Status of Women Committee on Feb. 26th, 2009

[The Chair, Liberal, Hedy Fry]

I'm going to call the meeting to order now, please.

The Caledon Institute has sent its regrets. Mr. Battle is ill, and the other person who might have represented him also couldn't do it, so he has moved the Caledon Institute to appear on another day. So we have only one witness today, and that is Richard Shillington from Informetrica Limited.

Normally we would have given each witness 10 minutes, but I think Mr. Shillington has such a body of information and knowledge that we could extend his presentation to 15, if you choose, or we could just ask him more questions. We'll do whatever you feel is best. I want to hear any ideas. Just give me some indication. Should we have a 15-minute presentation by Mr. Shillington? Absolutely. Okay.

So, Richard, you have an extra five to go here, and then I think we will open it up to questions.

After that, as you will note in your orders of the day, we'll go in camera. We're going to go to committee business. We're going to decide how we're going to carry out this whole process. We have a work plan that we want you to look at. We can talk about it. We will bring in all the other concerns that you have at that time and discuss that.

Okay, we shall begin.

Mr. Shillington, go ahead, please. You have 15 minutes.

[Richard Shillington, Senior Associate, Informetrica Limited]

Thank you very much for the opportunity to speak to you about employment insurance.

I appeared before this committee on this same topic in November 2006. I appeared about a year ago before a Senate committee on the same topic, and I have made available to the staff of the committee my submissions from those times.

Employment insurance has been a much abused program for a number of years. It has become less and less effective in meeting its original goal, providing temporary income support for the unemployed, because its funds are now used for a variety of purposes other than that.

Let me highlight the major assaults on this insurance program: the end of benefits for “voluntary quits”; the end of federal responsibility for benefits in areas of high unemployment, the so-called regionally extended benefits, by which the federal government used to pay a share of benefits out of its consolidated revenue fund when unemployment rates were high; the 1996 shift from weeks to hours, further marginalizing the marginalized; and the squeezing of maximum insurable earnings.

Employment insurance contributions are a regressive form of taxation. The contributions are now paying for training, and the surplus in the fund, as you know, has been used in the consolidated revenue fund and, I would argue, to facilitate tax cuts.

I've distributed a chart that illustrates that ratio of EI “regular” beneficiaries to the unemployed, which has fallen from what it was in the period before 1990, when it was in the range of 80% to 90%. EI started excluding those classified as “voluntary quits” from benefits, and the ratio dropped to about 45% in 1996.

In 1996 the criterion for eligibility was changed from so many weeks of employment in the last year to so many hours of employment in the last year. This has disadvantaged those working part time. This has disadvantaged young people, particularly people with children, and those would be women. So the ratio of EI “regular” beneficiaries to the unemployed today is about 50% for men and 40% for women.

A better measure of EI coverage than that ratio concentrates only on the unemployed who have contributed to the program in the last year. These data are not as easy to get your hands on, but I have published some research on them in the past. This ratio is slightly higher, because the denominator only includes the unemployed who have paid into the program, but it is still as low as 20% to 25% for young people and mothers working part time. The vulnerable employed are much less likely to receive benefits from this program than the unemployed who are not vulnerable.

Over time, EI is fulfilling less and less of its original purpose. Looking just at regular benefits, that is, the benefits for the unemployed, they used to be 90% of all income benefits. Income benefits would include the regular benefits plus sickness benefits, and maternity, parental, and caregiving benefits.

So what proportion of all income benefits are the benefits for the unemployed receiving regular benefits? It used to be 91%. It is now 58% of the income benefits. These regular benefits are now about 47% of the contributions. So the income benefits are now less than half of contributions that everybody pays into the plan, because a lot of the money is now being used to fund training.

It used to be that EI benefits were about 2% of the wages of Canadians. If you took the EI benefits and divided them by the total wage package of Canadians, they were about 2.1%. Now it is 1.2%, so it's been cut almost in half.

Adjusting for inflation, EI benefits per family have fallen by about one-third over the last 20 years. For poor families, these benefits have fallen by about half, because of the changes that have made it harder for people who are vulnerable to receive benefits.

The regional impact of EI, as you well know, makes it harder for people in areas with low unemployment rates to get benefits and easier for people in areas with high unemployment rates. I have published some research with some people in Toronto showing that Toronto made up about 19% of contributions to the fund and received about 10% of the benefits in 2002. Ontario makes up about 41% of the contributions and receives about 28% of the benefits.

