Finance Committee on April 3rd, 2020

[Veso Sobot]

I was saying that the USMCA deal, which has just been passed, is a very good first step, but we must be reminded that Canada does not have an exemption to the buy America or Buy American policies within the USMCA, so anything we can do to secure that special Canadian exemption as soon as is practical is a recommendation as well.

The last point is that the federal government currently has an initiative to label plastics as toxic. At a time when the government is appealing to the manufacturers to retool and produce needed plastic products for the health care sector, such as masks, ventilators, hoses, IV bags, PPEs and those sorts of things, labelling plastics as toxic is counterproductive. It disparages and demonizes an otherwise very strong and healthy Canadian plastics industry that is working hard to help alleviate the effects of the COVID virus.

I'd like to end with the notion that plastic are not toxic; rather, they are the product of choice in many very critical applications, so if the government could look at ending that initiative and being much more focused on what it wants to do in terms of environment and litter, that would be very helpful.

Thank you so much for your time. We look forward to taking any questions at the end.

[The Chair, Liberal, Wayne Easter]

Thank you very much, both of you.

I believe we have Derek Ferguson with the International Association of Machinists and Aerospace Workers. Derek, are you there now? If you are, un-mute your mike, introduce yourself and tell us where you're from so the interpreters can get a feel for how your voice works.

[Gord Falconer, Chief of Staff, International Association of Machinists and Aerospace Workers in Canada]

My name is actually Gord Falconer. It's not Derek Ferguson.

[The Chair, Liberal, Wayne Easter]

Okay, Gord. I've been getting all kinds of names over the line. Go ahead.

[Gord Falconer]

My name is Gordon Falconer. I'm the chief of staff for the International Association of Machinists and Aerospace Workers, representing workers across the country.

I want to start by saying thank you for inviting the International Association of Machinists to participate. The IAM is an international union with more than 650,000 members throughout North America. They're divided into 1,143 local lodges, including 65 of those in Canada, holding more than 5,000 collective agreements with more than 200 companies in the United States, Canada, Guam and Puerto Rico.

We're the largest union in Canada representing air transportation and airport workers across the country, with members at Air Canada, Air Transat, British Airways, GardaWorld, Menzies, AAS, Sky Café and others. We represent workers in a broad range of workplaces from aircraft parts manufacturing to aircraft overhaul and repair, automotive parts manufacturing, the hospitality sector, custom paint additives, industrial pump manufacturing and the public sector. We are also quickly growing and becoming faster growing in health care and hospitality.

In a quickly changing environment that is unpredictable, we acknowledge that the development of policies and guidelines is challenging and taxing on existing resources. We welcome the government's actions to address mass unemployment as a result of COVID-19, such as new benefits and financial assistance to businesses. Many of our members will benefit directly from the measures that have been undertaken, and we have worked hard to raise awareness of the new programs that have been put in place.

We would like to take this opportunity to address health and safety in the workplace and the Canadian emergency response benefit, as well as the Canadian emergency wage subsidy program.

Under health and safety, both federal and provincial legislation, employers have an obligation to ensure workers are working in safe environments, where the risks are managed and hazards are minimized. This pandemic has certainly redefined the notion of front-line workers, and many employers have found themselves inadequately prepared for the pandemic.

For our members in the air transportation industry, lack of preparedness is evident and some of our members have contracted COVID-19 while at work. The IAM members who work as screening officers at airports across Canada are certainly on the front lines. Their workplaces were and continue to be an epicentre of the transmission, and airports are high-risk areas. The nature of their work makes it difficult to practise social distancing, and the nature of their employers' relationship to the airport authorities and the Canadian Air Transport Security Authority, also known as CATSA, makes it difficult to determine who ultimately bears responsibility for workers' health and safety protection.

CATSA is a regulating and certifying body for screening officers. The certified screening officers' employers are obligated to follow directives issued by CATSA on a number of issues, some of which infringe on collective bargaining matters. CATSA does not have a direct relationship with the employer, nor the union. Oftentimes, in trying to deal with the employer, the union is referred to CATSA, an agency that it does not have a direct relationship with, and we have the employer who is in large part under the direction and guidance of CATSA. This has made it extremely challenging to address health and safety issues for our membership.

CATSA has directed the employer to follow public health guidelines, and the employer was firm in the position and was not supplying adequate personal protection equipment. At one point, even hand sanitizing stations had been removed. The union then initiated a risk assessment, and during this process a security screening officer contracted the virus, endangering themselves, other co-workers, the public and their community.

Employer policies have a large role to play in curbing transmission. When they take the position that unless public health guidelines require the wearing of a mask, there will be no action on providing protection.

In quickly changing and unknown circumstances, we expect the guidelines would follow the precautionary principle to protect workers and the travelling public. Just yesterday new research revealed that COVID-19 is, in fact, airborne, and that taking a precautionary measure would have curbed exposure earlier on. The same situation has occurred for members who work in health care settings, particularly for those who do not work in hospitals. Our members who work in retirement homes and long-term care. Lack of action and protection has resulted in numerous deaths in long-term care homes.

