Mr. Speaker, I welcome the opportunity to discuss the employment insurance program and examine the issues raised by the member for Laurentides—Labelle.
Before commencing, however, I would like to point out that many issues raised in Bill C-269 were raised in the Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities report, for which the government will table its response in the very near future.
The government is committed to ensuring that its programs respond to the realities of the Canadian labour market. In this regard, it is important that program changes, including those to the EI program, be founded on sound analysis of evidence.
Equally important, is that careful consideration be given to labour market impacts and the costs of individual measures.
To inform decision making on any potential EI changes, the government draws upon extensive monitoring, assessment and evaluation of the program.
In addition, EI pilot projects can be utilized to assess the labour market impacts of new approaches before permanent changes are considered. Currently, a number of pilot projects are in progress testing the efficiency of measures to address many of the issues referenced in Bill C-269.
Bill C-269 proposes fundamental changes to the Employment Insurance Act, changes so fundamental that they would represent a substantial program expansion, requiring considerable preparatory work and sound analysis. Before contemplating such extensive measures, it is important that we examine each of these proposals individually and, most important, look at their overall impact.
Bill C-269 would reduce the number of hours required to qualify for EI to a flat 360 hours of work, regardless of the regional unemployment rate.
The EI program's variable entrance requirement is designed to help provide adequate program access across the country and is adjusted monthly to reflect unemployment rates by region. The higher the unemployment rate is in a particular region, the more difficult it is to obtain work and to accumulate the necessary hours to qualify for EI.
Evidence indicates that the variable entrance requirement, as compared with a fixed entrance requirement, as proposed in this bill, has played an important role in equalizing the percentage of individuals who meet EI entrance requirements across unemployment rates.
While I would not presume to speculate on the reasoning behind the proposed fixed entrance requirement, some have argued that the qualifying period should be reduced because they claim that fewer than 45% of unemployed receive EI benefits in some parts of Canada.
This is a misleading way to look at the statistic and is a flawed measure of EI access across Canada, for this statistic includes those who have not contributed to the EI program by paying premiums, such as individuals who have never worked or who are self-employed.
For the record, 80% of unemployed people who pay into EI and who become unemployed, through no fault of their own, are eligible to receive EI benefits.
It is important also to remind the House why there is a 910 hour entrance requirement for new labour market entrants and those re-entering the workforce after an extended absence from the workplace.
The objectives of these measures are to ensure that those accessing insurance based income support have demonstrated significant workforce attachment as to prevent a cycle of reliance on EI while also strengthening the relationship between hours of work and benefit entitlement. I would note that this requirement does not apply if an individual has worked at least 490 hours in the year prior to the qualifying period of this claim.
According to successive monitoring and assessment reports, the objects of this policy are being achieved as these reports suggest that the current entrance provisions are encouraging workforce attachment.
Nevertheless, in areas of high unemployment, a pilot project was initiated to test the labour market impacts of reducing the hours of work new entrants and re-entrants required to qualify for EI benefits from 910 to 840 when linked with employment programs.
With respect to the bill's proposal to substantially increase EI benefit entitlements, overall evidence continues to indicate that the duration of EI benefits is sufficient for the majority of claimants. On average, individuals use less than two-thirds of their EI entitlement before finding employment. Even more telling, only a small percentage of claimants entitled to 45 weeks of benefits use all the weeks available to them.
Observers have noted, however, that certain individuals in seasonal industries may face an income gap when their EI claim runs out prior to returning to their seasonal job. Consequently, this past June our new government announced the extended EI benefits pilot project. The pilot project provides access to five additional weeks of benefits to EI claimants in high unemployment regions, up to a maximum of 45 weeks. The pilot project will test whether providing additional benefits has adverse labour market effects and whether it effectively addresses their income gap.
Bill C-269 also proposes to increase benefit levels by raising the maximum insurable earnings, or MIE. In 2001, it was determined that the annual MIE would be frozen at $39,000 until the average industrial wage increased to an equivalent level. The impetus of this decision was the fact that the MIE was substantially higher than the average industrial wage and, as such, could act as a disincentive to work. The same rational applies today.
The bill before us today also proposes raising benefit rates from 55% to 60% of average weekly insurable earnings. The current 55% EI benefit rate is designed to strike a balance between providing adequate temporary income while maintaining work incentives. Evidence indicates that the current benefit rates meet the needs of unemployed workers and in fact only 12% of those who become unemployed show a drop in household spending one year after a job separation.
Bill C-269 also proposes to eliminate the two week waiting period. The waiting period of the co-insurance feature of EI is similar to the deductible of other insurance plans in that it serves to eliminate short claims that individuals are able to cover and makes sure that insured persons absorb some of the costs of the employment interruption. While employees bear the cost of the two week waiting period, this is offset in that they pay a lower premium than their employers.
Turning to the issue of arm's length employment arrangements between relatives, section 5 of the EI act states:
Insurable employment does not include
(i) employment if the employer and employee are not dealing with each other at arm’s length.
This provision ensures that conditions of employment in family businesses are similar to those who have only an employee-employer relationship. We should recognize that in the overwhelming number of cases 92% of family member claimants are able to meet this requirement.
To summarize, Bill C-269 proposes fundamental and far-reaching changes to the EI program, changes that could potentially cost over $2 billion annually. Even more important than the financial considerations is the fact that Bill C-269 could very likely reduce work incentives at a period when the overall labour market is robust and, indeed, in many sectors there are significant labour shortages.
While the government shares the member's concerns for the unemployed, the evidence at hand suggests that supporting Bill C-269 would not be a prudent course of action. For this reason and for the points that I have outlined, we cannot support Bill C-269. I can say, however, that the government is committed to ensuring that the EI program continues to serve Canadians in an effective and timely manner as we continue to monitor and assess the program.