I'd like to make a couple of comments about EI in the context of the current economic situation. We know that EI benefits have a higher multiplier effect on the economy—and this is an economic incentive—than other income supports. We also know that the multiplier effect is higher when benefits are targeted at vulnerable populations. Based on my listening to the media, calls to improve access to EI are coming from across the political spectrum. The recent budget did nothing to improve access to EI benefits. We acknowledge that those who satisfy the access requirements will get up to an extra five weeks in benefits, but there's no improvement in the budget that I read that would improve access to the program.

Because your interest is in EI and women, and because this is the Standing Committee on the Status of Women, I'll make some comments about maternity and parental benefits. I would argue that the recent addition of compassionate leave and parental and maternity benefits to EI confuses the purpose of the employment insurance program. These are worthwhile programs. I am not sure that putting them within EI is the best design. In fact, I'm quite sure it's not.

Maternity benefits are only available to about half of new mothers. They are not available to the self-employed. About half of the new mothers who don't get maternity benefits were working in the last year; they either did not have enough hours or were self-employed. New mothers who are receiving maternity benefits cannot supplement their income with employment. They can, but the money earned would be reduced in their maternity benefits dollar for dollar. This is part of the problem from putting these benefits within an EI system.

The Canadian Bar Association contracted for a study on maternity benefits for the self-employed, the implications of extending EI to the self-employed, and also the implications of establishing a program like the Quebec program for Canada. That research was published about a year ago. Your staff has a copy of that report. It's a public document, so I encourage you to see what's in it.

Let me describe for a moment the maternity benefit program under EI. If you're sick or have been unemployed in the last year, your EI maternity benefits could be curtailed. There's a two-week waiting period for maternity benefits under EI, and the argument for that is beyond me. There's a 55% replacement rate for EI benefits, to a maximum benefit of about $450 per week. As I mentioned, you're not allowed to have earnings while on maternity benefits.

If you compare those conditions with any of the maternity benefits available to people who have employer top-ups, this is not a generous program. In fact, people who are in good economic circumstances generally have negotiated far better maternity benefits for themselves than are available to the general population, which suggests that they don't think the benefits under EI are adequate for them.

There's been a new development over the last couple of years: Quebec's experience with what it calls the Quebec parental insurance plan. I assume you are aware that Quebec has withdrawn from the EI program for the purposes of maternity and parental benefits. It started in January of 2006, so we now have some experience with what they've seen.

It includes the self-employed; all self-employed people contribute a special payroll tax to this plan. It's not voluntary; everybody pays in, even men who would generally not be looking to fatherhood pay into this program.

There's a flexibility in the maternity benefit design. You can receive a higher benefit rate. You can get a 75% replacement of income for a shorter period, or a lower replacement rate for a longer period, whatever suits your need.

There is no two-week waiting period. And the maximum benefit under the Quebec plan is double the maximum benefit under the EI plan, partly because the replacement rate is higher and partly because the maximum insured earnings are higher.

The average benefit is about 40% higher than the EI benefit for males and about 33% higher for females. The number of beneficiaries for the Quebec experience is about 20% higher than the EI program for females, and it is two or three times higher--200% or 300% higher--for males, because Quebec has a paternity benefit that can only be taken by fathers.

It's more flexible. I mentioned the variable duration and replacement rate. Eligibility is easier. You have to have $2,000 of earnings in the last year, not 600 hours. So the total benefits being paid out of the Quebec plan are roughly double what was paid in Quebec under EI.

I hope these comments are of some use. I look forward to an interesting discussion.

[The Chair, Liberal, Hedy Fry]

Right on time. We gave you the extra four minutes, Richard, but you didn't take them. Great.

[Richard Shillington]

I had my notes prepared. I only wandered a little.

[The Chair, Liberal, Hedy Fry]

Very well done.

I will begin with the first round.

Ms. Zarac, you have seven minutes. If you look at me now and then, I can give you the time so you know how you're doing.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Thank you very much, Mr. Shillington.

You didn't have to convince me of the advantages of the Quebec plan. It definitely suits more women than the EI benefits.

We know that women do earn less than men, and when they go on maternity leave they quite often don't take the time they should. The Quebec plan is definitely an advantage.

Could you elaborate more on the advantages of the Quebec plan?

