Mr. Chair, members of the committee, good afternoon.
My name is Judith Andrew, and I am the commissioner for employers at the Canada Employment Insurance Commission.
I'm very pleased to be here on this first opportunity to appear before you on your present study of employment insurance. I'm joined by my colleague, Charles Côté, who is a policy adviser in my office.
The Canada Employment Insurance Commission is marking its 75th year of tripartite oversight of the employment insurance system, and I'm proud to serve as a non-partisan representative of employer interests on the commission, alongside my counterparts representing labour, Commissioner Donnelly; and government, the chair of the CEIC and also the deputy minister for one more week, I understand, Ian Shugart; and the vice-chair, soon to be the deputy minister, Louise Levonian, all of whom have recently appeared before a HUMA committee.
A synopsis of the mandate of the CEIC and the independent commissioners' role in it is included in the information kit distributed to you. It's quite a complete kit.
Although the commission isn't a household name, mainly because EI operations have been delegated to the department, CEIC retains important direct responsibilities and continues to oversee the system in several ways, including preparing an annual report to Parliament that's bolstered by commission-led research on the functioning of the system.
Today I will address the topics you set out for your study in February: first, the impact of recent reforms to the EI program, with brief comments on the most recent reforms in the budget; second, an examination of low rates of access to EI and their causes; and third, the impact of recent reforms to EI appeals.
I will also address EI finances and the financial accountability of the EI program, with reference to the government's campaign commitments.
To begin, I want to draw your attention to a document in your kit entitled “Guiding Principles for Employment Insurance from Employers”. It's in the top right of your kit. This principles document was developed with employer groups at the outset of my term as commissioner, and they continue to guide my work in this role. For example, the reference in the preamble to holding service delivery to high standards has played out in my continuing to press for studies and upgraded comprehensive reporting on service to Canadians in chapter 4 of the EI monitoring and assessment report, recently tabled before Parliament by your colleague, Parliamentary Secretary Rodger Cuzner.
I turn now to the former government's Connecting Canadians with Available Jobs measures, those that defined the job search responsibilities of unemployed workers.
The measures required EI claimants to undertake an active job search and broaden their search parameters over time, based on claimant category. Detailed and somewhat complicated, the changes were sometimes misreported and often misunderstood. Ultimately, the CCAJ changes were seen as especially punitive to claimants, who were accustomed to using EI regularly as an income supplement, typically between seasons. This view was sometimes shared by claimant employers. However, despite the quite vocally expressed concerns, the CCAJ changes actually had very little impact in terms of disqualifying claimants for benefits.
I know some of the researchers have given you some very small numbers on that.
It should be noted that internationally, according to a recent OECD study, Canada is at the low end of the stringency spectrum on such measures. Typically, countries that have an easy access to a generous EI system rely on active return-to-work measures to keep things in balance. In Canada, I hear from, and I know this committee heard from, at least one employer group that has member data on employees actually asking to be laid off, and I know it varied from one in four to one in five, roughly. That does put a different complexion on the job of ensuring that laid-off EI claimants are actively looking for work.
With the repeal of the CCAJ changes, what is important in the context of our system, which is becoming more generous by some $2 billion more per year, is to take care not to send claimants the wrong message about the need to look for work while unemployed on EI. It is important for the department to continue holding meetings with new claimants to highlight their responsibilities in the system as well as conduct continuing eligibility interviews where warranted.
Employers remain puzzled as to why it is optional for claimants to register their search parameters with the job bank so that job seekers have the benefit of electronic notification of possibly interesting job matches with the positions on offer. To employers who are facing shortages of qualified labour now, as well as worsening challenges owing to demographic trends, it's inexplicable that the use of the EI ratepayer-funded national employment service—a.k.a. job bank—is not boosted in this way.
My office's March 2016 bulletin covering the budget offers commentary from the employer standpoint on each of the announced measures in EI and related matters, such as EI-funded training and labour market information. Among the measures that may cause employers extra payroll and administrative challenges are the waiting period reduction, meaning having to rejig top-ups, and the employee flexibilities that are signalled around special benefits.
Referring again to the guiding principles, it's worth noting that special benefits covering life events as opposed to workplace events—maternity, parental, sickness, compassionate care, parents of critically ill children, and so forth—are now approaching a third, or 31% right now, of benefit costs in a tripartite system wherein employers pay 7/12 of the cost, employees pay 5/12, and government contributes zero.
