EVIDENCE

[Recorded by Electronic Apparatus]

Monday, April 15, 1996

.0903

[English]

The Chairman: First of all, I'd like to welcome the members of the committee back from their Easter break. I'm sure you're all re-energized for what's going to be, I'm sure, a very exciting week.

I'd like to welcome the representatives from the Canadian Labour Congress: Mr. Bob White, Ms Nancy Riche, Ms Linda Gallant, and Mr. Kevin Hayes.

I'm sure you're not new to the parliamentary process. We have approximately one hour. You may begin with your presentation. Then we'll engage in a question-and-answer session.

Mr. Bob White (President, Canadian Labour Congress): Thank you very much,Mr. Chairperson. We're also pleased to be here this morning.

Nancy Riche is a vice-president of the Canadian Labour Congress and has had a lot of experience in dealing with UI, etc. Linda Gallant, who is currently one of my assistants and was formerly regional director of the CLC in Atlantic Canada, also has a lot of experience. Kevin Hayes is the person in our office, in our social and economic policy department, who spends the most time, I think, on UI. He has been accused of disseminating all kinds of unreliable information, so he's here to protect himself from that, and anything I can do to protect him I will do.

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I'll come back to our presentation this morning. We had sent to this committee a document called ``A Good Program in Bad Times''. We sent a document last November, I believe, to most of the members on this committee, entitled ``The Economic Impacts of Unemployment Insurance''. When we leave today, we're going to leave a book that's hot off the press this morning. It has been prepared by us and the Canadian Council on Social Development. We have a number of copies we'll leave with the committee. It's called Fact Book: An Analysis of Bill C-12, the New Employment Insurance Act.

I do that because I think you'll see in our presentation today that we don't want, certainly not in my opening remarks, to examine the deficiencies or merits of the individual provisions of the bill. We want to outline broader concerns with the direction of UI reform, the premise of reform, and the massive consequence we think it has for workers and for communities.

The unemployment insurance program is vitally important to all working people. UI addresses a fundamental insecurity all workers face in the market economy. It reduces the economic risk of unemployment, a risk that is felt with particular force today. UI stabilizes incomes of individuals in communities. It's a cornerstone of Canada's labour adjustment process.

In this debate the government has said nothing, or virtually nothing, about how important this program is to workers - the employed, the unemployed - or how vital UI is to hundreds of communities across the country. I keep saying in my speeches across the country, at some of the protests and other presentations we've made, that unemployed workers don't do what some of the rich and the corporations do. They don't invest their money outside the country. They don't have tax havens in the Cayman Islands or the Swiss banks. Unemployed people spend their money, cash their cheques, in communities all across this land. They have impacts on the small businesses in the communities. Unemployment insurance is a very important economic issue for the broader community and not just for those who are on it.

The UI program is designed to provide protection for workers. It's paid for primarily by workers.

The CLC has a long history with unemployment insurance. Since 1940 a labour commissioner has been part of the commission that runs UI. Hundreds of our members serve as worker representatives on boards of referees. Our unions help thousands of workers daily with claims, appeals, and administrative assistance. The CLC has represented workers on permanent and temporary advisory bodies that have been established to advise on policy and administrative issues - everything from royal commissions to working groups on administrative assistance.

The CLC speaks for its members and we believe for most working people, employed and unemployed, in expressing our anger and frustration at the government launching another attack on UI through Bill C-12.

We've been accused of being interested only in defending the status quo. We want to say very clearly today we're not satisfied with the status quo. The labour movement wants a thorough and thoughtful review of the program. There have been enormous changes in the labour market. People change jobs more often. More Canadians work part-time, part-year, are self-employed, and the duration of unemployment is longer.

The program serves the needs of workers in a turbulent labour market extremely well.

The attack cannot be justified in financial, economic, or ethical terms. The process for changing the program has been chaotic. It has excluded the labour movement and has not offered Canadians a reasonable opportunity to participate in an informed debate on the future of UI. We had the human resources committee going around the country and talking broadly about social programs. We had some opportunity there to talk a bit about UI, but it was mostly on broader issues of the social programs.

The exclusion of labour from any meaningful role in reforming UI is a very serious matter. Can you imagine the reaction if the Bank Act were fundamentally changed by a budget announcement following an election and the issue wasn't debated, or there was no consultation with the banks and financial institutions? Would the corporate tax structure be significantly changed and taxes hiked without extensive hearings?

When we talk about consultation, we're not talking just about coming here. If you look at the history of this labour movement in dealing with UI, we have had, until several years ago, incredible input and dialogue. We haven't had that now, and I think it's a serious lack of consultation. We should be there when people are talking.

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When the initial committee was set up with Mr. Axworthy, there was not one active labour person in it. Then we had a task force to advise on the question of seasonal workers and not one active labour person was involved in that.

We take our responsibilities for unemployment insurance extremely seriously. For example, if you look at the Canada Labour Code today, we have a committee of employers, called FETCO, and we have the Canadian Labour Congress, and sometimes we meet together and sometimes we meet separately. We have ongoing dialogue because of our responsibility for the Canada Labour Code. We work with employers on the CLMPC, and we have some discussions with them on unemployment insurance, but we believe we're entitled to more consultation, real consultation, in terms of whom we represent across the country. We're not going to take dismissal because we disagree with something as acceptance. We think we have an obligation, and we're prepared to play a meaningful role here.

To date the government hasn't even explained the incredible damage that has already been done to the UI program. The percentage of the unemployed who draw UI has dropped from 87% in 1990 to 46% today. UI benefits have dropped from $18 billion to $13.5 billion over that period. The damage that has already been done is not accounted for, but another attack on UI is being launched anyway.

The only explanation for the cuts is that they're part of a strategy for economic development that relies on low wages. They're an attempt to give a clear signal to business that it has a friendly government in office and they are part of a government short-term deficit strategy.

We say clearly that we're not attempting to put all of the blame or the blame for that on these committee members. Indeed, we complimented the members of the former committee for telling the government that it was wrong in proposing a two-tiered UI program. We're here to challenge the members of this committee to show their willingness to take a principled and independent stand once again.

We think the committee should tell the government that Bill C-12 cannot be made healthy with band-aid amendments. The government has to go back to the drawing-board, and the committee should tell the government that it has to put a clear set of proposals in front of the Canadian people for debate and that these proposals cannot presume that further cuts to UI are in order.

The committee must also be willing to travel across Canada to speak to the people who will be negatively affected by the bill.

The committee should also demand that the government put forward its proposals for labour market and training policy and hold hearings on the subject.

These are quite strong statements, but they are justified by the recent history of UI.

The 1993 election campaign took place against a backdrop of two recent rounds of cuts by the former Conservative government. These were part of a broad pattern of social spending cuts. Liberal members of Parliament had been critical of both the UI cuts and the general pattern of the cuts. Tory cuts and the changing pattern of unemployment reduced the percentage of the unemployed receiving UI to 64% by the time of the election.

The 1993 campaign was noted for the former Prime Minister's refusal to debate social policy. Prime Minister Campbell denied her government had a secret agenda for social policy, but said social policy was too important to be discussed in an election campaign. Liberals attacked Campbell but didn't tell the voters that within six months of the election they would put social programs on the chopping-block. It was quite the opposite: the red book assured Canadians that jobs and preserving our social programs were the priorities.

The red book also said:

...without a doubt, one of the greatest failings of the Conservative government has been the tendency to focus obsessively on one problem, such as the deficit or inflation, without understanding or caring about the consequences of their policies on other areas such as lost jobs, increased poverty, and dependence on social assistance. Social costs are real. They are measured in human suffering and hard dollars.

Canadians believed they were voting for jobs and for maintaining our social programs, and the Canadian Labour Congress expressed its desire to cooperate and support that agenda. We're on the record in letters to various government officials to do that.

But another message began to emerge in the weeks leading up to the first budget of the new government. The Minister of Finance started talking about UI becoming too generous and UI dependency, and the deficit replaced jobs as the government's priority.

