EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, January 24, 1996

.1347

[English]

The Chairman: Order.

Before we turn to our witnesses, I'd like to address the point that was made by Mrs. Brown at the close of our session this morning regarding the availability of legislative counsel for the committee during the whole course of our hearings on Bill C-111. During the lunch break I had a chance to discuss this matter with the clerk, and I thought I'd just advise the committee on what has been done on this matter.

First, the request to which Mrs. Brown referred had been raised by me on behalf of the committee to the assistant clerk for procedural services, Mr. Camille Montpetit, in October, when we were anticipating the legislation. He replied to me in November, basically saying that the general legislative counsel, Mr. Rob Walsh, had informed him that because of limits in resources he would not be able to provide the kind of legislative counsel we were requesting but that he was having to limit himself to the priorities of services that legislative counsel provide for committees and members...which provide legislative counsel during the clause-by-clause portion of legislative committee hearings.

I understand that Mrs. Brown has communicated with Mr. Walsh on this matter, and, at least to my knowledge, basically the same information has been transmitted to her by him.

The situation at this point is this. Given that the House of Commons, at least according to the current rules of operation of the House, doesn't have the resources to provide the access to legislative counsel that we would like to have in this committee, the only thing I can see at this point would be for the committee to have the matter raised before the Board of Internal Economy. If the committee agrees to that, I'm quite prepared to write a letter to Mr. Parent, the Speaker, asking him to bring this matter up at the next Board of Internal Economy committee meeting and requesting that additional resources be made available to the committee.

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I might suggest that to increase the likelihood of a favourable reply, it would be helpful if all parties were to consult their representatives on the Board of Internal Economy in order to lobby the board to be sympathetic to our request. But I'll wait for a motion from the committee before taking any further action.

Mrs. Brown (Calgary Southeast): Do you have any idea when the Board of Internal Economy will be meeting? If their next meeting is at the end of February, then we'll be into clause-by-clause in March in any event. Given your recommendation, Mr. Chairman, I appreciate the good intention behind your words, but we will be having a series of hearings over the next few weeks. I would submit to you that we require the support of legislative counsel. I can't imagine, with the amendments we'll be facing in Bill C-111, that we would have anybody who would be even remotely prepared to start drafting legislation at the eleventh hour.

Therefore, I would put to the committee members, all of them, that this is not an unreasonable request, given the nature and complexity...and really, this is a very significant piece of legislation coming from the Liberal government, and it's deserving of that kind of scrutiny.

The Chairman: The point is well taken. My understanding is that the Board of Internal Economy meets weekly when the House is sitting. I believe that meeting normally takes place on a Tuesday afternoon. So presumably they would meet in the first week the House is back, if not before. Of course, we could always word the letter such that a special meeting would be convened if necessary to consider this request expeditiously. But again, I'll wait for a motion from this committee which would authorize me to write that letter on your behalf.

Mrs. Brown: I would certainly move that, Mr. Chairman, but I already have another motion on the floor this morning to request approval from this committee that we do request legislative counsel. Perhaps we could vote on that and then move to your request.

The Chairman: Okay. Mr. Nault.

Mr. Nault (Kenora - Rainy River): Mr. Chairman, I'm not sure I understand whatMrs. Brown is up to. If she's asking for legal counsel to help her draft her amendments, it's common practice in this place that when opposition parties are given research funds, that's what they're for: to give them the ability to put together positions contrary to those of the government. If she's asking us now to bring someone into the committee to help her do that, that's not normal, to my mind.

I'm just trying to get a clarification of exactly what she wants this individual to do. Is that person to be here to help her with amendments, or is it something different from that?

The Chairman: My understanding is that we are simply asking that the legislative counsel normally here during clause-by-clause study of a bill be available to the committee on a full-time basis. He or she would sit over there and be available to all committee members during the period when we're hearing witnesses on the proposed legislation. That's what she's asking for.

Mrs. Brown: Yes, it's for everyone.

The Chairman: It's for everyone.

Mr. Nault: I still haven't got an explanation. What's the purpose of this? Is there something in the legislation she doesn't understand and she'd like to have explained?

Mrs. Brown: Mr. Nault, do you understand all of it? That would be -

Mr. Nault: No.

Mr. Chairman, I'm speaking through the chair. She'll get her chance to explain.

I'm just curious as to why she would want a lawyer to sit here and explain to us what, hopefully, we should know the bill says...and then ask the officials, who are the people who drafted the legislation, what it means. I'm just trying to find out why we have to have a lawyer sit there all day if there's no need for it. I'm suggesting that it's very unusual to have counsel sit here throughout a whole bill. In the time I've been here, in the last seven years, the request has never come up, so I'm curious as to why it seems to be such a problem in this case.

.1355

The Chairman: If I may summarize the argument that is being made for that, it is that the bill is of a complexity that requires the presence of legislative counsel for a longer period of time - and also, I suppose, to add to that, the fact that we're in pre-study as opposed to post-second reading study of the bill.

Again, we don't need to get into a long argument. It's a question of whether or not we as a committee want to make the additional request to the Board of Internal Economy. As I said earlier, I'm willing to make it on your behalf, even though I've explained to you that the initial request has been rejected because of an insufficient amount of funds or resources being available in order to do this. Perhaps at a higher level they can find those funds. So it's a simple matter of whether the committee will vote for me to do this or not.

Before I put the vote, I notice that we don't have a quorum to put a vote. So in good parliamentary practice, we'll defer the vote until we have a quorum to pass it.

For those listening from beyond the committee room, we have a quorum to hear witnesses, but we don't have a quorum to vote. So I think we should defer the vote until we have a quorum for it and do what we have a quorum to do now, which is to listen to the witness.

Mrs. Brown: Does a quorum to vote mean that we have a majority of Liberals in place before we take the vote?

The Chairman: No.

Mrs. Brown: I ask this because we have three members over there.

The Chairman: We need eight members in order to vote. So if your colleagues come, we can vote. Is that clear?

Mrs. Brown: Oh yes, it's perfectly clear.

The Chairman: So we'll defer that until a later time, and we'll now turn to our witnesses, who have been patient during all of this.

[Translation]

Mr. Noreau, have you been able to look into Ms Lalonde's request as to the availability of documents for today's meeting?

Mr. Jean-Jacques Noreau (Deputy Minister, Human Resources Development): We're trying to produce them as quickly as possible. I hope to be able to give them to you by the end of today's meeting. As you will be meeting after 4 p.m., that will give me an extra hour to get them to you. We are finalizing the documents, producing them.

The Chairman: Thank you.

Mr. Noreau: Thank you.

[English]

This afternoon we are getting into one specific issue that was raised, as I indicated last week, when the minister met with you. It is the issue of averaging the earnings over a fixed period of time in order to determine the level of benefits of which a claimant can take advantage.

Mrs. Smith is going to take you through a fairly detailed presentation so that we collectively will understand the mechanics of how this works and we will have a good understanding of the dimensions of this problem. This is an issue that has been spoken about a lot in recent months, but I think it will be important for us and the committee members to reach an understanding of the dimensions of that problem, where it can occur, and what are the avenues of cushioning the impact of this measure.

I want to say very briefly that two avenues are offered to us to cushion the impact of this measure, assuming that we continue to assess the negative impact. It is either to amend the rules or to find ways of generating, creating, encouraging the emergence of work. This is because in the issue we're talking about, an interruption of earnings, there is some work missing in some areas and that affects the level of benefits of claimants.

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With that in mind, I had a chat with the chairman and I indicated to him that in case the committee members would be interested at some point later in the presentation, after Mrs. Smith has made her technical presentation to you, I've invited three or four of my people from the Atlantic region who are now concretely, in a real live manner, trying to deal with some of these issues that are beginning to arise, or they are beginning to see emerging. Should you be interested, we might hear from a couple of them as to how they would be able to address this question of gaps, interruptions in earnings, and the impact on level of benefit.

I'm in your hands, but I think I will turn now to Mrs. Smith to take her through the presentation, and if the opportunity arises, we could have another kind of input to show what the reality looks like in a real manpower centre with respect to that issue.

Norine.

Ms Norine Smith (Acting Executive Director, Insurance, Department of Human Resources Development): Thank you, Deputy Minister.

