Mr. Speaker, I rise to speak against the Bloc motion being debated today. The reforms of Canada's unemployment insurance are not only overdue. In many ways they do not go far enough and are too complex. While the reforms will impose hardship on some Canadians, they will at the same time bring much larger economic and social benefits to society as a whole.
I make this judgment after much study. In my career as a professional economist I was deeply concerned with the economic and social effects of unemployment insurance. In the mid-1970s I published a number of studies and organized an international conference that examined the effect of the level of benefits and ease of access to UI on recorded unemployment rates in Canada.
A few years ago I published a study that argued the large gap between Canadian and U.S. unemployment rates, which first appeared in the early 1970s, was caused by the increased generosity of our system initiated by Canadian reforms at that time. Incidentally the co-author of this study was Dr. Josef Bonnici, a former student of mine who is presently the minister of finance for the Government of Malta.
In February 1996 I will participate in a major conference of social scientists which will re-examine the issue of Canada-U.S. differences in unemployment rates to be held in Ottawa. My work on the effects of unemployment insurance on unemployment was fundamental economic theory which in turn guided reproducible econometric measurement co-authored by several colleagues and experts in this field.
Our results were verified by the economic council. It is fair to say that today even the left leaning part of the chattering class of academics, journalists and other intellectuals has accepted the validity of the basic premise.
Assar Lindbeck, a famous Swedish economist who is a strong supporter of social democratic policies, recently published a paper in which he noted that social support programs like unemployment
insurance induce the creation of institutions and ethical norms which increase the demand for the support programs.
The chattering classes in the past tended to infer from my analysis that I recommended the abandonment of unemployment insurance. I never did. The policy issue has always been the correct level of UI benefits and ease of access which maximize overall social welfare. There is no doubt the more generous the system is, the higher is the welfare of those receiving the benefits. However, on the other hand, the higher the benefits, the higher the unemployment, the higher the premiums payable by workers, the higher the risk of dependency of habitual users, and a host of other economic and social costs.
For a long time the political culture in Canada has resulted in the denial that these costs exist or, if they exist, that they are largely relative to the benefits received by unemployed.
About 15 years ago I was asked to be a guest on "Cross Country Check-Up". The views expressed during that period on the subject were most extreme. However, most important, as Claude Forget told me after he found that his report on the issue was ignored by the political system, the case for a less generous system has no political constituency quite simply because the economic and social benefits are diffused and poorly understood.
Those suffering from the reduction of benefits are clearly identified and well organized. No political party in Canada could afford to make the system less generous. This was true until recently when the Canadian debt and deficit began to threaten the very existence of all social programs.
The shift in the perceived political payoff from doing nothing and making UI less generous has not come easy to people like the Minister of Human Resources Development who used to deny vehemently even the existence of insurance induced unemployment and other costs. The timid and convoluted reforms to which his ministry gave birth reflect the struggle he had in admitting that these undesirable effects not only exist but are very costly to society.
Let me return to the Bloc resolution being debated today. It is true, as it states, that UI reforms will make some Canadians worse off, especially those in seasonal industries. However, my long and intense study of the UI system has convinced me that these reforms at the same time bring substantial benefits to many other Canadians so that overall welfare has increased. This certainly has been the finding of a number of royal commissions which looked at the question.
A basic theorem in economics is that under conditions like these, where some gain and some lose from a given policy, the government should offer assistance to those who have been asked to carry the burden of adjustment. After all it was a government created system, not their own fault, which caused them to enter these seasonal industries in excessive numbers and at non-economic wages. At the same time the rest of society which benefits from the changes may be expected to pay for easing the costs of transition for those asked to bear them.
For this reason I take the opportunity to urge the government to stick to its reforms and possibly strengthen them while at the same time make more generous provisions to ease the pain of transition felt by those affected adversely and directly by the reforms.