Human Resources Committee on Nov. 19th, 2009

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you, Madam Chair.

Good afternoon ladies and gentlemen and thank you for being here. You say that the premium rate of $1.73 is at the break-even point, in your opinion.

[Frank Vermaeten]

The $1.73 is the current rate. On the rate that was chosen, it's a principle-based approach, where we said that employers would pay the same rate as employees without having to pay the employer portion. That's why in Quebec the rate will be $1.36 for 2010, which is the same rate that employees pay. In the rest of Canada, the rate is $1.73.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

The amount of $1.73 is as close as possible to the break-even point, according to your calculations. That is what you said earlier. I would like you to confirm this.

[Frank Vermaeten]

That is the rate that.... The legislation says that the rate the self-employed pay, if they choose to opt in, for the rest of Canada, is the same as employees pay, and in Quebec, it's also the same as employees pay. It's been determined to be--

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Yes, I understand. Is it a coincidence that that amount is the same as the amount paid by salaried workers? The premium of $1.73 that self-employed workers will have to pay is identical to that of salaried workers. Is that a coincidence?

[Frank Vermaeten]

It's identical. It's a principle-based approach. Other rates and principles could have been chosen, but the idea was that this is a fair rate that roughly reflects the costs. That's why we say it is very close to break-even—maybe a little more, maybe a bit less—and it is also a rate that we think is affordable. It's not an extremely low rate where it is a giveaway; it's an insurance program and we think it's a fair rate.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Very well. However, concerning the salaried workers' premium, that contains the employer's part and the employee's contribution. Earlier, you said that you estimated the cost of this to be approximately $700 million. Can you tell us how much of this $700 million would go to paying compassionate leave benefits, and how much would go to sickness leave and parental leave respectively?

[Louis Beauséjour, Director General, Employment Insurance Policy, Skills and Employment Branch, Department of Human Resources and Skills Development]

He said that the net cost would be $70 million.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Okay, it would be $70 million. Can that be broken down according to the three types of benefits?

[Frank Vermaeten]

Yes. We have some estimates based on the projections. Again, the costs will depend on the number of people who are joining. I think if we--

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you. You are estimating the cost, but you have not broken it down. There is something I do not understand. I must have missed a few math courses too when I was young, but I know that to estimate my total expenses at the end of the year I have to have some kind of idea of what my expenses are going to be.

I can't say that I will have expenses of $50,000 this year without knowing how much it is going to cost me for my car, my food, in short without having some kind of idea beforehand.

You estimate the cost of this program to be $70 million without being able to assess how much it will cost for each of these benefits.

[Frank Vermaeten]

We absolutely have. I've been trying to explain for a while how we go about...[Inaudible--Editor]...the estimate--

[Josée Beaudin, Bloc, Saint-Lambert, QC]

So what is the breakdown of the expenditures?

[Frank Vermaeten]

I think roughly...it depends on how many people join. As I said, I think we have a very firm number of how many people we think will join for maternity and parental benefits. The numbers work out to roughly $200 million of benefits, I think. It's approximately that. Again, the projection on how many people join for sickness and compassionate benefits is less clear, because this hasn't been provided before. It may be in the range of about $100 million in terms of benefits. So I think it's--

[Josée Beaudin, Bloc, Saint-Lambert, QC]

In the documents we read we estimate that the cost of maternity and parental benefits will represent 75% of the overall amount. Do you believe that the proportion will be much higher than 75%? Is there any chance that parental benefits will amount to much more than 75% of the total cost, in light of the fact that this could interest a large number of self-employed workers?

Where employment insurance is concerned, there is always a percentage that goes to administration; it says here that it will be 8%. Actuarial figures tell us that for salaried workers 8% of the amount of the cost of the program goes to administering it. Is that percentage taken from the $1.73 for self-employed workers? That would take us to a figure of $1.59. And if 75% goes to parental leave, that takes us down to $1.19.

I did some ballpark calculations. In fact, I feel like I'm taking to you as you often talk to us when you answer us.

Did you withdraw all of these cost percentages from the $1.73 amount?

[Louis Beauséjour]

You have to remember that the $1.73 amount represents the current rate.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

So this is this salaried workers' rate, comprised of both the employer's and the employee's contribution?

[Louis Beauséjour]

The amount of $1.73 is what the employees must pay, and the plan is that this will also be the rate paid by self-employed workers.

Currently this amount is set by the government and we know that it will not be sufficient to pay all of the costs. It will probably change, because the new crown corporation will be determining the rates needed to finance the employment insurance program in future.

For the moment, we consider that this $1.73 premium pays for everything.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Does that include a percentage for administration?

[Louis Beauséjour]

Yes, it does. Everything is included in the cost. Under the principle that has been established, self-employed workers will pay exactly the same rate, so that it will eventually become the break-even rate for the employment insurance program as a whole.

[The Vice-Chair, Liberal, Raymonde Folco]

Thank you.

Mr. Martin.

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

Thank you very much.

Thanks again for being here.

I just want to continue in the vein I was in with the minister and ask if any analysis was done, and if you have any figures to share with us re making the program mandatory as opposed to voluntary. The argument is made that there will be a small pot of money which ultimately will have to make the contribution to perhaps a larger ask; you talked about $80 million at the end of the day being out there that will have to come from somewhere. The fear is that it will come from the now shrunken and limited pot of EI out there that's coming from the regular contributions of workers and employers.

Has any analysis been done of the cost of making it mandatory as opposed to voluntary?

[Frank Vermaeten]

In terms of designing this program, I think right at the outset it was made very clear that the government had made a commitment to make this voluntary. I think the minister explained the logic that not everybody would want to sign up for this and that it might be considered just a general tax increase for a service that many people didn't want. So I think the work really did focus on a voluntary system.

Certainly we would have some very different numbers, I suspect, if it were done on a mandatory system, but right from the outset, our parameters were fairly firmly provided by the government to develop a system that was voluntary.

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

Is Quebec's mandatory?

[Frank Vermaeten]

Yes, it is.