My presentation this afternoon is broken into four main parts. The first is a very simple comparison between how the rate calculation period works under the current act and how it would work under Bill C-111. Then I'll go back to the objectives of the change and give you some examples of that as well. I'll walk through a number of the more technical points, some of the sorts of things that are at a level down below the general policy thrust so you can understand the mechanics of how claims are calculated and how that might affect the nature of this particular situation, and walk you through a number of particular examples of different types of claimants and different types of work patterns - I'll say right at this stage that there's a limited number of examples that one can choose, of course, and in regard to the examples I've chosen, I'm quite sure you'll have variants on the theme that you would also like to see, so maybe an apology up front for the limitations of what we can do in this kind of a presentation - then finally, I'll try to get a more quantitative sense about who might be affected by the interruptions in earnings, the scale of that problem and the considerations one has to keep in mind when one is looking at data and trying to assess the nature of the issue.

So I'll turn quickly to page 3, then, the mechanics of how the current system works and how the new system would work.

Under Bill C-111, earnings would be assessed over a fixed period of consecutive calendar weeks ranging from 16 to 20 weeks. In the current system, earnings are assessed over a period ranging from 12 to 20 weeks. It's the weeks of work that are taken into consideration, and weeks with no earnings are dropped out of the calculation.

So if you look at the chart down below, over on the right-hand side where that little arrow starts, that's where the start of the claim is. So you work back from there.

Under the current system, we would look back over 31 calendar weeks in order to find the first 20 weeks of work. Under Bill C-111, with the 20 consecutive week averaging period, we'd look back over 20 consecutive weeks and in that period we would find 15 weeks of work in this particular example. That, in a nutshell, is the interruption of earnings issue.

This morning I mentioned briefly the three objectives of moving to the fixed reference period, or what I'll refer to as the rate calculation period, which is the terminology that's used in the bill.

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The first objective is to ensure a typical earning stream, and here are the numbers that go along with the example I gave you verbally this morning.

Suppose a claimant typically works two weeks out of every month and earns $600 per week during each of those two weeks. Their average monthly earnings would be $1,200. When that claimant loses that job and is now turning to UI as their alternative source of income, their average monthly benefit would be calculated on the basis of that $600 per week and they would receive in total $1,320 per month under the UI system. So their earnings in a month would be $1,200, but once they become unemployed their UI in a month would be $1,320.

Under the approach in Bill C-111, UI would be based on the $1,200 per month and 55%, or whatever percent, depending on the other rules that would apply. So it would be in relation to their typical earning stream.

The second objective is to remove the shoulder season work disincentive that exists in the current system.

[Translation]

Ms Lalonde (Mercier): Mr. Chairman, I would like to ask for a point of clarification in order to be able to follow the presentation. The table on page 4 only shows what the situation is under the present system. Do you have the example there?

Mr. Noreau: It's on the following page. Example A is on the following page.

Ms Lalonde: Excuse me. Thank you. Could you give us the references as we go along?

[English]

Ms Smith: Before I go into the details of the shoulder season work, I might also mention the third objective or effect of moving to a fixed earnings period. It permits the simplification of the reporting system for employers.

So page 5 and the chart that faces it go through the details of how the current system works and why there is a disincentive to work during the shoulder season.

For clarity, what I'm referring to by the shoulder season would be the beginnings and ends of the work period for seasonal workers during those times when, for a whole variety of reasons, there might be less work for them to do. There might be bad weather or shorter hours of light. There might be less demand for their services. It might be difficult to get to the resource in question that they're harvesting. There's a whole host of reasons.

The particular example that is laid out in example A is one where in fact the shoulder season occurs in the middle of the summer. I've chosen this particular one because it is one of the examples that has been brought to our attention by some provincial officials and by Mr. Scott, and this is the example of a fish plant worker who has a fairly intensive work season in the spring. There's not a lot of work to do in the fish plants in the summertime, and then there is a spell of work in the fall. This would be the situation for a fish plant worker in a relatively small fish plant that is processing product caught not too far from the harbour of the community they live in.

So the mechanics, the specifics of this example, would be someone who has worked for six weeks in May and June. They were working on a double shift; they got very high hours during that period; they were earning $800 per week. Under the current system they would only get credit for $750 per week.

Then they have six weeks in September and October where they're earning $400 per week. They would file their claim at the end of that second six-week period. There'd be a two-week waiting period, and then they would be eligible for UI. They would qualify for thirty weeks of UI. Their benefits would be $316 per week. In total, they would be earning $7,200 in that year and they'd be receiving $9,480 in UI.

Then we turn to the situation of...suppose in that particular community there was opportunity to take some relatively low-paying work in the tourism industry. This might be a part-time job on the weekends in the tourism industry or a minimum-wage job full time.

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The job in this example is one that's paying $200 per week for an eight-week period. The example down below is that kind of a work pattern.

In this particular example, taking that work actually reduces the total annual income of this person by over $1,000. Their earnings have gone up. They have an additional $1,600 worth of earnings. They have eight weeks at $200 per week. But their average insured earnings have decreased by $150 per week, because we've now brought into their average that lower period of work.

If you look at the calculations in the little box at the bottom of this page, you can see how we've added up all of their income. Because they now have twenty weeks of work, it's divided by twenty, whereas previously they only twelve weeks of work and it was divided by twelve. So their average earnings have dropped to $425 from $575 in the case above.

Their weekly benefit rate falls as a result. They do get more weeks of benefits, because they have more weeks of work, but that doesn't compensate for the much lower benefit rate. In total their UI falls by over $2,000. So taking the work has definitely not paid off for this particular claimant.

This is not an unusual and isolated case. The mechanics I walked you through in this example flow from the way in which we calculate benefits under the current UI system. It's a direct corollary of the fact that for every additional week of work somebody works, an additional week is put into the divisor we currently use. If they add into their total work a week of work that is relatively small in earnings, what would be called a small ``stamp'' in these, then it brings down their overall average and it can have a fairly dramatic effect on their total UI. That is one of the things we want to try to eliminate from the program, so it's unambiguously the case for claimants that it's worth while to continue to work.

The next section goes through a number of examples of bits of mechanics about rate calculations that you might find useful in analysing this issue. The first is about the selection of the date on which a claimant files.

One of the evaluation results discussed yesterday noted how many claims end at exactly that point when the benefit rate is maximized for that claimant. Claimants are able to adjust the date on which they file their claim in order to make sure they maximize their benefit rate.

The example here is of somebody who might be working in an industry that is a declining industry. The firm they are working in is perhaps slowly going out of business. They've been a permanent worker and their work is beginning to taper off.

This claimant would file right after their first interruption of earnings. That would make sure their claim is based on that big block of earnings at the higher wage rate. If they get some additional earnings, additional weeks of work, later on down the road, as I mentioned this morning, there's a 52-week period during which people can draw their benefits. That would in essence just defer the time at which they draw their benefits, because they can draw them, as is shown here in the chart, at any time over the next 52-week period.

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I particularly wanted to walk through this example because one of the questions that has been put to me by a representative from a union expressed a concern that the move to a fixed period for averaging earnings would be detrimental to workers who are in declining industries and who are being displaced. That's not the case. They could file their claims at that point and it's to their advantage today to file their claims at that point as well, so in essence it makes no difference.

The next example is on page 9. One of the things that then comes up is that it's not always possible for people to pick and choose when they can file their claims. They're not in control of their work. That's true, but if a claimant has ever been unemployed in the last 52 weeks, he or she can use that interruption in earnings that occurred at any time in that period to file a claim when it is to his or her advantage. You don't need to be unemployed to file a claim if you have been unemployed in the past.

If you look at this example, we have a claimant who had eight weeks of work, a short break, and then another sixteen weeks of work. To maximize his benefits, this particular claimant would want to file at point A, and is able to do so on the basis of that two-week interruption of earnings experienced between that block of eight and that block of sixteen weeks. All that is required is seven days of no work, no pay. That's what qualifies as an interruption of earnings. In this particular case, if the individual files at that point in time - and many people do, so I'm not describing something that is a little-known secret in the UI system; people who use the UI system more than once are very well aware of this - the average earnings in this case would be $413 versus $300 if this person waited.

Example D, Madame Lalonde, might help to clarify one of the questions you had for me this morning about what happens when someone has two jobs and loses one of them. This is a very detailed example of one of the other amendments that's contained in Bill C-111, and of the treatment of earnings from two concurrent jobs when only one of them is lost.