Moving along to another aspect of your present study, examination of low rates of access to EI and their causes, may I commend to your attention a relevant analysis from the EI monitoring and assessment report, which is found the chart in MAR, chapter II, page 39. For 2014, the most recent year available, the Statistics Canada EI coverage survey shows some 1.26 million unemployed people, of whom 482,600—or 38%—were eligible for benefits. You are probably aware that the 38% has been quoted as a castigation of the EI system, but before jumping to conclusions, a closer look is necessary.
The difference between the total unemployed and the number eligible for benefits is accounted for in a number of ways. One group, those not having insurable employment, meaning self-employed people and unpaid family members, numbers in the vicinity of 50,000. A second group includes those who have not worked in the last year, including a substantial number who have never worked. A third group is made up of those not having a valid job separation—that is, people who have voluntarily quit. A fourth group is made up of people who have not worked insufficient hours to qualify.
In short, EI has eligibility criteria, just like any insurance program, or really any other program. Even social assistance has criteria. People who have not worked in a long time, who have never worked, who didn't work enough, or quit their jobs of their own volition simply do not meet the EI eligibility criteria.
Using the 38% number raises the possibility that people who have never worked, who haven't worked in the last year, who quit, and so on, should be as entitled to EI benefits as those who have worked sufficiently and paid premiums but lost their jobs through no fault of their own. Employers do not subscribe to that kind of thinking, and I would doubt that most hard-working employees do either.
I will briefly comment concerning the impact of the former government's reforms to EI appeals, which saw the long-standing, well-tuned former appeals system dismantled in favour of the new Social Security Tribunal, which encompassed not only EI appeals but also old age security and Canada pension appeals.
No doubt the thinking was that this reorganization of the appeals systems would be more effective from a cost perspective and otherwise, not unlike when diverse services to Canadians or procurements across departments were placed under one authority. It does seem to me that rather than taking the so-called benefits of such moves on blind faith, governments need to conduct careful before-and-after analysis to drive toward the intended improvements.
After learning about the change in the 2012 budget, commissioners worked diligently to gracefully stand down the old EI appeal system to ensure as seamless as possible a transition to the new SST. Subsequently we worked hard to ensure that SST activity concerning EI appeals is as comprehensively reported in the EI monitoring and assessment report as was its predecessor tribunals.
On the financial front, I personally have been trying to validate that EI is shouldering no more than its fair share of appeal costs, taking into account that the SST was originally resourced to handle a much higher level of EI appeals than actually materialized. The reason was that a new mandatory reconsideration step inside Service Canada, requiring the agent to actually telephone the client to explain the decision in lay terms, has resulted, happily, in far fewer appeals being presented to the SST.
This brings me to my final topic, which is EI finances.
According to the Public Accounts of Canada, in 2014-15 total EI revenues of $23 billion were higher than its expenditures of $19.7 billion, thus generating a $3.3 billion surplus. This was a bigger surplus than in prior years, but we have finally come back into the black, with an operating account balance of half a billion dollars.
Committee members may know that just prior to the recession, a cumulative surplus in the EI account of some $57 billion was zeroed out. With the account being a notional one and the funds intermingled with general government revenues, the money had been spent by previous governments on priorities unrelated to EI. The EI account was left with no cushion for the last recession, which meant the account fell into a significant deficit, and employers and employees were called upon to pay that off. We finally made it back to the black.
That's why the government's positive election commitment to spend EI monies on EI benefits and programs is so important to employers. Employers have absolutely no desire to repeat the sad history of the $57 billion of their and their employees hard-earned EI payroll taxes used for other things, never to be repaid.
Understandably and accordingly, as commissioner for employers, I'm keeping a close eye not only on the account balance but also on what gets allocated to EI on the expense line, and that's a complicated job.
Finally, here's a word on applicable tax credits. I am referring to the government's proposed youth hiring credit and the present small business job credit.
For 2016, the employee EI rate—which is how the rates are always quoted, in the employee terms—is $1.88. The employer pays 1.4 times that amount, or $2.63 per $100, up to the maximum insurable earnings, so the total for a given job is quite onerous, at over 4.5%.
Moving in 2017 to a rate-smoothing, seven-year, break-even mechanism, it seems good news that the EI rate is forecast in the budget to fall to $1.61, lower than the government's election commitment of $1.65. However, owing to the small business job credit relief of $275 million per year—that is a budget 2015 figure—the effective rate currently being paid by some 90% of businesses in the economy is $2.24. Unless something is done, the so-called decrease in store will be a de facto increase for small business.
Going forward, it will be especially important for government to gear incentives such as tax credits for hiring—especially youth—and for training to the business sector, which has a good record in doing both.
Chair, I am glad to attempt to answer questions from the committee.