Human Resources Committee on May 30th, 2006

[Geoff Regan, Liberal, Halifax West, NS]

I will start by following up on that question. Why would you credit interest if it's only a notional account, which you say has no real meaning?

[Réal Bouchard]

Last year, when the new premium rate-setting process decision was made to leave the EI account more or less without change, no change was made to the provision in the act that says the interest rate can be credited at the discretion of the Minister of Finance. I'm simply saying that no change was made in the legislation at that time.

[Geoff Regan, Liberal, Halifax West, NS]

Let me ask about the committee report, as it related to proposing changes to benefits for unemployed or eligible workers. There were two recommendations in terms of the hours requirement and the maximum benefit, but there was a broad range.

The question is, how many people would be affected by these proposals in terms of benefits, and what would the cost of these changes be? We've heard the number $2 billion from Ms. Carroll. She didn't say that was specifically what the cost would be, but she threw that number out. I'm wondering if this is the number, or if there's some other number for the cost of these proposed changes.

[Bill James]

I hesitate to speak directly to the issue of the costs of the recommendations, without knowing more precisely which one you--

[Geoff Regan, Liberal, Halifax West, NS]

Okay, let me clarify. I mentioned the creation of a 360-hour uniform qualification requirement, the increase in maximum regular benefits from 45 to 50 weeks, the increase in the benefit rate from 55% to 60% of the average weekly insurable earnings, the adoption of a new rate calculation period, equal to the qualifying period, and a new approach for calculating average weekly insurable earnings based on the best 12 weeks. The last point was greater access to and spending on employment benefits and support measures—I'm going to leave that out because it's rather vague and would be indeterminate.

[Bill James]

I can give you a general response on those issues. At that time, I believe the government did table a more specific response to each of their recommendations, but in terms of the cost implications of such changes, they would be quite significant in total. It would be difficult to give a cost estimation without fairly detailed parameters around that.

[Geoff Regan, Liberal, Halifax West, NS]

So do you mean to say that the department did not look at this report and actually state what it would cost to implement these things?

[Bill James]

What I'm saying is that for the sum total of the recommendations you're talking about there, it would be difficult right here to provide you with an estimate of what those would be, but it would be in the hundreds of millions of dollars for sure.

[Geoff Regan, Liberal, Halifax West, NS]

The government, in its response last year to the report, indicated that the department would continue to give serious consideration to the recommendations. Arising from the last question, I guess this leaves the question in my mind, which recommendations has the department been considering since then, and what has been the nature of those considerations?

[Bill James]

I would take that question as a matter of future policy direction for the government and, in that respect it is probably inappropriate for me to answer. I believe the government did table a response at the time.

[Geoff Regan, Liberal, Halifax West, NS]

Maybe you can get back to us in writing on this, but the government's response said:

The Government will continue to give serious consideration to the Standing Committee’s recommendations, while ensuring that any adjustments to the program have a sound policy and evidence-based rationale.

The question, again, is what has the department been doing in terms of giving consideration to these recommendations? If the government said that you would.... It basically sounds like you were directed to consider these things. What has happened inside the department in this regard?

[Bill James]

The issues raised in each of the three major recommendations you have raised pertain to the qualification requirements for the program, the duration of benefits available to claimants when they file, and the replacement rate or amount of their wage covered. Those are three things the government does monitor closely and report to Parliament every year.

I would be happy to provide you with a copy of that report. It's a very extensive report, looking in a detailed way at coverage and access to the program. The minister recently tabled it in Parliament, so I would be happy to provide it to the committee.

[Geoff Regan, Liberal, Halifax West, NS]

Perhaps you could also let me know in writing what policy analysis has been done by the department in relation to training. There are issues in the report relating to recommendations for providing training for a variety of purposes. What policy analysis has been done of those proposals, please?

[Bill James]

Sure.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Regan.

Five minutes, Mr. Lessard.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, Mr. Chairman.

There is something basically unhealthy about the dynamic that has developed around the employment insurance fund. We are told about a theoretical reserve, about theoretical surpluses. The premiums are not theoretical. The cutbacks to employment insurance are not theoretical. But the way in which this is used, and which we are not aware of, is not theoretical because the money is accumulating in the fund.

