Human Resources Committee on June 11th, 2013

[The Chair, Conservative, Ed Komarnicki]

Bells will ring at 11:46 and votes will be at 12:16. So with that in mind, I don't suggest we come back after the votes. I'd rather we conclude with three rounds of questions, and that we try, if we're still here on Thursday, to arrange for the second panel to appear by video conference on Thursday. In any event, if we couldn't arrange that, we would meet on Thursday morning to deal with drafting instructions.

I know we had copious notes with respect to the drafting instructions, and if we don't meet again on Thursday, you might proceed on that basis, unless someone particularly draws something to your attention in the interim.

So with that, we will proceed with three rounds of questions, and then I will adjourn when the bells ring.

Monsieur Boulerice, go ahead.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much, Mr. Chair.

I would like to thank our three guests for giving very interesting presentations.

My first question is for Ms. Mayo who is in Hamilton.

I would like to follow up on your conclusion. The issue of increasing the eligibility age for Old Age Security benefits is of great interest to us. The Conservative government tells us that since the announcement was made far in advance, people will have the time to prepare.

However, in my riding, a number of people earn minimum wage or $12 an hour. They won't be able to invest $2,000 a year in their RRSP. We are pleased when people choose to work longer, but we are not so pleased to see them being forced to do so. What kind of impact do you think this will have on your environment, especially on the health of those people who will be forced to work two years longer?

[Sara Mayo]

Thank you very much for your question.

I support what you said. I think we will run into many of these problems in Hamilton. We are noticing problems currently. When the labour market doesn't pay enough, we see people who can't save money.

I'll just speak in English for a minute.

We agree with Dr. Finnie's comments about savings being very important. We do need more collective savings instruments, but individual savings alone are not going to get us through this crisis. There have to be broader solutions to improve wages for young workers so that they are able to do their own saving and participate more fully in the CPP.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much, Ms. Mayo.

Mr. Gray, a little earlier, you said that more and more people are working longer.

Let's take the example of someone who is a member of a labour union. The person's seniority and experience are taken into account and the person benefits from protected rights and social benefits. Do you think this could contribute to a person's decision to voluntarily continue working?

[Dr. David Gray]

I was referring to displaced workers. I am not sure I fully understand your question. I was saying that a worker with a job like you just described, who is laid off, will incur enormous losses due to the adjustment. I think these workers are faced with discrimination in the labour market, and potential employers do not consider them to be very appealing.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

Mr. Finnie, you mentioned an interesting idea. You spoke about collective savings schemes, which protect individuals better than their individual investments do. That's an idea to be developed. You said that it could be CPP but that it doesn't necessarily have to be. There could be other possibilities. Adjustments would have to be made when a crisis occurs, such as the one in 2008.

If I may, I would like to ask you the following question. Could we put in place international policies to avoid a crisis like the one of 2008? Can we prevent speculators from taking on numerous bad mortgages and selling them on the market as a financial product, which is completely toxic? Can they be stopped from creating a financial product, that they then bet against, after selling it to investors?

Are there rules to consider that could prevent a crisis like the one in 2008?

[Prof. Ross Finnie]

I am not an expert in the organization of finances. I am not working on this matter, so I cannot give an opinion on it.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

That's unfortunate.

How much time do I have left, Mr. Chair?

[The Chair, Conservative, Ed Komarnicki]

You have one minute. Do you want to use it?

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Yes. Thank you.

Could the government require companies to reduce the administrative costs of individual RRSPs? You mentioned that these fees are around 2% per year whereas the return is 4%. As a result, 50% of the return goes towards these fees. Could such a measure be beneficial to workers?

[Prof. Ross Finnie]

As an economist, I would be reluctant to adopt such a policy. I am in favour of the government intervening when it's necessary, but the idea of forcing a price or something of that nature...

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

You prefer finding an alternative.

[Prof. Ross Finnie]

That's right. Finding an alternative would eliminate such a problem.

[The Chair, Conservative, Ed Komarnicki]

Thank you for that exchange.

Mr. McColeman, go ahead.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair.

Thank you to the witnesses here today.

Dr. Finnie, I'd like to ask you a few questions because I like your idea of the possibility of non-governmental vehicles perhaps being in the overall mix. I look at the generation just before us and what they did. I come from a blue-collar town and a blue-collar family. My parents' savings were basically the equity in their house and some small RRSPs. It's generational.

