Human Resources Committee on May 25th, 2020

[The Chair, Liberal, Sean Casey]

I call this meeting to order.

Welcome to meeting number 13 of the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities. Pursuant to the orders of reference of March 24, April 11, April 20 and today, May 25, 2020, the committee is meeting for the purpose of receiving evidence concerning matters related to the government's response to the COVID-19 pandemic.

Today's meeting is taking place by video conference, and the proceedings will be made available via the House of Commons website. The webcast will always show the person speaking rather than the entirety of the committee.

Before speaking, please wait until I recognize you by name. When you're ready to speak, please click on the microphone icon to activate your mike.

Before we get started, I would like to remind everyone to please use the language channel of the language they are speaking.

I would now like to thank the witnesses for joining us. With us today, appearing as individuals, are Shamez Kassam, author and financial adviser; and Kevin Milligan, professor at the University of British Columbia. From Fraserway RV, we have James Epp, president.

Mr. Kassam, you're up first for your opening statement. You have the floor for seven minutes.

[Shamez Kassam, Author and Financial Advisor, As an Individual]

Good evening.

I would like to thank the members of this committee for the opportunity to speak today. I also thank you for your continued public service during these challenging times.

I am a financial adviser based in Calgary, and an advocate for financial literacy.

With respect to the government's response to the COVID-19 pandemic, I want to thank the government for its quick action to help Canadians impacted by this crisis. I also have several comments and some suggestions.

The rules around the CERB program were initially confusing and live operators were difficult to reach for many Canadians, which caused more anxiety for individuals who were already suffering from increased stress. Some groups, such as students, were initially left without any direct assistance.

Many Canadians also fell through the cracks. For example, several people I know had their incomes dramatically reduced but were still earning $1,000 per month and therefore did not qualify for the program, but they did need assistance.

The CERB program also created some adverse incentives for workers in lower-paying jobs. I have heard several stories of individuals turning down jobs or not returning to work because they would rather remain on the CERB program.

Rather than rolling out support programs on a piecemeal basis, a better method would have been to immediately provide every Canadian over the age of 18 and workers under the age of 18 with a benefit of $2,000 per month on a taxable basis. This benefit could then have been clawed back based on income tax filings for the 2020 tax year, similar to the way it is done for the old age security program. Many accountants I have spoken to in my local community also expressed strong support for this concept.

In addition to this, in my opinion, the government was not adequately prepared with enough PPE for front-line health care workers and citizens. This should be strategically stockpiled in the future.

Some other missteps were the failure to act quickly on border crossings and ineffective, and in some cases absent, screening for travellers returning to the country, and also rapidly changing advice on whether civilians should or should not wear masks.

I would now like to turn to another area that the COVID-19 pandemic has exposed, which is the critical need to enhance the financial literacy of Canadians. While I applaud the work that is being done by the Financial Consumer Agency of Canada, FCAC, more needs to be done, and the need is urgent.

So many Canadians make significant financial mistakes in many areas, including poor investment choices, taking on too much debt and not saving enough. In my opinion, at least 90% of these mistakes could easily be prevented with the right knowledge. This knowledge should be taught in high schools right across the country. Financial education need not be complicated. If our students can do high school math, they can certainly be successful in managing their finances and investments.

Several provinces have taken steps towards teaching financial literacy. I urge the federal government to work with the provinces to put in place a mandatory financial literacy curriculum for high schools in all provinces. Although educational curriculums may be under provincial jurisdiction, the federal government can help to push this agenda forward. If requested, I would be pleased to assist with this effort.

I want to emphasize that if students were armed with a good base of financial knowledge coming out of high school, they would be less likely to make critical financial mistakes, and over the long term we can improve retirement readiness for the next generation. This would ease the burden on government resources in the future.

Another area that should be reviewed is the financial advisory industry. The standard to become a financial adviser in this country must rise and drastically so. Today, becoming a licensed financial adviser and providing advice to Canadians requires a high school education and passing three multiple choice exams with a 60% passing score on each.

While there are many competent financial advisers in the country who do wonderful work, the low barrier to entry also allows natural salespeople to come into the industry and easily obtain required certifications, and Canadians can suffer the consequences, in many cases with high fees and poor advice.

