Human Resources Committee on Feb. 23rd, 2021

[Vincent Dale]

We have that through the employment insurance coverage survey, and I could provide you the most recently available statistics on that. We can send that out to the committee after the meeting today.

Unfortunately, I don't have at hand the very up-to-date numbers on that.

[The Chair, Liberal, Sean Casey]

Thank you, Ms. Gazan.

Colleagues, we're going to leave it there so that we get a full hour with the next panel as well.

I'd like to thank the witnesses for being with us here today. Thank you for your service, especially at such a difficult time when the public service is very much put in the limelight.

We also appreciate the various undertakings that you've given to provide further information in writing to the committee. At the risk of being bold, the written information that you provide will help inform us in the examination of further witnesses. We're happy to receive it piecemeal if you can provide some of it promptly and the rest takes a little more time. As soon as you can get it to us, that increases the value that it will have and its impact on the work of the committee.

Thanks again so much for being with us, and we'll bid you adieu now.

We're going to suspend for three minutes while we bring in the next panel and test their mikes.

Thanks again, everyone.

[The Chair, Liberal, Sean Casey]

I recall the meeting to order.

We are meeting on our study of the review of the employment insurance program.

I would like to make just a few comments for the benefit of the witnesses.

Before speaking, you need to click on your microphone icon to activate your mike. Interpretation in this video conference will be like a regular committee meeting. You have the choice on the bottom of your screen of floor, English or French. When you are speaking, please speak slowly and clearly, and when you're not speaking, please put your mike on mute.

I'd now like to welcome our witnesses to continue our discussion. You will each have five minutes for your opening remarks, and that will be followed by rounds of questions.

We have with us today Miles Corak, professor of economics, graduate center, City University of New York; and from the C.D. Howe Institute, Parisa Mahboubi, senior policy analyst. We're going to start with Mr. Corak, please, for five minutes.

Welcome to the committee. You have the floor.

[Dr. Miles Corak, Professor of Economics, Graduate Center, City University of New York, As an Individual]

Good afternoon.

I'm especially glad to have this opportunity to discuss an issue of growing importance.

Employment Insurance has been found wanting. Many Canadians have experienced that for decades, and now is well beyond the time to do something about it.

The government can proceed immediately with a series of important changes that are well within its administrative capacity, but it also must proceed with an eye to more fundamental changes in the near term that may require more consultation.

I'll outline six proposals, three are immediate and another three are near-term possibilities for you to consider.

Let me tell you something that I don't think Canadians need more of. They don't need more platitudes about getting a better education, or about getting more training. The EI program already transfers about $3 billion to the provinces for programs of this sort. Some are effective and some less so, but the government doesn't need to spend more money on training through EI and putting more responsibility on individuals to adjust to the storms of the turbulent labour market.

My point is that Canadians need better and more complete income insurance. My suggestions are directed to this need.

I have three policies for the short term that I believe the government can immediately implement in the next budget.

The first considers qualifying for benefits with the last ROE. I suggest this committee and the government consider the reason for separation from only the last record of employment in a series used to support a claim. The administration of the program should ignore the reasons in previous ROEs and allow qualification if shortage of work was the reason for separation in the most recent ROE.

Currently many workers in a precarious situation trying to piece together jobs and incomes find themselves falling into an administrative rabbit hole because past ROEs have been incorrectly completed by employers or separations are worker initiated. Focusing on the reason for separation in the last ROE will simplify a needlessly complicated process.

The second suggestion to you is to offer a close-to-uniform entrance requirement. There are 62 EI regions with a number of hours of work required to qualify for benefits determined by region-specific unemployment rates, unemployment rates that fall into nine bands ranging from less than 6% to over 13%. This is why the black hole exists in some regions.

We tie narrowly defined regional unemployment rates so finely to EI eligibility because we treat the program as a regionally based program of income support, with some work conditions attached. This amounts to a type of basic income for many people living in regions east of the Ottawa River. Laudable as this goal is, it has distorted the insurance function of employment insurance, it has excluded many Canadians from coverage and it has slowed the response to big labour market shocks.

It means a 0.1% change in the unemployment rate can change eligibility for the program. This level of precision amounts to letting statistical fog influence eligibility. It also means that to reduce the statistical fog, Statistics Canada relies on an average of regional unemployment rates in the past three months. This further corrupts the ability of the program to respond quickly to sudden changes in the job market. Eligibility rules are hard-wired to be backward looking.

