Evidence of meeting #9 for Transport, Infrastructure and Communities in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was business.
A video is available from Parliament.
Research Associate, National Office, Canadian Centre for Policy Alternatives
I completed the work just at the end of September.
Conservative
Jeff Watson Conservative Essex, ON
Okay, and the announcement at Canada Post was recent. Fair enough.
Mr. Anderson, this question is for you. Each of the jurisdictions that you examined in your study with respect to postal banking has experienced—and this is not really talked about but is just for context—some degree of liberalization or privatization of postal services. In fact, if I understand the EU directive correctly, their postal monopolies will end by the end of next month. New Zealand ended its postal monopoly and is reducing delivery frequency to three days a week.
Do you recommend such moves for Canada? Why or why not?
Research Associate, National Office, Canadian Centre for Policy Alternatives
I don't recommend reducing mail delivery to three days a week. I think that's something Canada Post found out: that small business in particular was opposed to reducing mail delivery. I think that's important to maintain in our country, to maintain that delivery five days a week. In fact, many countries are debating whether they should maintain the six days, like the U.K. or the United States. They have delivery six days a week.
Conservative
Jeff Watson Conservative Essex, ON
In fairness, if I understand Canada Post's plan, they don't propose reducing delivery frequency or privatization as part of their plan.
With regard to postal banking, did your study speculate on the cost to establish and run postal banks?
Research Associate, National Office, Canadian Centre for Policy Alternatives
To introduce postal banking, it's a question of what services you introduce and how fast you introduce those services. To determine costs it's very difficult unless you're looking at a concrete plan, but just let me give you one example. In the United Kingdom, where they have a considerable postal banking system, which was increased by the Cameron government, they have 300 people of the total workforce of the post office who concentrate on postal banking, so that's is not a huge number of people who were hired specifically to look at postal banking.
Conservative
The Chair Conservative Larry Miller
Thank you.
We're out of time. We have one minute left.
Gentlemen, it's obvious there are a number of reasons why Canada Post is in the financial position that it is, but back a number of years ago, Mr. Lemelin, your union challenged Canada Post in court about rural mail deliverers who were on contract. A lot of them in my riding, and I presume in other ridings, were farmers. A lot of them were stay-at-home mothers and this allowed them to get out and make a little bit of money for three or four hours a day and what have you.
It's just a yes or no question, but does your union regret that decision now?
National President, Canadian Union of Postal Workers
Does it regret the decision to unionize them because...?
National President, Canadian Union of Postal Workers
No, we organized them and we're really happy to have them.
Conservative
The Chair Conservative Larry Miller
Okay, I take it that's a no then.
Thank you very much, gentlemen, for joining us here.
Mr. Campbell, thank you.
We're going to suspend for just a minute or two.
Could I have the next witnesses take the table, please?
Conservative
The Chair Conservative Larry Miller
I will call the meeting back to order.
By video conference we have Mr. Benjamin Dachis from the C.D. Howe Institute and Mr. Daniel Kelly from the Canadian Federation of Independent Business.
In the room we have Mr. Hanes and Mr. Brown. Thank you very much for being here today.
Mr. Brown and Mr. Hanes, who wants to go first?
Mr. Brown.
Bob Brown Member, Transportation Committee, Council of Canadians with Disabilities
The CCD is a national organization of persons with disabilities working for an accessible and inclusive Canada. Canadians with disabilities are everyone: moms, dads, students, workers, members of Parliament, job seekers, retirees. There are probably people with disabilities in your family and it is likely that, at some point in your life, you too will experience a disability.
In 2012 about 3.8 million people, or 13.7% of Canadians aged 15 and older, reported being limited in their daily activities because of a disability. The results come from the 2012 Canadian Survey on Disability.
The presence of disability increases steadily with age. One in ten working-aged Canadians aged 15 to 64 reported having a disability in 2012 compared with just over one-third of Canadian seniors aged 65 and older. Women, at 14.9%, have a higher prevalence of disability than men, at 12.5%.
I will give you a little bit about statistics and why seniors don't travel. For seniors with disabilities who do not travel locally, 56% consider themselves house-bound. Seniors who are house-bound list health problems as the number one reason, 48%. Beside health problems, the main reason why seniors with disabilities are house-bound differs for each age group. Older seniors are more likely to not want to go out, 44%, and need assistance, 37%, than younger seniors who are more likely to feel that transportation is not available, 19%. Older Canadians, however, are more likely not to go out because they have no companion, 28%. This information is shown in figure 4.9—we have some graphs—making an accessibility service less accessible.