The 1994 budget announced a new UI benefit structure. Benefits were cut by more than $4 billion. Never in the 54-year history of the program had such sweeping changes been made without warning, consultation, public debate, or extensive hearings. The 1994 budget not only did serious damage to UI, but it also cast serious doubt over the entire social security review that had been announced in January 1994. The former Minister of Human Resources Development had promised that social program reform would not be a slash-and-burn exercise.

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Early in the review process the CLC expressed its hopes and concerns for the review in a lengthy letter to the HRD minister. The congress indicated its willingness to participate in a full-scale review of UI as long as it was not presumed at the starting point that the review would include major program cuts. The CLC also indicated that while it wished to see major improvements in the UI program, there are a limited number of items on which the CLC and the government might be more likely to agree in the near future.

During the review process the former members of this committee held extensive hearings across Canada based on the green book on social security reform. The green book included a proposal for an explicitly two-tiered UI program. The committee members, having listened to widespread expression of opposition to the two-tiered UI program, disagreed with it and a number of other key ideas in the green book.

The two-tiered UI proposal was clearly and properly seen as an attack on seasonal workers. The government created a task force on seasonal work and UI. The task force held hearings, met with employed and unemployed workers, among others, and issued a report that was very critical of the government's approach to UI. But these parts of the reform process that were open and responsive to the public were not to carry the day.

In spite of the statements by the Minister of Finance during the 1994 budget debate, it became clear that the government had no intention of undertaking a balanced review of the UI program. This was confirmed in the 1995 budget, when it was announced that changes to the UI program had to result in program expenditure reductions of at least 10% - this notwithstanding the fact that the percentage of the unemployed drawing UI and program spending were already in a free-fall.

The recent history of debate on UI has been a history of the government forcing changes on Canadians irrespective of their negative effects or public opposition. Unfortunately, Bill C-12 is but the latest episode in an ongoing saga.

The history of UI cuts includes the predictable stories about UI cheaters and abuse. It is not helpful to debate when the language used to describe a very small number of UI claimants includes words such as ``fraud'', ``zero tolerance'', ``repeat offenders'' and ``three strikes, you're out''. They are obviously intended to convey widespread criminal behaviour. We may see this language in tabloids describing inner-city crack houses or descriptions of U.S. penal reform, but we want to argue it is not the way in which our elected representatives should be referring to unemployed workers in this country.

The negative effects of this bill will be widespread.

Under the guise of the hourly entrance requirement, the bill will make it harder, not easier, for part-time workers to qualify for UI. It will also lengthen the entrance requirement for maternity, parental, and sickness benefits for many women.

Benefits will be reduced for about three-quarters of UI claimants. This will result from a combination of the new benefit formula, the intensity rule, the new clawback provisions, and the changes to the matchable insurable earnings.

In addition, the duration of benefits is reduced. Among the groups that will be particularly hard hit by these changes are seasonal workers, short-term workers, and part-time employees, most of them women.

Reductions in regular UI benefits are our primary concern, but we did provide the committee members with a brief entitled ``A Good Program in Bad Times'' - I mentioned that this morning - in which we note a number of other problems with the government's proposals for UI. These include:

- the government has given itself increased scope for changing the UI program without reference to either Parliament or those with a stake in the program, such as the labour movement;

- the government has expanded its authority to introduce and finance labour market programs through UI;

- the government has not provided an adequate explanation of its intentions for training and labour market programs and appears to be devolving too much to the provinces; and

- the purpose of the program is further eroded with the introduction of a family income supplement, which I reminded members of the committee this morning is opposed by us, opposed by the business community, and opposed by the social action groups.

The damage done to individual Canadians and their communities by the cuts to UI would be a source of strong objections from the CLC under any circumstances. The fact that the cuts are totally unjustifiable adds insult to injury.

The cuts can't be justified on financial grounds. The program account is in a significant surplus. Even without the cuts in Bill C-12, program expenditures are going to be less than the finance minister said he was hoping for in his 1995 budget.

The cuts cannot be justified in terms of what we know about the effects of UI on the labour market and the economy. The cuts don't modernize the program. They heighten the difficulties and insecurities in current labour market trends.

The proposed changes to UI can be understood only in terms that are totally different from those expressed by the government. The changes reflecting this, we think, are to put pressure on unemployed workers to accept low-paid work. They are in fact in part a strategy that relies on promoting low-wage employment. The changes that reflect this are to deliver on the policy demands of business organizations, which have been working on UI cuts since prior to the last federal election. And they reflect a desire to have UI play an even larger role in helping the government meet its short-term deficit target. That's what the proposed changes are really all about.

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We find ourselves fighting to protect UI programs against another round of cuts when the overriding need is to strengthen the program. But achieving and improving UI has always been a struggle.

In the beginning the struggle for a national unemployment insurance system was frustrated by constitutional arguments. But the constitutional hurdle was not nearly as great a hurdle as the view of the powerful few that unemployment was the fault of the unemployed. They maintained that the unemployed were the authors of their own misfortune.

The constitutional amendment of 1940 making unemployment insurance an area of exclusive federal responsibility was a major turning point in our history because of the national consensus on the nature and cause of unemployment it reflected. The provinces agreed to the constitutional amendment not only because they could not deal with the cost and consequence of mass unemployment, as the Great Depression demonstrated, but also because they did not have the constitutional tools to deal with the causes of unemployment, which are national and now even global in origin. The federal government had and has the powers over monetary policy, international trade, and key tax and fiscal powers. Moreover, it was understood that governments have the responsibility to use these tools to create full employment.

Unfortunately Bill C-12, which is supposed to modernize UI, is rooted in the same ideology about the nature and cause of unemployment that left workers without a UI system in the 1930s. The government has gone back decades for its ideological inspiration.

Bureaucrats have presented an elaborate rationale for changes that reflect an extremely unbalanced view of the UI program. At root, this rationale would have us believe the unemployed are responsible for their own unemployment and drawing UI is a sure sign of a character weakness.

Surely no one believes millions of Canadians engineer their own lay-off, turn down well-paying jobs, and choose to live on incomes well below their earning potential. There is, however, a direct link to the abandonment of full employment in the mid-1970s and steadily rising unemployment and declining wages.

We have no shortage of evidence that Canadians want to work. We see tens of thousands lining up in sub-zero weather for the chance to apply for available jobs. Daily we see profitable corporations and governments laying off even more workers. We see this in places such as General Motors, which advertised for 26,000 people. People who wanted to make excuses said there were a lot of people in full-time work who wanted to get good jobs in the auto industry. We saw it in Toyota. I read in The Ottawa Citizen just last week that 5,000 people applied for 400 jobs at the new auditorium out here, as security guards and ushers. Wherever there are jobs, whether they be decent-paying part-time jobs or full-time jobs, all the evidence in the country is that larger numbers of people make applications than jobs are available.

So our challenge to this committee is to reject the direction that is being provided by the finance minister and his department. We challenge you to tell the government that Bill C-12 is wrong and cannot be repaired with band-aid solutions. We challenge you and the government to engage in a sincere attempt to strengthen and modernize UI in the context of a renewed commitment to full employment, equality, and improved living standards for Canadian working people.

In closing, we want to state clearly that the Canadian Labour Congress is not satisfied with the status quo. We don't accept the premise that our UI program needs to be cut further. Our unemployment insurance program needs major improvements to reflect the ongoing changes in the nature of work. We repeat that we are willing to participate in a review that would examine the best ways and means of providing income protection for workers during periods when they are unemployed.

I just want to say to this committee this morning that if this bill were an improvement for unemployed workers, if it dealt with the new realities of how people change jobs in an insecure market, if it were maintaining a decent level of income for people who are unemployed, why would we come before the committee and waste our energies on the background information we put together? I have seen a lot of allegations about political affiliations here. We're concerned about one thing, and that is the unemployment insurance system.

Our record is very clear. Our integrity is on the table here, in terms of our concern about the unemployment insurance system. That's the only reason we're here. That's the only reason we're conducting a campaign on the ground to try to raise awareness about this.