On December 7, 2005, at the request of the committee, Mr. Malcolm Brown who was then the Assistant Deputy Minister of Human Resources and Skills Development, came to testify. He had done some research following which he appeared before the committee to give us the results of his calculations.

The highest cost, for a coverage rate of 55 to 60%, was $1.2 billion per year. If the eligibility threshold was set at 360 hours, the cost would be $390 million and we would reach 90,000 more unemployed. If the criteria of the 12 best weeks was kept, the cost would be $320 million and we would reach 470,000 unemployed workers. If the maximum went from 45 to 50 weeks, the cost would be $11 million. That does not seem like much, and he was then asked why this seemed like so little. He answered that not everyone reached the 45-week level. He told us that they extrapolated according to the experience within the system, which allowed them to assess this hypothetical amount of approximately $11 million. The maximum insurable amount would then go from $39,000 to $41,000, therefore at $245 million, for a total of $1.9 billion. At the time this research was being done, the employment insurance fund was generating huge surpluses, year after year. The surplus for 2004 was $3.3 billion. For 1997, it was $7 billion. This is not theoretical. The premium rate was quite high, and at that time, the employment insurance eligibility rules had already been radically tightened.

In its 28 recommendations, the committee suggested that these diverted funds be gradually brought back into the fund, the funds that have been referred to as theoretical sums. We were told, and this is quite right, that this money was used at the discretion of the minister. However, these amounts should not be used at the discretion of the minister, but rather at the discretion of those who paid money into the fund.

The reimbursement of this money to the fund, at the rate we have foreseen, that is $1.5 billion per year, which would in no way compromise Canada's finances, would allow us to meet almost three quarters of these costs, without counting the surplus. Let us see how much of the 12-billion-dollar surplus achieved by the Canadian government this year has once again been taken from the fund, despite the reduction in premiums. That is what I have to say about the answers you have sent us.

I will now give the floor to my colleague, who wanted to ask a question about the Summer Career Placement Program.

[The Chair, Conservative, Dean Allison]

I'm sorry, Mr. Lessard, but that's actually your full time of five minutes. I'm sorry about that.

We're going to move on to our next witness.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

That should not count, Mr. Chairman, because I gave an answer.

[The Chair, Conservative, Dean Allison]

Questions and answers, five minutes.

We're going to move on to our next questioner.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

I'm a rookie, so I maybe have some rookie questions. I come from a different area of the country, and I notice that some of the concerns with EI are definitely different across the country, depending on what region you're in.

I'll make a comment in response to something Mr. Godin said earlier. I believe he said that each time you touch the EI fund, you're using government money. I'd just like to clarify that this is not really the case. Obviously, each time you touch the EI fund, it's your own money, other Canadians' money, and other employers' money.

The first question I have is whether there is a limit to the amount of money someone can make in a year and still collect EI.

[Bill James]

There are parameters in the EI act that are income sensitive. First of all, in terms of the contribution, the amount of insured employment you are covered for is up to $39,000. So you pay premiums on only $39,000 of your income.

In terms of receiving EI, if you become unemployed, there are some provisions in the program that are designed to test need as well. It depends on the circumstance of the individual as to whether those provisions apply. In terms of the ceiling of income at which there is a clawback in the EI benefit payments, I believe that is $48,000 a year. So if you make more than $48,000, you could be subject to a clawback. But a clawback does not apply if you are what we call a “first-time claimant”. That's someone who hasn't claimed, I believe, in the past five years.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Does seasonal work differ from an unexpected loss of work? Is there a different way it's treated in terms of the maximums?

[Bill James]

No, it's not. It doesn't vary based on the type of employment you're in.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I had a constituent in my office--a worker who was upset about the whole concept of EI--and I just want to clarify the relevance of his concern.

Let's use your number of $39,000. His concern is that he works very hard, let's say for 50 weeks during the year, to make $39,000. He used a little bigger number, but I want to use the maximum. His concern was that someone in a seasonal work situation can work, say six months, make $39,000, and then on top of that collect employment insurance for the other six months. Is that a real situation?

[Bill James]

There are probably two aspects to your question to respond to. First is the accumulation of hours for insurability, and Madam Carroll addressed that a little earlier. In 1996, there was a move to an hours-based system, so the contributions are based on the hours of work. If that's in a compressed period, a shorter period worth more hours, then there's no discrimination in the system against working those same amount of hours over a longer period.