There have been long-standing calls for a uniform entrance requirement, and currently that's the situation we're in. A reasonable alternative is to reduce the current nine bands to just three, say less than 6%, 6% to 10%, and greater than 10%.

The third immediate policy change that the government can introduce is to increase the benefit rate and the maximum insurable earnings. The benefit rate is currently 55%, meaning that an EI claimant receives 55¢ for every dollar of insurable earnings. Historically, this was 66 2/3%, and was as high as 80% for certain categories of claimants. Successive reforms cut the benefit rate, and these cuts were often done in the name of deficit fighting and work incentives. These past priorities don't serve our present and future well. It is both feasible and timely to raise the benefit rate and offer workers better insurance by covering more of their past earnings.

Let me jump to three other policies that refer to things the government can do in the near term that will probably require more consultation.

The first is to enhance coverage and step toward a basic income by integrating the Canada workers benefit with the EI program.

The fact that only 40% of the unemployed qualify for employment insurance in the best of times and the perception that the future of work will involve more contingency and more precarity in work arrangements has led many to question the eligibility rules of EI and its limited capacity to cover the self-employed. It has also led them to call for a basic income of some sort.

Not all of the self-employed should be covered by EI and dividend income surely should not. Further, the gig economy is not, nor will it be, a terrible reality for many, but both self-employment and employment as an independent worker will increasingly become a last ditch or supplemental means of support for many workers in precarious situations.

There is certainly a role for changes in regulatory policies and clarifications of the class of workers, but income support and income insurance policies can respond by focusing more on insuring incomes, rather than jobs or particular classes of jobs.

The Canada workers benefit remains a relatively modest program. Individuals living on their own must have at least $3,000 in earned income to qualify for maximum benefit of about $1,400. The jobs used to earn this income, including self-employment, do not necessarily lead to qualifying hours under EI. I suggest that any income used to support the receipt of the Canada workers benefit be converted to EI-eligible hours without regard to the nature of the job used to obtain that income. This will bring the self-employed who we might legitimately worry about into EI coverage, as well as others in contingent work.

If this committee were to consider recommending a considerable enhancement in the generosity of the Canada workers benefit with, say, an unconditional payment of $12,000 to $15,000—equivalent to the deep income poverty line—and a maximum benefit that lifts workers to the official poverty line, then it would have taken two considerable steps forward.

It will offer a way of significantly increasing the coverage of employment insurance for workers who need the insurance. It will also take a significant step toward establishing a basic income for single workers and those without children who need the support, much in the way that the Canada child benefit and the OAS-GIS offer a basic income to families with children and older Canadians.

[The Chair, Liberal, Sean Casey]

Mr. Corak, could I get you to wrap up? We're well past time.

Thanks.

[Dr. Miles Corak]

I will do that. Thank you.

This is what I mean by integrating the Canada workers benefit with EI.

I have two other recommendations. I'll just to list them, Mr. Chair.

The first is to offer wage insurance to long-seniority workers who are permanently laid off. This was in Minister Qualtrough's mandate letter. It is a form of wage insurance.

The final recommendation that I put to you is to offer special benefits through individual accounts with maternity and parental benefits in a complementary family insurance program under the Employment Insurance Act.

Thank you for your patience, Mr. Chair.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Corak. I have no doubt that you'll get a chance to amplify those points through the questions that will be posed by the committee.

Next is Ms. Mahboubi, please, for five minutes.

[Dr. Parisa Mahboubi, Senior Policy Analyst, C.D. Howe Institute]

Thank you, Mr. Chairman, and honourable committee members. I'm very pleased to have the opportunity to speak to you today.

The pandemic has exposed existing gaps in our employment insurance program and the need for potential EI reform to build a sustainable income support system. Today, I'd like to highlight gaps related to eligibility requirements and provide recommendations to enhance access to benefits.

Evidence shows that the pre-pandemic access conditions do not provide a broad coverage to support all Canadians who need financial assistance. For example, part-time workers, new entrants to the labour market and workers in low unemployment regions are less likely to meet minimum required insurable hours to qualify for EI.

Labour market statistics show that the crisis has affected hourly paid, low-wage workers the most. These statistics highlight the importance of recent temporary changes to EI requirements to expand eligibility and to fill coverage gaps in employment insurance by reducing the insured hours required and making enhanced requirements more similar across regions.