We think it's not the proper way to address the system in today's environment. We think it can be done from the base - When you talk about the status quo today, we're not talking about the status quo as it was five years ago. It's worse for most people out there. We really have to get that on the table.

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We can't stop you from proceeding if you're going to adopt this bill, but we think that would be a real mistake.

We're prepared to be part of a process. We live in a world of change. We are probably at the bargaining tables of this country's corporations more, and bargain more adjustment programs, more innovative change around technological change on training, than any other organization in the country.

Our affiliates have come before this committee and laid out clearly, in detailed form, how this bill impacts on certain sectors of their economy.

So we're not saying this because we don't believe it. We're not saying this for the sake of some political game here. We're prepared to work with this government in the development of an unemployment insurance system that takes us into the new millennium - but this doesn't do it.

This is a major mistake, unless we're driven by a very different agenda. This will put us much closer to the U.S. system of unemployment insurance in a low-wage economy. I think most of us in this room would pride ourselves on the fact that we haven't gone down that road in the past.

Those are our initial remarks this morning. We're prepared to try to deal with questions and make comments for the rest of the time.

Thank you very much.

The Chairman: Thank you very much, Mr. White.

On behalf of the committee, I would also like to express to you our willingness to cooperate with labour unions, business groups - all the individuals who in fact represent a cross-section of Canadian society.

Of course the role and mandate of this committee are to improve Bill C-12, an act respecting employment insurance. As the chair, I can tell you that members of Parliament on both sides have been working very hard to make sure that some improvements will come out of this committee to address some of the concerns you have raised in your brief.

In that spirit of cooperation, I will move to the question-and-answer session.

Madame Lalonde.

[Translation]

Mrs. Lalonde (Mercier): Thank you, Mr. Chairman. Thank you also to Mr. White and to those appearing along with him.

First of all, let me say that we want to convince the Liberal members on this committee as well to consider carefully the many representations that are being be made.

To my mind, the bill now before us is indeed is a huge blunder for Canada and for business productivity. It will bring about a major change, both for workers with no job security and for businesses themselves.

This change surprises me a great deal and, as we cannot discuss Bill C-111 without talking about Bill C-12, I would like to ask Mr. White to try and explain to me why it is that the government is proposing with this legislation to lower the maximum insurable earnings level from $42,000 to $39,000. With this change, it will be taking in $900 million less in revenues per year. It will also be giving back approximately $500 million to big business and $400 million to income earners in this sector instead of leaving things as they are or even increasing maximum insurable earnings in an effort to provide, in keeping with the UI System and the new labour market, more security to those who are most in need of it. Why does the government want to deprive itself of these revenues?

The only explanation I can think of is that the government really wants to turn the UI system into something approximating the social welfare system and encourage lower wages.

The surprising thing is that in the process, it will also be putting pressure on the provinces, on individuals and, I repeat, on businesses. The Canadian Federation of Independent Business has said that SMEs would lose out to big business if these changes take place.

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Therefore, I ask you once again to try and come up with some explanations that will convince the members opposite and the government not to go ahead with this bill which requires not simply minor adjustments but rather a major overhaul.

[English]

Mr. White: On the question of building a surplus in the fund, we have been arguing for a long time that we think it is important to build a surplus in the fund so when you get into a major recession you don't then add to the costs of unemployment insurance by having to increase your premiums.

There was no demand from working people in the country to get a rebate on unemployment insurance. Representing workers, we hadn't made that demand here, to get a rebate on the premiums of UI.

When you balance it off, at some point you build up a certain surplus and you say, well, it looks as if we can handle the next recession. Then you do something in terms of rebates. But it's a much different thing to be doing rebates in which the largest amount of the rebate goes to major corporations at the same time as you are cutting benefits for workers. Again, I just don't think it makes any sense to do it that way.

I can't sit in the minds of the people who drafted this piece of legislation. I don't think it makes economic sense to take money out of communities where people are not working, where people are drawing unemployment insurance, and make some rebate that is much less to employees in areas where they are working than it is to employers. I don't think that helps the economy. I don't think it helps the widening of the gap between those at the lower end of the scale and those at the higher end of the scale.

So I can't argue why it's done, except it doesn't make any sense to us. But I want to say we believe the fund should build a surplus and at some point you review the rebates - that makes eminent sense - and the money should not be moved over somewhere else. But it should not be at a time when, on the other hand, you're taking significant amounts of money away from people. How can you say to unemployed people there's no money to get the program back to where it was even five years ago when at the same time you're reducing premiums and taking serious amounts of money out of the program?

[Translation]

Mrs. Lalonde: I would point out that this bill shows no concern whatsoever for the problems of those who find themselves in the new labour market. Even though the government maintains that people will start contributing as soon as they begin working and that they will then be entitled to receive benefits, we know full well that while they will certainly be contributing, they are rarely going to receive benefits and that in particular, many of these workers will not have access to benefits.

Those employed on a short-term basis will pay more unemployment insurance than they now do because of annualization and in many cases, they will not be eligible for benefits. Therefore, it is clear that this bill is not geared in any way to the new labour market.

It is also clear that the government is backing down instead of moving forward since, at the start of the reform process, it said that it would deal with this issue and it has done nothing.

[English]

Ms Nancy Riche (Executive Vice-President, Canadian Labour Congress): It's a strange irony that when we talk so much about the new work, the changing place of work, it's almost as if someone sat down and predicted what the new work patterns would be like and then wrote a bill to penalize them. What we have here in fact is incredible new jobs going to part-time. Why for many years we asked for first-hour coverage was that anybody under fifteen hours a week was not even able to access the system. Now we have the very strange thing in this bill of that first-hour coverage and people with fewer than fifteen hours of week being able to pay into the unemployment insurance system while in fact vast numbers will never be able to access it. In fact, incredibly high numbers will earn less than $2,000 a year but won't get the $60 rebate.

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So it's really important for this government and this committee to be honest about what they're doing in terms of first-hour coverage, because I know the previous minister, Mr. Axworthy, went around talking about how 500,000 more people would be covered under UI. That is not true. That is a blatant misrepresentation of this piece of legislation.

As Bob White said earlier, we want to talk about the changing workplace. How do you write new unemployment insurance legislation that accommodates this kind of new workforce, the part-time, the just-in-time, the contract, the temporary, the job-sharing?

Incredibly, it benefits overtime work - this from the same government that just finished a task force on sharing work and the distribution of work - and actually penalizes the most vulnerable, the part-time and the temporary, vast numbers of whom are women.

The Chairman: Is there another question?

[Translation]

Mrs. Lalonde: Yes. You also made it clear to us that this bill was bad from an economic standpoint. Until now, the main feature of Canada's UI system when compared, for example, with systems in other European countries, was that it allowed businesses to adjust very rapidly to economic conditions because the vast majority of workers had UI coverage.

However, when fewer than 50 per cent of our workers will have UI coverage and when the system becomes more complex, a different problem will emerge. Indeed, departmental documents indicate that people will make choices and that they will choose the date on which they file their claim. However, will they really be able to choose this date themselves?

From an economic perspective, the government appears to be changing the rules of the game at a time when business is hoping for more flexibility. I think it is heading in the wrong direction.

[English]

Mr. White: I remember that earlier there was some public discussion between the former minister and the auto industry, for example, which I knew a little bit about.

Again, the UI system and the SUB system were very much part of that industry in terms of recognizing that, first of all, you wanted to retain the workforce if you had a downturn in the industry because you had a skilled workforce and you'd spent a lot of money in training, etc. You also wanted to protect those communities from devastation and the impact of mortgage foreclosures, of small businesses going bankrupt, etc., so you put together this adjustment program that's built into the bargaining system.

The more you take out of the unemployment side of that adjustment program, the more you put on the bargaining table costs for employers and there is more impact on a stability that exists in certain situations.

I come back to it. We would like to bring more people into the system. We've been arguing for bringing part-timers in and for finding a way to do contract work, and we've been talking about the whole question of governance of UI, but when whoever drafts this stuff drafts it in such a way that it looks like it penalizes more people than it protects, we're not going to buy it. It doesn't make any sense. It doesn't work in the long run. It works for a few people but it doesn't do the job it's designed to do. And I think it does have an impact on business. I've said before that when some of the small-business people keep clamouring for cuts to UI it's very shortsighted when you look at what happens in communities.