CCD is concerned that the proposal to end door-to-door service will make a service that is currently accessible less accessible to persons with disabilities.
When Canada ratified the Convention on the Rights of Persons with Disabilities, it made a commitment not to do anything that would reduce existing accessibility services. This is in article 4 of the CRPD.
From learning from the living experience of persons with disabilities, we believe that Canada Post's proposal to end door-to-door services will adversely impact Canadians with disabilities. Communal mailbox delivery is inaccessible to those with mobility or vision impairments and will make people with disabilities more dependent on family and friends to pick up their mail for them.
The experience of those in our network who have experience with existing communal mailbox service highlights the problems with this model of service delivery. CCD's chairman, Tony Dolan, a wheelchair user, lives in an area of Canada where Canada Post has implemented the communal service model. He reports that the service is inaccessible to him and he must rely on his spouse to get his mail. Not everyone with a disability lives with another person who is able to retrieve their mail.
I would like to identify a few of the barriers. The communal mailbox will be a barrier for many Canadians with disabilities. Due to weather and snow conditions, sidewalks can become impassable for persons who use wheelchairs and other mobility aids. For persons whose disability causes fatigue, a trip to the community mailbox can be an additional task that they have to juggle in their daily routine.
Due to poverty, some people with disabilities live in unsafe neighbourhoods as housing costs are lower. They may feel vulnerable when retrieving their mail from the mailbox. Due to other constraints, some people will have to rely on friends, neighbours, and volunteers from charitable agencies for help with their mail retrieval. This lessens the independence of persons with disabilities.
Having other people pick up their mail reduces an individual's privacy. This could be particularly worrisome for women with disabilities living in abusive situations. They may not want their abuser having access to personal documents that come in the mail, such as bank statements.
Roy Hanes Member, Social Policy Committee, Council of Canadians with Disabilities
I'm going to take over now.
Good afternoon, everybody. One of the things the Council of Canadians with Disabilities is also looking at, as Bob mentioned, is what we refer to as “ableist” assumptions and the digital divide.
One of the things we're concerned about is that, while reliance on information and communication technology instead of on Canada Post delivery may be an option for some Canadians, not all Canadians can afford to have Internet service at home. Canadians with disabilities face a disproportionate level of poverty, and thus Internet service is beyond the budget of some people with disabilities, especially those reliant on social assistance, as they have very little discretionary income.
In addition, some Canadians with disabilities require adaptive technology to make information and communication technology accessible. This comes with additional costs to the person with disabilities.
According to the participation and activity limitation survey in 2006, low income is a significant issue for a large number of people with disabilities who are of working age—from 15 to 64—after which the poverty rate drops significantly among seniors but falls to a level that's similar to that for seniors without disabilities.
In 2010, according to Statistics Canada, eight out of ten Canadian households had Internet access. Access rates were higher in large cities, where about 81% of households had access. They were lower in smaller cities—about 76%—and in rural areas—approximately 71%. So there was quite a high level of access to the Internet. There was, however, a considerable income divide; wealthier households were more likely to have Internet access than were poorer households.
If Canadian households are split into four groups based on income, the richest one-quarter of households, those with annual incomes of about $87,000 or more, had almost universal access, about 97%. At the other end of the income divide, the poorest one-quarter of households, those with incomes of $30,000 or less, barely half—54%—had Internet access. Many people with disabilities fall into this lower range.
Of the 21% of Canadian households that didn't have Internet access, more than half—56%—told Statistics Canada they had no interest in it. One-fifth cited the costs of accessing the equipment, and 15% said they lacked a device such as a computer through which to be connected.
One of the things the Council of Canadians with Disabilities also wants to stress is that there is often a relationship between postal delivery service and people with disabilities, and that service is important to our population. In many ways, there's no substitute for having people interacting with people with disabilities, and mail carriers, albeit unofficially, play a vital role in looking out for vulnerable people in their communities, particularly people who have disabilities or are seniors or both.
We feel an unacceptable option is a two-track mail system, which would be problematic for people with disabilities if there were an assumption that there should be a separation between people with disabilities and seniors. One of the things we realized at the Council of Canadians with Disabilities is that many people have to legitimize being disabled in order to be eligible for the service, a process that takes time and money.
Another thing we're really concerned about is navigation of the system, which Bob already talked about, and the accessibility issue.
A third element we're quite concerned about is having a system that identifies or labels a person with a disability, which would allow others to note that somebody with a disability lives in a particular household or apartment, thereby leaving that person open to violence or abuse.
Those are some of the things. I notice my time is wrapping up so I'll leave it there.
