Thank you very much for inviting me. I appreciate the time.
While I'd be happy to answer questions regarding division 24 of the bill on old age security, division 43 on the EI Act, or division 54 on immigration and refugee protection, I'm going to speak initially on the OAS and EI components.
I have to say that like many of the previous speakers, I'm favourably disposed to policies that encourage Canadians to remain active in the labour market later in life, because that will increase labour force participation and national output—although some care needs to be taken to protect those workers who are unable to work.
It's clear that life expectancy has increased and is increasing. Since 1966, when CPP was started, life expectancy has increased by about 10 years for men, and eight years for women.
Although so far we've been focusing on the phased-in increase in OAS eligibility, it seems entirely possible to me that the voluntary deferral provisions might be at least as valuable, offering an extremely sensible policy as an incentive for a very large increase in years of labour force participation.
The weakness with the current proposal, as has been mentioned by some of the previous witnesses, is that the current reform does not fit into a comprehensive package. We need to be worried about how these various pieces of the system fit together.
We might want to push a little bit further and have an automatic system, more like the Swedes do, as opposed to the piecemeal, occasional system that we seem to have. In Sweden, there's automatic indexing of the age of retirement according to gains in life expectancy. This seems very sensible, although we might want to have some sharing rule whereby gains in life expectancy are partly allocated to increased years of work and partly allocated to increased years of retirement.
As a second point on OAS, I'd like to put a further nail into the coffin of the modern falsehood often heard in popular discussions that somehow senior workers need to retire to make way for younger workers. Economists have frequently called this the lump of labour fallacy, and have done so for many decades. There is not a lump or a fixed number of jobs in Canada, and it's not the case that if someone takes a job, someone else will lose one. In fact, there are frequently complementarities whereby all age groups benefit from the labour market success of particular age groups.
Relatively recently, some very high-quality work has been done comparing across 12 developed countries, and it's been summarized by two American economists at Harvard and MIT, and one Canadian economist at UBC. It persuasively concludes that there's no evidence supporting this idea that seniors are taking jobs from young workers. In fact, the evidence suggests that the alternative is true: Youth employment increases and youth unemployment decreases as older citizens remain employed. As well, survey work by Statistics Canada suggests that older workers appreciate and value employment.
Turning to EI, although not discussed as much, the recent changes to EI by the minister that seem quite valuable are the improved collection and dissemination of labour market information regarding job vacancies. If implemented well, this seems like an extremely important and potentially very valuable change. I would hope that all job seekers would have access to this new information system, and not only employment insurance claimants.
Turning to the suitable work provisions that the current legislation is striking out and replacing with regulations, I see the increased flexibility of regulations as advantageous. Although it goes beyond the text of the budget, I think it's worth thinking about the ramifications of the regulations that might follow from the changes to the budget, as announced recently by the minister of HRSDC. Although clarity in the regulations is useful, my sense is that the proposal is sometimes a bit too stringent for truly long-tenured workers. This partly follows from a very generous definition of long tenure.
In terms of the impact of the regulations, it seems entirely likely that many of the initial reactions in the media and by politicians to the minister's proposals might be off the mark. In particular, the high unemployment rate regions of eastern Canada might well not be the most affected by the suitable work changes.
As background, it's useful to distinguish between the impacts of the proposed new regulations for suitable work on individuals and the aggregate impact on regions of the country. It's also important to realize that for these new suitable employment regulations to have any impact, there have to be job openings.
At the level of the individual, it seems reasonable to believe that frequent claimants in low unemployment rate regions, especially in Alberta, will probably be the most strongly affected by the policy changes. There are a lot of job openings in Alberta and the EI claimants who are frequent claimants will be required to take them. However, there are relatively few EI claimants in Alberta, so the aggregate impact on the region is not likely to be particularly strong.
It seems reasonable to believe that the aggregate impacts will be felt most strongly in EI regions that are in the middle of the unemployment rate or spectrum that frequent EI users populate; that is, that the impacts will be strongest in regions that combine an appreciable number of EI claimants who are potentially most strongly affected and also regions that have an appreciable number of job openings for those workers.
It's undoubtedly true that these reforms will cause some short-term pain for some workers; however, in the long run, if it works, it should reduce unemployment and cause firms and workers to tailor their unemployment patterns less to the parameters of the EI system. This will beneficially increase productivity.
It's also worth noting that individuals need not remain in the first job they find after terminating EI benefits. In fact, the research in labour economics suggests that an employed search is not necessarily less productive and can sometimes be more productive than job search when one is unemployed. The key issue is that job search need not end when EI benefits do.
Looking forward, if Canadian society can find a way to reduce the deleterious EI incentive that subsidizes full-time work for part of the year only, we can then perhaps turn our attention to improving the system for those who are poorly served at present, especially long-tenured job losers and permanent part-time workers in low-income households.
Thank you very much for the invitation to speak today.