The Chairman: Thank you, Mr. White.

Mr. Robinson.

Mr. Robinson (Burnaby - Kingsway): Thank you very much, Mr. Chairman. I thank members of the committee for giving me the opportunity to ask a couple of questions although I'm not a full member of the committee, and I thank the witnesses for their presentation this morning.

The Chairman: You're more than welcome to attend.

Mr. Robinson: Thank you, Mr. Chairman. I trust the same invitation will be extended to the leader of my party -

The Chairman: That's good.

Mr. Robinson: - at least on an equal basis with Mr. Grubel, Mr. Chairman.

Some hon. members: Oh, oh!

Mr. Robinson: Mr. Chairman, I think probably one of the most disturbing figures in the brief presented by the congress is the quite dramatic drop in the percentage of unemployed workers who are receiving unemployment insurance. The percentage drops from 87% in 1990 to 64% in 1993 when the Liberals came into office, and now drops to 46%.

Obviously the out-of-work folks who aren't receiving UI are presumably on social assistance in order to survive. And at the same time as the demand is increasing on social assistance, we see massive cuts in transfer payments to the provinces for the Canada Assistance Plan and an elimination of the national standards, which allows for workfare and so on.

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The point you make with respect to the enormous damage as a result of this, and the overall impact as a part of our low-wage strategy and, quite frankly, as a direct implication of NAFTA - you don't mention that, but certainly it's something we have to look at very seriously - is a real concern.

One of the areas you talked about in particular in terms of the impact of this bill is the impact on seasonal workers, short-term workers, and part-time employees, in particular the impact on women.

I assume you've heard as witnesses that some members of this committee are proposing some amendments that might have some impact in the seasonal worker area, but I wonder if you've had an opportunity to examine those proposed amendments and if you could share with the committee your analysis of the impact those amendments might have and concerns that remain about the impact of this bill even after the proposed government amendments on seasonal and part-time workers, particularly on women.

Ms Riche: First we have to try to figure out what the amendments are. I think you're talking about the eligibility, how you calculate benefits on the 20 weeks.

I think, Andy, you've come up with 26 weeks.

We're trying to get rid of the gap where we have the zero-based earnings. Try to work this through.

On the 14 weeks - you're going 14, 16, 18, 20, right? If the person has only 12 weeks in that 26 weeks or 12 weeks in the 20 weeks, then the divisor doesn't change. We're still going to have 14 divided into 12. Is that not right? If you've got only 12 weeks, then whether you've got 12 weeks in 26 or you've got 12 weeks in 20, you divide by 14. We have the gap. With the amendment, we have not eliminated the gap.

This is the point we've been trying to make: don't try to amend it by doing that little piece. It's not going to work.

I think this committee, as the new committee, found that when the minister came in and talked about his concern for seasonal workers - I know that's a surprise, but he did. I've seen the quote. He said that he was concerned and that people couldn't get jobs in particular areas because of the season. So it seems to me we get rid of that and go back to where we were in terms of the last 52 weeks. I don't think that amendment is going to work, because it doesn't have to.

The other amendment was the top-up of the family income. I find that really distressing and very unfortunate. I know that the amendment is made with all sincerity, but it wouldn't be necessary if you didn't make the changes under this legislation. So we start with kicking the hell out of these low-income people and then we say, with true liberal guilt, let's top it up.

If we've got this one clear, we're actually taking $70 a week from some low-income people and we're going to give them back $30 and call it a top-up. I might not have that exact, but that's what it looks like to us.

So I guess I could simply say that we're not impressed by the amendments we're hearing.

Mr. Robinson: With respect to the issue of consultation, Mr. White, you've talked about the historic role of the labour movement's involvement in all aspects of unemployment insurance. You've talked about the exclusion of labour from any meaningful role in this process of reforming unemployment insurance. I wonder if you could just elaborate a bit on the extent to which there was consultation. We know that the current minister responsible is not exactly keen on meaningful consultation with the president of the CLC, but to what extent has the congress been shut out of any meaningful review of this unemployment insurance program?

Mr. White: I said in my opening remarks that we would have expected that when this government got elected -

Let's be candid in this room. We were of one mind on a lot of the other changes to the UI bill that the previous government made. We opposed them together. We expected that when Mr. Axworthy set up his initial advisory group we would have an active trade union person who was knowledgeable about this at least in the room, with whatever confidentiality was required.

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If there is going to be a redrafting of an unemployment insurance bill of this magnitude, we would expect that people would spend a lot of time with our people who have experience in this. If the government decides, after all that, this is not the direction it wants to take, that's democracy; we'll take a position on that. But to ignore us because we now oppose certain things, to say that somehow we've become irrelevant in this, I think is an insult to the labour movement.

It's a question of expertise. It's a question of knowing on the ground what impact this has. It's a question of recognizing realities of the changing workplace, and we're trying to deal with that all over the place. In the end, it gets us into confrontations like the one we're in today, because we haven't dealt with wide consultation.

Again, as you are saying about the Canada Labour Code, that doesn't mean we are going to be of one mind on every change. We're not suggesting that. We're not the government. But we do think when you look at the history of this, when you look at our full participation at every level on unemployment insurance, when such massive changes have taken place since the election of this government, it is shocking that in 1994 the largest change took place without any consultation with us.

What is going on today is not consultation. It's a chance for us to talk to a committee. The power structure is making decisions and making changes and giving recommendations to this committee to pass through, but that's not consultation for us.

If Mr. Young has decided not to meet me and get off his camel, that's his choice. I've never heard of that before. But he's made that decision, and I'm not going to whine about it. My guess is that we'll have a meeting at some point.

I'm talking about real consultation; I'm not talking about theatrical politics here. I'm talking about real consultation with people such as Kevin Hayes and other affiliates who work with this every day of their lives in the workplace, who work out arrangements with employers, who work out arrangements with people going on retirement, who deal with the new reality of part-time, who are in the textile sector where home work is developing, who are in the service sector - such as the retail sector of UFCW - where you have many more part-time and service employees, more women. We have the expertise. But nobody says, when drafting this, why don't we get the people with expertise around the table for three or four days and talk about ``what ifs''. Then someone goes back to the drawing board and -

I've been around some bargaining sessions, such as the debate we're going to have today on some of these amendments. The employer says ``We're going to give you a 15% wage reduction or a 30% wage reduction: which do you think would be the best for you?'' We say ``Thank you very much. We don't think either would be the best for us.''

When you start with the premise that you have to take billions of dollars out of it - WhenMr. Axworthy started the social policy review - I think you were his junior minister or whatever then, so you have moved way up now - we submitted a three- or four-page document to the minister and we said we were prepared to sit down with him. We said there's nothing wrong with looking at social policy in the country every 25 years. Obviously we were going to have to look at that, and we were prepared to do that.

I'm troubled by it because I think it leads to unnecessary confrontation here, which we didn't have to have. But we're going to have it. Whether Mr. Young likes it or not, we're going to continue to participate in peaceful protest across the country, because we think that's part of democracy. But what we are really concerned about is that we think we could have avoided some of this.

This bill is now getting patched together by the same bureaucrats who put the first bill in and gave the minister advice that it would be fine. Then when he took it out to the field to test it, it wasn't fine. So now this committee is charged with the responsibility of trying to patch it up again. That's not the way to put in legislation that's going to be in existence for several years.

The Chairman: Mr. Scott.

Mr. Scott (Fredericton - York - Sunbury): Welcome.

On the consultation side, I think the committee has a good history, and I appreciate the interventions that have been made by you and your organizations. For me it has been a year and a half now, and I appreciate the support we received when two-tier was on the table. It isn't now.

Having said that, I'm concerned about a couple of things. The reference to overtime - and other social agencies have been in and have made the same references - concerns me, because I know the Canadian Labour Congress historically has been after first-hour coverage. There doesn't seem to be a recognition of the advantage of that shift from weeks to hours.

