Human Resources Committee on April 30th, 2013

[Voices]

Oh, oh!

[An hon. member]

What a surprise.

[The Chair, Conservative, Ed Komarnicki]

I've made my thoughts known on the subject, and I would stay with that.

Mr. Shory is next.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and my thanks to the witnesses for being here this morning.

Definitely these notes will be very helpful in our study.

In your presentation you talked about budget 2012, and basically deferring receipt of OAS benefits up to five years. I want to understand how it works. Could you make a quick comment on it?

[Dominique La Salle, Director General, Seniors and Pensions Policy Secretariat, Department of Human Resources and Skills Development]

This change which starts in July 2013 will allow Canadians who are turning 65 to delay taking the OAS pension. For each year that they delay, they will get an increase of 7.2%. In other words, if one is gainfully employed and wants to have a little bit more in retirement, one will have the flexibility of deferring the OAS. At the end of five years, that will be 36% more. It's an actuarial adjustment. That percentage was determined by the Chief Actuary of Canada. It takes into account that you will be receiving, in all likelihood, the benefit for a little less long, but you'll be getting more. It's a lifelong fully indexed benefit.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Am I right in understanding that this will also look after the taxation issue for the people Mr. Butt was referring to? For example, they want to continue working, and because they are not getting OAS at 65, their income level will not include those OAS benefits, which will reduce their income level for taxation purposes.

[Dominique La Salle]

It would be one of many considerations.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Okay.

In the presentation you talked about challenges for people who are 55-plus years of age who lose their job for any reason. You said that they basically have 25% less in earnings. I am trying to understand. On the one hand, we have a shortage of skilled workers, and on the other hand, these skilled people get 25% less in earnings. Where is the gap? How do we study it, and how do we try to fix it?

[Yves Gingras]

It's a very good question. I don't want to speculate, but it's a reality that in today's economy there is new technology emerging, and it's changing fast. It's possible that some people may not have kept their skills up to date, and when they happen to lose their job, they have to reinvest massively to be able to find a job in a similar occupation, since an employer might require a higher level of skill or knowledge of new software or technology. That may be one explanation: technological change.

Although we hear from employers that they value older workers, there's some indication that there could be discrimination sometimes. The employer may think twice before investing in the training of an older worker, who may not have many years to spend in the workplace, compared with a younger worker. That is something employers may have in mind. We sometimes hear in our consultations with workers that they felt they were discriminated against in that they could have brought value to a company but they felt that they were not given a chance.

I would say that the importance of this loss of benefits could depend on a person's circumstances. For example, it is more difficult for low-skilled workers to find their way back into employment. If you have a disability, if you are a recent immigrant, we know it is more difficult. There are factors associated with the individual that may make it more difficult to find a network and get back into a job quickly so that they don't lose their skills.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Basically you're saying the jobs grant program, programs like this, could help even seniors to upgrade and get into the right job market.

[Yves Gingras]

Yes. Helping people to quickly retrain and get ready for the jobs that exist is certainly one way to make sure they don't lose too much.

[Devinder Shory, Conservative, Calgary Northeast, AB]

You said, “The government is also implementing measures that help promote the continued labour force participation of older Canadians by removing disincentives to work and introducing flexibility to accommodate differences in work-to-retirement transitions through the pension system.”

Could you please elaborate on this?

[Dominique La Salle]

Beginning in 2007, the Income Tax Act was changed to allow people contributing to a defined benefit plan to collect some of the benefits while continuing to work part-time. Before that, you couldn't do it. It was not allowed.

The CPP, Canada pension plan, was also changed. I believe it was in 2009 that these discussions took place. It's phased over a number of years, but what is in place now is that you can collect....

We did away with what was called a work cessation test. You had to stop working for two months, detach yourself from the labour market, in order to start collecting the CPP, and then you could go back into the work market. What we found is that detachment, asking people to stop working, too many times for older workers meant that they could not go back to being gainfully employed.

This change now makes it possible to start collecting CPP while working. There's also flexibility in selecting the year you want to collect the CPP, from 60 to 70.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

[The Chair, Conservative, Ed Komarnicki]

Thank you. Your time is up.

We will now move to Monsieur Lapointe.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

After the 2011 election, I myself hired people in my riding who were over 55 years old on average. It works well for me. From time to time, I have to deal with some stubbornness, given that they have a lot of experience, but that very experience sometimes leads to better decisions.

What I am sure I did not do was to bring about an overall loss of 25% in their income when they changed jobs. What bothers me most is that all the statistics look very much like what we see on the ground. For example, when Stryker, the manufacturer of hospital beds, closed its doors, people 55 and older ended up working in service industries at inevitably lower salaries. That is what we are seeing on the ground all the time.

Do you have statistics on the specific impact of that situation? I mean the loss of income and purchasing power and the requirement to work longer in order to have the means to be able to retire.

Do you have statistics on that generation of people who have lost their jobs in manufacturing and are now working at lower-paid jobs in the service sector?

[Yves Gingras]

Mr. Chair, there are a number of studies that help us to understand the repercussions of these job losses. As I mentioned, with older workers, the loss in revenue can reach 25%. The repercussions can vary from study to study, but the fact remains that the loss of income can be as much as 25%.

These are very pertinent studies that look at the changing trends in industrial production and the shift from the manufacturing sector to the service sector. That underlies all the results we see in the studies. The 25% drop in salaries is directly linked to these phenomena that are happening in Canada. A number of studies come to the same conclusion. A loss in salary brings with it a loss in purchasing power. That ties in with your question very specifically.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Do any of those studies deal specifically with the repercussions of the situation, meaning the purchasing power of those people and the number of additional years they are going to have to work before they are able to retire? I am talking about the specific consequences that it will have on the tens of thousands of people 55 and over whose salaries have dropped.

[Yves Gingras]

You would like to know the extent to which it requires them to work longer?

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I want to discuss the consequences of that strong trend: people being paid less at the end of their lives.

[Yves Gingras]

In a study we conducted in 2008, we asked people which factors affected their decision to retire.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Great.

[Yves Gingras]

In deciding whether they are ready to retire, people considered health reasons first, then financial reasons. If their plans change because they have a lower income, they will be forced to work longer. That is the second most important reason.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Fine. I understand. I see that no study focuses specifically on that aspect. So it will be less interesting, in my opinion.

In terms of the targeted initiative for older workers, it is supposed to help workers from 55 to 64 years of age by providing a range of employment-oriented activities, such as training that is tailored to meet their needs.

In my riding, the Centre d'aide et de recherche d'emploi Montmagny-L'Islet has developed the Cible-55 program, which is supported in large part by the federal government. They do not provide specialized training. They do not teach welders how to use new computerized welding equipment, for example. The employees at the organization sit down with people who may not have prepared a resumé or gone to an interview in 25 years. So they offer to go through it all with them so that it will not be so hard later.

They get annual funding that is not indexed and they live under the constant threat of being told that their jobs will not exist next year. I do not understand that. People who lose their jobs after 25 or 30 years at the same place need someone to support them as they return to the workforce, by showing them, for example, how to write a resumé and how to express themselves in an interview.

Given that the need is not going to go away, why is the organization not offered three-year funding, at least? It could then have some assurance that it would be able to operate properly.

[Catherine Demers]

You were talking about tailoring measures to specific situations and that is precisely what the TIOW does. Each project varies with the location and with the community where it operates.