Human Resources Committee on May 27th, 2008

[Monte Solberg, Conservative, Medicine Hat, AB]

Thank you very much for that question, Mr. Chair, through you.

I think we need to be clear about what it is we're trying to do here. What we really want is for those people who pay into the fund to get the best professionals possible in terms of managing that funding. And remember, there are four main objectives that have been established for the people who make up that board: to set the premium rate under section 66 of the act; to maintain a reserve in accordance with that section; to manage amounts paid to it under section 77; and to invest its financial assets with the view to meeting its financial obligations.

I would argue that the positions people have taken in the past--they come from the labour side or they come from the employer side--really aren't relevant to those rules. What we're looking for are people who truly are professionals when it comes to managing those funds, similar to what we've seen on the CPP Investment Board. I think it's entirely appropriate for people from labour and people from business to make their arguments when it comes to the benefit side. That will of course continue to be in the realm of my ministry and Parliament as a whole, but when it comes to this, what we're really concerned about is that this money is properly managed.

[Tony Martin, NDP, Sault Ste. Marie, ON]

I would respectfully disagree and suggest to you that setting the rates is something that will require some sensitivity in terms of who can afford to pay what. And in terms of looking at how the fund will grow or not grow, depending on investments, I find it a little bit--I hate to use this word--“arrogant” to suggest that workers, for example, may not have some interest in where that money might be invested so that it might contribute and make sure that the fund stays healthy.

I understand that your ministry will take care of the benefits side of things, but the benefits side of things will be paid for by what's in the account, isn't that right? So I would think there would be certainly a very direct and important interest, on behalf of employees across the country, in how that fund is actually built up and managed.

[Monte Solberg, Conservative, Medicine Hat, AB]

I guess I would say that nothing we're proposing precludes anybody coming from a labour background, for instance, from being involved. I'm simply arguing that their background in that regard isn't nearly as relevant as the skills they bring to the table when it comes to managing the account. Their job is to ensure that these things are brought into balance, which benefits both employers and employees over time. It's in everyone's interest to make sure that is done.

We want to make sure that, on the one hand, we don't take any more money than is necessary from employees so that we can, over time, if situations warrant, reduce premiums, which helps workers. On the other hand, we want to make sure that we have adequate revenues coming in to pay for the benefits.

You know, when the mandate is so narrowly described--and I think it's appropriate that it should be--what becomes a lot less relevant is your previous attachment, whether it's labour or on the government side. It's really the skills that you bring to the table when it comes to managing these funds that become very important. But again, it doesn't preclude people from labour being involved in this, which I'm guessing would be your interest.

[Tony Martin, NDP, Sault Ste. Marie, ON]

It's that we would have a balance.

[Monte Solberg, Conservative, Medicine Hat, AB]

Yes.

[Tony Martin, NDP, Sault Ste. Marie, ON]

I will just very briefly go on to the next piece, which was the amount of money that you're putting into the fund, the $2 billion. From what we've heard, that's just not enough. You're convinced it is. So I guess I ask you, what happens? Who picks up the slack if in fact we run into a difficult time in the economy?

I was in the Government of Ontario in the early 1990s, when we had that huge recession that was worldwide in nature. The challenge to government to take care of people, to make sure that they don't fall below the water in those times, becomes quite significant.

So what if there isn't enough money in that account? What happens then?

[The Chair, Conservative, Dean Allison]

That's all the time we have, sir; just a quick response.

[Monte Solberg, Conservative, Medicine Hat, AB]

First of all, there is no money in the account right now, so we're adding $2 billion, so there's $2 billion more than there would be. Secondly, in the event that this cushion is used up in the event of a downturn, just like today, benefits would be backed up by the consolidated revenue fund and by the resources of the Government of Canada. But the one difference I think between now and the 1980s and times in the past is that the nature of the labour force has changed quite dramatically in Canada. This fund would certainly get us through a mild downturn like we saw in 2001-02, but there's reason to believe that with the demographics being the way they are, we don't face quite the same challenges today as we faced in the past in terms of job loss in the event of an economic downturn, because we have so many labour shortages today.

I'll give just one final example. In the past, economist experts would tell you that we'll never see the unemployment rate drop below 7%. That was called the NAIRU. The NAIRU was supposed to be 7%. The experts were all wrong on that. The nature of the labour force today has changed so much, and demographics are working against us--or for us, depending on how you look at it--in terms of there just being so many more opportunities for workers today than there have been in the past.

[The Chair, Conservative, Dean Allison]

Thank you, Minister.

Thank you, Mr. Martin.

Now we're going to move to the government side. I believe we have Ms. Yelich and Mr. Tilson sharing the time.

[Lynne Yelich, Conservative, Blackstrap, SK]

I would like to thank you very much, Minister, for attending today. You have always made yourself available, as was mentioned. On this particular issue, I think you've already given us quite a bit of time, so I was surprised you were asked to return. I thought you did a very good job in your first presentation.

At any rate, we will see if there is anything to clear up today. Mr. Lessard complained about the time he had, and yet he started on another topic. Obviously this topic isn't as important as it was perhaps let out to be. I think it would be nice if you would tell the committee that it isn't easy being called in front of them all the time. There's a lot of preparation, and you do have a very big department. It might be helpful if you would remind them that this isn't always easy.

That said, my main question will be about the board, because people are dubious about the board and their mandate. Could we just walk through the duties and the mandate of the board? I understand there will be three committees: the investment, the audit, and, I think, the human resources.

So perhaps you could just walk through the duties of the board as it breaks down into the individual committees. Then I will defer to Mr. Tilson.

[Monte Solberg, Conservative, Medicine Hat, AB]

Sure, I am happy to do that.