You're wondering why people are supporting the bill itself. The advantage of the shift from weeks to hours, in the context of the existing labour pool and seasonal industries, is significant. People will actually get access to the system more easily by virtue of that shift.

I recognize the inconsistencies with the direction of the Donner report, and I'm generally a strong supporter of the direction of the Donner report for the country. But I also recognize that people who work in industries that are seasonal in nature work long hours for short periods of time. It's not difficult to comprehend, then, that the shift to recognize the value of hours of work rather than weeks of work is of enormous benefit to people who work in those types of industries - industries I'm very familiar with, since I come from Atlantic Canada.

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On average, people will get in a couple of weeks earlier. I can name numbers of people in my own constituency who will get into the system, people currently in the labour market. I'm prepared to acknowledge that the people who aren't will have a more difficult time. I accept that. But generally it's not the people who are not in the labour market who are protesting right now. It's people in the labour market who are protesting now, and in fact in my constituency they will get into the system more easily by virtue of this bill.

They'll also get a couple more weeks of entitlement because of this bill, because the value is placed on hours of work rather than weeks of work, because of the nature of hours of work in terms of the value that has in seasonal industries, where you work sixty hours in a week. If you work seventy hours in a week, on this system that's worth seventy hours. It's worth two weeks in terms of getting in.

So I'm concerned about that, and about the unwillingness of the CLC to recognize that, because I think it's important. I'm concerned that it's a bit of a trade-off problem in terms of the seasonal people versus people who aren't in seasonal industries.

Second - and I'd like clarification on this - is your position on the social policy, the social income support, parts of this. I've seen other letters that have been directed by the CLC to unions in my own constituency, and those challenge the fact that social policy objectives, income support, income enhancement objectives, are being pursued through the unemployment insurance program. The problem I have with that is in seasonal -

You mentioned the communities that are affected. That is the very nature of unemployment insurance in many of these communities. It is income supplement. It is not because they've lost their jobs. They're going to have their jobs again next year. They can't live on what they can make in a short period, so they have their income on an annual basis supplemented by this program. That's what it is, in absolute terms.

Mr. White: But they're unemployed.

Ms Riche: It's called unemployment insurance.

Mr. Scott: They're unemployed for the period of time. But you mentioned the fact that this was designed to assist those communities where the macro-economic impact would be enormous. I could list the communities. I know them well.

So the fact of the matter is that it's a part of the program. They've not lost their jobs on a permanent basis. They simply cannot make enough money in a seasonal industry over the course of the period in which they can work to sustain a family. So the unemployment insurance program has brought in that feature. It scares me to death that this feature of this is being challenged.

I would like you to respond to both of those. Thank you.

Mr. White: As we said in our opening remarks, and Nancy said, we've been proposing the first-hour system for a long time. So you won't have any argument with us in designing an appropriate first-hour system. We've touched on what we think is wrong with this. We're not saying if we craft a new bill we shouldn't have a first-hour system. We're on record as saying we should have a first-hour system.

Mr. Kevin Hayes (Senior Economist, Technical Services Department, Canadian Labour Congress): As Bob was mentioning, we've been advocating first-hour coverage for ten years now. The issue here is not first-hour coverage. It's not even the hourly system. It's the design of the threshold, primarily. What you've really done is doubled the threshold, from 15 hours to 35.

Mr. Scott: For some.

Mr. Hayes: For some. There are 600,000 people who are now claiming unemployment insurance and who are 15 to 34 hours. These people are going to be hurt. And under first-hour coverage you're going to bring in 500,000, of which nearly two-thirds are earning less than $2,000 a year and are going to get the rebate.

We have not seen from the department estimates of how many people they think are going to lose with the additional hours. We do know if you go through the arithmetic of somebody who works 25 hours or 20 hours, a lot of people who are now claimants under UI will be hurt. They're going to have to work 30%, 40%, 50% more time, depending on how short a week they work.

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Then there's the displacement effect, which we haven't heard about. You had the UFCW before you. We're not talking only about seasonal industries that are going to have problems with the new thresholds. It's not the hourly coverage. What the typical employer will do is displace, if he has three or four people working 20 or 25 hours. Will the behaviour change? You bet it will. What will happen is that he will lay off a couple of others. So that whole displacement effect has to be looked at thoroughly.

Go back and ask how many of the 600,000 people who are now UI claimants are going to be displaced because of this - and they're not all in seasonal industries.

Mr. Scott: Further to that, you have to acknowledge that it helps the 87% of the people in New Brunswick who work more than 35 hours.

Mr. Hayes: Yes, but you can do that without increasing the threshold of 35 hours.

Mr. Scott: The point I'm making is that you're the one who drew the conclusion that if you make less than 35 hours, it hurts. Okay, that's true, but you also have to recognize that it helps those who work more than 35 hours.

Mr. Hayes: Yes, and how many are hurt and how many are not should be laid out. I'm saying that you have to go through the analysis of how many people are in that critical 15 to 34 hours and look at the sectors. They're not all seasonal workers. We're talking about retail workers, particularly women, who are working 20 or 25 hours. First, they are not going to get through the front door, with the 910 hours, because you've tripled the entrance requirement for the major attachment part of it. For those who do not have a major attachment, in some cases you're doubling it. They're the people who are living in Toronto, Vancouver, Ottawa, and so forth.

So much of this discussion tends to concentrate - particularly in respect of the eligibility issue, hours - on the seasonal aspect. That is not the central issue. You're right; in fact, if anything, seasonal workers work long hours.

Mr. Scott: That's right.

I have a further question on the gap. Your answer referred to the amendment that has been proposed that would deal with the fact that the way of calculating benefits would not recognize the difference between a week and a week of work. What I'm proposing is an amendment that would see that if there is no work in a week it wouldn't be included, going back 26 weeks.

In our province, where you're now generally going to be able to get in with probably 10 weeks, in many cases, because of the shift to hours, lots of people will get in with 10 weeks and less. But it will be divided by 14 weeks, as a minimum, according to Mr. Regan's amendment.

Before, the way it was going to be calculated would have meant that if you didn't work it still counted. The amendment I'm proposing would mean that if you didn't work in that week it wouldn't be counted back to 26 weeks of work. It will mean that a lot of zeros - up to 12 - can be dropped from the calculation. I expect that's true and I don't think there'll be any debate about that.

I recognize that there could still be zeros as a result of the divisor, but those are not zeros on the basis of the fact that you're going back to include work.

Am I correct, Kevin? Am I missing something?

Mr. Hayes: No. We're not disagreeing with you that your amendment is going to help marginally, but to some extent it is still a matter of debating the strength of the poison.

In respect of the formula, what we have opposed is that it's extremely capricious in the sense that you ambush people, essentially, over a very mechanical formula.

What we've always asked for - and the seasonal task force came close to recommending it, I believe, if it didn't - is the best 12 weeks or the best weeks for qualifying. Obviously that does not cut $2 billion of benefits.

The other thing is that when you're looking at this formula - and, to my mind, the department has not provided the numbers on this - you should really ask what the cost of these various provisions is. That new benefit formula alone, depending on how it's constructed - If you even take it on the phase-in, we're talking about a lot of money being cut. About $1.5 billion to $2 billion could be coming out from that provision alone, but the department is claiming that it's only $2 billion.

Mrs. Lalonde mentioned the maximum insurable earnings roll-back - another $1 billion cut in benefits. The intensity rule is probably $400 million. You could go through a long list.

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I think this committee should demand from the department to go through each of those provisions and cost them. On the one where we were just debating about the eligibility, you should go through each of those provisions about what 910 hours is going to do and how many people are not going to qualify. How many of the 600,000 part-timers who now qualify are not going to qualify because they get zero?

The other question that should be asked is on the provisions related to the family income. How many of the people who are now theoretically eligible for family income are not going even to qualify because of the 910 hours?

On the so-called top-up, two penalties come in on the very people you are presuming to help: the intensity rule and the new benefit formula.

