Evidence of meeting #58 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was authority.
A video is available from Parliament.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
Mr. Askari, previously at finance committee we asked if you were able to find out how many businesses paid between $14,000 and $16,000 in EI premiums in 2013. Has a formal request been made to the PBO by the government for these figures?
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
We asked the Department of Finance for the numbers and they provided the numbers to us. It's based on their estimates according to the data for 2012. There are 10,000 small businesses that fall in that category of $14,000 to $16,000 in EI payments. That's all the information that we got from Finance Canada.
Liberal
Scott Brison Liberal Kings—Hants, NS
So it's about 10,000 small businesses. For the businesses in that category they would be very close to the threshold that would trigger the disincentive to hiring that is being cited by economists.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Potentially.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you.
The government is citing the CFIB's numbers in terms of potential job creation, saying that this job credit will create 25,000 person-years of employment. Are you aware of any internal government analysis in addition to the CFIB analysis?
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
No. We have not seen any estimates from the government.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
No.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
We looked at what they have published on their website in terms of what methodology they used. They have used an estimate for pension premium changes that was, from my recollection, originally estimated by the University of Toronto. They have turned that into the number of jobs over a period of time, which is not specified in their publications. They are using a job-year as a measure of the job impact. That is, from my point of view, unusual because typically what we do to estimate the impact of the policy measure on jobs is to measure the impact on the job levels. That's what we have done in our publication. They're using person-year or job-year, which requires a period of time that the job has to stay there.
This job credit is a temporary job credit. Anything that is done now has to be offset by 2017 when the government sets the seven-year break-even rate. If there is no 10-year period, or a period beyond the two years, it's not clear to us how they came up with the 25,000 job-years.
Liberal
Scott Brison Liberal Kings—Hants, NS
How many jobs has the PBO analysis determined this would likely create?
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Our estimate, based on the multipliers provided by the Department of Finance, is about 800 jobs in 2016.
Liberal
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Yes, $550 million. That's right.
Liberal
Scott Brison Liberal Kings—Hants, NS
That's $700,000 per job.
Mr. Macdonald, on your web site you say, “Say you’re a business just over the $550,000 payroll cap. Why not just fire your summer student or cut back her hours to get yourself under the cap?” Have you done some analysis on how large this disincentive to growth would be, or how many businesses may be affected? Is it consistent with what Mr. Askari has referenced?
Senior Economist, Canadian Centre for Policy Alternatives
Thank you for the question.
I assume that the numbers that Mr. Askari has received from Finance Canada are the accurate ones of businesses that are around the cap. Included is a strong disincentive to go over the cap if you were near the cap. If you're far enough away from the cap, it's probably neither here nor there.
I would encourage the member to take a look at the report that was attached to the tax expenditures and evaluation report that came out this spring that examined small business rates across Canada, both provincially and federally. I think what's quite clear is that the small business rate, which is unrelated to this EI small business job credit.... However, what it does show is that businesses are very willing to change the profits that they declare to get just under the small business line in federal and provincial taxation.
So there's a clear incentive there, and you see a reaction to that incentive for small businesses to declare under $500,000 in profits. I think you'd almost certainly see the same type of reaction to this cliff that would be implemented through the small business job credit, where you would see a bunching of companies that are declaring EI contributions of just under $15,000, and you would see a disproportionate fall on the other side of that cliff that would probably correct itself after another $1,000 or $2,000 in EI contributions.
Liberal
Scott Brison Liberal Kings—Hants, NS
According to a recent PBO report, the excess of EI taxes the government is charging over the next, I think, two years, will cost the economy 10,000 jobs. Have you done some analysis on the overall EI premiums and the impact on employment rendered by excess premiums?
Senior Economist, Canadian Centre for Policy Alternatives
Well, it depends on how those premiums are spent, I suppose. If that money is put into a [Technical difficulty--Editor] there's obviously going to be a negative impact on the economy of higher-than-necessary EI—
Senior Economist, Canadian Centre for Policy Alternatives
Well, that's potentially another issue.
However, what I would encourage is for members to examine the fact that most Canadians who are unemployed cannot access the EI system. Instead of decreasing premiums, what we should be doing is increasing coverage rates on unemployed Canadians, the benefits of which are quite high. They're three or four times the amount that you'd see for EI premium changes.
Thank you.
Conservative
The Chair Conservative James Rajotte
Okay, thank you. Thank you, Mr. Brison.
We'll go to Mr. Allen, please.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Thank you very much, Mr. Chair, and thank you to our witnesses for being here.
I'd like to start with the Canadian Payments Association.
Mr. Gaetz, under the existing governance structure today, what do you see as the kind of major shortcomings in the existing governance structure, and specifically, how do you assess how that's going to improve things for the consumer? Do you see it improving things for the consumer in any way?
President and Chief Executive Officer, Canadian Payments Association
In today's governance structure, within the act and legislation, the CPA's board of directors is first chaired by the Bank of Canada and is majority-structured from members from financial institutions.
Today there are 16 board members, only three of which are independent board members. The new structure is important in that it is a smaller board, so a more efficient board of 13. It will be chaired by an independent member and will have six additional independent members, so it will be a majority independent board. I will also sit on the board as an ex officio member and we will retain five board positions from our members.
The notion is that it is a board that is more balanced. It is independent. It is a board that will be elected by the membership on a one vote per member basis, so in that sense, the size of the financial institution.... A large institution carries the same vote as a small institution. My belief is that this governance structure is more representative of the broader financial industry and from a payment standpoint will be reflective of some of the smaller and new entrants over time and the views thereof. Therefore, more efficient and majority independent are the key changes.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
I guess the logical follow on to that is that with more independents, consumers will be protected as will new companies coming on as well. Is that how that would help the consumer?
President and Chief Executive Officer, Canadian Payments Association
Right. From a consumer standpoint, there are two elements of our governance structure that are important. We have a stakeholder advisory council that reports directly to the board of directors, so it's a direct line to provide advice and guidance. It is made up of a broad set of stakeholders, importantly including consumer groups.
That is how we ensure that the voice of the consumer gets right to our board of directors and again, a board of directors that will now be majority independent of financial institutions. We think this has struck the right balance going forward.