all of the benefits encompassed by this legislation. This contradicts the testimony that the two lead HRSD officials gave--and I'm sorry if I'm mispronouncing their names--Vermaeten and Beauséjour. In the blues again, at 17:15, they stated the rules that apply to payroll employees, i.e., these funds are deducted from both maternity and from sick benefits, though a different formula applies to parental, would be the case here for like treatment.

We have a lot of questions of this kind. This needs to be dealt with before the bill is passed, not after.

[The Vice-Chair, Liberal, Raymonde Folco]

Thank you very much. You brought up some important points.

I don't think you gave us a copy of your presentation, did you, Madam Ritchie?

[Laurell Ritchie]

I gave rough notes; they're not translated.

[The Vice-Chair, Liberal, Raymonde Folco]

Since they're in English only, for the benefit of the members we'll have them translated and then we'll circulate them among the members.

Do these rough notes include those particular examples that you gave at the end of your presentation? They seemed to be very specific, and I think it would be important for us to have them.

[Laurell Ritchie]

Yes, I did, the one example, but as you know, this is very detailed, and I only uncovered that last point on the plane on the way here, so I will send the note to the clerk.

[The Vice-Chair, Liberal, Raymonde Folco]

Yes, send them to the clerk, please. We'd really appreciate that.

Thank you so much.

Dr. Don Friedlander of the Canadian Dental Association, please.

[Dr. Don Friedlander, President , Canadian Dental Association]

Madam Chair and committee members, good afternoon and thank you for inviting us to participate in your study of Bill C-56, the Faimess for the Self-Employed Act.

l'm Don Friedlander, and I'm president of the Canadian Dental Association. l'm a general dentist who happens to practise a mere few blocks away from where we are in the West Block.

[The Vice-Chair, Liberal, Raymonde Folco]

Is that an advertisement, Dr. Friedlander?

[Dr. Don Friedlander]

Absolutely. I'll give you my card afterwards.

With me is Andrew Jones, our director of public affairs from our office, also here in Ottawa.

The Canadian Dental Association is the national voice for dentistry, dedicated to the advancement and leadership of a unified profession and to the promotion of optimal health, an essential component of general health. That's a mouthful, but what it really means is that our association is focused on building a stronger profession, nurturing a more collaborative dental community, and supporting a healthier public. We accomplish these three priorities through knowledge and advocacy, and it's primarily our work on advocating for a strong profession and supporting a healthier public that brings us before you this afternoon.

The CDA supports Bill C-56 and encourages this committee and the Parliament of Canada to pass it as expeditiously as possible. We have two key reasons for supporting this legislation. First, establishing maternity and family leave benefits for self-employed Canadians has been an advocacy issue of ours for a number of years. We have included it as a recommendation in our submission to the House of Commons Standing Committee on Finance's pre-budget consultations, and we've raised it during our regular meetings with policy- and decision-makers here on Parliament Hill.

It might surprise you that we would be a vocal advocate and supporter of extending maternity, parental, sickness, and compassionate care benefits to self-employed Canadians, including dentists. The reality is that the dental workforce and private practice environment is changing. We believe these proposed measures will make our profession more desirable to a greater number of young people who might consider dentistry as a career.

For example, we believe this act will allow a greater number of younger dentists to alter their practice style by making it easier to balance practice and family. Therefore, they can stay more involved in practice during their years of childbirth and raising young children. One of the workforce changes is that many of our new members are coming to the profession with a much different perspective and different needs from those who have come before. Our dental schools are graduating a majority now of female students--58% in 2008--and we believe it's important to allow our new dentists, whether male or female, who are bringing a fresh perspective on work and life balance to the practice of dentistry, to have the opportunity to participate in this program.

In addition, while our profession thankfully does not have provider shortage challenges like our medical colleagues, this is an issue we're watching closely. We're receiving signals that it's becoming more and more difficult to attract new dentists to practice settings in rural and remote areas in Canada. So, again, having the option to join this program may be a positive factor that allows younger dentists to locate to rural areas, alter their practice style from what we would refer to as a full-time traditional model, but still service the area with high-quality dental care that Canadian dentists provide and our patients have come to expect.

Our second key reason for supporting this legislation is its voluntary nature. We believe that the majority of current established dentists will actually not join the program, and if it were compulsory many of them would see the premiums as an unfair and unnecessary tax on their practice that will lead to no individual benefit and simply increase the cost of providing services. We're confident that we would then be sitting before you today asking that the legislation be amended to apply it in a voluntary manner. So we support the fact that it is voluntary.

In closing, Mr. Jones and I thank you for the opportunity to bring the voice of Canada's dentists to your deliberations in support of Bill C-56, and we look forward in a few minutes to responding to any questions you may have.

Thank you.

[The Vice-Chair, Liberal, Raymonde Folco]

Thank you so much, Mr. Friedlander.

Now, Madam Barbara Byers from the Canadian Labour Congress.

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

Thank you, Madam Chair.