Conservative
The Chair Conservative Larry Miller
Thank you very much, Mr. Brown and Mr. Hanes.
We will now move to Mr. Dachis for 10 minutes or less.
Benjamin Dachis Senior Policy Analyst, C.D. Howe Institute
Thank you very much.
Good afternoon. Thank you for inviting me to speak to the committee today. I apologize for not being able to attend in person, and I very much appreciate the willingness of the committee to allow me to attend by video conference.
My name is Benjamin Dachis. I'm a senior policy analyst at the C.D. Howe Institute. For those who are not aware of the institute, we are an independent, not-for-profit organization that aims to improve Canadians' living standards by fostering economically sound public policies.
I am the author of a recent C.D. Howe Institute publication entitled “How Ottawa Can Deliver a Reformed Canada Post”. That was published in August of this year. I'm going to be arguing that Canada Post needs more reform than what was announced last week.
Rather than provide less service at a higher price, Canada Post should be partly privatized, with the full privatization of Canada Post to potentially follow. This would follow the reform model that we see in the U.K., for example, which is gradually privatizing parts of its mail delivery service while keeping other parts of the postal service within public hands.
The federal government owns but provides significant autonomy to Canada Post. Under the Canada Post Corporation Act, the government has made Canada Post the only organization that can collect or deliver letter mail at the price of a stamp. However, the government has tasked Canada Post with the obligation to serve all addresses. This is known as the universal service obligation. I believe that the primary objective of Canada Post is to provide a universal service at the same price to consumers across the country.
The government has created a monopoly in order to provide that universal service mandate, but I'm going to be arguing that the two issues are separable. I'll be arguing that a real reform of Canada Post must address the government monopoly, the requirement for universal service, and the pension and labour issues for existing Canada Post employees.
The increase in prices and the service reductions do not address issues of government monopoly, universal service, or pension concerns. I'll show how we can deal with some of these issues in the future.
First, on monopoly, there are two approaches to limiting government monopoly on mail delivery.
The first approach, similar to what we've seen in, say, Sweden or Finland, is to eliminate the government monopoly on letter pickup and delivery completely, and to allow private sector entrants to handle the job. When governments do that, they often set the terms of services and prices for new entrants.
A second option is to eliminate the government monopoly more gradually. This can be done through contracting, say, whereby the government auctions the right to operate specific parts of the postal services, such as mail delivery and pickup.
Canada Post can set the terms of the contract with bidders, such as maintaining a certain number of postal outlets in a region or preserving household delivery where it currently exists. Canada Post could then pay the least-cost contractor out of revenues from stamp sales. The winners could then experiment to find the most innovative and least-cost ways of delivering and meeting those contract terms.
Those winners could be existing parcel delivery companies. They could be newspaper companies that currently operate door-to-door services. They could be community groups, and that could also include existing Canada Post workers. Contracting arrangements for delivery and pickup services would be a continuation of the existing practice of contracting out the operation of postal outlets, customer care centres, long-distance transportation, and air transportation.
If you look at contracted postal outlets, you see that they have a one-third lower cost than the facilities owned by Canada Post. If contracting delivery and pickup delivered the same sorts of savings, the cost savings would be dramatic, without necessarily cutting the delivery standards.
Separating and then privatizing the delivery component of postal operations that can be provided by private companies, but then keeping other parts within government ownership, is the direction that the U.K. is going to be taking. The U.K. has privatized the delivery network of the Royal Mail, but it's still going to maintain the ownership of the post office, which is responsible for maintaining its network of postal outlets. Government ownership does not necessarily mean government operation.
In the United Kingdom, 97% of post office branches are operated by contractors or private businesses. In Canada, only about 40% of our retail postal operations are contracted. These are the sorts of operations that you see in, for example, Shoppers Drug Mart.
Even in this area, in which contracting has been considerable by Canadian standards—and these are services that provide good services to Canadians under the banner of Canada Post—we are still behind the United Kingdom.
How can we preserve the universal service mandate if we undergo the contracting route?
First and foremost, the economic merits of maintaining common prices and service levels across Canada are dubious. The cost of service is higher in rural areas than in urban areas, and cross-subsidizing mail services in rural areas results in higher costs for urban customers. Nevertheless, with Canada Post, like the third rail of rural politics, scrapping the idea of universal services is going to be unlikely in the near term.
Rather than imposing the costs of maintaining rural services on urban postal customers, Ottawa should provide subsidies for rural service. Transparent subsidies set by Parliament would be an efficient way to preserve equal urban and rural prices. Such a subsidy would be similar to the current policy of free delivery of letters to and from members of Parliament, which costs taxpayers $22 million per year.