Currently if you're in that situation and you lose one of your two jobs, the only earnings that are included in calculating your benefit rate are the earnings from the job that you've lost. If you look at the calculations for the current system here - I'll just go through the example - this claimant is one who was working for $600 per week and had been doing so for an extended period of time. In January, that work week was reduced and the claimant was down to only $350 per week from that employer. To compensate for that, the claimant went out and found a part-time job and was earning $100 per week in that part-time job. In May, that main job was lost, and all that was left was the $100-a-week part-time job.

We start counting back from that period in May and under the current system we would go back for twenty weeks. We would have sixteen weeks at $350 - those are the earnings of $5,600 - and we would have four more weeks at $600 - the earnings at $2,400. This claimant then has insured earnings of $400 on average, which gives a benefit rate of $228, and while on claim the person has allowable earnings of $55. The calculations we were trying to go through verbally this morning are laid out here, but the bottom line is that the UI payable is $175 per week.

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One of the amendments that is included in Bill C-111 is that their earnings on that second $100-a-week job would be factored into that calculation in the following way. We would now have 16 weeks of earnings at $350, 16 weeks of earnings at $100, and an additional four weeks of earnings at $600. We would have total earnings that are now $9,600 and a benefit rate of $264, and once we take into account earnings while on claim, their employment insurance payable will be $230 per week.

The next example is one that would apply to a number of seasonal workers. We know from labour force statistics that seasonal workers generally work fairly long work weeks. This example is one that would probably apply in the construction industry, where wages for some skilled workers are fairly high. The average wage rate that we've used in this example is $20 per hour, which is about halfway between a labourer's wage of about $14 per hour and a skilled trade wage of about $36 per hour.

This work pattern is perhaps fairly typical as well, where they're saving up during the spring, there are very intensive, long hours during the summer and September, and then it phases out again in October.

What this example shows is how the combined effects of lifting the weekly maximum, taking account of all earnings a seasonal worker might have as well as of the hours they put in on a job, can combine to provide them under Bill C-111 with benefits that are very similar to their benefits under the current act, even though their gaps in employment are included in the rate calculation period.

Without going through all of the gory details in this example, it in fact works out to be exactly the same number, because in both cases they end up by having average insured earnings that exceed the weekly maximums.

The next example is of someone who has two seasonal jobs in sort of opposite seasons. They have a summer job and they have a winter job. An example of a worker who might work like that would be someone who works on the road crews in the summertime and is a plow operator in the wintertime. This is one example that has been brought to my attention. Another example that has been raised with me is someone who works in the tourism industry where again there would be very intensive work in the summertime and then, over the Christmas season and the holiday season, periodically during the winter.

Under the approach of a fixed-length averaging period, as long as this claimant has a relatively long work period in the summertime the effects of the fixed averaging period on their overall benefit rate are not large.

Just to go through one of the mechanics of this to help you understand why that occurs, one of the provisions of the bill is that if you have 20 weeks of work, we will count 20 weeks of work. So in this particular example this claimant has 16 weeks of work in the summertime. When they file their claim at that point, we're going to go back to find 20 weeks of work. So included in their average earnings calculations today would be those two weeks back in March, at $200, and the two weeks back in February, at $250. Including those numbers has the effect of giving them average insured earnings of $525.

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Under the approach with a fixed divisor of between 16 and 20 weeks.... Suppose this were a worker who was working in a part of the country with 11.5% unemployment, or anywhere between 10% and 12%, for that matter. They would have their earnings subject to a 18-week divisor. So their average insured earnings would be $533. Today their average insured earnings are $525. With a fixed divisor their average insured earnings would be $533.

In addition, because workers in seasonal work tend to have long hours, it's possible this claimant would have more weeks of claim than currently is the case. In this particular example their total income, their benefits plus earnings, would be very comparable to what they would receive under the current system.

The next example repeats example (a), to redo the calculations in the situation where this worker who had six weeks in spring, six weeks in the fall, and who was able to find alternative employment in another industry to fill in the summer work period...and how that set of calculations would work under the provisions in Bill C-111. I won't go through the example in detail. I'll just say it becomes a set of calculations very comparable to how the calculations would have worked if this individual had taken that work under the current program.

I'm now turning to page 14, to our best guess of what proportion of the claimant population might be significantly affected, or might have significant gaps in their employment, during the rate calculation period, such that this is an issue of some concern for them. Our guess is that it's probably on the order of 2% to 3% of claimants.

To repeat some of the numbers Mr. Noreau provided you with yesterday, we have used the labour market activity survey and found that about 65% of claimants do not have any gaps in their employment before applying for UI. A further 25% might have a gap of between one and four weeks. About 10% have a gap of more than four weeks.

We think 10% is probably a fairly significant over-estimate of the proportion of claimants who once.... This is a static analysis. Once you take into account how things might adjust, it would over-estimate the number who would be affected.

The types of things that might happen are these. They would adjust how they file their claim. An example of that in particular, one I didn't mention when I was going through example (g), is that you'll notice when you're comparing those two examples under the proposed system that it is to their advantage to file their claim right after those eight weeks of small earnings in the summertime, whereas currently it's to their advantage to file at the end of their work period, in October. That's an example of how they would adjust when they filed a claim in order to make sure the numbers continue to work out.

Then there are the results of the evaluation studies that have been mentioned a number of times in the last two days, about the ability of workers to find the extra weeks of work required. There will also undoubtedly be less manipulation of the system, and I do have a few examples of that. New employment opportunities would also emerge, sponsored in part by the funding available through part II of the bill and the transitional jobs fund.

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I do have some additional data about that 10% in response to a question Mr. Nault asked us yesterday. Maybe we could pass those pages around.

Mr. Noreau: Are you okay with that, Mr. Chairman?

Ms Smith: I'm referring to the 10% who had gaps of more than four weeks. Yesterday you asked whether we had more detail about that statistic.

While the pages are being passed around, I'll just say that this is more detail about all of those statistics. In particular, I guess it's really about the 35% of claimants who have any gap at all.

We have the percentage in each province who have breaks in employment, and you'll be able to see on those pages that it ranges from 41% to 27%. It's slightly higher in eastern Canada than in the west, although we do have almost 40% of claimants in Alberta with gaps in their employment.

I'll stop for a minute. It will be more useful for you to have the charts.

Mr. Arseneault (Restigouche - Chaleur):

[Inaudible - Editor]

Ms Smith: That's a statistic I don't have, but I'll come to that in -

Mr. Arseneault: Is it in the documentation?

Ms Smith: No, but I have other things to help guide you in that direction. I can't answer that specific question.

The Chairman: Does this about conclude your presentation, Ms Smith?

Ms Smith: Yes, with a few more minutes.

The Chairman: Is this an appropriate time to bring in the regional directors, before we proceed to questions? I'm asking for your guidance on this.

Mr. Noreau: As you wish, Mr. Chairman.

The Chairman: Whatever you think would be better in terms of helping us understand this.

Mr. Noreau: We'd better focus on the questions on the presentation and then....

The Chairman: Okay. Let's have some questions. We'll have questions on your presentation and we'll save some time to hear from the regional directors once our first round of questions has been exhausted.

Mr. Noreau: Okay.

Ms Smith: Perhaps while I'm waiting for this material to be passed around, I will just deal with the last couple of pages, pages 15 and 16 in the presentation I have handed out to you.

I mentioned the way in which adjustments would occur. I mentioned four factors: how the claimants file, the amount of work done, less manipulation of the system, and new employment opportunities.

At the bottom of pages 15 and 16 are a couple of examples related to existing manipulations of the system. I want to state clearly before I go into these examples that by and large these are examples drawn from our claim investigations so these are real-life cases, but it not my intention to suggest that all claimants are engaged in this type of activity. That is not the case. Nonetheless, this does occur, and it will give you a bit of insight into how one should be interpreting the kinds of numbers one pulls from surveys such as the labour market activities survey.

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I've asked the people in my investigation and control group what percentage of claims have penalties or prosecutions or disqualifications of some sort, and probably about 15% or 20% of claims are in that category. So these sorts of activities happen.

For example, in hiring halls workers might ask not to be allocated to a job if they know that job is short-term, because they would like to wait for a longer project to come up. There might be situations where someone would use a call display on their telephone to avoid getting a call back from their employer because they're not interested in a temporary recall. There are situations where people change their status between employer and employee depending on what they need in order to qualify for UI. There are circumstances where the work year is split between two or three shifts in order to assist as many people in the community as possible to qualify for UI.