[Richard Shillington]

There is the flexibility in terms of adjusting your benefit rate and the duration. There's a higher dollar value. It has three benefit categories: the maternity benefit, which can only be taken by the mother; the parental benefit, like in EI, which can be taken by either; and the paternity benefit that can only be taken by males, which is what I would assume is the major reason the male uptake is so much higher.

There are two reasons. One, there's that one benefit that only they can take. If you don't use it, it's gone. The second is that because the maximum benefits are so much higher--double, $800-some per week--than the EI benefit, males who usually have higher incomes will lose less by taking advantage of that.

Also, there's no two-week waiting period. It has been a total mystery to me for years as to why we have a “deductible” of two weeks for getting benefits because you're having a baby. It's as if we want to punish people for making the mistake of getting pregnant.

You'll notice that in the employer plan for the public sector in Ottawa there's no two-week waiting period. Again, why would we have this? We have it because it's embedded in an employment insurance program that has lots of focus on deductibility and determining labour force attachment.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

In conclusion, would you say we should really have two different programs, a maternity program and an unemployment program?

[Richard Shillington]

Both the compassionate leave program and the maternity and parental benefit programs are not well designed because they live within an EI program that's talking about unemployment and labour force attachment, both of those programs. You can understand politically why it happened. In some sense it was cheap money and there was money that was a surplus anyway, so you could add it there without increasing taxes anywhere else. My preference would be a totally separate program outside of EI. If that's not feasible, then, yes, you could add the self-employed within EI if there could be a way to do that. But I think a totally separate program, which means you could design it....

A small critical point. Even in the Quebec plan they are still clawing back earnings from people who are receiving maternity benefits. I do not understand the argument for this at all, particularly if you're going to include self-employed people. I've been self-employed for most of my career. Many of the people who are self-employed receiving maternity benefits are going to want to work part time. Especially if they're self-employed and have their own business, they want to stay attached to their business. To have a program that says deductions are going to be made dollar for dollar from any earnings they receive while on maternity benefits, it escapes me what the argument for that would be, unless you go back to the EI world where you say this will help till they get working, and if they're working, we're going to take that benefit away. But in the context of maternity benefits, this is your money, use it how it suits you, with as much flexibility as a bureaucracy can tolerate to suit the needs of individuals. Even Quebec is still doing the clawbacks, which I don't think serves a useful purpose.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

I was surprised by the fact that you said that 50% of the money is put into financing training programs. I believe women do not take advantage of that training to better their positions to have access to more work. What would you consider would make it easier for women to access those training programs?

[Richard Shillington]

First, I think I said that half the money was going into the income benefits. I guess the rest is training. I don't think I know a lot about the training programs, and your observation that women use them less is new to me. But I'm no expert in that area.

I must say I am dubious about the value of those training programs, frankly, from things I've read. But my preference, if I were allowed to design this system from scratch, would be that training is paid for out of consolidated revenue using a progressive income tax system. It's not paid for out of a regressive payroll tax. Therefore, you could have a lower payroll tax to pay for income benefits, but of course I would have benefits that are somewhat more generous than these.

We are heading into a very interesting social experiment. People who have been doing research about EI and publishing studies about it for 15 years have worried about its diminished role as a cushion for vulnerable Canadians, and now we're hitting a serious economic dislocation, I gather. We will see how that impacts on EI. It's not clear to me that it's going to have a huge impact on EI, frankly, because it's quite possibly the case that if the economic downturn affects vulnerable Canadians more than secure Canadians--and arguably that will happen--then those people are generally not eligible for EI. So they will be going straight to welfare. And given the changes in the social assistance welfare regulations of the last 15 years, many of them won't be eligible because we've tightened up on those eligibilities. So I'm not sure what's going to happen to them.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Ms. Demers.

[Nicole Demers, Bloc, Laval, QC]

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

You have three minutes left, Ms. Demers.

[Nicole Demers, Bloc, Laval, QC]

Mr. Shillington, thank you for being with us today.

You say you have appeared before the committee, but that wasn't the Committee on the Status of Women, because it didn't exist in 2000. You say you made presentations to the Senate in 2000, 2005 and 2007 on the same issue.

Mr. Shillington, the rise of the right wing that we are seeing just about everywhere in the world, except in South America, is tending to create even more distance between classes than there was 10 years ago. Bit by bit, the middle class is being done away with, and various governments are using different methods to achieve that.

