Thank you, Mr. Chairman, members of the committee, and fellow presenters. Good morning.
I'm representing the Toronto City Summit Alliance, which is an alliance of civic leaders in the city of Toronto, and today I'll concentrate on the alliance's resolutions and recommendations on the employment insurance program.
Changes to employment insurance can be implemented quickly and would deliver significant short-term stimulus, including increased spending and workforce participation, but also longer-term benefits for Canada's labour force and economy, particularly as the federal government considers strategies to respond to current economic conditions.
The Toronto City Summit Alliance recommends that EI reform is an important opportunity to both reduce poverty and provide stimulus. It was in May 2006, 37 months ago, that the Task Force on Modernizing Income Security for Working-Age Adults, which we call MISWAA, a broad coalition of community leaders led by the Toronto City Summit Alliance and St. Christopher House, a settlement house in Parkdale, part of Toronto west, recommended a comprehensive strategy for income security reform and the alleviation of poverty in its report entitled Time for a Fair Deal.
That report recommended that the federal government create a working income tax benefit for low-income earners, reform EI coverage to address the significant decline in coverage of the unemployed, and improve access to employment supports and training. It further recommended increasing the Canada child tax benefit and providing and administering a national disability income support program for persons whose disabilities prevent them from entering the workforce.
Additional reports by Toronto Dominion, or TD Economics, other economists and social policy experts have explored the work disincentives and high marginal effective tax rates faced by working-age adults on social assistance and other issues inhibiting poverty reduction in Canada. Both the federal and Ontario governments have acted on these reports in a number of positive ways, including through the working income tax benefit, which was expanded in the recent federal budget, and through the Ontario child benefit and a dental plan for the working poor. At this critical juncture, however, there is still much to do to ensure that all individuals have adequate opportunities to work and become more self-reliant.
Looking at the GTA, as the current recession continues, rising unemployment is evident and will continue substantially. As noted in the MISWAA report, again from three years ago, EI in recent years has not provided coverage to most of those who have become unemployed in Ontario, particularly in Toronto. The report noted that only 22% of those in Toronto who became unemployed received EI benefits and only 27% for Ontario as a whole, as compared to a national average of over 40%. Of course, going back before 1993, it was over 80%.
The low rates of eligibility in Ontario and Toronto are driven primarily by benefit qualification requirements, which are significantly higher than they were before the 1996 and 1993 EI rule changes and are especially high for new entrants and re-entrants to the workforce.
Given the high immigration levels in the GTA and the large and growing part-time workforce--regular part-time jobs are lower than 50% in the GTA--EI is increasingly only a program for a minority of workers who have stable long-term jobs. For those who do not qualify for employment insurance, provincial asset tests on social assistance are at a very low level--in fact, the lowest in history--requiring those without income to liquidate virtually all their resources to go on social assistance. Of course, having liquidated most of their assets, they will find getting back into the workforce that much more difficult.
Among the suite of options for federal income security reforms, we strongly recommend EI reform as a readily available, modestly priced opportunity to both address human needs and generate immediate economic stimulus. The specific changes suggested are as follows: suspend the two-week waiting period temporarily; standardize the variable entrance requirement, or VER, at 360 hours until a more extensive review is completed to determine whether the VER is the appropriate metric and, if so, to what rate this will be calibrated.
Don Drummond of TD Economics, who is a member of the Toronto City Summit Alliance, has estimated that these first two measures would cost $1 billion in fiscal 2009. He's also on record as saying that the VER might be the wrong metric for the EI benefit structure, so he fixed the 2010 EI contribution rate at the 2009 level.
At a minimum, do not raise the 2010 premium to cover the cost of any policy-induced increases and benefits. This would be a major drag on employment creation. A smoothing mechanism needs to be put in place to enable EI to be truly counter-cyclical in its effects.
In addition to addressing the human cost of this recession, these proposed EI reforms will generate short-term stimulus by putting money and increased job potential in the hands of the people most likely to use them. Experience has shown that temporary sales tax cuts generally lead to higher savings or accelerated purchases, much of it of foreign goods and services that may later dampen economic recovery. Recent analysis of the U.S. tax rebates last year indicate that 80% of the rebates were saved. Of the remaining 20% of the rebates, half were spent on imports. Thus the U.S. received only 10ยข of stimulus for each $1 spent.
Immediate EI reforms will ensure that economic stimulus money is spent in 2009-10, that the human costs of this recession are being addressed, and that the federal government is continuing to implement structural advances critical to Canada's long-term prosperity.
Thank you.