Human Resources Committee on May 30th, 2006

[Diane Carroll]

Mr. Godin, to your point, yes, you're right.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Thank you.

[Diane Carroll]

You're not completely right, but you're right on one point.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

I am right, and you know that I am right.

[Diane Carroll]

Well, I'll explain it and let's see if we both agree.

Yes, prior to EI you had to work at least 15 hours per week to get an insurable week of work. It meant that you had 12 weeks of 15 hours and you could qualify in the highest unemployment regions. But that week-based system actually led to a lot of employers making sure they only employed people for 14 hours. There are actually more part-time workers who qualify for EI now than before.

The individuals who now work for 14 hours, 12 hours, or 10 hours, possibly in two or three jobs, which a lot of people do these days, now have all of their work insured. Before, an individual could actually have three of those kinds of jobs and not have one hour of insurable employment. Those part-time workers are insured.

Yes, it means that somebody who had been working 15 hours for only 12 weeks has to either increase those hours per week or work longer than 12 hours to qualify. The other thing it did was you got a week insured before, so somebody who was working 50 hours a week for only 10 weeks, which can happen in the construction industry, did not qualify for UI. The person who now works 50 hours for only 10 weeks gets 500 hours of work and qualifies for EI. The hours-based system actually created a lot more equity across the system and stopped employers from creating distortions in the system.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

How can you say that that created equity when there's a 49-billion-dollar surplus in the employment insurance fund? What do you say when the United Nations states that Canada should not be proud of the way it treats its workers? A global organization said that Canada... What do you answer to that after the statements that you have just made? How can you make such comments when the United Nations is making such statements?

You say that this is more equitable. How was the government able to amass a surplus of $49 billion, whereas in the past it always had a deficit? The government was in a black hole. Now, it is the workers.

[Diane Carroll]

I certainly cannot speak to the account. Whether or not the program itself is fair and equitable and good policy in terms of assisting the unemployed is one thing. How the government decides to manage the premiums and the benefits.... Because it's integrated with the books of Canada, the reality is that if the government decides to increase EI benefits, say, by $2 billion a year, it does mean that it's a $2 billion fiscal commitment the government has to recognize. So that is an issue that's outside the domain of HRSD and even the minister of HRSD.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

I congratulate you for the student program. It is a good program, except that students are leaving the rural regions in order to go to universities, and then they stay there. The students leaving the rural regions means that we are losing a part of the money that has been injected into those areas.

I believe this is a fundamental error on the part of the government, because this prevents young people from returning to the rural regions and from having the desire to stay there. This is a terrible mistake. I will ask the department to make recommendations in this regard.

I will not be here for the next meeting and I wanted to say something on this subject. It is a very good program, but I think mistakes were made over the last few years when the data was collected. I am sure that you are aware of this.

[The Chair, Conservative, Dean Allison]

A quick response, Mr. Smith.

[Robert Smith, Director, Youth Initiatives Programs, Service Canada]

You're right that there was a movement of funds from rural to urban Canada. It was based on the fact that the variables, which were the same as before...the new statistics to those variables were taken into account for the 2001 census data.

As the chart in the back of the deck outlines, there has been a considerable shift or demographic change in the youth population in Canada. Newfoundland, for example, lost 17% of its youth population between 1996 and 2001. So the reality is that those new numbers reflect the changing demographics in each constituency.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Smith.

Mrs. Yelich, a final round of seven minutes.

[Lynne Yelich, Conservative, Blackstrap, SK]

The questions, I feel, that the member was asking should have been answered by Finance perhaps, which brings into question pilot projects. What actually can be expected of them, even in the future? When they're set up, are they meant to be put into place? I wonder about the rate-setting mechanism. Will that set limits to programs and projects, because you're now setting it so it's almost revenue neutral? If it all goes into the big pot, what will that do? I'm just wondering about the rate-setting mechanisms.

I want to ask Finance as well what they thought should be done with the notional EI reserve, because obviously I think that's what the problem is. It no longer seems to be about EI benefits.

I also have a question about the 15 weeks meeting the objectives of providing temporary income support. You responded to a report talking about the 15-week maximum being based on the examination of the private sector in other countries. Would you agree with that assessment and the rationale behind it?

And then I have a question for career placement, particularly about concurrence and members of Parliament having to concur with reports. What practical purpose does this have, and what concerns have been raised with this process? And if there haven't been any, I have some.

I would like to go back, first of all, to the EI sickness benefits. What was the rationale behind your...? Would you agree with the assessment?

And then I have a few questions to ask Finance, just to see where they're at with all that they've just heard.

[Diane Carroll]

Maybe I'll start with your first one on the pilot projects. The intent of the pilot projects is very much to do a test. What the pilot project basically allows you to do is to set aside some of the rules within the EI Act to test, in a particular region or with a particular group of clients, a new approach to the program. You can do that under the legislation. You can have pilot projects in place for up to three years. The purpose is really to assess if this is something you would want to do on an ongoing basis. So it is testing. Does it address the issue? Does it provide additional benefits to the people who need it? At the same time, you need to assess whether it is creating other disincentives to work. Does it lead to people taking longer to find jobs? So it is trying to find the balance.