Mr. Scott: An amendment has been proposed that would exempt from the intensity rule the people who would be eligible for the top-up - and you know that.

Mr. Hayes: I'm talking about the new benefit formula and about eligibility. To my mind, Ms Augustine's amendment will get at the intensity rule, but to some extent it is the least lethal of the three provisions that are going to hurt low-income people.

The Chairman: On the issue of employment benefits, part II of the employment insurance bill, where people have had attachment to UI for the past three to five years, depending on parental benefits, how do you feel about that? Is that a positive measure to get people re-employed?

Mr. Hayes: The employment benefits are a regeneration of the old developmental uses, and there are some terrible things with that.

Number one is the new formula by which you are going to calculate the funding of it. Over time employment benefits will grow proportionately to how much you are going to pay in unemployment benefits. Employment benefits are not an entitlement system, and for that precise reason we've argued against the inclusion of developmental uses. Unemployment insurance is insurance, and it should be organized on an entitlement basis.

To give the government access to using premiums as another big fund to finance labour market programs is wrong. We've said that the labour market programs should be funded out of general government revenues or some precise tax, and we've asked for a training tax. How you would introduce a training tax is worthy of a good debate.

We have not been enthused about developmental uses, and we're no more enthused about employment benefits.

You've made it even more complicated by giving provinces a veto over the training part of it.

The Chairman: But within this framework you have social assistance recipients. I understand that you are concerned about it, and I think we're all concerned about social assistance recipients vis-à-vis obtaining the type of training that will lead to a job. If these individuals can access the $800 million through re-employment measures, what's the problem with that? Why are we against helping the individuals who are most vulnerable and who require help to get re-employed? Aren't we all focused on getting people back to work?

Ms Riche: You phrase the question in an interesting way.

Of course we want to get social assistance recipients back on the job. One of the ways might have been not to introduce the CHST and not to have us into cuts in social assistance.

The shift here is to turn UI into a social assistance program. Andy questioned our saying that. As soon as we go to family income, not based on what a person pays into the insurance system, we move from insurance to assistance.

We don't have here just a change in UI. What we have is a change in direction, and you can't separate it from everything else that is going on. We put the cap on CAP, and then we get rid of CAP. We start cutting back on transfer payments to the provinces.

I think we had a wink-wink, nudge-nudge when the four Atlantic premiers met with the minister back when this committee was first put in place, when we got the extra $300 million into those employee benefits. There was $800 million, and another $300 million appeared after that night. But something else happened there too. The employment benefits became how we're going to help you with social assistance.

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So what we have, and I know this is going to sound like strong language, is this government stealing from the UI fund to top up some sort of social assistance - to move UI into social assistance. If you really want to get into where I'm coming from, the psychology about welfare in this country and the stigma - If we move UI into that, we'll build the stigma even more, and then we'll really hit on the cheaters and abusers.

It sounds disjointed, but we've watched it. Every time cuts to UI were introduced, every time the government was losing in the public opinion polls, we got a minister talking about ``cheaters'', ``abusers'' - what we say in the brief is language that's used in crack houses. We heard it from Mr. Young last week. We didn't hear it from Mr. Young when he was first appointed, but we heard it about a week ago. Now it's ``cheaters'' and ``abusers'' and that's the reason we're changing it.

The Chairman: Excuse me. We started with helping social assistance recipients. Now we're talking about abusers, something I certainly didn't bring up. Nor do I believe the majority of the people who use unemployment insurance like to use unemployment insurance. They wish they could go somewhere else for a job.

But the reality is this. Within the framework we have, within the challenge we're faced with as a committee, I am looking to you to give us some advice on whether or not those funds should be given to those individuals, social assistance recipients, people I know you deeply care about, to give them the opportunity to get re-employment measures to get back to work. We know these re-employment measures work. Are you interested or not?

Ms Riche: Not from UI.

Mr. White: We're saying not from UI. We're not saying we won't sit around a table and discuss how you do that. We're not saying people aren't entitled to assistance. We're saying not from UI.

The problem is if this committee says we're going to live within the parameters of the cuts, then you have the handcuffs on. If you've been dictated to that such is the only parameter, all you can do is patch this up, then we could discuss the patch, but that wouldn't stop our opposition to the bill. As Kevin said, there are some good pieces in the legislation for some people.

Look at the discussion on hours you just had here. Had the discussion been held with you and Kevin and some other people around the bureaucracy, it might have come out differently. That's the point we're making. We get forced to oppose the bill in totality because a lot of it doesn't work. There are some little pieces in there we'd like to have, but the bad medicine sure supersedes the sugar that's in there.

The Chairman: Mr. Allmand.

Mr. Allmand (Notre-Dame-de-Grâce): Have you sought a legal opinion on the constitutionality of this bill, in view of the fact that in 1940 the amendment was for unemployment insurance and now, as you point out, over the last seven or eight years, more and more non-unemployment insurance measures are being introduced? Have you sought a legal opinion on that?

Mr. White: To be very candid about it, some people tried to advise me to. I believe we live in a democratic process, and I think we'd rather do it by pushing and getting decent legislation. The problem I have is even if you get a ruling from the courts, the next week you may get an amendment coming in that will change it.

There are some people who want to make those arguments, and they may be on solid legal ground, but to my mind the labour movement has never made great progress through the courts, and it seems to us, Mr. Allmand, the best process is through the democratic process. It recognizes the history of this bill and the responsibilities. We don't want to rest on the legal constitutional challenge.

It may be valid. There are people who are arguing with us that we should be part of a challenge to this. But to this point we've said we don't want to join in that; we'd rather deal with it under the process of the parliamentary system.

Ms Riche: If the legislation goes through, there'll have to be a constitutional amendment, since the Constitution currently states that the federal government has jurisdiction for - and it lists a bunch of things, and one of the things it lists is unemployment insurance. I don't think you can take out the ``un'' before ``employment'' without having a constitutional amendment, so I guess we'll open up the constitutional discussion if you pass this bill.

The Chairman: I'm not sure I want to get into the Constitution in this committee.

Ms Riche: I'm just saying it's factual that you'll have to do that. I don't know.

The Chairman: Mr. White, Ms Riche, Mr. Hayes, Ms Gallant, on behalf of the committee, I'd like to thank you.

I'd like to tell you that as a committee we have to listen to different points of view, from labour, from business, from a cross-section of Canadians. We've been doing that for - well, I can remember it since social security review. That's a challenge we face, to make sure that everyone within the Canadian society is accommodated so we'll come up with a bill better than the one that was presented to the committee.

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Mr. White: I understand that, but the Fraser Institute is coming on this morning. They haven't worked with UI as we have. They can have some academic observations about what it is, but they haven't worked with it on the ground as we have. We've been in this system for a long time, and we're entitled to something better, quite frankly.

Thanks very much.

The Chairman: Thank you.

We'll suspend for five minutes.

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The Vice-Chair (Ms Augustine): Order.

We have with us, from the Bouctouche Chamber of Commerce, Mr. Benoît Michaud.

Mr. Michaud, welcome to the Standing Committee on Human Resources Development. I'll ask you to begin your presentation. Allow some time for discussion and for questions from members.

Mr. Benoît Michaud (President, Bouctouche Chamber of Commerce): Thank you. I hope you're hearing me okay. My brief was sent to you in the French language, but there's a representative of the Atlantic Provinces Chamber of Commerce here with me. He is English, so I will make my presentation in English. I hope you will bear with me. I'm a bit nervous.

The brief we sent was in response to the reforms brought forth by the Hon. Lloyd Axworthy shortly before Christmas.

I represent the Bouctouche Chamber of Commerce. Bouctouche is a town of about 2,000 people. It's a rural community in the county of Kent in New Brunswick. My brief has been endorsed by all the chambers of commerce in Kent County - by the regional chamber of commerce, which represents all the other chambers. It's been recognized by the Conseil économique du Nouveau-Brunswick. It's been recognized by the Atlantic Provinces Chamber of Commerce, and it's also been supported by the Municipality of Bouctouche.