There's the example of banking of earnings that I described to you this morning. There's the example of firms that shut down over the holiday period, during which people are on claim. There are examples of people and industries where very intensive shift work is common, such as three weeks on and ten days off, that sort of thing, where workers would maintain a continually open claim and during that ten days off would be on UI.

Also, there's obviously the example of not reporting earnings while on claim, which is something that occurs not infrequently.

Returning to the data pages that I've just handed out, there are five tables here. The one I'm looking at shows the percentage who have breaks in employment by province. It shows that of all the claimants in Newfoundland, for example, 41% have breaks in their employment. Of all the claimants in Ontario, 34% have breaks in their employment. This is a break of one week or more during the fixed period. I'll just qualify that as well.

The next one shows the average length of breaks in employment by province. You can see that in fact in Atlantic Canada the average length of a break in employment seems to be lower than those in other provinces. It ranges between 2.85 weeks in New Brunswick and 3.47 weeks in Newfoundland, compared to, for example, 4.76 weeks in Manitoba.

The percentage who have breaks in employment by industry: Here you can see that there's no really noticeable pattern, that breaks in employment occur in virtually every industry. Between 38% and 40% of claimants in virtually every one of these industries have some breaks in their employment during that reference period.

The next chart gives the average length of a break in employment by industry. Again, there's no really marked story line there. Typically, it's between three and four weeks in virtually any industry.

The final chart, on the length of breaks in employment in the averaging period, is the one giving the statistics of 65% and 10% was more than four weeks. That's just a graphical presentation of those numbers.

.1440

Mr. Noreau: Mr. Chairman, that concludes Ms Smith's presentation. Before we turn to questions, I would like to make a couple of comments to wrap the presentation up.

There is no doubt there is an issue here, that there are interruptions in earnings. There are gaps in employment. This happens in seasonal industries. So it's a real issue. It's probably not as big as the media have made it out to be over the last while, but it is an issue.

I think the key question for you and for us is what is causing this problem. Is it the introduction of a new rule or is it a traditional pattern of missing work, a traditional pattern of lack of continuity in the work? Depending on the answer to that question, you either go after changing the new rule that is about to be introduced or you go about trying to take all kinds of measures to generate the work, create the missing seasons, and over time try to find ways to plug the gaps.

There are two more points. It's important to note that this problem will not materialize before, at the earliest, the spring of 1997, because the introduction of the hours and the new record of employment will be done only in January 1997. Therefore this issue is real, but it will begin to manifest itself later in the next year.

The final point I would make is that this legislation, I insist, is not only about part I; it's about part II. It's about employment; employment encouragement and employment creation. Remember the numbers, because they are important to keep in mind.

This legislation will see, over the next five years, first of all, the investment in the transitional funds of $300 million in the most affected areas over the next three years. It will then see the reinvestment over the next five years of $800 million of the savings generated by the reform at maturity - $800 million that will be added to an existing budget of developmental use of the UI account of $1.9 billion.

So this legislation is about changes in rules and changes in eligibility patterns. But it is also about, if your arithmetic adds up the same as mine, $3 billion worth of investment in employment encouraging and employability measures. I don't think we can turn a blind eye to this side. You will come to this in more detail tomorrow, when you go through part II of the legislation. But it's important to keep both those numbers and this perspective in mind.

The Chairman: Thank you very much, Mr. Noreau and Ms Smith. We will now take a round of questions before inviting the regional directors to come in to address themselves to the last point.

[Translation]

We will proceed in the usual manner. Ms Lalonde will lead us for the Official Opposition on this first round, for approximately 10 minutes.

Ms Lalonde: I would like to start with a comment. I would really have liked to have gotten these documents in advance. I am usually able to follow reasonably well, but I would have liked to have been able to follow this. I am in no way questioning Ms. Norine Smith's intelligence nor what she has said.

I know that you have selected some examples. I'd like to be able to review them adequately in order to protect the interests of the people I am supposed to be defending, but you went through your presentation very quickly since you were trying to cover everything. I feel extremely uncomfortable with that.

Once again, I feel we have a right to be provided with timely information so that we can do our work properly. I don't think I should be feeling guilty for not having been able to digest all of this at once, including what was said, what was not said, and what was said in such and such a way. You have your job to do, but we also have ours.

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Once again, I feel that I am not in a position to do my work properly, but I will nevertheless try my best.

Before addressing the issue of the most disadvantaged regions, I want to say something that concerns people. You emphasize on page 8, and I quote, that:

an individual will choose the date for submitting a claim so as to maximize the benefit level, since the weekly rate will depend on earnings for the previous 16 to 20 weeks.

You have just finished saying that you wanted to prevent any manipulation of the system, and now you're telling us that those who are unable to manipulate the system will have difficulty with respect to benefit levels. Claimants will have to be really well informed, and some of them may realize too late that not only did they not submit their claim at the right time, but that they paid dearly to find that out, given the benefit levels that are listed.

To me, that is an extremely important issue. That means that the smartest people, those who are unionized and who will be able to take courses, will be alerted to this in time and will be able to "profit" from the system. Otherwise, they won't get what they're entitled to. This issue raises a grave concern.

I understand that there were some instances of abuses or biases that you wanted to correct, but it would seem that you are introducing biases that will penalize ordinary people, those who can't finagle their way around the system, or who don't have the required information. I think that is a real issue. Please understand that I am not attacking you, nor am I accusing you. However, I feel that I must raise this because you are the ones who are saying "An individual will choose the date for submitting a claim in order to maximize..."

Mr. Noreau: Ms. Lalonde, I don't want to underestimate how important it is to inform people and help them use the new system. This is a system which is radically different from the previous one. So, not only should unions provide courses for their members, but our employment centres will also need to spend a lot of time helping people. I agree that is indeed a significant change.

I don't think that making effective use of the system implies somehow that people are manipulating the system. By submitting their claim for benefits at the right time, people will simply be exercising their right to do so. They will simply be availing themselves of what they are entitled to, and it will be our duty, all of us together, to help them do that. It won't be easy, and it will take some time - until next fall - for people to get used to the new rules and learn how to complete the forms. I am not underestimating what is involved here.

Ms. Lalonde: We know that there are a lot of questions we could be asking in order to protect the people involved. With Bill C-17, we saw some cuts. Rather than take Quebec as an example, I will take the Atlantic provinces.

It has been estimated by your department that cuts for 1995-96 will total 630 million dollars, if memory serves, and the same again for 1996-97, since they would normally be repeated in that fiscal year as well. For the province of Quebec, the cuts total some 125 million dollars - of that I am sure - and the total amount for all of Canada was 2.4 billion dollars. Those are the figures you yourself gave us, and when you say something, I believe you.

Mr. Noreau: That is correct.

Ms. Lalonde: Thank you. If you change the figures, please tell us so that we can keep up to date.

So, some cuts have already been implemented with Bill C-17, and there is already less money, less real money, in the regions. You have said that you would be investing 300 million dollars over three years. There is something I must add in order to complete my question and the thinking behind it. How much is being cut from the Atlantic provinces with this bill?

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For the province of Quebec, the cuts will total 640 million dollars in the end. How much will be cut from the Atlantic provinces?

Mr. Noreau: If you're talking about the legislation we are dealing with now...

Ms. Lalonde: Yes, I am.

Mr. Noreau: ...in the impact data which were provided to you yesterday...

Ms. Lalonde: How much is it for the four provinces?

[English]

Mr. Noreau: The four Atlantic provinces....

[Translation]

The total is 130 million dollars, but I must point out that that is after reinvestment.

Ms. Lalonde: I would first of all like you to tell me how much these cuts amount to, because we will then be able to see whether or not there will indeed be reinvestment. Some funds had already been allocated.

Mr. Noreau: The previous amount was 220 million dollars. That is for 1997-98. If you want the figures for 2001-2002, they would be higher in both instances.

Ms. Lalonde: Very well. So then for 1997-98, if you take the 630 million dollars provided for in the reform measures contained in Bill C-17, plus the 220 million dollars you just mentioned, the cuts for that one year, as compared with the funding available when the Liberals took over, would amount to 150 million dollars.