My frustration with this situation and the lack of a clear road map for Canadians seeking financial advice led me to write and publish a book in 2017 entitled Your Money's Worth: The Essential Guide To Financial Advice for Canadians.

Today we're seeing the consequences of poor financial literacy. Many Canadians are without savings and a personal safety net. Too many are on the brink of personal bankruptcy. Even many Canadians who are earning higher incomes are on the financial edge. They did not save for a rainy day and now it is pouring. Many retirees have also suffered deep losses to their portfolios and are afraid of outliving their money.

The COVID-19 pandemic has exposed the issue of financial literacy and there's much work to be done in this area on an urgent basis.

I would like to conclude by informing the committee that for many years, from my early childhood to my mid-thirties, I suffered from a severe stuttering disability which significantly impacted the quality of my life, including being unable to say my name, speak on the telephone, being challenged to find employment or order what I wanted at a restaurant. Stuttering is a condition for which there is no cure and it impacts 1% of Canadians. Thankfully it can be controlled with appropriate treatment.

In Canada we are fortunate to have the Institute for Stuttering Treatment and Research, known as ISTAR, which is affiliated with the University of Alberta. It is a world-renowned treatment centre that has changed thousands of lives around the world. I would like to recognize and thank Deborah Kully and the late Dr. Einer Boberg for establishing this institute, as well as all ISTAR staff. Without their help, I would not have been able to appear before this committee.

If you come across people who do stutter, please ask them to consider seeking treatment at ISTAR.

Thank you.

[The Chair, Liberal, Sean Casey]

Thank you very much, Mr. Kassam.

Next we have Mr. Milligan. You have the floor for seven minutes, please.

[Professor Kevin Milligan, Professor, University of British Columbia, As an Individual]

Thank you, Mr. Chair, for the invitation to appear.

My comments today will be focused on the Canada emergency response benefit, the CERB.

The CERB was designed to sustain Canadian families as we put much of the economy on pause. The CERB helped to support millions of Canadian families in the early uneasy weeks of the COVID pandemic, but we are now entering a different part of the pandemic, with work and economic activity beginning to resume in many parts of the country.

We need to release the pause on the labour market now and let the labour market return to its regular function of matching workers with jobs. The CERB was designed for an emergency, not for regular labour market functioning. For this reason, we must now prepare to end the CERB. I will now explain my views on the why, how and when of ending the CERB.

First is why we should end the CERB. The CERB was designed as a temporary emergency measure, but in the coming months, we need programs that encourage the resumption of work and the search for new job matches. The CERB was designed to freeze and not to restart the economy. How do we end the CERB?

In my view, the best way to end the CERB is to transition the remaining CERB caseload to the existing employment insurance program. There are two main reasons for this. First, through EI, workers gain access to services such as job training and job search assistance. Second, for issues such as how much you can earn while keeping your benefits, EI has existing rules and a system for handling them. This is much easier than trying to reinvent and paste these kinds of rules into the CERB. Those transitioning from the CERB to EI might, for example, be grandfathered in at a $500-a-week benefit level to keep benefits the same under the CERB.

At least three groups require special consideration: first, child care for parents of school-age or preschool-age kids who are unable to work because of their children; second, the self-employed and others who are not normally eligible for EI but are eligible for the CERB; and third, those unable to work because of health concerns. Solutions for all these groups should be found before we start to wind down the CERB.

Finally, when should we start to wind down the CERB? The CERB, in my view, should be allowed to run its current 16-week course. Those who took the CERB from mid-March will exhaust their 16 weeks of eligibility in early July. Others who started the CERB later may have different eligibility. I think this transition to EI should begin as soon as possible after the 16-week CERB period is complete.

What does as soon as possible mean? We know the existing EI administration was not equipped to handle that initial surge in March. I do not know if we have the administrative capacity to handle this kind of transition in July. It may require more planning, more computers and more administrators. Maybe these preparations will take place in August. Maybe they will take place and be ready in September. I don't know. What I do know is that we should not delay starting to make these preparations.

