Human Resources Committee on March 10th, 2015

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you, Mr. Chair.

I want to thank both our witnesses. I have several questions, so I will try to be focused here.

Mr. Sandberg, in your program you talked about working for the Government of Ontario, trying to pull people off social assistance, getting them jobs, which would save literally thousands of dollars over the long term when a person is pulled off social assistance so they're not relying on the taxpayer. You said that the businesses that were willing to hire people off social assistance understood that they're probably going to get someone with less training and weaker job than they might otherwise get. They would get an interest rate reduction of half a point, basically. Is that enough to motivate these businesses? Are these businesses risky and couldn't get a bank loan? Does this provide access to capital that otherwise they wouldn't be able to access? Is that another carrot for them?

[Magnus Sandberg]

Yes, you are actually correct. In our current loan program, getting access to financing, period, is a struggle for some of these businesses. But in many cases, and this is why we saw this opportunity to work with the banks and so forth, they were able to get financing through banks and other traditional sources. But, yes, lowering the interest rate and getting help with hiring activities and being seen as doing good for the community attracted them to this program.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

After you implemented this program, you discovered that you needed to hold the hands of the employees a little longer than you originally anticipated because they struggled as soon as they came off social assistance and got into the workplace. They didn't have that experience or the proper training, so now your organization continues to monitor and support the actual employees going into these businesses. Is that accurate?

[Magnus Sandberg]

I have two comments on that.

We work with community partners like the YMCA and Goodwill, who provide such support, if needed, for these candidates. They are the judge if that's needed or not. We are more the intermediary.

Secondly, what we believe is appealing with the model that I described is that half a percentage equates to $3,000 over a period of a five-year-term loan. It's not a lot of money, but it changes the behaviour of these employers. It's not the government saying, “You should hire people from our community service agencies.” Now it's the financial institutions, either us or.... And what we hope the bank is saying is, “Here's an opportunity and we think it works. We've seen it work.” For them to go and hire people from these community service agencies, with a financial incentive, is a nudge for them to change their behaviour. What we're seeing with our portfolio companies again and again is that they come back and say, “Wow, these candidates are very motivated when given the opportunity. We don't need your money, but we want to continue to utilize your hiring services.” That is a big opportunity, which I think is lost today in the system.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I've one more question for you, Mr. Sandberg, before I move on to your colleague.

Moving that from the provincial level to a federal level, my guess is that we'd look at employment insurance and some sort of program to try to get people off EI on an earlier basis, to intervene immediately to try to use that. Do you see this model being transferable to help support people getting off EI earlier?

[Magnus Sandberg]

Yes. It's a little trickier to do the evaluation of the savings to the government. But yes, absolutely, because those population groups are served by the partners we're working with, in addition to other population groups, we believe it's transferable. But what's exciting about this whole set-up that we're working on right now is that if the banks take this on, instantly you can have a national scale with your program.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

The savings in the EI program will go back into the EI fund. I guess what you would be successful at doing is that the businesses would get a stronger employee with a better and more recent work history, because they're closer to the labour market. Furthermore, if you intervened immediately when a person went on EI, instead of waiting for the end of their claim, you would provide some savings right there for the EI fund.

I'm going to move on now to your colleague quickly, because I'm very interested in this notion of using dormant bank accounts. You said there's $500 million right now in Canada for this—

[Norm Tasevski]

I think as of 2013 it's something like $532 million. That's as of 2013. There's a holding period of about 40 years. I don't know the exact number prior to 1975, but that would be what would in theory be going back to the Receiver General.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

What they've done is Great Britain is to take the dormant bank accounts and instead of allocating them into general revenue, they've targeted them social capital funds, the big society fund.

[Norm Tasevski]

Exactly.

It works in the following way. The bank accounts originate in any national bank or government bank. In the Canadian case, it could be RBC, TD, or BMO. For those people who have open bank accounts, who may have passed away or something else and haven't accessed those funds for a period of 10 years, the funds get redirected to the Bank of Canada, which then holds them for 30 years. Then, if these are never touched, the money goes into the consolidated revenue fund of the Government of Canada through the Receiver General.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you very much.

[The Chair, Conservative, Phil McColeman]

Ms. Groguhé, you have four minutes.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Thank you, Mr. Chair.

Mr. Sandberg, I'd like to hear your thoughts about impact investing, and more specifically, on social impact bonds.

In your view, how could we best implement the issuance of these bonds? Do you have any recommendations about that?

[Magnus Sandberg]

Yes, I'll provide some overall comments on social impact bonds. I think you have had some comments on them from prior speakers as well.

We believe in the concept of a social impact bond, which is pay for performance, and which introduces new players and uses private capital, and we believe in de-risking it for governments, and so forth.

The challenge we see is obviously that you need to have perfect before-and-after attributions. They have to be very long term, because you don't know if a specific intervention was actually the one that was contributing to the outcome. There are a number of challenges with social impact bonds. I think it's still a very interesting concept that we should continue to try to pilot, but the program that we have constructed tries to take some of the challenging components of social impact bonds to make them more available and to utilize existing infrastructure as opposed to creating new infrastructure for the social impact bond.

In terms of the framework, I think the components of a social impact bond are very compelling, but if we can simplify the way it's implemented, we believe there would be some opportunities with it to leverage existing infrastructure and tweak it to become the social-ish impact bond.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Precisely. I gather from what you just told us that you have been thinking about this matter, and that you have yet to see results. How close are you to formulating your final thoughts on the matter? How soon will you propose something regarding these bonds? Could you let us know sometime before the end of the study?

[Magnus Sandberg]

I don't think that I would be the best person to provide that view.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

All right.

[The Chair, Conservative, Phil McColeman]

Are you finished, Mr. Sandberg, on that?

[Sadia Groguhé, NDP, Saint-Lambert, QC]

I believe so.

[The Chair, Conservative, Phil McColeman]

I'm cutting you off a bit early, but that's okay because we're coming to the time limits of our meeting and we like to be right on schedule.

I want to thank you two gentlemen for being here today and giving us your input on this very interesting study that we've embarked on.

If there's anything that wasn't covered here today that you thought might be important or essential for the committee to know, please don't hesitate to give us a written submission if you wish after we've done more study. Obviously, the transcripts of our meetings are available publicly, so you can review what has been discussed and, if you want to weigh in in the future at any time while we're doing this study, please do so.

Committee members, that adjourns the meeting.