I'm pleased to be here in front of the committee again on behalf of the 3.2 million members of the Canadian Labour Congress, workers in virtually every occupation in communities all across this country.

The CLC has long supported the provision of special benefits—maternity/parental/adoption benefits, sickness, and compassionate care—through the employment insurance program. Those benefits now make up an important part of the Canadian income security system. Maternity and parental benefits allow working parents, especially women, to better balance the demands of work and family care, helping equalize labour market outcomes between women and men while also contributing in a central way to the well-being of very young children. Sickness benefits provide an important income cushion to cover an involuntary absence from work of up to 15 weeks.

The CLC welcomed a major expansion of maternity and parental benefits in 2001, when parental benefits were increased from 10 to 35 weeks, bringing the total leave period up to one year, counting the two-week waiting period. Given the fact that a significant and rising proportion of all labour force participants, not least women, are self-employed, and that the trend to self-employment may continue, it's important that self-employed workers be given access to many of the same protections and rights provided to employees where this is feasible and appropriate. We believe that it is both fair and feasible to provide access to maternity and parental benefits comparable to those of employees.

We strongly support the principle of extending maternity and parental benefits to self-employed workers, but this must be done in a manner that is consistent with the basic principles of a social insurance program. A basic principle of social insurance is that participation is mandatory, so that costs are pooled across the workforce. The labour movement welcomed the introduction of the Quebec Parental Insurance Plan in 2006 as a progressive step forward that greatly improved access to, and the level of, maternity parental benefits for all Quebec workers, and also extended these benefits to the self-employed. In our view, Bill C-56 falls well short of the Quebec model. It does not improve access to or the level of maternity/parental benefits for employees, and it extends coverage to self-employed workers in a different and inferior way. Under the Quebec plan, all self-employed workers must pay into the program. Coverage is mandatory, as it is for employees, and the premiums paid by the self-employed in Quebec are set in such a way as to cover the full cost of the benefits provided to the self-employed. By contrast, Bill C-56 will allow self-employed workers to choose if they wish to be covered by opting out or in and paying premiums for one year before claiming a benefit. Further, the premium, set to equal the employee premium, will not, and is not, designed to cover the cost of benefits.

Our major concern is that providing special benefits to the self-employed in this way will prove costly, and could well result in a significant increase in premiums for employees and employers to cross-subsidize benefits paid to the self-employed. This could in turn undermine broad support for EI special benefits, especially given that EI premiums are likely to rise very rapidly after 2010.

Having said all this, we recommend that Bill C-56 be passed, but that the government immediately appoint the panel of experts promised in the 2009 budget. The panel should be mandated to design a program of maternity/parental benefits for self-employed workers based on social insurance principles, with close reference to the successful example of the Quebec plan. With reference to the broad issue of providing special benefits to the self-employed, we have noted on many occasions that many supposedly self-employed workers are, in legal reality, employees who deserve the protections of employee status, including EI coverage. As noted, the Quebec plan not only extended coverage to the self-employed, it also improved maternity/parental benefits for employees. The CLC supports lowering the entrance requirement from 600 to—guess what—360 hours, and benefits should be paid out on the basis of 60% of insured earnings over the best previous 12 weeks.

Changes also need to be made to the program to ensure that the receipt of maternity and parental benefits does not reduce or eliminate regular El benefit entitlements, as happens now if a layoff occurs after a return from parental leave, and vice versa, when a worker is laid off prior to parental leave.

Thank you, and I look forward to your questions.

[The Vice-Chair, Liberal, Raymonde Folco]

Thank you so much, Madam Byers.

We'll now go into the first round of seven minutes. Mr. Savage.

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

Thank you, Chair.

I want to thank the witnesses for coming. I think it was a very useful panel.

I want to thank the Canadian Dental Association and ACTRA for their representations on behalf of their members. And I want to thank our friends from organized labour, who have raised a number of very significant questions.

In general, I think we all share the view that we want to see employment insurance accessible to self-employed persons. The problem is that there are so many unanswered questions.

The CAW and the CLC have taken somewhat opposing views, both of which were based on good analysis. The CLC is calling for us to pass the bill and then establish some mechanism to make sure there's accountability for the new expansion of EI. The CAW is saying let's put this on hold, so that's an interesting point of view.

We've all indicated support for this, but getting answers out of the government, which presented this bill without giving us any estimate of costs, has been challenging. It was after persistent questioning last week that we received some information from Frank Vermaeten and Louis Beauséjour from HRSDC.

I want to read this, because I want to get your response. This is what we received, “Understanding that heretofore the minister has indicated that this will be self-financing”:

The financial impact will be different in Quebec, where maternity and parental benefits are already provided through QPIP. In Quebec, where only sickness and compassionate care will be provided through EI, it's projected that premiums collected will fully offset costs. For the rest of Canada, it is projected that premiums levied on the self-employed will not fully cover costs because costs associated with maternity and parental claims would exceed premiums by those primarily interested in maternity and parental benefits. Table three, below, provides projections of the expected accrual financial impact on the EI account. It is expected that projections for 2014 closely resemble the steady-state impacts.