If the EI administration cannot handle the CERB caseload now, perhaps the CERB might be extended on an interim basis until the transition to EI can be made. The exact timing is less important to me, but what is important is the decision we make about the destination right now. To me, that destination is clear. We must prepare to end the CERB, and that should be planned as a transition toward EI.

Thank you very much.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Milligan.

Next we have Mr. Epp. You have the floor for seven minutes, please.

[James Epp, President, Fraserway RV]

Thank you for the opportunity and for listening to me.

During the last 10 weeks, the RV industry has found dealing with COVID and its restrictions challenging. The rentals division has taken a massive hit. The Canadian RV rentals sector combined contributes over $260 million annually to the economy. Now we hear that there might be no recovery until a vaccine is available, as per Premier John Horgan and Dr. Bonnie Henry in the Vancouver Sun on May 7. This could jeopardize our industry for the next two years.

What is the government's plan for tourism-focused companies for 2020 and 2021? What are the serious plans to open up the borders, including flights from Europe? With regard to the procurement of PPE, have we plans to fill the shelves for that first worst-case scenario? Why the slow response on stopping flights from China in early February? Has a study been done for the people who follow basic protocol: wash your hands often and well, use antiseptic when moving from one place to another, keep a two-metre space and use a mask when that can't be accomplished, and don't touch your face?

As the largest Canadian RV rental company, Fraserway RV has over $100 million in RV rental inventory, half of which will now need to be liquidated. Many small businesses and service providers along the highways of Canada rely on summer tourists for their survival. Some may think that locals will fill the gap. However, overseas tourists average more than three-week rental bookings, plan their holidays four to 12 months in advance and fill campgrounds seven days a week. Locals travel mostly during long weekends. They contribute only 10% to the rental revenue quoted above. Currently, most campgrounds are shut down. With provincial parks now putting restrictions on limited capacity and no interprovincial travel, it poses challenges for the campgrounds and providers and causes a significant drop in their revenue.

Rental operating expenses continue 12 months through the year. This is significant and serious, causing a lot of anxiety and concern for many operators who will not be able to survive the long winter coming up. Businesses have been innovative in operating and following protocol during this crisis. For example, Fraserway RV had 12 open locations—limited open locations—and had zero COVID experience, including family circles across hundreds of employees and customers. For this we are very thankful.

There are challenges for people isolated at home for long periods of time and for individuals who can't pay their bills. Many of those who have lost their business or lifetime investments will have serious health challenges. Who will pay the taxes as our federal deficit climbs to a quarter of a trillion dollars and as our debt starts to approach the range of one trillion dollars?

I understand that with every death there is a grieving family, but the media love to amp up the overall fear of this crisis. They need to look at things from a broader picture, including celebrating our successes, how the majority is committed to the new protocol, how most provinces have levelled the curve, and how important it is to open the economy safely while following that protocol.

Most decisions are being made by individuals who do not have worries about employment or have a regular salary through government payroll, health institutions or consultancy. This is not to question those at the table but to question those who are under-represented. Small business contributes a large part to the Canadian economy and is a leading innovator. In 2009, we led the G7 out of the deepest recession since the Great Depression. What are our plans now?

Finally, when some political parties start collecting on the wage subsidy program when they don't contribute taxes, this is a conflict of interest.

In my family journey as an entrepreneur, over 51 years there were many times when payroll went out and the family was told not to cash the cheques, which meant minimal spending for a period of time. Other times, we spent 50 to 80 hours a week getting another unit ready so a customer could take delivery so we could make payroll. Customer service, banking, purchasing, paying taxes along with a myriad of other regulations, through this all we grew the business and were successful. Today we have a great team. We pay taxes. We support the community. We run a charitable foundation. We will survive this financial crisis, but to ensure that we are there in the future, we will need to cut expenses. How much will depend on your response—I should say, the government's response. You're the committee reporting.

This experience is nothing new for the upcoming generation of entrepreneurs who have poured and will pour their lives into their businesses and are now potentially losing everything. These are the drivers of our future economy.