I'm flattered to have the opportunity to explain it in more detail, and I thank you very much. I will try to explain what came about to cause us to send the brief.

First, can you hear me okay? Am I speaking plainly enough?

The Vice-Chair (Ms Augustine): We're hearing you quite clearly. There is a beautiful picture on the screen in front of us, and you're doing fine. We can hear you.

Mr. Michaud: That's reassuring.

The reason why we sent the brief is we know that the status quo may not be the perfect solution, but what has been brought forward creates other problems. We feel that in the status quo, as it is now, since the Hon. Bernard Valcourt shortened the period of a claim, the unemployed are running out of UIC cheques before work starts. So the government sort of reacts with section 25 or gap programs, and sometimes that money, which is spent to do community work, is done in a rushed fashion, whereas it could probably get a lot more mileage.

I don't think we can get away from our reality that we have seasonal industries in rural New Brunswick, or the whole of the Atlantic provinces, and it's a yearly cycle. If we didn't have UIC to help, it would hurt the seasonal industries.

I'm a farmer myself, and it's impossible for me to farm in the winter. My employees need to have food on the table, but I cannot provide an income when none is coming to me. So we're saying that we're proud of being farmers and fishermen and tourist operators, but we need the system to give us a bit of protection.

What the reform proposes compared to the status quo is basically converting weeks to hours, but it's the same length of a claim period. It doesn't allow enough time.

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Minimum number of hours: I think we can live with that for a qualification period. It seems to be flexible across the country. The way we see it in our formula, it's a requirement everyone could live with.

What we are trying to suggest is a system that would require the minimum number of hours put forward by the Axworthy reform. We would even accept the divider suggested by Mr. Axworthy, but with a twist. The divider would climb as the hours are climbing, but in a slower fashion, to a 1,500-hour cap. What that would do is encourage people to work as much as they can, because it makes their insurable earnings a bit bigger every hour they add on between 420, which is the minimum in high unemployment areas, and 1,500 hours.

What we also see is that if the commission wants to save money and cut expenses by a certain percentage, it should be taken out of administration, and maybe from the higher unemployment beneficiaries. Here we suggest that those who are working for $200 or less in insurable earnings get a higher percentage of that income than those who are working for $800 in insurable earnings. The way we presented it in our brief was that anything under $200 would be insurable at 90% and everything between $200 and $800 would be on a sliding scale, down to 50% at $750. It may be a bit hard for me to explain, but it does have its merits.

After that, we also suggest that to encourage people to work more, anyone having the minimum number of hours would be punished by a penalty multiplier. That would be a percentage that would go up to 100% between 420 hours of work and 800. Therefore someone working the bare minimum would get only 60% of his UI benefits. That's an incentive for them not to work for the minimum and then say ``We qualify; we're going to quit or try to get laid off''. The incentive works up to 800 hours; also, the divider which was coming on earlier would have helped it until 1,500 hours. That's a double incentive.

The conclusion of the thing is that the period between your two jobs, let's say from fall until spring, in conventional and seasonal areas would be the same. It would not be according to the number of hours worked. We suggest 36.

The thing that would change is the amount of money you receive. If you worked the minimum number of hours, you would receive a minimum UI cheque. If you worked a maximum number of hours, you would receive more, until you reached that maximum. That would be the incentive to work.

What we also suggest to incorporate in this system is that if someone had tried his best to find work and was able to get only the basic minimum 420 hours, or whatever the case may be in that particular area, he should have an opportunity to qualify for a bit more money by doing community work. That means you could credit community work against the multiplier that applies itself against the low hours. You would not earn UI doing community work per se, but it would apply against the penalty multiplier. That would be good for the communities themselves, because you could give the money being spent now on the gapper programs, section 25, to the non-profit organizations, some municipalities, to help create a better life environment in the communities. Those hours could be used in the most advantageous situations.

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I'm going to shut it off now. You may have some questions, because I know most of you may be a bit mixed up.

The Vice-Chair (Ms Augustine): Thank you for your presentation. You were very clear. I want to reassure you we did hear you quite clearly.

Please start, Madame Lalonde.

[Translation]

Mrs. Lalonde: Thank you, Madam Vice-Chair. You referred to the Parti Québécois, but I think you meant the Bloc québécois.

Welcome, Mr. Michaud. I only received your brief this morning, but I will read it carefully and study it. To help us better understand your approach, could you please tell us what problems you have with the draft legislation insofar as the main points listed here are concerned. Am I making myself clear?

Mr. Michaud: I can already tell you that the first problem with the proposed reform is that there is no incentive whatsoever to work more hours. The

[English]

banking of hours,

[Translation]

banking of hours is a widespread practice, but it has often proved awkward for employers who sometimes have had to tell an employee that he would not be paid this week because the benefits were too low. Employers are under constant pressure in this type of situation, but this practice is fairly common, particularly in seasonal industries. A person must work a minimum of 16 hours per week to be entitled to UI benefits. However, he may not be able to work one week because of poor weather, for example, and then the following week, he may work 80 hours. Instead of claiming 16 hours and then 80 hours, that person would be better off counting all of his hours of work and dividing them into two 50-hour weeks, for example. This would certainly reflect the reality in our rural areas where unemployment is fairly high.

Therefore, to correct this problem, we are proposing that people no longer be allowed to bank their hours because according to the proposed formula, 1,000 hours at the rate of $6 an hour are worth more than 500 hours at $12 an hour. It therefore pays to work more hours. However, the UI system is only interested in reported income and it is therefore preferable to report the number of hours worked at their true value.

Furthermore, under the proposed reform, people would not be able to receive the maximum benefits. A person would have to work approximately 20 weeks to be entitled to 28 or 30 weeks of benefits, and this still doesn't bring him up to the maximum. The government had programs to compensate for this, such as section 25 programming.

Personally, I am a member of the Chamber of Commerce and I can tell you that we use these programs to develop cross-country trails or bicycle paths. Many projects could be carried out in our region, but quite often, when the programs are announced in late March or early April, there is too much snow on the ground and we can only do half of the work that we could have done at the start of the winter, when the weather was more clement and there was less snow. The money could be better spent. Therefore, we suggest that community work be administered by the regions.

Mrs. Lalonde: Thank you very much.

[English]

The Chairman: On the Liberal side, Mr. McCormick.

Mr. McCormick (Hastings - Frontenac - Lennox and Addington): Thank you very much for your very interesting suggestions here.

I want to say I'm glad to see you recognize our efforts and support our shift in the employment insurance from passive to active measures.

On part II of this bill, I want to get your personal comment on what you see as perhaps the best use of the tools you could get and what you might think would be most effective in your area of Atlantic Canada. Would it be the earnings supplement, the wage subsidies, the self-employment assistance, the training or the job creation partnerships? In your view, which would be the most successful?

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Mr. Michaud: I think it would be employment initiatives. Our local lead corporation has administered the program. It has more than a 78% success rate. Why pay someone on UIC year in and year out when this particular program has a high success rate after 18 months in existence? It's one program that should be kept. It encourages people to have their own businesses as long as they do not compete with existing businesses and put everybody out of business.

Training is another part that needs to be addressed, but as it is now, the status quo, for every hour of training that is offered on computers, for instance, you have three applications. Drawing UIC benefits while on training is a great idea. The course materials are also expensive. We propose that as much as you can save on administration of the system should be directed toward training and the EI employment initiative endeavours.

Mr. McCormick: Thank you. I understand there's a program going on in Charlottetown, a local partnership with the unemployment/HRD offices and the Charlottetown Chamber of Commerce. Could you tell me a bit more about that?

Mr. Michaud: That is beyond my expertise. I'm from New Brunswick. I do have a colleague with me who will be appearing before your committee. I could put him on the mike right now and he could answer that question right away.

Mr. McCormick: Is that your colleague beside you?

The Chairman: Could you kindly identify yourself?

Mr. Eric Ellsworth (Chair, Atlantic Provinces Chamber of Commerce): Yes. My name is Eric Ellsworth. I'm the chair-elect of the Atlantic Provinces Chamber of Commerce and president of the P.E.I. Chamber of Commerce.