Consequently, when you say that you will be investing some 300 million dollars over three years, we musn't forget that there will nevertheless be a significant economic impact. That is what we have to discuss. I would like to know whether or not you have assessed the economic impact of those cut, because when unemployment insurance benefits are cuts, there is less money going around. There is less money for housing, for paying the mortgage on a small house, for food, for basic necessities. There is an economic impact.

I can understand the desire to take positive steps to promote employment, and I have never been against that, but I find that nowhere in the reform package is any account taken of the economic impact of having less money circulating, especially in the regions. That means there is less money spent in corner stores, in grocery stores, less money to pay rent.

Mr. Noreau: I could not...

Ms. Lalonde: Could you tell us more about some of the economic impacts?

Mr. Noreau: I could try to give you more explanations, Ms Lalonde, but I would simply like to say that there will indeed, because of the reform, be less money going to some regions in the form of unemployment insurance benefits. That much is clear.

However, the diagnosis and the studies that have been done over the past ten years - and I did not take any part in those - for example that of the Forget Commission, concluded that the payment of benefits could have an economic impact, because these represent a form of income for the province, for the region, but that these benefits also had a counter productive effect on economic development.

I would suggest that you look at the assessments we have handed out. These point out that unemployment insurance has a stabilizing effect in recessionary periods, and that it has a definite economic impact. If I remember one of the numbers quoted correctly, between 10 to 14% of jobs would have been impacted if there had been no unemployment insurance.

Ms. Lalonde: Ten to fourteen percent?

Mr. Noreau: On the other hand, there is the disincentive. I did not participate in the preparation of these papers, but I think we should look at them together.

Ms Lalonde: I agree with you, but what I find in these papers, what you are...

The Chairman: This will be your last question, Ms Lalonde.

Ms Lalonde: Thank you, Mr. Chairman. You will understand that we're really getting to the heart of the matter.

The Chairman: We will be studying the heart of the matter for quite a while. Our task today is to understand the presentation of our witnesses.

Ms Lalonde: Yes, but we have to understand not only the details but also the big picture.

Yes, Mr. Deputy Minister, there could be some negative impacts, as I used to say when I was a member of a union. You cannot cut without making sure that you replace whatever you have got rid of. If you cut without making sure there's something else, there you will force people to live in sheer misery. That is the truth. We have to say it, we cannot hide it.

It is obvious that the imbalance has created a problem. It is understandable that western provinces are fed up with paying for eastern Canada. I've read about it and I've seen the situation, but for the actual people affected, if there is nothing else, it will be sheer misery.

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Thus, an individual who sees the business he works for is slowing down, and that he will work fewer hours and have a lower income, must find a part-time job right away if he wants to be eligible for the full unemployment insurance benefits, because otherwise his benefits will be reduced. But in some regions of the country it's not possible. Moreover, if the individual who has a full-time job looks for a part-time job, he is taking that part-time job from someone who has no other job at all and no other means of earning a living.

Mr. Chairman, that was the general point I wanted to make.

Mr. Noreau: I have three comments to make, Ms Lalonde. Firstly, it is to make these impacts more manageable that the government has proposed to implement this reform over a six-year period, so that the reductions and the reinvestments will balance each other out.

Secondly, it is obvious that these reinvestments mean to bring about job creation. This is not another type of passive benefit as they are called in Quebec. These are measures such as employment subsidies, for example. It has been shown that these measures can not only help people survive, but also help them find and keep a job.

Ms Lalonde: But there must be a business for employment subsidies to exist. When there are none, there can be no subsidies.

Mr. Noreau: There is a program called "Job creation partnerships" that aims to help these businesses to create the jobs we're talking about.

The Chairman: Thank you very much.

[English]

I now turn the questioning to Mrs. Brown.

Mrs. Brown: Thank you, Mr. Chairman.

On page 9, we have a statement here that I could hardly believe as you read it, Ms Smith. You were talking about the fact that a claim could be filed while you were employed, so this is somewhat in relation to Madame Lalonde's comments, although for an entirely different reason.

What you are doing, if you look at the top of page 13, is telling workers how to take advantage of the system by building in moral hazard. That's not what unemployment insurance is for. They are being encouraged here from the get-go on how to manipulate the system. You're saying on page 14 that there's going to be less manipulation of the system, yet if the government is offering opportunities to manipulate, how can the worker be blamed for that responsibility?

You go into hiring hall agreements, and everybody knows that those particular agreements are couched in some fairly extensive legal documents. Your evidence here is anecdotal. How do you think workers are going to accept an assumption about manipulation of the system? Do you think they - not only the workers but also the unions - would be willing to mount some kind of a legal challenge for you, and what would you do in that instance? Is there potential for some legal challenge to what you've said here?

This does not represent, in my view, anything even remotely related to unemployment insurance. You're building in moral hazard. You're saying there could be less manipulation of the system. We understand there's manipulation of the system, yet government is giving them the opportunity to do just that.

Ms Smith: Perhaps as a point of clarification, the example on page 9 - when people can file their claim - is not a new feature related to Bill C-111. That is the way the current system works and the way it has worked for a long period of time, in order to allow people to take advantage of an interruption of earnings that they have had.

With respect to your comments on the examples of manipulations on pages 15 and 16 -

Mrs. Brown: Excuse me, Ms Smith, but I related that specifically to page 13, which I would assume represents new provisions under Bill C-111, because you're saying now that claimants would have a strong incentive to take the available summer work and could still file a claim just as that job ends. Is that not new?

Ms Smith: They can always file a claim just when a job ends. That's the normal time when most people would do so.

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What's new about example (g) is the rate calculation period. So example (g) is a repeat, as I mentioned, of example (a) under the old rate calculations methodology. So a claimant would shift when they file their claim, but in both of these particular examples it is probably to their advantage to do so. In example (a) they do it right at the end of the job in October. In example (g) they do it right at the end of the job in August.

Mrs. Brown: So you really are talking here more about filing dates than about the rate calculation. It seems to me that the filing date has a great deal of relevance to that. Is that not correct?

Ms Smith: It starts the rate calculation period. It sort of puts the goalpost down at one end, and then you work back 16 to 20 weeks from there.

With respect to people filing while they are employed, this is not illegal. This is the way in which the current system works, and it's designed to enable people to position themselves to be insured with their best earnings to the maximum extent possible.

Mrs. Brown: Further to my other question with respect to the hiring hall -

Ms Smith: I just want to point out that with the exception of the example of call display, there are cases of investigations that have led to penalties behind each of these examples. They are not fictitious cases.

Mrs. Brown: Are these legal investigations?

Ms Smith: Yes.

Mr. Noreau: Yes. These are cases that our investigation and control services have found and documented, at times very many, that have been pursued by requiring paybacks, or even by criminal charges, as we see from to time in the papers.

Mrs. Brown: Although I have read Bill C-111, can you tell me where in the bill this particular element of your explanation is carried within the context of the legislation?

Ms Smith: These would be sprinkled throughout many parts of the bill, because these would be related to different infractions vis-à-vis the bill. But we could perhaps do that crosswalk for you to show you what particular feature of the program -

Mrs. Brown: From a legal point of view, it's from the legislative point of view that I.... I'm trying to make a point here about the importance of having the support of legislative counsel here when we are looking at these particular matters. These are questions that are hard for you people to answer. They are questions to which I don't know the answers. They are questions that I think would be appropriate to ask of a legislative counsel person if indeed he or she was here.

Mr. Gordon McFee (Acting Director General, Insurance Policy, Department of Human Resources Development): Mr. Chairman, we are certainly not trying to appear to be reticent to answer questions. Quite frankly, I think what Mrs. Brown might have been talking about is clause 38 of the bill, which is the penalty provision.

There are two provisions in this bill that affect people who don't tell us the straight goods when they file their claims. One of them deals with the earnings they are allowed to declare before there's a deduction from benefits. As was explained already today, there is what is called the 25% rule, which means that the first 25% of the benefit rate can be kept before their other moneys are deducted. That is not a new feature.

There is a provision in this bill that would make that rule not apply to people who deliberately don't tell us what they're doing.

Secondly, there is clause 38, which I just pointed out, which also provides for penalties in a variety of situations where people deliberately don't tell us the truth.

I apologize for not having answered that more quickly. I didn't quite understand the question.

Mr. Scott (Fredericton - York - Sunbury): On the various charts that we've been given on the impacts by region, I point out that if you have a chart that has the unemployment rates per province and then you layer all the consequences four or five charts deep, you begin actually to see the impact on the percentage of the community that we're talking about. Each of them independently wouldn't demonstrate....