Unfortunately, now there is a situation where the protective equipment is sorely lacking. Many workers do not have access to the equipment that keeps them safe at work. While governments ask people to be responsible and adhere to rigorous measurements to curb transmission, it is incumbent on employers to do the same, especially in cases where their employees are on the front line. General guidelines are not enough to protect front-line workers. Employers should be held to a higher standard.

On the area of Canadian emergency wage subsidy, any attempt to keep people employed is welcome and appreciated. In workplaces we represent we have begun discussions to let employers know about the program and consider applying. As details have yet to be communicated, we are asking government to consider the following, as we think it's a prudent way of deploying public money at a time when the resources are under pressure.

Subsidies that are paid out should not be used to reward executives and shareholders and should be prohibited for stock buy-backs, executive bonuses, golden parachutes and shareholder dividend payouts. All applications, details and amounts of funding provided to the employers should be published and publicly available as soon as possible. Employers should, at least, be required to demonstrate that revenue declined in relation to COVID-19 and not in relation to other factors. Employers should be required to demonstrate that without the subsidy they are unable to pay normal wages. Companies that are unable to rehire workers should be allowed to put employees back on the payroll and use the subsidy to pay for those wages.

We also have heard some concerns from some of our members that the impact of the employer participating in this program could adversely impact their earnings, reducing their income to levels below what they'd receive on EI benefits. Similarly, employees of companies that partake in this program would not be able to apply for the new CERB. We are sure this wasn't the intent of the program in its inception, but there is a real possibility that its application could impact some of our members negatively.

Under the Canadian emergency response benefit, as of April 6, all claims of EI regular sickness benefits as a result of COVID-19 will be transferred to the new CERB program. Individuals already receiving benefit from EI regular benefits who receive more than $500 a week will see the benefit adjusted to lower than $500 a week. In essence, the CERB is designed to pay a flat amount to all applicants, irrespective of their earnings, insurable hours or the region in which they live.

With equalized payments for all applicants, disservice is done to those who were entitled to more, but more importantly, to those who live in northern areas where the costs of living are high: $2,000 is very little in some parts of Canada, and some Canadians will have a very difficult time keeping their households operational. Additional work is difficult to obtain and most companies are not hiring, so supplementary income is not an option.

We do applaud the government for the swift action in this uncertainty. However, we are also asking that additional supports be provided for individuals who are not able to sustain themselves and their families on this benefit. To date, there have been 500,000 mortgage deferrals, and fewer landlords are giving tenants a grace period.

Even with supports, some Canadians will not be able to meet their financial obligations, so targeted solutions are required. In addition, we also have people—

[The Chair, Liberal, Wayne Easter]

Gordon, I don't want to interrupt, but if you could wrap it up fairly quickly....

[Gord Falconer]

I'm just going to wrap it up right now.

[The Chair, Liberal, Wayne Easter]

Thank you.

[Gord Falconer]

The other part that needs to be addressed is people who are in work that is part-time and multi-employer, with no benefits. We need to be able to address that as a government.

Thank you very much, and thanks for the time.

[The Chair, Liberal, Wayne Easter]

Thank you, Gordon.

Especially on the sick benefits, if anybody on the government side can clarify that point when we get into discussions, that would be helpful.

Turning then to the Macdonald-Laurier Institute, Mr. Cross the floor is yours.

[Philip Cross]

Thank you. It's always a pleasure to speak in front of this committee.

We are living through the fastest-moving crisis of our time, surpassing previous shocks such as the 1998 ice storm, the 9/11 terrorist attacks and the great financial crisis of 2008. It is worth recalling that these shocks were unprecedented, yet we found the resources, wisdom and strength to overcome each of them.

The federal government is increasing spending at the fastest rate in its history. This is arguably an appropriate and largely unavoidable response to the massive disruption of our economy. Canadian households and businesses need quick access to funds if they are going to survive financially until the suspension of normal economic activity ends, yet the imperative of dealing with the current crisis cannot blind us to their long-term effects. It is not widely appreciated that macroeconomic policies to buttress demand in the short run are harmful to potential growth in the long run. We can see this already playing out in the response to the current crisis.

Canada entered this crisis already in a vulnerable state because of its excessive accumulation of debt over the past decade by all sectors of the economy. Our highly cyclical economy and past experience with unexpected shocks should have bred a more cautious approach to savings and borrowings. Already, federal government debt is exploding. The Parliamentary Budget Officer, last week, projected the deficit would surpass $100 billion, even before the wage subsidy of at least $70 billion and bailouts of hard-hit industries.

These projections are not likely to prove to be very accurate. Economic forecasts are made using abstract models that do not incorporate knowledge of local conditions, and they routinely underestimate the impact of events such as the 2008 financial crisis or the coronavirus today. This fallibility is seen in the unemployment insurance claims in the U.S. Economists forecast an increase from 3.3 million last week to 5 million this week, but claims actually soared to 6.6 million. Worse, economists expected U.S. payrolls in March to fall by about 100,000 when they actually plunged by 701,000. The failure of economists to understand how quickly and severely the economy is contracting implies government spending will increase much more than anticipated, while the loss of revenue is being underestimated.

