Mr. Speaker, I would be remiss if I did not congratulate you on your appointment. I hope that you enjoy your appointment and that you find these speeches utterly fascinating.
I am somewhat reluctant to get into this subject because I am from Toronto. Toronto is of course the place that everyone loves to hate. Indeed, there are times when my colleagues, particularly those from the maritimes, express some sentiments that, shall we say, may not be Toronto-friendly.
Let me take a few moments to discuss the goals of EI and how changes in the bill support those goals.
As the House knows, the unemployment insurance act was first designed in 1940 as a safety net and as an income support for Canadians temporarily out of work. Since then it has evolved. It has allowed workers and their families to remain attached to the labour market, staving off, in many cases, a period of dislocation and financial worry.
Over the years, it has changed dramatically. Our employment insurance system has become a far more sophisticated entity as it attempts to respond to market realities. Some of the changes to EI actually resulted in market distortions and had to be addressed. In 1996 we updated the system to better reflect market realities.
The objectives of our EI reform were to make the system fair, reduce dependency, help low income families, ensure the program was sustainable, encourage active employment and reduce market distortions. There were a number of bizarre situations wherein clearly it was better to be on EI. We would therefore have the ironic situation of EI creating unemployment rather than creating employment.
Many of these goals have been achieved and are as important today as they were in 1996. We promised Canadians that we would carefully monitor and assess the changes to see if they were working as intended. In fact that is in the legislation. We always promised to make adjustments as needed, and the time has arrived. Since the reform it is clear that many elements such as the divisor rule and the family supplement are working well and that other parts of the program need some fine tuning.
We listened carefully to the concerns of Canadians about the EI program. In fact, as other members have pointed out, this was an election issue during the last two or three elections. Members such as the hon. member for Fredericton have articulated concerns here and elsewhere that are reflected in the bill. Canadians have told us about some of their difficulties with some elements of EI. Some elements need adjustment to ensure the effectiveness of the program. We have responded with concrete and progressive changes that reflect today's economic realities.
The clawback was originally implemented to discourage high income claimants from claiming benefits year after year. The member for Mississauga West repeatedly pointed out in the House and elsewhere that the threshold was far too low. Once the bill is passed it will raise the net income level at which clawback applies for repeat claimants from $39,000 to $48,750. In future only higher income Canadians will face repayment.
Middle income workers who need to claim EI will have more money to spend because we are raising the income threshold at which clawback begins. The vast majority of middle income earners have contributed to the system all of their lives without ever drawing benefits. Yet under the current system, we claw back the very first time an individual makes a claim. This is using a sledgehammer to kill a fly. By definition first time claimants are not dependent on EI. They are not the people who are using EI as an income supplement.
We are also removing the clawback for those collecting special benefits. Pregnancy or illness should not affect one's entitlement. Special benefits are designed for Canadians who are too sick to work and for those who stay at home to care for a newborn or an adopted child. These are not the people using EI as an annual income supplement and there is certainly no reason to penalize new parents or people who are too sick to work.
By changing the clawback provision we will be helping three broad groups of Canadians. First, middle income groups will benefit primarily due to the change in the threshold. Second, Canadians receiving special benefits will no longer have to repay any of those benefits. Third, first time claimants will be exempt from benefit repayment.
In addition the bill would eliminate the intensity rule. The rule provided that the more frequent a claim, the greater the reduction in the percentage benefit to which one was entitled. The rule has proven to be ineffective with the unintended consequence of being punitive. The elimination of this rule should be of the greatest benefit to seasonal workers.
Simultaneously it is hoped that the raising of the clawback and the elimination of the intensity rule will not mean a return to business as usual. Employment insurance cannot be a substitute for a job. It cannot make it impossible for a low wage employer to set up shop in a region. A prospective employer should not find himself or herself competing with EI. Otherwise it becomes self-defeating.
We should look at the reduction in EI premiums from $3.07 to $2.25. Every 10 cents costs the federal treasury $700 million, cumulatively a $6.4 billion tax reduction.
Some say that the government has eliminated the deficit and is now paying off the national debt on the backs of the workers. It is true that EI is going into general revenues and for good reason. There is no separate bank account for EI when times get tough, which they will sooner or later. All taxpayers of Canada, whether they are employers or employees, will be obligated to unemployed workers. There is no better guarantor than the Government of Canada.
Canadians in every province and territory will benefit from the improvements to the Employment Insurance Act. The changes are in keeping with the values that Canadians hold dear, values like taking care of each other and looking out for one another in times of need.
When we designed the employment insurance system, we wanted to do more than just merely insure people's wages. We wanted to get them back to work. However a concern echoed by many Canadians is that the design that we have can be improved.
The bill is about ensuring that the system continues to work well and is responsive to those who are most in need. It is about ensuring that the system responds to the needs and realities of working people. The bottom line is that EI must be there for Canadians. It must be there for those people who have contributed and who now need our help.
Taken together, the changes to the intensity rule and the clawback will improve our ability to address the original goals of EI, which were to ensure fairness, to help people return to work quickly and to reduce dependency without penalizing those most in need.
The simple fact is that our employment insurance reforms were in the right direction and these reforms are even more in the right direction. Employment insurance is working but it will always be a work in progress.
I would like to specifically acknowledge the members for Fredericton and Mississauga West, who in our caucus repeatedly brought forward these issues. I congratulate the relevant ministers on their willingness to be responsive to members of caucus and indeed members of the House.
That is why I will be voting for the bill and I would encourage other members to do so as well.