First, the unemployment rates would be the first place at which you would start in order to demonstrate what the impact would be, and the unemployment rate in New Brunswick is higher than it is in Ontario, notwithstanding the nature of the unemployment. It's important to make that note.

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The second thing is that Mrs. Lalonde was combining Bill C-17, I think, the other changes to UI in previous years, with C-111. I think it's very important, or at least I want to make the point, that the method of achieving the reductions in expenditure under the UI account is significantly different. As much as I have some difficulty with C-111, in my opinion it's a much fairer way to achieve that than simply making unemployment insurance harder to get and duration of benefits less, which seemed to be the pattern in the past. I think it's important to establish that the nature of achieving the savings in the past was different from the nature of achieving the savings now, particularly in the context of how it would play out in income levels, because so much of the savings in this case is in MIEs and in clawbacks and so on, but also because of the income protection.

Having said those nice things, I have to make a couple of points. The deputy minister has said we really have to get to cause for why there is the interruption in work. I know there are those who believe some element of that cause is behavioural patterns that have been created by unemployment insurance. I'm not one who is sold on that explanation. I know lots of people who are looking for employment in the periods when everybody says they can't find anybody to fill these jobs because of unemployment insurance.

So my anecdotal experience just doesn't match with the perception that somehow people who could, if they were forced to get these jobs, would, when I have lots of people I'm trying to help find jobs but they can't find them. I'm not sure it's an anomaly created by the unemployment insurance program that's causing these interruptions in work. I think it's unemployment that causes interruptions in work.

Consequently I have some difficulty if the calculation method being employed puts the burden of which of us is right on the backs of the people who might not find that job. If the anticipated remedy is that the unemployed person has to find a job or has to find a few more weeks, if we're presuming that's going to happen as a behavioural change, I don't anticipate that to happen perhaps with the same level of optimism, and I don't think it's fair to put the burden of consequence on them if it doesn't happen. Rather, put the burden of the consequence on the UI program.

The argument is that if you allow the unemployment program to bear the burden of that you'll always have people using the unemployment program. But with the divisor there is incentive to get more work than you need to qualify, because of the way the calculation is done for your benefits. In other words - and I don't want to be drawn too much into this disincentive notion, because I'm not one who accepts it very readily; but if I accept it for the moment - the divisor deals with that. People will look for work beyond their minimum requirements because they want to have the best possible insurable earnings. Why do we have to add to that the problem of interruption of work inside their claim period?

The second question is this. If we value work, which when this was all introduced was one of the things we were trying to make these reforms for - to show the appropriate value of work - why should my work, which is divided by a period of unemployment which I contend is not my fault...why should my work, which is divided by a period of unemployment, be treated any differently from someone else's work, which is not divided by a period of unemployment?

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Because of the way the calculation is going to be done, it is, because if my period of work is interrupted significantly, then the first period of my work may not be included in calculating my benefits. However, for the guy living next door to me, whose work is not interrupted, it is. It's the same work; it's the same effort; it's the same everything.

Again, unless you believe somehow the space in the middle will be filled, it's an anomaly that is a creation of the program. I don't accept that. If I'm wrong, I would sooner have the unemployment insurance program suffer the consequences of the mistake than some unemployed person who can't find a job.

Mr. Noreau: I think you're raising a very important point, and it's important for all of us to understand.

When we're talking here about the possibility of work being generated, we are not - I underline ``not'' - saying the only effort to produce that work has to be done by the individual. We are not saying that. To the contrary, when we're talking about behavioural change - and maybe we've not been clear enough - we mean behaviour of employers, behaviour of communities, behaviour of families, behaviour of local economies, and behaviour of individuals.

It's not an issue of putting the burden of the consequence on the individual. This is a system that has got used to playing along with certain rules. We're changing those rules.

My argument is that we need to see the impact, therefore the monitoring. We are expecting impacts; therefore, there is the cushioning of $300 million during the transition. It's not big, not massive, but some cushioning of the impact can be made there.

So we're recognizing the impact on individuals. We're saying what has to be reviewed in behaviour is not only individual cases or persons, it's...let's call it the local economy. That's why we're suggesting there be one-time monitoring and ways of cushioning impacts as we see them emerge out of the local economies.

Mr. Scott: Why not simply acknowledge...? I guess there's a cost issue. I don't know how much that acknowledgement would cost. I accept that certain proposals that have been put in attempting to deal with perhaps 10% or 5% would have an impact on all the system, and I accept that's not a reasonable way to try to deal with this. People have proposed best weeks, and I understand that probably is impossible, and I think many people have accepted that. However, why not simply attempt technically to find some solution to what I consider to be an anomaly? I don't think anybody, in designing this, intended that if somebody gathered a whole bunch of work and then had a large break and then had enough work that they could then qualify...that somehow their benefit rates would be as low as they're going to be with this calculation.

I know it doesn't happen very often, but what do you say to the person it happens to? Do you say, I'm sorry, but it doesn't happen very often? The fact of the matter is that it will happen. I have instances in my constituency right now where it's going to happen. How do you explain to the person it's happening to that basically the system is flawed, we're trying to correct it, and we're monitoring how you make out? I can almost tell you in advance how he's going to make out.

Mr. Noreau: We're monitoring how you make out and we're trying to see, as I think we'll be able to talk a little about this afternoon, what kinds of initiatives can be taken to address specific problems such as the one you're referring to.

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So probably the solution is that we are exploring technical ways of addressing that. Our knowledge so far is that none of them is costless. Therefore, since the bottom line in terms of achieving the savings is a fixed variable, it will have to be paid for out of something else.

We have not finished our exploration here, but we're working on that. In the meantime, I think we also have to explore the other path of solution, which is the myriad little ways in which specific issues, a specific plant policy, a specific group of employers, can be.... These gaps, as you can see, are terribly different one from to the other. They're almost one of a case. So we have to pursue those two tracks of action.

I submit, Mr. Chairman, that we have a little bit of time to do that, because, on the point I made, the problem is not going to hit real people before at least a year from now.

I'm not saying that some people are not worried about Bill C-17, the second-year impact.

Mr. Scott: With respect, it has already impacted. People are afraid, so there has been an impact already. Families are really afraid.

I would conclude now, except I've forgotten what I was going to conclude with. I hope we'll have other chances.

The Chairman: Let's just say you've concluded.

Mr. Scott: I conclude.

The Chairman: Mr. Bevilacqua.

Mr. Bevilacqua (York North): Thank you, Mr. Chairman.

First of all, I think it's really unfortunate that we can't put this entire package into the entire framework of the government jobs and growth agenda, because if that was done, you would see that employment insurance, as I see and understand it, will be a very important building-block.

I must tell you, Mr. Chairman, that I, like Mr. Scott, am quite concerned about the fact that some members of the Canadian family are concerned or have expressed some anxiety about the direction in which employment insurance is going. This is a good opportunity for us to lay out some of the facts out there so that the people who perhaps are feeling anxious - and I say perhaps not for the right reasons - can have a sense of hope.

By that I mean that employment insurance, particularly the components we will be talking about tomorrow, speaks to the issue of job creation. I think approximately 100,000 to 150,000 new jobs will be created as a result of the changes we have made, which can help the people who are feeling a bit anxious.

It would be unfair to the people making the presentation here today if the Canadian people watching this committee were left with the impression that this is a piece of regressive legislation. It would be wrong, because a close analysis - and God knows that the Department of Human Resources Development has given us literally tens of studies to review if we take the time to review....

If we look at some of the initiatives of this particular.... I want to see if the deputy minister would agree. In reference to low-income workers, unemployed workers, I want to know if these facts are correct: that the family supplement will provide targeted help for approximately 350,000 claimants and low-income families with children, who will receive about $30 more per week; that a $50 floor on earnings while on claim for all claimants will permit about 290,000 low-income claimants to earn more while receiving employment insurance; that the benefits of the hour system will allow people to insure more of their work; and in fact, even when you look at the issue of refunds in premiums, approximately 1.3 million people will receive benefits that are greater than they receive now. That's not to mention, Mr. Chairman, the benefits we will find out about tomorrow.

