Thank you, Mr. Chairman.
On behalf of the Canadian Federation of Independent Business and the 105,000 business owners we represent from every sector and every region of the country, I want to thank the committee for inviting us to provide comments on Bill C-50.
Small and medium-sized businesses play a major role in Canada's economic growth and job creation, accounting for almost 50% of the GDP and 60% of total employment. I ask committee members to refer to the first graph in the document we've provided. The first graph tracks the GDP to CFIB's business barometer, based on small business owners' expectations for their own business. This is used by the Bank of Canada on a regular basis and by the Department of Finance. As you can see, our members are cautiously optimistic concerning the economic downturn.
And some good news can be seen with the graph on page 2. Thirty percent of the small and medium-sized enterprises said they plan to increase employment in 2008, compared to 8% who plan to decrease employment. This is good news when considering future unemployment rates, EI premiums, and EI surplus.
We have included several surveys based on thousands of responses from business owners. I may not have time to go through the entire presentation. However, I thought it important for the committee to have this information. Perhaps we can discuss it with the questions afterwards. But if you look on page 3—this is about 10,000 responses—it identifies the high priorities for small and medium-sized enterprises, and you can see that Bill C-50 touches the top six.
Our immediate reaction to the budget is summarized in the report card we attached, which you also have in front of you. We'd be happy to answer the questions you might have on any of these issues, but I want to focus the rest of our presentation on the establishment of the Canada Employment Insurance Financing Board.
The overall message we are delivering today is that EI is a major concern for small and medium-sized enterprises, as you can see on page 3. They feel the EI system needs to be fixed because the rate-setting process is flawed; the EI surplus continues to grow; and the EI program does not address today's labour market needs. This concern is so high that we currently have over 20,000 of these action alerts signed by business owners sitting in our office right now. We'll be delivering them to HRSDC Minister Solberg in a couple of weeks and we'll deliver them to each MP in a little while too.
As you can see on page 4, of all the various taxes a business must pay, business owners identify payroll taxes like EI affecting the growth of their businesses the most. The graph on page 5 shows that reducing taxes and EI premiums allows business owners to increase wages, hire additional employees, and provide more training. Page 6 shows that our members, 74%, feel a good first step to fixing EI is to move the account from general government revenues to a separate fund. They also think there's a need to improve the management and governance of the EI account. Currently, only one-third of our members are satisfied with the federal government's approach to managing EI, as you can see on page 7. They believe EI premiums should be used exclusively for EI purposes.
Having said that, CFIB supports the creation of the Canada Employment Insurance Financing Board. The rate-setting mechanism has been improved, while still retaining some of the positive aspects, such as a fixed date, November 14, to publicly announce the new premium rate, and limits to ensure rates do not fluctuate wildly from year to year.
We are very pleased that the EI operational surplus will no longer flow back to general revenues. The new reporting mechanism should ensure accountability and transparency. However, we do have some concerns and issues that should be addressed. For example, will there be significant operating costs that employers' and employees' premiums must cover? Will this be a truly arm's-length board, or will it be a partisan board, with members changing as political parties are newly elected? Will this board be able to address the issues of hundreds of millions of dollars paid by employers with EI over-contributions, an issue that's a high priority for our members, as you can see on page 8?
We are also concerned that the new system will create pressure to increase rates rather than to decrease rates because of the administrative costs and the limited EI surplus provided on top of the annual increase in the maximum weekly insurable earnings.
Finally, we're concerned that employers and employees must bear the risk of paying for economic downturns after having built up a $54-billion surplus. It's shameful and unfair. At the very least, the federal government should cover off any future shortfall on the EI account, if the need arises. However, it is a good first step to fixing EI.
We agree that the Canada Employment Insurance Financing Board should not be involved in EI policy and programs, but that is where there's a dire need to fix EI. The EI system is failing. It does not address employers' needs.
In 2006, only 44% of EI premiums were spent on regular benefits, as you can see on page 11. The vast majority of the over 9,000 business respondents to the survey--on page 12--were unaware of, or did not use, EI programs such as the labour market partnerships, self-employment assistance, job creation partnerships, and employment assistance services.
It's not fair that business, especially small business owners, continue to pay 60% of the EI premiums. The rate should be gradually moved to a 50-50 split, or 40-40-20 split for premiums, where government pays 20%.
Finally, the EI system needs to be fixed because it does not address today's labour market needs. With the aging population, many companies are begging for employees. The graph on page 14 clearly shows that as the unemployment rate decreased over the past decade our members' concern with the shortage of qualified labour has increased dramatically. This is not a coincidence. Both are linked to a demographic trend caused by an aging workforce.
The shortfall of qualified labour has steadily increased, and it is expected to increase over many years to come. In March of this year, CFIB released its “Help Wanted” report. The report looked at the long-term vacancy rate. As you can see on page 15, the long-term vacancy rate has almost doubled since we first did the study in 2004. Our study found that a 4.4% long-term vacancy rate meant there would be an estimated 309,000 long-term vacancies last year. Page 16 shows that there were long-term vacancies in every province, and page 17 shows that, not surprisingly, our members have told us it's getting harder and harder to find employees for the future.
Canada needs a long-term comprehensive strategy to deal with the labour shortage challenge. CFIB has been working with the provincial and federal governments in several areas to deal with this critical issue, such as education and training, apprenticeship programs, co-op education, business succession, and immigration strategies. However, EI policy is one area where little has been done.
EI policy can play a significant role in either alleviating or exacerbating the labour shortage issue. We are concerned that the current EI program is hindering rather than helping employers and employees deal with the labour shortage issue. As you can see on page 18, one out of five employers stated they had difficulty hiring people because some people would rather stay on EI benefits. In some provinces the people who would rather stay on EI are close to 40%.
We need to fix EI so it better meets the needs of employees and employers. It's too important a program to leave in its current state for another 15 years. The creation of the Canada Employment Insurance Financing Board is a good first step, but more needs to be done in the near future.
Thank you, Mr. Chair.