[Lynne Yelich, Conservative, Blackstrap, SK]

A member of Parliament in the last government said pretty well every pilot project became permanent, and I wonder about that.

[Diane Carroll]

I'll turn to Bill to answer that.

[Bill James, Director General, Employment Insurance Policy, Employment Programs Policy and Design Branch, Department of Human Resources and Social Development]

There was a pilot project that was not implemented permanently and nationally. It was referred to as the mères brimées pilot project. It was implemented in Quebec and dealt with people taking what is called a retrait préventif. The results of the pilot showed that it was somewhat effective, but with the implementation of Quebec's own parental insurance plan, the need for that pilot was no longer clear.

[Lynne Yelich, Conservative, Blackstrap, SK]

So that suggests pilot projects are good for finding different solutions, as Quebec did. I think we have to shine some light on what the idea of a pilot project is. Perhaps people don't have an understanding. I'm not sure.

[Diane Carroll]

On your point about the rate-setting mechanism and will it tend to limit the potential to increase benefits, when the commission is looking at the rate for the future year, at that point, during that prior year, the minister can signal at any point her intent to make changes and the chief actuary needs to take that into account. So she can provide advice to the chief actuary that says, "I am considering making these kinds of changes. In your assessment of the rate I want you to take into account these kinds of changes.” So she would get a sense of what the costs were.

There is a mechanism to make sure that if the government has a plan to make a change in a future year, the chief actuary takes that into account in the upcoming year. Obviously, if a change was made mid-year, the impact on the actual revenues would probably be very small, because if you make a change mid-year, the actual cost is often out further. It doesn't really restrain the government at the time.

[Lynne Yelich, Conservative, Blackstrap, SK]

Because it's going to be almost revenue neutral, in some ways.

[Diane Carroll]

Yes, it will be, but all I'm saying is in the prior year, the minister can say, "I want you to set a rate that will enable me to make these kinds of changes that are going to cost $200 million, so make sure the revenue is there to pay for that change."

[Lynne Yelich, Conservative, Blackstrap, SK]

And the EI sickness benefits--I would like to know your assessment and rationale behind the decision on the availability of sickness benefits in the private sector and other countries. That's what it was based on.

[Bill James]

Yes, the current duration is 15 weeks, and that was established quite some time ago, but it probably continues to reflect the short-term sickness coverage provided by most employers. In that respect it is somewhat complementary to some of the other types of longer-term insurance provided by a variety of employers and by private insurance plans. It's one of the things we do monitor closely and report on in terms of the amount of benefit used by people and the number of people who run out.

[Lynne Yelich, Conservative, Blackstrap, SK]

Yes, particularly cancer patients. Many people don't have extended benefits.

I would like to hear from Finance if they have any comments on the rate-setting mechanism. With these consultations, was there anything that should be done with the national EI reserve? Are there any comments on that? When they set up the rate-setting consultations, I just wondered if there were any particular comments.

[Réal Bouchard, General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

I have a few comments.

It has been described before. Up to 2006, prior to having the new rate-setting mechanism, in theory the surplus was taken into account in setting the premium rate. But with the new process in place, essentially that past cumulative surplus, which has been alluded to, does not enter into the calculation of the break-even EI premium rate. So the $48 billion or $49 billion notional surplus, which is the past accumulation of surpluses and deficits, no longer enters into the calculation of the premium rate. From now on, it's essentially based on program forecasts for the coming year. As Ms. Carroll indicated, if we were to make a change to benefits, there would somehow be an adjustment to the premium rate to reflect the increase in benefits.

The impact of moving in tandem between benefits and premiums, on a forward-looking basis, is that it would have a neutral effect on the government's bottom line, because revenues would go up as benefits go up and the two would be a wash.

There is a distinction to be made—Mr. Godin is gone—between the past and the future. The surplus that Mr. Godin alluded to is a reflection of cumulative surpluses of the past. From now on, we have a new policy in place. That notional surplus is still sitting out there, but it's sort of dormant. The impact it had in the past on the government's bottom line, as Ms. Carroll said earlier, was that it impacted in the year when an annual surplus actually occurred. If there was a $2 billion surplus, it had an impact on the government's bottom line. But once the year was past, the cumulative number essentially had no meaning. It's an accounting device that simply adds up the pluses and minuses, and so on. It's a bookkeeping entry.

The impact took place annually, depending upon revenues and expenditures in that year. Today, the surplus does not enter into the calculation. It does not have an impact on the government's bottom line. It is sitting dormant in the box, although in theory it could still go up by notional interest being “credited” to the account, at the discretion of the Minister of Finance. It is a plus and minus in the books, and it's a wash as far as the government's bottom line is concerned.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Bouchard.

We're into our second round now.

You have five minutes, Mr. Regan.