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I want to give the opportunity to the deputy minister to, first, confirm that in fact these are the correct numbers, and second, in the overall picture of the issue of employment insurance as a method to create jobs.... Because the bottom line here is to create jobs and give a sense of security to people, what kind of measures are we taking on the small business sector, which is the number one job creator in our country? What type of progressive measures will employment insurance provide Canadians with?

I have the feeling that today we are somehow stating that this piece of legislation, because it aims at a reduction of approximately $2 billion, is hurting people. That's not the impression I get, Deputy Minister. I think it's balanced and I think that more than anything else it provides opportunities for people to get back to work.

Mr. Noreau: Just to use your number, Mr. Bevilacqua, it is indeed a saving of $2 billion, but do not forget the reinvestment of $800 million. The net savings, the net reductions in the UI program, will be about $1.2 billion at maturity in 2001.

Karen Jackson carefully noted the numbers you quoted, and I think she's in a position to confirm them. Then, if you agree, I'll make a couple of comments on your other points.

Ms Karen Jackson (Acting Director General, Labour Market Policy, Department of Human Resources Development): I may have misunderstood you. Was one point that 1.3 million Canadians will receive a premium refund?

Mr. Bevilacqua: That's right.

Ms Jackson: Yes. That's correct.

As for your question about small business, we anticipate that 300,000 small businesses will be eligible for the premium relief. We anticipate that the reduction in administrative costs to business, as we're told by the payroll association, will be in the neighbourhood of $100 million to $150 million. At the premium rate of $2.95, we know that 68% of small firms will break even or pay less in premiums than they pay today.

Mr. Noreau: I have a quick comment on your question about small business. We had many encounters with small businesses as we went through the various stages of design of this proposal. First, there is a reduction in the premium rate that is indicated here. The future years are not decided yet.

But what is important for small business is the predictability of the premium rates. They do not like planning assumptions that change. They do not like the goalposts moved. That's why we have proposed the building of a reserve that would allow the creation of a more stable pattern of premiums, so that small businesses - and big business as well, but most importantly small businesses that, as you say, are the job creators - can plan their development with at least this variable well-known and not shifting dramatically every year.

The Chairman: Thank you very much.

Before we turn to the next group of witnesses, I have one question. I'll avoid all the preliminaries and get right to the question. As I understand it, the main aspect of the new program is the fixed period, which is what's giving rise to this discussion on the interruption in earnings. That piece of architecture, if I may use the word, is central to the new benefit rate structure.

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My question is this. Have you considered other forms of achieving the goals you have identified for this, and if so, what, in summary terms, are the approaches that were rejected?

Obviously this is central to the program. If we are looking at eliminating the problem that has arisen, we have to consider what is amendable and what is not amendable. I'm wondering if you've looked at other approaches besides the fixed calculation period. Everything has to be turned around that.

Mr. Noreau: You will remember when we went back to the social security review papers we put out more than a year ago, in the one dealing with going from unemployment insurance to employment insurance we had two major options: either we reform the unemployment insurance program in the traditional manner that has been used in the past...either you reduce the benefits, you reduce their duration, or you increase the entrance requirements. We were discussing that option. We put it to the government, and the decision was made, as Mr. Scott reflected, to go for a more sophisticated, more balanced, more multidimensional, and hopefully fairer, proposal.

The issue I think we're trying to get at here is that we're trying to design a system that's not going to kick people out of the system, which entrance requirements or reduced benefits do. But if you didn't kick them out, the trade-off would have to be that in some cases the benefits would have to be reduced, provided we are putting in place the right incentives.

We believe the fixed period has an incentive driver to it. It is, however, hitting this issue that in certain areas of the country it is felt that the work we hope will be generated does not exist, or does not exist now. Can it exist? Can it be created? Can the change in behaviour of the players in the local economy be such that some of that work, some of these seasons, can be created? This is the challenge we have to deal with.

But in general, yes, there were other options. Yes, it's true it's a central piece of that architecture, because it has, as I think you sense, this incentive both for individuals and for the local economy as a whole.

The Chairman: Again, I limit myself to that for the time being so we can hear from the regional directors about the issue of generating additional weeks of work. To do that, I'm going to break for five minutes so our TV cameras can adjust to our new witnesses, and we'll allow the witnesses to come to the table.

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The Chairman: I would like to call our members and our witnesses to the table, please.

To finish up this afternoon's session on the employment insurance legislation, the department has invited to the table the directors general of the four Atlantic regions to talk to us about activities taking place in Atlantic Canada in the area of job creation as part of the solution to this interruption in earnings problem we've been discussing.

So we will invite the deputy minister to introduce his colleagues and give them an opportunity to talk briefly about what they've been doing in their respective regions or provinces, and perhaps if there is time left we will have a few questions to each of them.

Mr. Noreau: Thank you, Mr. Chairman. I'm not going to speak long because I want to leave the time to them.

I have to say to Madame Lalonde, I cannot give you tonight the documents for tomorrow in both languages and I don't want to offend you by offering them to you in English only. But I note your request, and the next time we'll try to get -

Mrs. Lalonde: That means you work in English.

Mr. Noreau: That means we work at night, madame. I'm a bit bound by the rules of the committee and the rules of the House here as well because I'm obligated to provide the documents to you in both languages.

Having said that, with me are Derek Gee from Halifax; Norbert Robichaud from Bathurst; Arlene VanDiepen from Souris, P.E.I.; and Max Park from Clarenville, Newfoundland.

They are busy now trying to assess the existing changes out of the last legislation and the coming changes out of the proposed legislation, and I would like them to share with you very quickly some of the things they're attempting to do.

Let's start with Arlene.

Ms Arlene VanDiepen (Manager, Human Resources Canada Centre, Souris, P.E.I., Department of Human Resources Development): Thank you very much, Mr. Chairman.

I manage a centre in eastern Prince Edward Island. My area has a high annual rate of unemployment and a high degree of seasonal employment. I would like to give you an example of how we feel and the community feels we can create employment that will assist people to adjust to the new employment insurance legislation.

Partnerships have been developed between the province of Prince Edward Island, ACOA, HRDC, and the private sector to develop unused forest-covered land that has the potential to grow blueberries.

The P.E.I. soil is capable of producing heavy blueberry crops, and therefore the province has developed a blueberry project. This project will increase the amount of acreage and the processing and freezing capabilities of the island.

A local fisherman has formed a company and has purchased land using a loan from ACOA and Enterprise P.E.I. He tells me that he feels his future must change. He can no longer depend on UI to supplement his income. He is prepared to invest in his future, and as he sat talking to me he was very optimistic about his future and I was rather encouraged by his approach to the future.

The fisherman is applying to the self-employment assistance program through HRD. He will be hiring two fishing labourers who have traditionally worked for ten weeks at the lobster fishery from April to June, and four weeks at the scallop and tuna fishery in September and October. These claimants would be adversely affected by the interruption of earnings.

We are hoping that these workers will be hired using the wage subsidy program under the new employment measures. This project has the potential to create ten-month work seasons for these UI claimants as compared to fourteen weeks. The new ten-month season would consist of fourteen weeks in the fishery and the remainder in the blueberry industry - land clearing, crop maintenance and harvesting.

As this land is developed and starts to produce, the company will be hiring approximately fifteen additional labourers for the six-week harvest season in August to September. These workers will be from the local processing plan, who will be in a period of unemployment at that time.

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A processing facility is also under construction as part of the P.E.I. blueberry project. The above grower, and other growers who are working on the same type of entrepreneurial venture, will supply this processing plant with product for freezing or processing. This will create six weeks of work in August and September for approximately three workers.

We are very optimistic that the target date for the start-up of this plant will be August 1996.

Thank you.

Mr. Derek Gee (Director, Human Resources Canada Centre, Halifax, Nova Scotia, Department of Human Resources Development): I want to talk about what we're doing in Nova Scotia to develop community capacity and to reduce dependency.

It's done through a partnership. We've developed a strategic framework, and the examples I'm going to use today deal with extending seasonal employment and creating new employment.

The first example comes from Cape Breton, from the area of Ingonish, basically north of Cape Smoky. The community had some very natural assets. One was the Cape Smoky ski hill; another was the Highland Links golf course; and of course there is the beautiful scenery that exists around the Cabot Trail. But a number of small communities needed to have a spark to expand on the assets they already had.