Several studies have previously suggested a reform to harmonize EI eligibility. One reason is that this change would provide better support for part-time workers since workers in regions with a low unemployment rate need to accumulate more hours, making it harder for part-timers to qualify.

The recent data on regular employment insurance and unemployment shows that the beneficiary to unemployment ratio, which can be seen as a measure of EI coverage, has increased by about 36 percentage points over a 12-month period to 75% in December 2020. This is a significant increase and represents high EI coverage given that a large number of unemployed Canadians, such as gig workers, do not contribute to EI.

Since the previous recession in 2008-09, the so-called gig economy and platform work have been growing, mainly due to rapid economic changes related to technological progress, globalization and demographic changes. The growth of gig and non-standard work can have an important role in a post-COVID-19 economic recovery, but there are concerns about the lack of financial security and predictability, paid sick leave and other benefits.

Previous C.D. Howe Institute research highlights the idea that Canada should focus on policies that provide proper supports for workers in non-traditional jobs—for example, through an expanded employment insurance system—while maintaining a dynamic labour market. Currently, the Canada recovery benefit attempts to address the income support challenges of these workers, but the program is temporary, while the concerns about income-related stability and uncertainty are not.

While an EI system that covers gig workers and the self-employed may be desirable, it is not clear how to build that system. For example, there are workers who have experienced substantial earnings losses without job loss, and self-employed workers whose earnings can be negative. Besides, a challenge is to define the time period in which earning losses and benefits are evaluated for eligibility of self-employed workers.

EI programs that insure various forms of unemployment need to insure earnings in a more flexible way, but this will reshape the labour market, distorting decisions of businesses, employees and the self-employed in a way that may or may not be desirable.

In conclusion, for a broader and further-reaching eligibility increase, the government needs to consider a program that offers a lower yet geographically more uniform hours-based requirement. However, more research and better data are needed to build an EI system for the 21st century that includes all forms of employment.

Thank you for your attention. I look forward to your questions.

[The Chair, Liberal, Sean Casey]

Thank you very much, Ms. Mahboubi.

We will begin now with questions. We'll start with Ms. Dancho from the Conservatives for six minutes.

You have the floor, Ms. Dancho.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you, Mr. Chair.

Thank you to the witnesses for being with us today. I found your opening remarks very interesting.

I have a few questions for you, Mr. Corak. I reviewed you letter to Minister Qualtrough from October 19, 2020, and I found your idea about the EI special benefits account very interesting. You touched on it a little bit in your opening remarks. I have a few questions and I am hoping you can expand on it.

My understanding from your note is that it would be similar to how individual EI premiums would be allocated to their own account, much in the same way as the Canadian pension plan, really financed on their work history. You mentioned that everyone would be free to use their account to support a period of time away from work—whenever, for whatever reason and for whatever length—subject to the balance in their account. I'm wondering how you feel this would work in another pandemic, if you feel that this would be helpful.

My point is that one of the problems with the EI account now is the people who didn't work enough to pay into it. Would we see a similar problem with your proposal, or am I missing something?

[Dr. Miles Corak]

First of all, you're correct that everything is conditional on eligibility for the program. Given that we've worked on that, then families face two types of risks. They face risks associated with their jobs and they face all sorts of family-associated risks, be it sickness, caregiving and so on. My view is that all of the contributions of employers should fall into supporting regular benefits, and all of the contributions that workers make should go into their own accounts.

I feel this is important, because it gives people agency. Right now these accounts have layer upon layer of unanticipated needs put on them by the government, each with a whole set of regulations, making it very complicated. It's even to the point where, in the most turbulent time of a person's life, when someone close to them is dying, the government asks them to provide a doctor's note to access benefits. If you just gave them an account, it would make things a lot simpler.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

I think you put it really well when you said this:

Individual accounts for family events that are truly unforeseeable would have the dual purpose of recognizing that individual citizens know their own needs and circumstances better than politicians—

I really appreciated that one, because I would very much agree.

—while also promoting incentive compatible behaviour.

I wasn't quite sure what you meant by that. Could you expand on it?

[Dr. Miles Corak]

What I'm trying to say is that we shouldn't get into assessing the reasons for the use of these accounts. Let people do whatever they want. However, does that mean I just get to quit whenever I want and go skiing in Banff? Not if I don't have anything in my account, and not if I haven't worked for it.