I do agree we need to ensure that we don't have a relapse of the virus, and we want to be cautious. As we move forward, we need to be responsive with a multi-pronged approach to limit the economic damage and ensure a quick rebound. Given the greater risk of COVID-19, individuals—

[The Chair, Liberal, Sean Casey]

Mr. Epp, I'd ask you to try to wrap it up. We're about a minute over time here.

[James Epp]

Okay.

Given the greater risk of COVID-19, individuals with compromised immune systems and underlying medical conditions, including many elderly people over 65, myself included, should be prepared to take extra steps of precaution so that the overall economy can operate under normal circumstances following the protocols that have been put in place for reopening business.

Thank you very much.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Epp.

Now we're going to move to rounds of questions beginning with the Conservatives.

Ms. Kusie, you have six minutes, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair. I'll be splitting my time with Mr. Vis.

Thank you very much to all of our witnesses who are here today.

Mr. Kassam, thank you so much for your presence here today. This is the first time in knowing you that I've heard about your problem with stuttering, so congratulations on overcoming that and thank you for having the courage to be here today.

Recently our party put forward two potential solutions in an effort to help seniors in particular with their finances during this difficult time. The first is a one-time RRSP withdrawal that would have to be paid back by December 31, 2023. With this they could potentially help their own finances, the finances of their family or perhaps they have a business or want to help the family business. We think this is something that would be useful relative to relying on the government to bring us further into deficit and debt.

Our other solution was no mandatory RRIF withdrawal this year. Again, this is a time when portfolios are taking a significant hit. Of course, you know, as do I, from following the markets, that times of great gain usually follow times when portfolios lose so much, and seniors have so much to lose.

Could I please get your response to these two policy ideas that we've put forward, how they could help the government and most importantly, how they could help Canadians both in this difficult time and going forward?

Thank you.

[Shamez Kassam]

Thank you for the question and for your kind words.

I think any idea that allows seniors to get better access to their investments is a good one. At the moment, there are many seniors being put into a position where their families and adult children need assistance. Therefore, if some funds could temporarily be taken out of the RRSPs, that would be useful. There are also some seniors who may not need to take money out of their RRSPs and RRIFs. This year, for those people, not having to take money out would enable them not to have to sell assets at the depressed levels. I like both ideas.

I will just share something with the committee, and this goes back to the concept of financial literacy. There are so many Canadians who make exactly the wrong decision at the wrong time. They panic about their investments and sell at depressed values, which is very unfortunate, but it happens every market cycle.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you so much.

I'll pass my time to Mr. Vis.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Chair.

Thank you, MP Kusie.

I'm just going to jump right into it. I have two quick questions for Mr. Epp.

First, how has COVID-19 impacted our local market in the Fraser Valley region? Second, how has the emergency wage subsidy responded to the needs of your business as a small or mid-sized national business during this financial crisis?

[James Epp]

Let me start with labour. Labour has always been challenging in the Fraser Valley, at least for the last 10 to probably 15 years. However, the crisis has not helped at all. Part of it may have been because of the generosity of the government initially in some of the offers. Even now when we try to bring people back to work, they are getting paid pretty much the same or maybe more in some cases. I don't know all the details on it, but I know people are declining to come back to work today because they are on great government programs. That is challenging us right now.

From a technical point of view, we always need technicians. There's a shortage of technicians. It could be industry or government, but we have not promoted the great job of being a technician. You will never be out of work if you're a good technician because there's never been unemployment in that part of the market, where you're earning, in terms of dollars per hour, anywhere from the low twenties to start, up into the high thirties. Sometimes with incentives you'd be working overtime and earning over $40 an hour.

That's a big hit for us now, and because of COVID we had the big shutdown of business so that we sold very little for a short period of time. Now it seems to be coming back, so it's a bit of a rebound just as we are getting into spring. I don't know how long that is going to stay, but it feels good right now. However, now we can't get the people to fill the pipe to deliver a great service on the product we're delivering, so that is a challenge.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Epp.

Thank you, Mr. Vis.

Next, we're going to Mr. Dong for six minutes.

[Han Dong, Liberal, Don Valley North, ON]

Thank you very much, Chair.

I want to thank all the panellists for joining us this evening or, in some parts, this afternoon. Thank you very much for your thoughts and suggestions.