All three of those committees are extraordinarily important. Human resources is, for instance, because you want to find the best possible talent in terms of the people who are working for the board. We're talking about substantial amounts of money. We're talking about the funds of workers and employers. We want to make sure we're very careful about how that money is invested.

It's obviously important to have an audit committee that ensures, again, that all the proper procedures are being followed. It's also important to have an investment committee that on one hand ensures prudence for these funds and on the other hand works to get a decent rate of return for workers and employers who pay into this account. Of course, any revenues that come in from investments ultimately will be used to help reduce premiums.

So those are all important committees of this governance board. Again, they have four main jobs--to set the premium rate, maintain a reserve, manage amounts paid, and invest the financial assets. These are the four main jobs of people on the committee. This is extraordinarily important, and we're looking for people who are of the highest calibre to fill those important roles.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Mr. Chairman, thank you.

I'd like to follow up on the question of rates, which Mr. Martin started asking. I wonder if you could elaborate on whether there are guidelines for rates, as to how rates go up and how rates go down. Is that dependent on the contingency fund that you spoke of, or is it dependent on the economy? I'm just curious as to how rates are determined.

[Monte Solberg, Conservative, Medicine Hat, AB]

Rates will be determined by the board and by the actuary who would be working for them and the staff. They would look at what has occurred in the previous year in terms of any excess premiums that came in because, for instance, calculations were not completely accurate for unemployment rates or for benefits that were paid out.

They would also look forward, and this information would come from a number of sources. It would come from the Department of Finance. It would come from the Department of Human Resources and Social Development, and, as it says in the act, from any other source that the board deems to be important.

They would gather all of this information, so it is important that they have expertise when it comes to things like forecasting. It's important that they have an understanding of economics, unemployment rates, the impact on benefits, these kinds of things. Then they would make a judgment, based on all of this information, regarding what the premiums would be so that they could maintain the reserve at $2 billion but also, of course, bring into balance premiums and benefits.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Is the reserve or the contingency fund the key to whether rates would go up or down or stay the same?

[Monte Solberg, Conservative, Medicine Hat, AB]

The goal is to keep the reserve at $2 billion. The rates would go up and down by a maximum of 15¢, which is what currently happens. That is the policy that is currently in place. The idea is to ensure that there's some stability so that they don't go up too much or go down too much, because obviously that has an impact on employers and employees. So that is the first thing that is considered when the board of governors is making judgments about premiums.

The second fallback position is the cushion of the $2 billion reserve.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Can you elaborate on the qualifications of the people who will be chosen for the board?

[Monte Solberg, Conservative, Medicine Hat, AB]

It's in the act. We're looking for people “with proven financial ability or relevant work experience such that the Board will be able to effectively achieve its objects”. I've laid out what those objects are: maintaining the reserve, investing the funds, and those kinds of things.

So we're really looking for people who have that kind of experience in their work lives.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Tilson, and welcome to the committee. We're glad you're here this morning.

We'll now move to our second round of five minutes. I'll try to do a better job of keeping you actually on five minutes this time. We were slightly over in the last round, as hard as we tried.

Ms. Sgro, you have five minutes.

[Judy Sgro, Liberal, York West, ON]

Thank you very much.

Minister, thank you very much for coming again today.

You did a fine job when you were here on your first occasion briefing us. Following that, witnesses raised a lot of questions. I felt it was important to have you back to make sure that they get adequate answers and we're doing the job we're asked to do. EI is an extremely important thing. It's not something anybody wants to have to seek out, but the reality is that it's been a backstop for many people to bridge that day when they find themselves unemployed.

A significant issue that's been raised to us is the difference here between “shall” and “may”. I'll read you a portion of clause 131 that talks about the board's reserve. It says that in the event that it is not sufficient for the payment of the amounts authorized,

the Minister of Finance, when requested by the Minister, may authorize the advance to the Account from the Consolidated Revenue Fund

I'd like to see that word changed from “may” authorize to “shall” authorize. There's a very significant difference between those two words. Some people out there think this is moving one step toward the elimination of an EI program. It's really important to make it clear that is should be “shall” and not “may”.

Do you have any problems with that recommendation?

[Monte Solberg, Conservative, Medicine Hat, AB]

My understanding from legal counsel is that this is a bit of legal semantics. It has always been the practice with employment insurance to talk about “may” rather than “shall”.

Maybe Mr. Thompson would like to comment on that.

[Paul Thompson, Associate Assistant Deputy Minister, Skills and Employment Branch, Department of Human Resources and Social Development Canada]

Sure.

There are provisions elsewhere in the act to ensure that the CRF is an automatic backstop. Since these are statutory benefits, the CRF will be used as the immediate recourse to pay benefits. The clauses around the advance are to essentially formalize the use of the CRF and the terms and conditions around that use. So the CRF is essentially an automatic backstop for the payment of these statutory benefits.

[Judy Sgro, Liberal, York West, ON]

Then there shouldn't be an issue with changing it from “may” to “shall”.

[Paul Thompson]

The convention in the past has been the use of “may” to enable the minister to determine the provisions around the use of the funds. But a different provision in the act ensures that the CRF is there as the backstop. That's the provision that automatically applies.

[Judy Sgro, Liberal, York West, ON]

It's nice to know that, but it's always better to have several provisions that cover off an issue that matters to Canadians immensely.

On having labour as part of the board, I agree with you that it's extremely important for Canadians that this money be managed effectively. But it's also a matter of having someone on there who understands the implications, who's sensitive. I have always thought that somebody who has never been unemployed in their life probably just doesn't realize how difficult life can be.

Are you prepared to give consideration to having somebody from labour sit on that management board?