Evidence of meeting #18 for Human Resources, Skills and Social Development and the Status of Persons with Disabilities in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.
A recording is available from Parliament.
Liberal
Wayne Long Liberal Saint John—Rothesay, NB
Thank you very much for that.
Mr. Corak, thank you for your presentation. I'm a former small business owner and was self-employed. I know you've talked about gig work and things, but are you aware of some of the best practices internationally for insuring the self-employed?
Professor of Economics, Graduate Center, City University of New York, As an Individual
Mr. Long, I'm not as well versed as I should be on that. There are officials at ESDC who can really speak to some of the innovations in the Netherlands and other countries in Europe, but I'd be a bit out of my scope.
My own feeling is that we can get into a great deal of difficulty trying to classify workers. The workers we care about are people who are self-employed and are using self-employment as a last-ditch attempt to piece together income, not so much the risk-taking entrepreneur. This is what I sort of have in mind when I think about those things.
Liberal
Liberal
Ryan Turnbull Liberal Whitby, ON
Thanks, Mr. Long.
Thanks to both the witnesses.
Mr. Corak, maybe I'll start with you. I think you've said that a 21st-century employment insurance system should respond to big shocks in real time, and I know that you've said that EI eligibility rules respond with a significant lag when there are sharp changes in the unemployment rate. What do you propose in terms of changes to the EI system to make it more responsive in this manner?
Professor of Economics, Graduate Center, City University of New York, As an Individual
Thank you.
That's absolutely correct. As I tried to outline in my opening remarks, because we have so many regions we are stretching the capacities of Statistics Canada's survey instrument to its very limit. Statistics Canada wants to give you the best signal possible, so it uses a three-month average of past unemployment rates. What we saw in this pandemic, what we saw in Alberta when the oil prices bottomed out, and also in Saskatchewan when potash prices collapsed, and what we saw in the great recession was an employment insurance system that was looking backwards. When the pandemic hit, it was still January's unemployment rate that was helping to determine eligibility for the program.
My suggestion is to make the bands that determine the eligibility rules much wider, or to cut back on the number of regions for a type of special benefit. Just use provincial employment rates or urban versus rural in a province. Statistics Canada can give us provincial employment rates on a monthly basis, and I think that would be hard-wiring a quicker, real-time facility into EI, rather than fossilizing it by being backwards-looking when important things happen quickly.
Liberal
The Chair Liberal Sean Casey
Thank you, Mr. Corak and Mr. Turnbull.
Ms. Chabot, you may go ahead for six minutes.
Bloc
Louise Chabot Bloc Thérèse-De Blainville, QC
Thank you to both of our witnesses. Their input is especially useful to help determine the way forward.
My question is for Mr. Corak, but I'm going to set the stage first.
We are here to examine precisely which aspects of the EI system should be reformed to ensure as many people as possible qualify for benefits and to restore the social safety net that once was. As you pointed out, the pandemic hit hard and the system wasn't able to respond.
I'm wondering whether I understood you correctly with respect to unemployment rates. Do you think eliminating 62 administrative regions and introducing a minimal unemployment rate for all regions would be a good idea?
That is more or less what the government did when it adjusted the EI system. Does that strike you as an effective solution?
Professor of Economics, Graduate Center, City University of New York, As an Individual
Thank you, Ms. Chabot.
If you don't mind, I'm going to answer in English.
The government has currently—and this seems like a temporary measure—suggested that everyone should have the same eligibility rule, and my colleague from the C.D. Howe has suggested the importance of that. I'm suggesting perhaps go partway, perhaps just three ranges of unemployment rates. In that sense, Madam Chabot, that would render the regional map less significant for getting into the program, but not necessarily for the duration of benefits.
I'm not so much arguing that we should rewrite the regional map. I think that would be a political challenge. In some measure, you could render it less relevant for some aspects of the program. The regions and the regional employment rates could still determine the duration of benefits, but maybe they should play less of a role in determining entry into the program.
Bloc
Louise Chabot Bloc Thérèse-De Blainville, QC
The regional map and the unemployment rates for the different regions determine the number of hours of insurable employment people need to qualify for EI benefits, anywhere between 420 and 700 hours.
Another important consideration right now is part-time work, which mainly concerns women and young people. Even though they pay their EI premiums, they have a harder time qualifying for benefits. Clearly, it takes longer to accumulate 420 hours when you're working just 15 hours a week, as opposed to 40 hours.
We believe the government needs to reduce those barriers so that more people can qualify for benefits.
