Finance Committee on April 25th, 2013

[Dr. Miles Corak]

Thank you very much for the question.

To relate this to the previous discussion we had, Ms. Glover's discussion, inequality is rooted in the labour market, and the tax and transfer system is basically a bandage on top of that. What we want to build up is a high-pressure economy at the lower-end skill level. Let the demand outstrip supply, and you'll see wages rise.

In both cases, the employment insurance program and the temporary worker programs, the design of these programs in effect offers a wage subsidy to low-skilled employees. As Professor Boadway said, the evidence is not yet in on this, but I can't see how that can promote a high-skilled, high-wage economy at the low end.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Caron.

I want to start my round with Mr. Muzyka.

I'll refer to the study you have on your website, the Conference Board study. The poverty rates you have on your website for child poverty, working-age poverty, and the elderly, indicate they were all increasing from the mid-1990s to the late 2000s. Yet, when I go to Statistics Canada's website and the low-income rates from 1976 to 2009—I have it here, and we have it on another chart to 2012—it's 13% in 1976, and 14% in 1983. The highest is 1996, at 15.7%, but since that time it's gradually reduced. In 2009, it was 9.6%, and it's fallen further since that time.

Clearly there are two sets of numbers here, one from Statistics Canada and one from the Conference Board. Can you explain what that difference is?

[Dr. Daniel Muzyka]

If I may, Mr. Chair, I'd like to turn it over to the person who's actually an expert on that, Brenda Lafleur.

[Dr. Brenda Lafleur, Program Director, Conference Board of Canada]

What are the two numbers that you're referring to? We use data from the OECD. What it does is it takes all of the data from all the different countries and makes sure that it's comparable.

[The Chair, Conservative, James Rajotte]

I'll explain. You have poverty rates on your website.

[Dr. Brenda Lafleur]

Right.

[The Chair, Conservative, James Rajotte]

You have the child poverty rate, the working-age, and the elderly. You show them all increasing. According to Statistics Canada, the low-income rate has decreased since the mid-1990s. In those three groups, if they are going up, you would not expect the LICO—the low income cut-off—rate to drop. So why is the low-income rate dropping according to Statistics Canada?

[Dr. Brenda Lafleur]

The LICO is a different measure. What the OECD uses is a relative measure, so it's a certain proportion that are below a certain median income. You can get two different results from it.

[The Chair, Conservative, James Rajotte]

With poverty, though, would you say that poverty is getting worse for elderly, for children, for working-age, or would you say that, in fact, it is improving somewhat?

[Dr. Brenda Lafleur]

Each of those is different. For the elderly, for certain, it was one of the big successes of the Canadian story to have it come down from such high levels in the 1970s. In the last few years—and all of the data supports this—it's been creeping up a little. But it still is one of the lowest rates, and it's certainly one of the lowest rates around the world.

[The Chair, Conservative, James Rajotte]

For children and for working-age, how does it look?

[Dr. Brenda Lafleur]

Working-age is increasing, and it has been increasing over the last, say, 20 years. For children, it has been increasing as well.

[The Chair, Conservative, James Rajotte]

The biggest concern for the Conference Board is working-age. Is that correct?

[Dr. Brenda Lafleur]

Correct. We're concerned also with the squeezing of the middle class. If you look at the working-age poverty rate and you see we have a large portion of people of working age with inadequate education levels, that's a problem.

[The Chair, Conservative, James Rajotte]

We have a lot of measures in this country for trying to deal with this issue—a very progressive income tax system, a refundable GST credit, a Canada child tax benefit, a refundable national child benefit supplement, a refundable working income tax benefit, a guaranteed income supplement for low-income seniors. There are a lot of policy measures in place.

Can you give us some advice on what works well and what perhaps we should do in addition to this? Do some of these not work as well as we think they do?

[Dr. Brenda Lafleur]

If you look at the impact of the tax and transfer system over the last few decades, you find that it has been reducing inequality. It has been less effective since the early-1990s. These data have been borne out by our studies and by major studies around the world. You're right that certain programs have been put in place, and they're good programs. But the government has also cut some programs, and that has had a negative impact on income inequality.

[The Chair, Conservative, James Rajotte]

The last government put in place two of the credits, at least two. The working income tax benefit, WITB, was put in place by this government, and we increased—

[Dr. Brenda Lafleur]

Correct.

[The Chair, Conservative, James Rajotte]

—the funding for the Canada child tax benefit and the national child benefit.

[Dr. Brenda Lafleur]

The world is changing, and globalization, and all of these things are changing so quickly that in fact you probably have to move faster on a lot of these programs. If you look at globalization and what's happened to those working class people, the programs you're putting in place are not being as effective as they could be.

[The Chair, Conservative, James Rajotte]

I'm out of time, since I cut everybody else off. But what I'm looking for, as the chair, is whether these specifics work well. Do they not work well? Are there types of programs like this that we should mirror, things like WITB? I think we need some very specific advice, so if anyone wants to submit that to me afterwards, I'd appreciate it.

But my round is up. I will go now to Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair, and my thanks to each of the witnesses for appearing this morning.

A Liberal government was proud to introduce the WITB measure in the fall of 2005, prior to our being given a sabbatical in January 2006. But we're glad the Conservatives kept that measure, and we support it heartily.

[The Chair, Conservative, James Rajotte]

[Inaudible--Editor]

[Some hon. members]

Oh, oh!

[Scott Brison, Liberal, Kings—Hants, NS]

Well, yes. It's been twice extended, but we've learned enough. We're ready now to go back to work.

Mr. Eisen, you believe we can have tax reform that could render taxes more progressive and fairer, and at the same time be pro-growth. We can do both.