Through some involvement of our staff in the community, which took a little bit of a risk in getting the project going, a number of agencies came together - such as ACOA, the Municipality of Victoria County, the Province of Nova Scotia, and some private interests in this area - to expand the ski hill, to add snow-making to its facilities, to upgrade the equipment it had, and also to expand the potential of this tremendous asset and the view it has to create a number of jobs that would exist year round. This ski hill will be adding fifteen jobs to attract people there also during the summer months.

The golf course, as some of you may already know, is a very beautiful one, but it was in decline. They've expanded the golf course. They are going to be adding concessions to this golf course. They're going to be increasing the number of permanent jobs there by at least ten positions by the time the last phase will be over. They are encouraging facilities that would not normally be open there in the shoulder seasons to open up, such as restaurants and accommodation.

So it's a community that has come together to look at the potential that their natural assets would have to expand their seasonal employment, and we expect a significant number of spin-offs from that initiative.

The interesting thing that has evolved from that process is that the communities saw a great asset in working together. They have formed the North of Smoky Economic Development Association. They have hired somebody to work with them to develop a five-year strategic plan, and they have also hired somebody - this is very interesting - to introduce Internet to all those communities in order to connect them. This is something that we are doing right across the whole province, and we hope in the next couple of years to have all these small communities hooked up electronically.

To support that effort, we are taking our labour market information and making it very much a part of this process and really starting to build the capacity of small employers to gain information about the labour market and to use that information in generating additional potential opportunities.

Two other small examples I have are from Digby County. There again we're very proactive. We put an ad in the paper asking if anybody in the community was interested in extending their season. We got a number of responses, two in particular, one from a motel that provided accommodation for people interesting in whale watching and eco-hiking. We assisted, through a wage subsidy program, extending his staff so that he could take his own assets and promote his facility. In fact, he has been able to extend the employment of his staff in that area by up to eighteen weeks in the first year, and he's very hopeful that he'll be able to do this again on his own next year.

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Another small operator there, a fruit and vegetable market operator, had a very short season. He was interested in expanding his capacity. He had an idea to make candy and wanted us to support him. We agreed to provide a wage subsidy for his staff, who were interested in learning these new skills. He made an investment of $10,000 to buy the equipment. He had a very successful first year and is hopeful this is going to be an ongoing part of his business.

So there are a few examples of how, by being a bit proactive in these communities and showing where there are other opportunities, we can generate a fair amount of employment.

[Translation]

Mr. Noreau: Norbert.

Mr. Norbert Robichaud (Director, Human Resources Development Centre, Bathurst Miramichi, New Brunswick): I would like first off to say a few words about the region I represent, the northeast corner of New Brunswick, mainly the Bathurst region, the beautiful Acadian peninsula.

This is the region where we find the highest number of seasonal fisheries workers, those who work in fish processing plants. Our other industries are peat moss, construction, some forestry, and tourism.

I would like to give you an example of the type of partnership that we're trying to set up with the major stakeholders of the region. I'm talking about plant owners, representatives of various levels of government, and various groups involved in the economy of the region.

The discussions we held recently were aimed, among other things, at identifying prospects or alternatives that could be set up to develop new industries, and develop or diversify the fishery sector.

For example, there is a species that is currently fished by fishermen in the region, herring. We could develop a technology that is currently used in Holland. It allows the processing of smaller-sized herring, when it is of too small a size to be processed using traditional means currently in use in the processing plants of the peninsula.

This new project will allow workers who work in processing plants during the fishing season, normally from May to June, who are unemployed between the first of July and mid-August and who go back to the processing plant if there are good landings at the end of August and early September, to keep working during these periods.

That would allow us to extend a period which, so far, hasn't been used to process any other species. This would mean that the employment period of several hundred workers would be extended.

What is the status of this project? We're still at the research stage. We have, in the Acadian peninsula, a marine research centre which is studying the product using a technology developed in Holland, a technology that seems to be working rather well. The initial phase of the project could take awhile, but the prospects are quite interesting.

There are, of course, other projects that have been suggested lately. Among other things, the expansion of agriculture in the Acadian peninsula, particularly oyster farming, the production and processing of blueberries, also in the Acadian peninsula, and tourism.

Mr. Noreau: There is a lot of competition.

Mr. Robichaud: Yes. A lot of you have probably heard of the Acadian Village. One of the projects would see the realization of phase 2 of the village, dealing with the period from 1880 to 1930. We are studying the advisability of expanding that village, which currently attracts close to 100,000 visitors a year.

There are also projects for beach improvement and other projects involving computers, textiles and so on.

To summarize, I can tell you that our department - which plays a very active role within the stakeholders' group - is extremely encouraged by the concerted effort that is taking place in the region.

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The key to this development is the participation of those who have the necessary authority, power and influence to change the course of events in the economic sector. Their involvement leads them to become aware of the fact that there are other ways of finding jobs or extending employment periods in these sectors.

That is about all I have to say for now, but those are concrete prospects for my region.

The Chairman: Thank you.

[English]

Max.

Mr. Max Park (Manager, Human Resources Canada Centre, Clarenville, Newfoundland, Department of Human Resources Development): Thank you, Mr. Chairman.

I'll give you one example of what we have done to develop new jobs and some idea of what we are now doing. The Province of Newfoundland and Labrador recently released its strategic economic development plan, which specified tourism as a major growth area. At the present time, that industry is unfortunately very underdeveloped, but let me tell you what we did.

Three years ago, with seed funding provided by our department, a small community on the Bonavista Peninsula started the Trinity Pageant. For those people who are not familiar with that, it was live outdoor theatre depicting the history of Newfoundland. It was one of the first times that we had done live theatre as a tourism attraction. It was tremendously successful beyond anyone's expectations, creating in the vicinity of 20 to 30 jobs directly, and many more indirectly through the advent and the nurturing of bed-and-breakfasts and restaurant facilities. In fact, much to our surprise and delight, it became a drawing card for tourism to the province, catering mostly, I might add, to tourists from outside the province.

Now, let me tell you what we're doing to expand that. Next year, 1997, marks the 500th anniversary of Cabot's discovery of Newfoundland. Obviously there are major international celebrations planned around that event, and we see this as a golden opportunity to really develop the tourist industry in our province. Just to build on the success we've had with this outdoor theatre, in cooperation with local community groups, with the province, with Historic Sites Canada - which is investing a considerable sum of money here - and with a private theatrical group, we are planning to expand that theatre by developing a new theme in an adjacent area.

We see the benefits of this as extending the tourist season. There are real plans to extend the season on both ends by offering packages to tourists who travel outside the normal season, as well as to the regular tourists. We see that this will create new jobs, directly and indirectly, and will extend the current seasonal jobs. This requires some seed money from us in the beginning but has the real potential, based on our experience with the original pageant, to become self-sustaining through gate receipts and private sponsorships.

Thank you.

Mr. Noreau: Thank you.

There is only one point I want to make. In response to one of my remarks, Mr. Scott said the legislation already has had an impact. People are scared or afraid. I think there are some people who are not and who are prepared to roll up their sleeves and to get along with other community partners in order to begin to cause some of these things to happen.

I want to thank my colleagues for taking a very short period of time to give some interesting stories.

I give it back to you, sir.

The Chairman: Thank you very much, all of you, for your presentations. We are almost at4 o'clock at this present time. Since we have another agenda item at 4 o'clock, I thought that rather than get into a period of questions, what we might do is carry on what is a discussion that's going to continue tomorrow at that time.

Now, if it is okay with you, perhaps we would get more into the whole issue of employment benefits and job creation measures, which are those parts of the legislation that some of these projects will anticipate. Will the officials be present tomorrow for that discussion?

Mr. Noreau: We'll certainly try to keep a few of them, if not all of them, Mr. Chairman.

The Chairman: If there are questions to be asked to any of them, perhaps tomorrow would be a good time to do it in the context of the presentation to be made tomorrow.

Mr. Noreau: By all means.

The Chairman: Is that acceptable to the members of the committee?

[Translation]

Ms. Lalonde: We will not ask any questions for the time being, Mr. Chairman.

The Chairman: You can wait to have them later.

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Mr. Dubé (Lévis): Mr. Chairman, this was all very interesting, but how will the reform allow them to do what they want to do? Or, rather, how does the current legislation prevent them from doing what they want to do?

The Chairman: Maybe you can think this over and answer the question tomorrow.

[English]

It's a useful question to have in mind.

On that note, I will conclude this session. We'll take a five-minute break before the next session, which will be clause-by-clause consideration of Bill C-96.