That's what I meant by incentive compatibility.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

I appreciate that.

You also mentioned earlier in your note that, “This reform of EI would start with a careful assessment of what is and what is not a 'demographic risk.'” I wasn't sure what that meant.

[Dr. Miles Corak]

Just to be clear, maternity and parental benefits are still a part of special benefits. I'm not sure that is an insurable risk in the same sense, and I'm not sure that we can handle that with special individual accounts. It would take time to build up these accounts, particularly early in your work history, probably when you are in the middle of family formation. That's why I suggest that maternal and parental benefits be hived out of this altogether and treated as a special program in the EI Act.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

I thought that was a very interesting idea as well. If I'm understanding you correctly, if someone falls ill or has to care for someone or falls into unemployment or is laid off or whatever, it's very different from them having a baby or their wife or partner having a baby. Is that sort of what you're saying, that we should not be blocking those together in this idea that you have?

[Dr. Miles Corak]

That's correct.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Okay.

Do you see any general disadvantages or advantages of this? You've outlined a number of them, but I'm just wondering in practical terms how you would see this rolling out. Let's say we have another pandemic a year from now. How would you see this roll out if, in a perfect world, your idea was implemented?

[Dr. Miles Corak]

I think this would give people a great deal of flexibility. The future is unknown. We've learned that, both at the societal level and the individual level. It would allow people to access their account when they need it for what they need.

The problem is that these accounts need to also be funded at some base level for everybody. I suggest that, in that case, just as we have in our pension system a floor below which we don't let the elderly fall with the OAS and GIS, there should be a flat government contribution to these accounts that is funded through the consolidated revenue fund. Then people build up these accounts with their own earnings, just as they build up their CPP benefits through their earnings. Then, finally, if they have any savings, they can self-insure.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Your idea has a lot of personal autonomy and agency, as you mentioned. It's an intriguing idea and I appreciate your elaborating a little further on it. I certainly appreciate the thought that went into your note.

We have about 30 seconds left. Is there anything else you would like to say about this idea?

[Dr. Miles Corak]

It would simplify things in terms of the debate we're going through now, for example, with sickness benefits.

The other thing is that, quite rightly, MPs bring issues to the EI system as they become aware and as we get better publicity. Now we've layered so many different types of programs that require so many different regulations and information. These accounts would simplify that, and I think it would be a positive way of understanding agency in the context of demographic risks.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

There would be less red tape.

Thank you, Mr. Corak. I appreciate your remarks.

[The Chair, Liberal, Sean Casey]

Thank you, Ms. Dancho.

Next we have Mr. Long, please, for six minutes.

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Thank you, Mr. Chair.

Good afternoon, colleagues.

Ms. Mahboubi and Mr. Corak, thank you for your presentations. They were very interesting.

Ms. Mahboubi, I want to talk to you first, with respect to CERB. We all know that CERB was created to give income in the quickest way possible to those who lost employment during the pandemic. I think we can all look back really remarkably with a sense of pride at how quickly it did get out to so many people.

As CERB ended, obviously there was a transition to the simplified EI program for those who were eligible, and then obviously, the CRB.

In your opinion, what would have been the consequence of continuing the CERB and not relaunching a simplified and more generous EI program?

[Dr. Parisa Mahboubi]

Thank you for the opportunity to speak about that topic.

The C.D. Howe Institute published, through commentaries and intelligence memos, and talked about why it was really important to have that transition, or if we wanted to extend CERB, we needed to reform that program, because when CERB was created and introduced, the purpose was to keep people inside their houses. The purpose was for people to stop working, stop doing other things and stay at home to keep people safe.

However, as the economy and businesses started to reopen, there was a problem with CERB. It didn't create an incentive to look for employment, because as I mentioned, the majority of those individuals who lost their jobs and had seen a reduction in hours were mostly low-income individuals. Therefore, CERB was a program that was quite desirable for these individuals.

In receiving CERB without being required to look for employment, of course, it's going to create some challenges for businesses to find the right individuals to work for them. There was no requirement to look for employment.

If you wanted to stick to CERB, it had to be reformed. It needed to take into consideration several elements of the EI program. Of course, moving to the EI program was the better option when the government was ready to shift that big portion of individuals into the program.