In normal economic circumstances, the programs that were proposed a few years ago would probably be welcomed by the general public. That is not the case now. For example, the children under six benefit is worth more for people with higher incomes, because they can get the entire benefit. As you put it so well, employment insurance benefits people with higher earnings more, and the same is true of tax credits.

Mr. Shillington, you spoke earlier about a multiplier effect. Do you believe that the various programs have that kind of effect on the lives of the most vulnerable people, women heads of single-parent families who don't have access to these programs because of the barriers in their way?

Thank you.

[Richard Shillington]

I interpret that question to be very broad.

For those of you who don't know my background, I'm a mathematician by training, a statistician. I use numbers to try to see the world.

I have done recent work on the income disparities of Canadians. It's not so much that the poor are worse off than they were in the past—I don't think you can sustain that argument over the last 30 years—but the top 30% or 40% are certainly pulling away; there's no doubt that this has happened.

If you look at the broad federal programs that are important for protecting vulnerable Canadians—that's the EI program—the short observation is that benefits have been cut by about one-third in the last 20 years. For the poor they've been cut by a half. That's self-evident.

On the child tax benefit and the idea of increased support for poorer families with children, I'm absolutely on-side 100%. It's too bad that Mr. Battle is not here, but I'm forced to observe that it was designed in a way so that people on welfare would not benefit from the increased benefits in the child tax benefit. The provinces are running social assistance, and the federal government chose to remove human rights protections. There used to be something called the Canada Assistance Plan, and the federal funding was contingent on meeting certain standards. That was eliminated in 1995.

I've been doing a great deal of work over the last 10 years on benefits for seniors, on OAS and the guaranteed income supplement. Let me use this opportunity to observe that the average income of a senior in Canada who retires without an employer pension plan is $15,000, and 80% of them have an income below $20,000. If I go back over the last 25 years that I've been doing this kind of work in this town, I can think of only one program that might have increased the income of poor seniors. Old age security has been indexed to CPI since before 1985, and there have been no increases other than that for 25 years. GIS, which is targeted to low income, was increased by $35 a month about four years ago. That's the only increase in the guaranteed income supplement's purchasing power in the last 25 years.

In the same period, the RRSP limits have gone from about $4,000 to $22,000. We've had pension income-splitting provisions that will benefit seniors who are well enough off to worry about income taxes. We've had increases in the age credit and tax deductions that will benefit seniors who are lucky enough to be paying income tax. But for those who are retiring on $15,000 a year, $35 a month is the total increase in the federal support over the last 25 years.

So of course you have an increase in disparity. It is inevitable from that 25-year history.

You saw The Globe and Mail headline, maybe six months ago, indicating that the increase in the average earnings of people who work full-time for the full year was, over the last 20 years, $53 a year—it was less than $100. Why have we had huge GDP growth, huge productivity growth, huge increases in corporate profits over the last 25 years and no increase in the purchasing power of wages? What has happened with the dynamic of the conflict between employers and employees in negotiating a wage for my time?

Certainly, amongst people who know this material much better than I, the “voluntary quit” regulation that said that if you leave your job you will not be eligible for EI—that you'll get nothing under EI if you leave your job voluntarily, or if I fire you, you'll get nothing out of EI—has affected the competitive position between employers and employees.

[The Chair, Liberal, Hedy Fry]

You have less than one minute.

[Nicole Demers, Bloc, Laval, QC]

Mr. Shillington, you work with figures. Are you an objective person? Are you more on the left than the right? Is a person who works with figures objective, and someone who can be trusted to make real diagnoses, and not diagnoses that tend to be against the interests of one or the other party?

[Richard Shillington]

Of course, I'm not objective; I think I'm fair. If anybody claims to be objective, you should be very suspicious. When somebody looks at average incomes or measures things using median incomes, they've made a choice about what's important to them.

I will say, in my defence, that if you look at my publication record right up to the last six months, I've had material published repeatedly by the National Anti-Poverty Organization, the Canadian Council of Social Development, the Canadian Centre for Policy Alternatives, and the C.D. Howe Institute. You'll see my work referenced by people right across the political spectrum, including Gordon Pape in his most recent book on retirement planning.

I would not claim to be objective at all. If we talk about child poverty and senior poverty, no, I'm not at all neutral; not in the least am I neutral on this. But I think I try to be fair in the way I use data.