I'd like to hear your thoughts on that.
Professor of Economics, Graduate Center, City University of New York, As an Individual
I completely agree.
What I'd like to add, though, is that we should think of the Canada workers benefit as an important complement to EI for people with part-time work for partial hours, who don't otherwise qualify. We would catch them through the Canada workers benefit and then convert that income—whatever they earned—into eligible hours. Right now there is no discussion or integration between these two programs. You can easily solve the problem of the 60% of the unemployed who are not eligible for EI by offering this complementary program.
At the same time, right now what you have is a situation in which the eligibility rules vary according to each percentage change in the unemployment rate. If a region moves from 8.9% to 9%, that changes eligibility rules. A one-tenth of a percentage point change is just statistical fog. It has really no meaning, so why should it play a role in determining eligibility?
I suggest using just three bands: if the unemployment rate is less than 6%, if it varies between 6% and 10%, and if it's greater than 10%. Leave it at that.
To cover off the many people who don't qualify, that's where you would use the Canada workers benefit—which now makes automatic quarterly payments to a whole host of people—and just convert their income into hours so that they can then graduate, if you will, to the EI system.
Bloc
Louise Chabot Bloc Thérèse-De Blainville, QC
As you said, the current benefit rate is 55%. When the system was introduced, that number was much higher. Time and a slew of restrictive policies have whittled it down.
What would you say the ideal rate is?
Professor of Economics, Graduate Center, City University of New York, As an Individual
That's a good question.
Historically it was 66 2/3%. I'm not sure where to put the number on the increase, but it should increase.
The other thing you should note is that, if they're making above the maximum insurable earnings, it's even less than that.
What does the future of work involve? It probably involves people in the service sector—relatively highly paid people—facing the kinds of risks that manufacturing workers faced in the 1990s as globalization rolled through the heartland of Ontario and Quebec and decimated work.
If you can work wherever you want, how long is it going to take for your boss to wonder whether maybe anyone can do the work you do? There will be a whole series of contracting out that could happen, putting people higher up on the wage scale at risk. When they fall into unemployment, they will find that this system—which they paid into all their lives—is going to give them 25% or less of their earnings.
You're not preparing people for the future of work if you don't offer better insurance. Increasing the benefit rate and the maximum insurable earnings is a way to do it, though I have to admit I'm not in a position to put a number on that yet. You would want to balance that with the financial constraints the government faces.
Liberal
The Chair Liberal Sean Casey
Thank you, Mr. Corak.
Thank you, Ms. Chabot.
Next is Ms. Gazan, please, for six minutes.
NDP
Leah Gazan NDP Winnipeg Centre, MB
Thank you, Chair.
My question is for Mr. Corak.
In your presentation, you mentioned—and certainly the committee knows it's a real interest and passion of mine—a guaranteed livable basic income. We know that there is a breadth and depth of expertise that exists on the topic of basic income as a form of income insurance and as a partner to EI. Do you believe that the information—and this is one of the frustrations I've had—about basic income is being properly understood and acknowledged?
Professor of Economics, Graduate Center, City University of New York, As an Individual
I think there is naturally a good deal of confusion about this topic. I'm confused by it as well. The way I make sense of it is that there's “basic income: the why” and “basic income: the how”.
I think everyone's agreed on the “why.” There are different rationales. We want basic income to make the administration of benefits simpler. We want basic income to fight poverty. We want basic income to foster solidarity, community and family. Those are all laudable goals. I think most people agree on them. I think where the differences come from is confusion over “basic income: the how”. When this debate began in Canada, basic income was seen as a universal payment to everybody, regardless of their station in life.
I think the basic income community has evolved tremendously and I don't think many hold that view. I am looking for something like a Canada child benefit. We have a basic income for families with children. It's called the Canada child benefit. They are looking for something like OAS or GIS. We have a basic income for the elderly. What we're missing is that important segment of our population who are in mid-life, mid-career, on their own, have had family challenges and have had work challenges. I encourage you to use the instruments available to you.
The Canada workers benefit is a nascent basic income. I would add to it an unconditional payment, just like the Canada child benefit, that would keep people above the deep poverty line, say $12,000 to $14,000 a year, depending upon region.
I would enhance the supplement for work to bring people up to the poverty line, and then I would taper off benefits as income grows further.
If the committee and the government used the instruments they have at hand, you would cover, through these different tiers, what we think of as a basic income, what economists put as a negative income tax.