Professor Milligan, your presentation was focused on the CERB. I want you to compare the CERB to a universal direct payment system, which was suggested to the government some time ago. What's your view on that?

[Prof. Kevin Milligan]

Back in the initial stages of the crisis, there was a lot of very vigorous and productive debate, I thought, about how to provide income support to Canadians.

There were two important criteria, I think. One was for something that we could do quickly. Another one was for a program that could replace lost income for people who lost their job because of the crisis. There are various different ways to do that. The one that was chosen was using the CERB, which, as we all know, was delivered fairly efficiently and quickly through the Canada Revenue Agency. By early April, cheques were arriving in mailboxes and by direct deposit. It was focused on replacing income.

The contrast is to some kind of system of basic income or “a cheque to everyone” kind of approach. There would be two challenges with that approach. Number one, it is not actually clear that it would have been any faster, because there does not exist any master database so that you can just press a button and send a cheque to everyone. That simply doesn't exist. It would have taken time to build that, and in fact would have taken longer than the CERB to deliver things.

The second thing is that there are millions of Canadians who lost their jobs and, at the same time, there are 30 million adult Canadians. If you had sent a cheque to every one of those 30 million adult Canadians, that would have spread the same amount of money very thinly. Instead of sending everyone a smaller cheque, the idea was to focus resources on those who lost income because of work.

[Han Dong, Liberal, Don Valley North, ON]

Thank you.

I want to move to the wage subsidy. As you heard, there was CERB first and then, very quickly, for small business and employers, a subsidy from the government to cover partial wages, at 75%. How important do you see the wage subsidy being as a tool to help businesses while we're entering the recovery or the reopening of most of our businesses?

[Prof. Kevin Milligan]

For the initial phase of the crisis, the idea of freezing the economy or pressing pause so that we could push down the curve and understand a bit more about what this virus was doing was, I think, tremendously important. We've seen in almost all provinces that we've had really good success in pushing that down, and in many provinces, really close to zero. A couple of provinces are still working on their cases, but great progress has been made. That was in part because we put in place programs that allowed us to pause to fight the virus.

Now, as we enter a different phase of the crisis, I think it's important to understand that we have policies that are appropriate to this phase. In this phase, when it is safe in a particular place in a particular province, we want people to get back to work. We need to make sure that our policies support those decisions. That's where the wage subsidy comes in.

We want firms to start re-employing people so that they will have money and they can spend it in their neighbourhood shops, and then those people will have money to spend in their neighbourhood shops. That's how an economy works. It's this circle of money that goes from one place to another, from my pocket to yours. We want to kick-start that entire process by getting people back to work. In my view, that's what the wage subsidy is trying to do.

[Han Dong, Liberal, Don Valley North, ON]

In your view, you think the CERB is a much faster way to get money into the hands of people who need it. In your view, it's even faster than a universal basic income model. Can you confirm that? Is that what I'm hearing?

[Prof. Kevin Milligan]

That's my understanding. Because of the administrative complexities of trying to figure out whom to send a cheque to, it was actually faster to do it the way they did, with the CERB rather than the alternative.

[Han Dong, Liberal, Don Valley North, ON]

Do you know how much more expensive it would be if we were to go with the basic income model?

[Prof. Kevin Milligan]

It totally depends on what kind of model you had in mind. If it were to be a $2,000 cheque to each adult and there are 30 million adults in Canada, that would be $60 billion a month multiplied by 12 months. You'd get into numbers that are astronomical.

Of course, one could try to tax that at the back end, but that's a lot of giving up money on one end and bringing it back on the other. There are already enough challenges with CERB in trying to do that. I can't imagine at tax time in 2021 trying to collect $300 billion or $400 billion that was handed out at the front end.

I think the decision that was made with CERB was the right one for those circumstances to be faced in March, April and May. As we get into July and August and, in some provinces, June, as we're starting to open up, I think it's appropriate to shift our policy focus towards the wage subsidy.

[Han Dong, Liberal, Don Valley North, ON]

You mentioned call backs. If that were to take place, which portion of our working population would suffer the most? Who would feel the most pain?

[The Chair, Liberal, Sean Casey]

A short answer, please, Professor Milligan.