Under a contracting model, service providers would require a subsidy to service high-cost areas. If the cost per item sent or delivered in remote areas isn't covered by the set stamp price, the difference would be made up by a payment from government revenue. Contractors would then compete on the basis of the lowest subsidy they need to provide the service.
Contracting arrangements would create a strong incentive for contracted employers and their employees to maximize their productivity. Firms with relatively low-productivity employees would either lose contracts or be less profitable than otherwise. Knowing that low productivity or excess wage demands by contractor employees could result in their firm losing contracts would result in those workers trying to improve their productivity or reduce their costs relative to Canada Post's employees.
Contracting could also result in productivity improvements by existing Canada Post employees who compete with private contractors for work.
I'll try to conclude by discussing issues of running labour contracts and pension issues of Canada Post employees.
Canada Post could gradually increase the share of services it contracts out without relying on layoffs as layoffs of most existing employees are forbidden under the current collective agreement.
As of the end of 2012, Canada Post had a pension solvency deficit of about $6 billion. Canada Post has received special permission from the federal government to defer the payments it needs to make to cover its pension deficit. There are going to be few easy fixes for such a sizable pension hole. In the U.K., for example, the government took on the historic pension liabilities of the Royal Mail in 2012. That pension plan transfer amounted to £40 billion of pension liability. That's about $70 billion. They had a pension solvency deficit of £10 billion or about $17 billion. Gradual privatization could allow Canada Post to start shrinking that deficit by reducing future benefits, increasing worker premiums, or both in the coming years.
Contracting could also spur Canada Post employees to come to the bargaining table to address that looming pension cost.
Gradually increasing contracting arrangements for more Canada Post services would extend to broader reform and eventual full privatization, leading to the process that's currently under way at Royal Mail once new competitors are in place and the costs of maintaining existing universal services become clear.
Whatever route we choose, and there are many different international models of privatization that we can consider, whether that route involves a wholly privatized Canada Post or one that involves further, carefully selected private services to be tendered for contract, the goal should be a competitive and efficient postal service.
It is time that Canada's postal services caught up with those of the rest of the world and that Canadians benefit from the most efficient system possible.
Thank you for inviting me. I look forward to discussing this further in questions.
Conservative
The Chair Conservative Larry Miller
Thank you. Thanks for keeping it under the time.
Now we will have Mr. Dan Kelly from the CFIB for 10 minutes.
Daniel Kelly President and Chief Executive Officer, Canadian Federation of Independent Business
Thanks very much. I'm very happy to be here today.
We've been hearing a lot about Canada Post from small and medium-sized businesses that are members. At CFIB we have 109,000 small and medium-sized companies spread across Canada in every province and in two of the three territories. This has been a fairly hot issue with our members, particularly on the pricing side of the equation.
Hopefully some survey data we recently collected has been distributed to you. I have to say our staff at CFIB was right on the money and had done an extensive research survey poll of our members, with 8,000 small business respondents just over September and October of this year, so we have very fresh data on our members' views about Canada Post, and some of it may surprise you.
If we look at the third page in my deck, it shows that 40% of small and medium-sized firms send 50 or more pieces of letter mail per month and there are very few that don't use—
Conservative
NDP
Paul Dewar NDP Ottawa Centre, ON
I don't think the members saw the deck he's referring to. Just so he knows, we don't have the information.
Conservative
The Chair Conservative Larry Miller
Okay, I was just reminded that the members don't have the deck you are referring to.
President and Chief Executive Officer, Canadian Federation of Independent Business
I'm terribly sorry about that. We did send it earlier today, but I know this committee meeting was rushed. I'll summarize the high points with you directly.
President and Chief Executive Officer, Canadian Federation of Independent Business
Forty per cent of our members send 50 or more pieces of letter mail per month, and these are small companies. In fact, very few of our members—only 1% or 2%—send no letter mail per month. The impact of the rate changes on small and medium-sized firms will be rather significant.
When we ask our members why they use Canada Post, accessibility and convenience are the number one reason, followed by the cost. Low cost was the second most cited reason, at 50% of our members. Reliability was also fairly high. The list goes on from there.
When we asked our members recently about how important Canada Post delivery services are to their business in sending and receiving mail, 61% said that Canada post delivery services were very important to small firms, and 30% said they were somewhat important. As you can see, over 90% of small firms do believe that Canada Post delivery operations are somewhat important or very important to their firm.
