Finance Committee on Oct. 23rd, 2012

[The Vice-Chair, NDP, Peggy Nash]

Oh, you're together. Sorry.

Go ahead, Ms. Aquin.

[Elizabeth Aquin, Senior Vice-President, Petroleum Services Association of Canada]

I have somebody with me, too.

[Voices]

Oh, oh!

[The Vice-Chair, NDP, Peggy Nash]

You're all together.

[Elizabeth Aquin]

Good afternoon, and thank you for the opportunity to speak with you here today.

As mentioned, my name is Elizabeth Aquin, and I'm the senior vice-president of the Petroleum Services Association of Canada, or PSAC—the other PSAC.

Joining me today is Kathy Marasco, vice-president of corporate human resources, a representative from one of our member companies, Sanjel Corporation.

The Petroleum Services Association of Canada is the national trade association representing the service, supply, and manufacturing sector of the upstream petroleum industry. PSAC represents a diverse range of over 260 member companies, employing over 76,000 people, and contracting almost exclusively to oil and gas exploration and development companies. PSAC member companies represent approximately 80% of the business volume generated in the petroleum services sector.

PSAC is having statistics updated this fall on the economic contribution of the petroleum services sector; however, for the purposes of perspective, a study by the Canadian Energy Research Institute revealed that in 2006 the sector contributed $65 billion to Canadian GDP, paid $9 billion in personal and corporate taxes, and employed 800,000 people across the country directly and indirectly. In 2009, 36 Canadian-based companies alone exported almost $13 billion worth of products, technology, and services.

We believe that the oil and gas industry in Canada is, and will continue to be, a major source of economic growth. Arguably, however, one of the biggest obstacles to this growth is the shortage of labour. This issue will require a combination of remedies, some of which I would like to highlight here today.

The first one is with respect to the overseas employment tax credit, OETC. When companies have valuable employees who have gained experience and are now able to help Canadian companies diversify and grow internationally, the main issue is retention. Retention involves continuing to provide those employees with career or personal development opportunities, compensation incentives, or perhaps a combination of both. The OETC is one example of such an incentive. Work assignments in foreign countries are typically rotational in nature. For example, employees are requested to work 30 days in the foreign country, and receive the next 30 days off in Canada. This type of arrangement causes significant disruption to family life. The OETC has been a very effective tool in enticing employees to accept such work arrangements.

The benefits of the OETC are several. The company is able to expand internationally, earning revenue for itself and for Canada and providing increased jobs to Canadians through such growth, as well as the portion of income tax paid by those employees working internationally, over and above the OETC. As those employees return home, they also contribute to the Canadian economy as they spend their disposable income in Canada. In addition, the company is able to retain the employee to deploy as needed. The phasing out of this tool, as indicated in the 2012 budget, removes an important arrow in the quiver of Canadian competitive advantages.

On another topic, as PSAC member companies search for new employees, they most certainly seek Canadians first. This makes the most business and economic sense, as international recruitment is expensive, time-consuming, and often beyond the HR capabilities of many small and medium-sized enterprises. Placing an ad in the local paper is always the first choice. As much of PSAC's membership operates within Alberta, more and more member companies have started to expand their recruitment searches across the country, aware that—

[The Vice-Chair, NDP, Peggy Nash]

You have one minute—

[Elizabeth Aquin]

—unemployment is higher outside of Alberta.

In doing so, work arrangements to encourage people to work away from home, in another province, are being created. Offering work schedules of 21 days on and 14 days off is one example, allowing workers to have their families remain in place until they are confident that their skills are truly transferable and that this new industry will work out for them.

The issue with this arrangement is the uncertainty for companies as to whether the travel and accommodation costs for workers are taxable benefits. Under subsection 6(1) of the Income Tax Act, all benefits received by an employee from their employer are taxable. There are certain exceptions under subsection 6(6) that many offer relief, but only under specific circumstances and criteria.

A key criterion is that the work assignment must be temporary in nature. Since it is not usually the intention of the company, this would appear to render employees ineligible for relief under this section.

Employees, however, do not see travelling to work as a benefit that should be taxed. Without the help of subsection 6(6), the entire interprovincial distance travelled could be considered as travel from home to work. As such, it's a taxable benefit.

The amount of this taxable benefit is extremely large, and quickly erodes the employee's net pay. This—

[The Vice-Chair, NDP, Peggy Nash]

Ms. Aquin, thanks very much. Your five minutes are up.

If you want to say a couple of words in closing, go ahead.

[Elizabeth Aquin]

Okay.

I would just say that in terms of this particular one, we seek clarity on this situation in order to remove any disincentives to hiring Canadians and to Canadians trying to find new opportunities in other provinces.

We don't believe this was the intention of the CRA in the creation and implementation of this section.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much. I appreciate that. You'll get more time during questions.

Members of the committee, can I get consent, under Standing Order 115(5), to sit through the bells for maybe 15 minutes?

[Some hon. members]

Agreed.

[The Vice-Chair, NDP, Peggy Nash]

Thank you.

In the absence of the chair, I'm going to take my five minutes right off the bat and then go into the rotations.

I want to thank all of the witnesses for being here. Some of you had very similar comments. Many of you spoke about R and D and innovation. You spoke about labour shortages. You spoke about debt, both government debt and personal debt.