NDP
Leah Gazan NDP Winnipeg Centre, MB
It's obvious that the current EI system needs to be revised. We had people testify before committee last week.
However, we also need to recognize that the current definitions of work are outdated. It's certainly something that impacts my riding significantly. Therefore, many people fall through the cracks of the existing system. I often refer to people who are dealing, for example, with severe mental health and trauma who often end up on the streets living in destitute poverty.
We know that many populations living poor or living rough are overrepresented by women, racialized people, disabled people, indigenous people, millennials, zoomers, as well as older folks. Do you believe that another form of income insurance, as a partner to EI, would be helpful—for example, an income-tested guaranteed livable income?
You spoke a little bit about that. Can you expand on that and how a guaranteed livable basic income could work in partnership with EI?
Professor of Economics, Graduate Center, City University of New York, As an Individual
Thank you.
That's exactly what I'm suggesting. Thanks for the opportunity to expand on it.
That's what I see the Canada workers benefit being. This said, people face all kinds of challenges in their lives. Money is not everything. There is an important interface with the provinces that has to happen here. I see converting the Canada workers benefit, as I suggested, into an unconditional component that is independent of your work status, and then that is tiered to the amount of income you have.
Earlier, there were issues raised about whether people file their taxes. This would only capture people who are in the system. We still need advocates for many people. We still need the provinces and the municipalities to be engaged in an important way.
This is an important area on which I think the federal and provincial governments should interface. You don't have to worry about classifying someone as a gig worker or self employed. The point is that their income is just too low. We have a poverty reduction strategy. They fall through the cracks.
NDP
Leah Gazan NDP Winnipeg Centre, MB
I certainly appreciate your insight on this.
One of the issues I currently have with EIA in Manitoba, for example, is that it's punitive and stigmatizing. Guaranteed income programs would just look at income. You wouldn't have to go through an interrogation process to have minimum human rights met. Am I understanding this correctly?
February 23rd, 2021 / 5:10 p.m.
Professor of Economics, Graduate Center, City University of New York, As an Individual
I think one of the things we've learned over the course of the pandemic—and this is why people saw the CERB as being very successful—was the ease of application and the agency that people had. That has to be paired, of course, with accountability to the public purse. However, if we can simplify EI and if we can simplify income support, that will not only remove the administrative burden, but it will also offer people dignity and benefits in real time.
Liberal
The Chair Liberal Sean Casey
Thank you, Mr. Corak. Thank you, Ms. Gazan.
Next, we have Ms. Falk for five minutes please.
Conservative
Rosemarie Falk Conservative Battlefords—Lloydminster, SK
Thank you, Chair.
I want to thank both of our witnesses for being here today. I know that both of you did a lot of work analyzing employment insurance well before the pandemic.
To start, I have a question for both of you. I'm just wondering what measures can or should be built into the EI program to ensure it provides meaningful support to an unemployed person, without creating a disincentive to work.
I wonder if Ms. Mahboubi would like to start.
Senior Policy Analyst, C.D. Howe Institute
Thank you.
In terms of creating employment income that provides support to Canadians, I would say the first parameter that we need to consider is coverage—the proportion of Canadians who could have access to EI programs when they lose their jobs, or if we're going to have some sort of modernized EI program in the future, talking not only about employment loss but maybe income loss. As I said, this is a topic that is very complicated. We need lots of investigation data to be able to think about how we can reform the EI program and about how we consider income loss.
In general, in terms of benefits, I guess a focus on coverage is more important than the amount of the benefit, because we want those individuals who don't have any other option, who don't have any income, to have access to some sort of support, rather than nothing. After we make sure that individuals receive some sort of support, we can have a better discussion about whether there is enough or not.
I believe the main parameters for reforming the EI program would be about the eligibility criteria, in terms of how it can support more Canadians, more individuals, who contributed to the program. This is something I believe is important.
In terms of, for example, regional variations, the reason that I believe we should eliminate that feature from the EI program is that, for example with remote working, we are facing changes in the nature of work. We are seeing a borderless labour market. If we are moving in that direction and we want to modernize our EI program, it means that we need to look at the way the labour market is changing and the nature of work is changing. As I said, remote working is an example. You can physically be in one location and work for an organization in a different region, a different province or even a different country. These are the questions we also need to take into consideration when we are going to reform the EI program.
Conservative
Rosemarie Falk Conservative Battlefords—Lloydminster, SK
Thank you.
How about you, Mr. Corak? Do you have anything to add?