[The Chair, Liberal, Hedy Fry]

Merci, Monsieur Shillington.

Patricia Davidson.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Thank you, Madam Chair.

Thank you, Mr. Shillington, for being here. I've enjoyed your presentation very much. I think we've heard some things that we all need to hear and that perhaps we haven't heard quite as clearly before this morning.

I have notes all over the place, so I'm going to be rattling papers here as I sort through them. There's one thing that has always confused me. With your background, maybe you can help me with this.

Different people come to this committee and give us different statistics on what is happening. Some people talk about 25% of women who can access EI. Then we hear the statistics that 80% or 81% who are eligible are able to collect and they can receive benefits. As well, somebody said something to me about a beneficiaries-to-unemployed ratio, and that this is how they're getting one of these sets of figures, while the other set of figures is coming from another method that Statistics Canada is using to collect data.

I'm told that the beneficiaries-to-unemployed ratio includes people who have never worked, so they have never paid into EI--or maybe they have worked, but not within the past year, or maybe they're people who quit their job without just cause, or they were self-employed and didn't pay into the program.

Those are all reasons, I think, why people are not collecting, but do we go with the 80% eligibility, that 81% who are eligible and collecting, or do we go with the 25%? There's such a huge disparity between the numbers. Anybody can use any number to prove their side of the story or further their side of the argument.

[Richard Shillington]

And your circumstance is challenging, because people will use information to support their point of view.

The chart I distributed concerns the beneficiaries to unemployment. I think in my presentation I said there is a better way of measuring coverage. In fact, I was part of three “experts” who did some reports for the department about four years ago on how you measure coverage. Some of the numbers I presented here I used in that report, about how you measure coverage using what I think is the better measure.

That data is not readily available. In preparing for this meeting I went to Statistics Canada and spent about $100 getting readily available data in order to produce this chart. As you know, nobody is paying me to be here. In fact, because I'm self-employed, it costs me money to be here. If I had wanted to do the proper analysis, I would have spent a week and maybe $3,000, and I wasn't willing to do that.

The data exists to measure this better. I gave you some numbers in my presentation, which, if you knew it better, still don't give you 80%. I know how you get the 80%, and I'll explain it.

The value of the beneficiaries-to-unemployed ratio figure is that it's easy to get—I can get the raw data for $100—but it's not the best measure. You're right, some people in the denominator didn't pay in. If you adjust for that—and this is the paper I wrote four or five years ago for the department—it doesn't go from 45% to 80%. It goes from about 45% to 55%. But you still have extraordinarily low coverage figures for young people, women with children, people who work part time.

The way you get the 85% figure is.... Think of EI as a series of hurdles. To be eligible for your benefit, you first of all have to have had paid employment—self-employment doesn't count. You have to have a certain number of hours. You have to have left your job for the right reason—you can't be fired; it has to be a lay-off. What they're saying is, once you've satisfied this number of hurdles, how many people are excluded by the last hurdle—which is hours? That gets to 85%.

That 85% figure, which I'm very familiar with, isn't even saying that of the people who are unemployed, 80% are eligible—I don't think, though I could be wrong. I believe it is 80% of the general labour force. Usually the way that figure is used to convince people of one point of view is, of the people who are working today, if they lost their job, 85% would be eligible.

Well, most of the people who are working today aren't at risk of losing their job. If you lose your job, the more vulnerable you are the less likely you are to be eligible. Most people who are in their jobs right now have been in their job for more than a year, and most jobs are full-time. So most people out there now, if they lost their job, would be eligible. This is only relevant if everybody lost their job, which is not going to happen.

So it's a hypothetical construct designed to create a big number.

I hope that helps explain it. I am a mathematician and I'm familiar with how you can make a ratio larger or smaller, and not everybody is going to be fair.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

There's one other thing I want to ask you about. When you were speaking of maternity and paternity benefits, I believe what you said was that it confuses the issue, if they're bundled with the EI program. Do you want to expand on that a little bit? Where should they be?

[Richard Shillington]

Let's step back. Why do we have maternity benefits? It's a program, I presume, that says if you can't work for a period of time because you're a new parent—narrowly, it's for mothers, and then more broadly for mothers and fathers—we are going to provide some income support for you so that you don't become destitute while becoming a new parent. There's a need for this. Is the need only for people who work in paid employment and not for people who are self-employed?

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

You know, there is a proposal to expand it to self-employed as well.