First, Mr. Awad, you have a proposal to help alleviate student debt. Can you tell me, from the perspective of students, what role reducing student debt would play in helping with economic development? Are there overall economic advantages to Canadians for reducing the debt, particularly to students?

[Adam Awad]

Absolutely. As I made reference to in my remarks, what we're seeing more and more, particularly with high youth unemployment—at the moment, it's double the general rate of unemployment—is that youth, particularly graduates, are having a harder time finding employment right afterwards, so it makes it difficult to repay that amount. We're also seeing lower levels of youth entrepreneurship. If you graduate with $25,000, $35,000, $40,000 in debt, then taking on an additional debt from a bank loan in order to start a business is often way too much in terms of actually being able to pay that all back.

When we see the rising number of students using the repayment assistance program as part of the Canada student loans program, that means.... This year there are 147,000 people whose interest in being covered by the federal government, which means they aren't able to invest locally in their economy. They aren't able to put money away for economic stability. They aren't able to start families, often, because that requires greater resources.

Actively reducing the debt would alleviate a number of those issues and would provide students an opportunity to reinvest in their local economy, to be creative, and to start their own industries and businesses. It would allow them to be able to plan much further ahead, rather than from week to week and paycheque to paycheque.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much.

I notice you also raised in your report the issue of aboriginal youth. That was also mentioned by you, Mr. Gratton. Mr. Everson, you mentioned the whole issue of labour shortages.

As I understand it, there will be about 300,000 aboriginal youth joining, or potentially joining, the labour market over the next 15 years.

Mr. Gratton, I'd like to start with you. What is the mining sector doing to reach out to aboriginal youth to address the skills shortage and to bring those youth into the labour market?

Then I'll open it up to anyone else who would like to get into that specific question about aboriginal youth.

[Pierre Gratton]

I'll touch on a few things. This is actually something that I could spend a lot of time on.

[The Vice-Chair, NDP, Peggy Nash]

I'm sure.

[Pierre Gratton]

Through our sector council, one of the projects we've done in partnership with the Assembly of First Nations and the Inuit is on aboriginal inclusion. It's been taking to companies the skills and systems they need to make the workplace a better place and more attractive for aboriginal people. That's not just youth, but since they have the youngest population in Canada, they're often fairly young people. That's something we've been doing.

As you know, any major new mining development in Canada will typically come with an impact benefit agreement, or something like that, with the local communities. It will typically have employment targets, and often also training arrangements to help encourage aboriginal participation in the industry. That's another aspect.

I would be remiss if I didn't mention an excellent program in British Columbia, where I used to work, that just recently got new funding. It's called the BC Aboriginal Mine Training Association. They just got renewed funding for the next three years. That's been a remarkable partnership between industry, communities, governments, and first nations to provide work experience and training for them.

[The Vice-Chair, NDP, Peggy Nash]

Thanks very much.

Does anyone else want to talk about aboriginal youth? I have 20 seconds.

[Adam Awad]

Yes. There a number of things.

In our report, we say that the Centre for the Study of Living Standards highlighted that if the aboriginal communities in Canada participated at the same rate as non-aboriginal communities in post-secondary education, over 20 years we would see a return on investment of $400 billion pumped into the economy. That's because aboriginal people are the fastest-growing demographic in Canada.

[The Vice-Chair, NDP, Peggy Nash]

Mr. Awad, I'm sorry, I'm out of time. Thank you. I'm going to read your report to find out more, or maybe someone else will ask you about that.

Next is Mr. Van Kesteren. You have five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, all, for coming this evening.

Mr. Gratton, I will continue with you on the issue about the aboriginal workforce.

I was up in Alberta, in the Teck coal mine, and they did in fact have a program through which they engaged the aboriginals. We do know, of course, that in a lot of these areas—the Ring of Fire, for instance—there are large groups that can be tapped into. It's good to see you are doing that.

What I was fascinated to hear you talk about was needing 140,000 workers in the next 10 years. When you talked about 140,000 workers, were you talking directly? If we're talking about the extraction industry, which I understand is indirectly responsible for 20% of our GDP, were you talking about direct requirements in the extraction industry, or were you talking about the spinoff—the unguided hand principle?

[Pierre Gratton]

These are direct jobs.

Now, I should clarify, in case there is a misunderstanding, that these are also jobs to replace retiring workers. Part of it is the effect of the aging baby boomer generation, which is leaving the industry, and part of it is labour market projections in terms of growth in the industry. It's a combination of the two. It's not all new jobs; some of it is replacing older workers.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

What about specialty? A lot of these workers obviously have to be trained. Are you having difficulty getting university students who need specific training, or is that need being met?

[Pierre Gratton]

We have gaps across the whole range of skill sets, including the trades, the university level, and engineering. It really depends on where you look on how acute it is.

For example, metallurgical engineers are extremely rare these days. We haven't seen the turnout from our schools to meet the demand for metallurgical engineers. There has been a far greater take-up for mining engineers, and a lot of our schools across the country are full to overflowing. We are starting to see certain niches being addressed better than others, so it really does depend.

Of course, part of what we're also facing is that with some of the skills we need in the trades—electricians, auto mechanics, etc.—there are other sectors in the economy that are facing the same shortages, so we're competing for a lot of the same people.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I think I could have addressed my questions to you, too, Ms. Aquin. I think you have the same issue. Are you having difficulties recruiting specialty employment workers?