Moreover, there will be other demands on the federal government. Low interest rates are making pension plans for employees increasingly problematic in the public sector. Remember, as recently as last December the federal government raised its estimates of the federal debt substantially because it finally began to acknowledge that low rates of return on pension assets would force the government to subsidize federal pensions. The full amount of this subsidy has still to be publicly acknowledged and is rising as bond yields further decline.

Provincial government revenue losses are likely to be especially severe. They rely more on sales taxes, which are suffering from unexpectedly sharp declines in the usually stable services sector, even as the provinces bear the brunt of soaring health care costs. Undoubtedly, this will lead to even more demands on the federal government.

Soaring government debt adds to the massive bill we are passing to future generations, when we know that government debt was already poised for steep increases as our aging population puts increasing demands on our pension and health care systems. Generational conflict was already being fuelled by the policy of low interest rates, which are now approaching their zero lower bound. Low interest rates already have helped price housing out of the reach of many adults in Toronto and Vancouver.

There are other impacts on younger people from actions taken to combat the virus. Suspending classes, likely for the rest of this school year and possibly beyond, will harm learning because home instruction is unlikely to be as good. Meanwhile, about 250,000 university students are about to graduate and enter a labour market that has dried up overnight. There is substantial research that cohorts who enter the labour market during recessions suffer a lifelong loss of earnings that is never fully recouped.

Hopefully, we will not often hear the slogan, “Never let a crisis go to waste”. History is littered with examples of rash decisions made during a crisis that aggravated the problem in the long term. The Iraq war following the 9/11 attacks comes to mind. In Canada, invoking the War Measures Act in response to an imagined FLQ insurrection was a blatant mistake.

The same is true of economic crises. The federal government used the stagflation of the 1970s to intervene in the economy on a vast scale, culminating in wage and price controls and the national energy program, both of which are now completely discredited. More recently, the Ontario government adopted the Green Energy Act in response to the great recession, a misguided foray into industrial policy that resulted in a doubling of electricity rates, ballooning government deficits and chronically slow growth. It is worrisome that some of the architects of that policy are today advising the federal government.

Parliament should be wary of schemes hatched by the civil service to permanently expand government program spending during a crisis. One study of social policy concluded that the rapid expansion of the welfare state in the 1950s was not a response to public demand but played on widespread fears of a return to depression after World War II ended. Their “genesis, formulation, justification, and, of course, implementation all occurred within the state and as a result were the handiwork of key policy actors.”

The frenzy of a crisis atmosphere makes it seem worth taking risks with both state power and public money, although once a government program begins it is hard to end. One example of how permanent a temporary government program can be is the U.S. Congress raising pensions in 1958 for civil war widows, nearly 100 years after the war ended.

Canadians want a return to their normal lives as quickly as possible, not a permanent expansion of government spending programs. Already it may be hard to roll back higher tax credits for low incomes, while the drums are beating in some quarters to convert the $2,000 CERB grant into a permanent guaranteed annual income for all. As soon as possible, we want to restore the efficient allocation of credit to the—

[The Chair, Liberal, Wayne Easter]

Am I the only one who lost Philip?

[An hon. member]

I lost him too.

[Pierre Poilievre, Conservative, Carleton, ON]

It is too bad. He was on a roll.

Wayne, can we ask him to start again from the beginning?

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Wayne Easter]

No, but he did have some really good points there at the beginning. I liked the first paragraph.

I would expect that the operator is trying to reconnect with him. I'll just go through the list that we have while we are waiting for him to come back. The first questioner will be Mr. Morantz, then Mr. Fragiskatos, Mr. Ste-Marie, Mr. Julian and Mr. Cumming.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Our problem, Mr. Chair, is that my questions were for Mr. Cross.

[The Chair, Liberal, Wayne Easter]

Then we'll just move on to whoever wants to start.

Mr. Cumming or Mr. Cooper...?

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

My questions are also for Mr. Cross. If need be, I can proceed, but if someone else on the Conservative side has some questions for someone else then perhaps they—

[The Chair, Liberal, Wayne Easter]

Mr. Cumming, are you on there?

[James Cumming, Conservative, Edmonton Centre, AB]

Sure, I can help out.

[The Chair, Liberal, Wayne Easter]

Okay. We'll let you go to questions and then if Philip comes back on, we'll let him finish.

I think he was—

[Philip Cross]

I can hear you. I don't know if you can hear me.

[The Chair, Liberal, Wayne Easter]

We have you now. Please finish up, Philip.

[Philip Cross]

Okay. I was just at the last paragraph anyway.

So far we are not repeating one lingering problem from the 2008-09 crisis, where rescue packages for banks and quantitative easing favoured the wealthy and helped to widen income inequality, especially in the U.S. and Europe. The policies currently adopted in response to the pandemic have been targeted more at those parts of the working class and small businesses bearing the brunt of the downturn. Hopefully this will help avert the worst of the last decade’s divisive and futile debate over distributional issues.

Thank you.