When RRSPs came.... I understand your thoughts about RRSPs in terms of the loading of the fees that are taking away from the growth of the fund. Having said that, however, I will say that many people, especially in the category I've just mentioned, do not have the wherewithal to invest in vehicles that they would understand and for which they would be willing to accept the associated risk factors.

So I'm not so down on RRSPs as you are, and I want to make this comment about them and maybe have you react to it. When people arrive at their retirement, the theory is that the government has matched their contribution through tax deferral. That tax deferral at the time of a high income level is reduced in retirement, because of the decrease in income, generally speaking, that the average Canadian would experience in retirement.

The fact is that they would be paying the taxes on their withdrawals from RRSPs, from that lower tax base, and would also, with the legislation we brought in that was called income splitting for seniors, have the ability to split income. That income now can be split between spouses. I'd like your comments on that.

I'm going to bring all my questions to you, because I know we're short on time. You did not mention in your comments the tax-free savings plan that we brought in, again as a savings vehicle in the mix of things, as you've described, and as another way for every Canadian to put away—we upped it this year—$5,500 a year tax free. That can be taken out at any point in time. It's an incentive, an inducement, to put money away for retirement. It's another inducement.

The third item that we've brought to the table is the pooled registered pension plan. It's in the exact design that you've just talked about in terms of how you answered the previous question. It's pooling resources. It offers Canadians another vehicle to pool, to put resources in registered pension plans to be managed by a pension plan fund similar to the way CPP is managed, as an alternative to savings, again to incent Canadians to put money away.

As I mentioned, on the mix of those things and the direction we've taken to encourage savings for Canadians, the thinking is that many do have limited resources. For many of them, their savings plan, as I've said, is to pay off their mortgage and own their house. When they get to retirement, many of them have to liquidate that or do liquidate that as they age—

[The Chair, Conservative, Ed Komarnicki]

Mr. McColeman, you might want to give him an opportunity to respond.

[Phil McColeman, Conservative, Brant, ON]

So please respond.

[Voices]

Oh, oh!

[The Chair, Conservative, Ed Komarnicki]

You have about a minute and 15 seconds.

[Prof. Ross Finnie]

The world could be a much better place, I agree.

First of all, income splitting is I think partly a philosophical issue, and I don't want to get into that. I'd rather focus my response on the other issue.

The tax-free savings plan I think in principle is a good thing, but I think the take-up rates are not high. That exactly reflects part of the problem.

Similarly, the pooled registered savings plan I think had great potential. It just didn't go nearly far enough nearly soon enough. The reason is that it requires the employer, first of all, to be on board. The employer actually has to take the initiative. If you're a worker out there, and you want to be part of a savings scheme, you have to be with an employer who actually wants to be part of this. As well, the transferability across plans is not what it could or should be.

So if I'm looking at a vehicle, yes, I agree that in that direction it is a collective scheme. But the one that goes further, that allows every worker to participate, and that allows for greater transferability from one job to another to another will get more people saving the amount they want to save.

[The Chair, Conservative, Ed Komarnicki]

Thank you.

We'll move to Mr. Cuzner until the bells ring.

Go ahead.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Thank you.

Mr. Gray, you had referenced the studies done about retraining. Is your concern around the outcomes or results of these studies that are being done, or is there a lack of study being done on it, or is there a lack of retraining taking place?

You had voiced some concern in your comments, but I didn't get exactly what the concern was.

[Dr. David Gray]

Those are very good questions.

When it comes to older displaced workers particularly, the time horizon that exists in order to recoup the initial cost of retraining is relatively short. That's one of the reasons why retraining for another occupation might not be the ideal policy response in the case of an older displaced worker.

The research has tended to show that job retraining programs suffer from a lot of design flaws, perhaps, in that when they're done outside of the apprenticeship model, where there really might be a vacancy for the worker down the road, it's kind of a hit-or-miss operation.

I think the evidence is suggesting that what does pay off more than trying to retrain someone for a specific occupation is to retrain them in bolstering their more generally applicable skills of literacy, numeracy, and document use, perhaps with a year at a community college or something like that. That's a good way to help them learn how to learn, and how to be trained for, a new job, and the skills when the new job comes up.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Is there a body of evidence, or are assessments being made, on the efficiency or the effectiveness?

[Dr. David Gray]

Yes, sir, including on a cost-benefit basis. We look at such things as how many of them are re-employed two years out and what wage they're earning. We have to always compare them with a group of hopefully identical workers who were not laid off. For the United States and for Canada, the evidence is kind of disappointing.