Thank you, Mr. Chairman.
On behalf of the Canadian Federation of Independent Business and the 105,000 business owners we represent, I want to thank the committee for inviting us to provide comments on the creation of the Canada Employment Insurance Financing Board.
Small and medium-sized businesses play a major role in Canada's economic growth and job creation, accounting for almost 50% of the GDP and 60% of total employment.
I'm asking the committee to refer to the graphs in the presentation I have submitted. You can see that the first graph tracks the GDP and the CFIB's business barometer, based on small business owners' expectations for their own businesses. As you can see, our members are cautiously optimistic concerning the current economic downturn.
There is some good news on the second page. In this area they are experts. They are experts in their own businesses on employment plans, and 30% of small business owners said they plan to increase employment in 2008, compared to 8% who plan to decrease employment. This is good news when considering future unemployment rates, EI premiums, and the EI surplus.
I have included several surveys based on thousands of responses from business owners. I may not have time to get through the entire presentation; however, I thought it important for the committee to have this information. Perhaps you can discuss it during the questions afterwards.
The overall message we are delivering today is that EI is a major concern of small business owners, as you can see on the third slide. They feel that the EI system needs to be fixed because of three things: one, they think the rate-setting process is flawed; two, they think the EI surplus should not be allowed to continue to grow at the rate it's growing; and three, they feel that the EI program does not address today's labour market needs. This concern is so high that I have over 20,000 action alerts like the one I've given to you sitting in my office right now, and we will be delivering these alerts to HRSDC Minister Solberg in a few weeks.
As you can see on page 4, of all the various taxes a business must pay, business owners identified payroll taxes like EI as the kind of tax that affects the growth of their business the most. The graph on page 5 shows that reducing taxes and EI premiums allows business owners to increase wages, hire additional employees, and provide more training.
Page 6 shows that the majority of our members feel a good first step toward fixing EI is to move the EI account from general government revenues to a separate fund. They also think there's a need to improve the management and governance of the EI account. As you can see on page 7, currently only one-third of our members are satisfied with the federal government's approach to managing EI. They believe that EI premiums should be used exclusively for EI purposes.
The punchline is that CFIB supports the creation of the Canadian Employment Insurance Financing Board. The rate-setting mechanism has improved, while still retaining some of the positive aspects such as a fixed date, November 14, to publicly announce the premium rate and ensuring that there are not widely fluctuating rates from year to year.
We're very pleased that the EI operational surplus will no longer flow back to general revenues, and the new reporting mechanism should ensure accountability and transparency.
However, we do have some concerns on issues that we feel should be addressed. For example, will there be significant operating costs that employers' and employees' premiums must cover? Will this be a truly arm's-length board, or will it be a partisan board, with members changing as political parties are newly elected? Will the board be able to address the issue of hundreds of millions of dollars paid by employers through EI overcontributions? As you can see on page 8, this issue is a high priority for our members, with 95% of our members feeling that this issue should be fixed.
We are concerned that the new system will create pressure to increase rates rather than to decrease rates because of administrative costs, the limited EI surplus provided, and the annual increase on the maximum weekly insurable earnings.
Finally, we are concerned that employers and employees must bear the risk of paying for economic downturns after already building up a $54 billion surplus. It is shameful and unfair. At the very least, the federal government should cover off any future shortfall in the EI account if the need arises.
However, it is a good first step to fixing EI.
We agree that the Canada Employment Insurance Financing Board should not be involved in EI policy and programs, but that is where there is dire need to fix EI.
The EI system is failing. It doesn't address employer needs. In 2006, only 44% of EI premiums were spent on regular benefits. The vast majority of the more than 9,000 business respondents listed on page 12 were unaware of or did not use EI programs such as labour market partnerships, self-employment assistance, job creation partnerships, and employment assistance services.
It's not fair that businesses, especially small business owners, continue to pay 60% of the EI premiums. The rate should be gradually moved to a 50-50 or even a 40-40-20 split for premiums, where the government pays 20%.
Finally, the EI system needs to be fixed because it does not address today's labour market trends. With the aging population, many companies are begging for employees. If you look at the graph on page 14, it clearly shows that as the unemployment rate decreased over the past decade, our members' concern about the shortage of qualified labour increased dramatically. This is not a coincidence. Both are linked to demographic trends caused by an aging workforce. The shortage of qualified labour has steadily increased and is expected to increase over many years to come.
In March of this year, CFIB released its Help Wanted report. The report looked at long-term vacancy rates. As you can see, the long-term vacancy rate has almost doubled since we first did a study in 2004. Our study found a 4.4% long-term vacancy rate--which means jobs being vacant for four months or more--which means there were an estimated 309,000 long-term vacancies last year. You can see that this long-term vacancy exists in every province. It's not surprising that our members have told us that it's getting harder and harder to find employees for the future.
Canada needs a long-term, comprehensive strategy to deal with the shortage-of-labour challenge. CFIB has been working with the provincial and federal governments in several areas to deal with this critical issue. We've been dealing with issues such as education and training, apprenticeship programs, co-op education, business succession, and immigration strategy. However, EI policy is one area in which little has been done.
EI policy can play a significant role in either alleviating or exacerbating the shortage of labour. We are concerned that the current EI program is hindering rather than helping employers and employees in dealing with the shortage of qualified labour. As you can see on page 18, one in five of our employers stated that they had difficulty hiring people, because prospective employees would rather stay on EI benefits. In some provinces, such as Newfoundland and Labrador, the rate is closer to 40%.
We need to fix EI so that it's better and so that it meets the needs of employers and employees. It's too important a program to leave in its current state for another 15 years. The creation of the Canada Employment Insurance Financing Board is a good first step, but much more needs to be done in the near future.
Thank you, Mr. Chair.