The table indicates that in the first year there will be a surplus of $48 million, which makes sense, as people have to pay in for a year before they can draw a benefit. But by 2014 there will be a $78-million deficit in the account. I think it validates the concern that there is going to be a cost here. Added to that is the fact that this is coming out of the EI fund, not out of consolidated revenue funds, so there is a potential to have an impact on regular EI payers—employers or employees—who don't have a choice, .

I'd like to get the views of CLC and CAW on the information we were provided today.

[Andrew Jackson, Chief Economist, Canadian Labour Congress]

I don't pretend to be in a position to cost the program. I think it's speculative on anybody's part as to what enrolment rates would be.

We do know that the vast majority of maternity and parental benefits are collected by women. I think it would be reasonable to expect that relatively few men would enrol for that benefit.

You can do a rough calculation. If you pay a year's worth of premiums and you get the maximum benefit, on a present cost basis you're going to have to pay in for about 25 years to cover the cost of the benefit. If a lot people enrol for maternity and parental, then have one or two children and collect...that's quite a significant cost.

I would guess that there are few people who would pay their premium to get access to 15 weeks of sickness benefits. On a cost-benefit basis, I think relatively few people would find that an attractive position. I might be wrong, but I think that's why we need the experts to look at it.

[Laurell Ritchie]

The problem is that it is all speculative. We can do some calculations based on the experience in Quebec, but even that has some unknowns about it. The rising birth rate, while minimal but still evident, can equally be attributed to a stronger child care system there. Who knows?

When it comes to the sick benefit and compassionate care benefit, we've been given no examples of where it exists anywhere else in the world. I saw a reference to California, but that is a different system and it's not done through EI. I don't know how we get there.

I did a quick calculation of somebody with a $30,000-a-year income. With the kinds of premiums that are projected, again by the budget office, it's going to take a couple of decades for that individual--

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

On that point I think you're right.

I don't want to make undue difficulty, but I asked the minister a question. I said that given you're saying that this is meant to be self-financing, if there is a deficit in the extension of EI benefits to the self-employed, it seems to me we should make a commitment that it comes out of the consolidated revenue fund, not out of the EI fund. Does that make sense to you?

[Laurell Ritchie]

We've been saying for a long time that the government should be contributing to EI, in general, as they did prior to the 1990s. It would help a lot if they were contributing for extended benefits during these difficult economic times on an ongoing basis.

It sounds like a good fix, but I know that in Quebec there was a hue and cry about getting the government to fund part of the employers' portions there. The one thing I would caution you about is that there may be some backlash among those who are payroll employees and participating in the program if there are government contributions towards the self-employed from general revenues and not likewise for the payroll employees.

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

Thank you.

[The Vice-Chair, Liberal, Raymonde Folco]

Madame Beaudin.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you very much.

Thank you very much, Madam Chair.

Thank you all for being here. Thank you for your presentations.

According to what Ms. Ritchie just said in response to my colleague, the government is looking to evaluate this program every five years. Does that seem too long to you?

[Laurell Ritchie]

It does seem a long time. Again, it's grating to know that on issues that have been advocated for much longer and in which there are much more concrete studies for improving benefits, we get stuck with pilot projects or temporary measures when it comes to payroll employees. On this one we look at a review, which is a horse of another stripe. It does seem inordinately long.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you very much.

You know, then, that in Quebec, we already have parental benefits. Under this contribution, Quebec will actually receive two other benefits: compassionate and sickness.

Finally, as far as we are concerned, we could therefore call it a Quebec sub-program. According to the department's estimates, Quebec will have surpluses on those benefits. However, all workers in the rest of Canada will have a large deficit that will have to be absorbed by other contributors to the plan, regular contributors.

Do you think it is fair that self-employed workers in Quebec should pay more than they need to to fund the programs while workers in the rest of Canada have their deficit absorbed by other regular contributors?

Ms. Byers, Ms. Ritchie, if you have an answer, I would very interested to hear it.

[Barbara Byers]

I just want to expand it. Certainly in terms of ACTRA, CAW, and ourselves, what we've really been talking about is fairness in access and opportunity and benefit payments and levels. I think there's some consistency, although there are obviously some differences.

I'm going to go back to what we've been hammering away at. When I said the 360 hours and so on, I think the problem we're going to find with what's proposed here is that we may in fact have a woman who's worked in a hotel for ten years, and because of the way the current EI system is structured, when she needs to take maternity and parental leave she won't have access to it because she doesn't have the number of hours that are needed. Yet someone else who has contributed from the self-employed side for a shorter period of time and has had the option to not pay in will in fact have access. We're going to find that low-income women who are employed are actually going to be supplementing a lot of other people. They currently are as well. That's the reality.

I go back again to what needs to be done as well. When we're looking at this system, the 360 hours has to apply for all people who are in part of the system and so on. When we're looking at it we need to have a system that is fair. We've long advocated that the self-employed be included in employment insurance. It has been our policy for a long time, but it was on the basis that it was a social insurance system and that everybody was in.