But business usage of Canada Post is changing. We've had a fairly large number of our members—42%, in fact—say that over the last three years they have reduced their reliance on Canada Post. Another 42% said that it has remained the same. Only 14% said that it has increased.
This often surprises people, because as consumers, as residents of Canada, I think most people will say that their reliance on Canada Post has dropped significantly, and that they're no longer doing a number of things they used to do through the mail. But with Canada Post specifically and the small business community, reliance is still fairly high.
I want to single out a couple of areas.
One is that we have a large number of business that do payments through the mail. During the most recent postal strike, huge numbers of small businesses were affected, because invoicing and receiving payment through paper cheques is still the dominant form of payment in the business-to-business base. While consumers have moved towards online payments in a big way or to automated payments in another fashion, businesses, because of CRA requirements for paper invoices, still rely very heavily on invoicing and receiving payment through the mail.
Beyond that, letter mail is still an important way of reaching out to one's customers, so that still is ranked fairly high as an issue of concern to our members.
When we asked why they send mail through delivery services other than Canada Post, they say that the speed and reliability of delivery are reasons why they looked at other options.
But we also surveyed them extensively on some of the options for Canada Post to reduce its costs. The option that was rated highest by our members in terms of reducing Canada Post's costs was to freeze wages of Canada Post employees for several years, and also, replacing door-to-door delivery with community mailboxes. Two-thirds of our members, or 66%, said they supported a move towards community mailboxes and away from door-to-door delivery, not because they love the idea, but because they thought that was a reasonable compromise for Canada Post in order to reduce costs without killing service.
Also, closing underutilized postal offices was favoured by a majority of our members.
We had more mixed views on delivering letter mail and ad mail three times a week versus five times a week, but very, very little support for the idea of raising prices significantly. We put out the suggestion that prices would rise by 5% to 10% a year over multiple years for letter mail and parcel mail. Only 21% of our members supported this, and 75% of our members opposed that move.
Now, I should say that we were estimating a 5% to 10% increase in letter-mail prices, and these price hikes that have been announced by Canada Post are much more significant than that. These are huge price hikes that will affect a large number of businesses. I can tell you that one of our members in Saskatoon e-mailed me to tell me that he sends 20,000 pieces of letter mail per year and this cost increase would have a massive impact on his business.
We've looked at some of the cost structures at Canada Post. We do something called “Wage Watch”, whereby we evaluate public sector salaries and benefits versus private sector salaries and benefits.
Overall, wages and benefits at Canada Post were 40% higher than in similar occupations in the private sector; that's wages, benefits, and the working hours advantage combined. On wages alone, it's 17% higher than similar occupations in the private sector. When you include benefits such as pensions, there's another 23% on top of that.
Our members generally support the move to community mailboxes. They support some of the very small steps that have been taken to address unsustainable pension liabilities, but they do feel that Canada Post needs to move faster and to move farther in addressing that particular issue. As for expanding postal franchises, 62% of our members supported that move, and we do support some of the baby steps that Canada Post is taking towards addressing its costs of labour by bringing wages and benefits closer to private sector norms.
The piece we are very concerned about is of course the letter-mail rate hike. We do ask that it be given some reconsideration, or at the very least that it be phased in over a longer period of time. I do think this is ultimately going to lead to a discussion on whether Canada Post's monopoly over domestic letter mail remains appropriate. Our members have mixed views towards privatization though the majority do support privatization of Canada Post. But the question I ask is if anybody would be interested in buying Canada Post given the massive unfunded liabilities and the mess that it finds itself in today.
I do want to make a special note about the $6.5 billion unfunded pension liability. We are now seeing Canada Post—one of the first major agencies of government—turning to price hikes and service reductions as a result of not addressing unfunded pension liabilities. Our advice to you and our urging to you is to think about that for all other government agencies, because there are massive unfunded pension liabilities in many federal government agencies, in the federal government's core civil service, and of course, in the broader civil service at the federal, provincial, and municipal levels. We see the pension crisis as one of the areas that all members of Parliament should be addressing, not just through the small steps that have already been taken and, in fact, far more quickly over time.
Thanks very much.
Conservative
Mike Sullivan NDP York South—Weston, ON
Thank you, Mr. Chair.
Thank you to all of the witnesses who have come.
On the issue of persons with disabilities, Canada is a signatory to the UN Convention on the Rights of Persons with Disabilities, and part of what Canada has agreed to is that the standard of living for persons with disabilities should never go down, should never get worse. Does moving to 106,000 community mailboxes, when now people get mail delivered directly, take the standard of living for persons with disabilities up or down?