Mr. McCormick: Good morning, Eric. I am from eastern Ontario.

In Charlottetown I heard about this local partnership with the chamber of commerce and the HRD office. I think we have to look more within our own communities as to how to use these programs. Could you tell me more about that program?

Mr. Ellsworth: That program seems to be working very effectively in the Charlottetown area. It is a combination of training in the classroom and working as a student assistant in the business environment. For a period of time they are receiving on-the-job experience and on-the-job training. After that they are able to go back to the classroom environment and hone their skills in areas where there may have been some deficiencies. This puts them in a better state for job placement with the business community. It has been a fairly successful program. It has certainly identified particular areas in which people do need upgrading as far as their skills are concerned and also as far as their on-the-job experience is concerned.

The Chairman: Thank you very much, Mr. Michaud and Mr. Ellsworth, for your thoughtful presentation. We will certainly take your point of view into consideration as we try to improve Bill C-12, an act respecting employment insurance. Your contribution, like the contributions of many other Canadians who have appeared before our committee, is indeed valuable. Thanks very much.

Mr. Michaud: Thank you. I didn't have a chance to show you, but I do have a computer layout of how the system would work compared to the status quo. If you give me an extra five minutes, we could run through it.

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The Chairman: Oh, yes, please go ahead.

Mr. Michaud: It's going to be on screen. I hope you can hear me well.

What's in the brief is sort of version A. You have your number of hours, which comes to an average of 782.40. Let's say the average hourly wages would be $8.41. Gross wages would be $6,531. Then the divider would react to those wages and number of hours at 17.21. The divider reacts exactly. It's a formula based on the number of hours. After that, it would give you a weekly insurable salary, and that salary would be multiplied by 77.9% instead of 55%, which is the status quo. That would give you a gross weekly benefit of $273.65.

Since your hours are close to what they would be at 800 hours, they would be multiplied by 0.9947, which is almost a factor of one. That would give you a benefit of $272.01; the status quo would be $253.49, with a 7% increase. Also, 132.97 community work hours would have been applied against it.

That's what we propose. With the statistics we got from our MP, Fernand Robichaud, we worked with the formula a bit and found that by working a few numbers we could change - and make a profit with it. So the numbers used in the formula - for example, on low salaries we're going to change it to 75% instead of 90%. We find that we actually save 6% on UIC on average. There are 70 or 72 cases involved, so that's an average of all kinds of wages and community hours.

I hope you can see just how the thing works. It's threefold. You have your divider that moves, you have your rate that moves, and you have a penalty multiplier. All of those things together encourage employment, and you are able to save dollars - here is 6%, for instance. It also encourages community hours in a work way. Maybe 50% of community hours could be encouraged and you could throw an extra 25% towards courses.

There are great possibilities in looking at this more closely. Thank you.

The Chairman: Thanks.

Do we have any questions on that? Mr. Easter.

Mr. Easter (Malpeque): I have just one, Mr. Chairman. I'm wondering if the witnesses have looked at the Scott and Regan amendments, which also change the current proposals substantially in terms of getting rid of the dead weeks and having a divisor of two weeks over eligibility.

I wonder whether you have any comment on that. Maybe you haven't seen those amendments.

The Chairman: Mr. Michaud, have you seen those amendments?

Mr. Michaud: I've heard about the amendments of having a divisor two weeks above your worked hours. That actually encourages people to bank, to hide hours. What we have here is something that encourages people to show their hours. People will face a reduction in their UIC benefits of up to 7% or 8%, as you would like to see happen. What people won't accept is a 30% or 50% reduction and not having money to meet both ends between jobs. It encourages people to do all kinds of things, and we can't blame them. There's just no more room -

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I think this system encourages people to work more and therefore we'll save money. On top of that, it does offer savings of up to 6%. It takes money from the higher UIC earners and gives it to the poorer ones, but 6% is saved in the way it's administered. We feel it's better than just having two above-normal work hour weeks because you never gain. There's no incentive.

Mr. Easter: I have one supplementary on your proposal. When you were going through it, I saw the column in terms of community work. Are people given credit for the community work aspect of their work? How does that work under your proposal?

Mr. Michaud: Under my proposal, there would be one year of lag time, probably with status quo. I don't know how you'd go at it, but once the system is in the works, you would be on UIC and it would be up to you to go to look at the different organizations to try to do community work.

Let's say you've put in 200 or 150 hours during the spring or summer. You would be given a paper when you're finished that would be a record of employment. It's a record of community hours worked that would apply the next time you open a claim. So even though you could be in a good claim position while community works needs to be done, you'd still have an interest in doing that community work. The commission could control the number of community work hours by giving quotas to different organizations so that they wouldn't throw them away haphazardly.

The non-profit organizations or municipalities would have to be responsible for the amount of community work hours they could give to the UIC claimants. You could do that through your local politician's offices or through your EI centres. I think they could show that they can be as responsible as the employers giving employment records are at this moment.

The Chairman: Thank you, Mr. Easter.

Thank you, Mr. Michaud. We certainly appreciate your input and we'll be looking at it for ideas on how to improve the bill. Thanks very much.

Mr. Michaud: You're welcome. This program does exist on diskette. It's been improved with six or seven different scenarios. We would love to be able to discuss it at greater length, because it's a bit confusing but it does show that it saves money.

I appreciate the opportunity to appear before you. Thank you.

The Chairman: The next submission will be from the Atlantic Provinces Chamber of Commerce. Appearing will be Mr. Paul Daigle, president and chief executive officer, and Eric Ellsworth, chair.

Mr. Ellsworth, welcome back. We have approximately half an hour. You have approximately ten to fifteen minutes for your presentation and then we'll move to questions and answers.

You may begin.

Mr. Ellsworth: Good morning. I won't introduce myself again.

I must inform you that Mr. Daigle is not available this morning to be part of this presentation. He's out of the province. So I'll be carrying the torch here for the next half-hour.

I certainly welcome the opportunity to speak before the committee on a topic that is so important for the Atlantic Canada region and for Canada. This is a major issue, and we are all very concerned that we take the right steps toward fairness and efficiencies.

The Atlantic Provinces Chamber of Commerce has 125 local chambers throughout the four Atlantic provinces and approximately 17,000 businesses and professionals as members. It is by far the largest and most representative business organization in the Atlantic region.

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The chamber is certainly very encouraged by the nature of the reforms proposed in the legislation. The bill contains many of the changes we have been recommending for a number of years. For example, in our presentation to the standing committee in December 1994, our organization implored the federal government to return unemployment insurance to the roots of being an insurance program.

While we also recommend that any reform endeavour to establish the proper balance of incentives and disincentives to discourage abuse or misuse, as is the case with any good insurance program, we argue that reform of the unemployment insurance program is central to the goal of encouraging employment and that job creation has to be the number one priority, certainly here in Atlantic Canada.

It is therefore most gratifying to hear that the new Minister of HRDC, the Hon. Doug Young, publicly stated that job creation is to be the department's primary goal and is considered fundamental to the success of the EI program.

We also express some opposition to any action that would lead to higher premiums for employers, especially for the small to medium-sized businesses, as this will stifle job creation. We see that premiums are at the highest now and need to be reduced in order to support the initiatives that the small to medium-sized business is taking to create employment in the region.

Based on our examination of the proposed legislation, we are pleased to see that government has been listening. The chamber may not be satisfied with the extent and the size of the changes proposed, but we certainly support the direction. We would like to have seen a much greater reduction in premiums and a faster program implementation schedule. However, we recognize that the dramatic changes will negatively impact on many people and that, wherever possible, they must be given sufficient lead time to adjust to the new realities.

With respect to the improvements that are needed, the provision for a rainy day reserve fund is certainly a responsible step; it's a step in the right direction for government to establish a fund, which can't be exploited, to cover general revenues in the future. We feel that the fund probably could be capped at approximately $5 billion and that if the fund were a self-administering fund, the revenues generated from that particular cap could be used for any kind of downturn in the economy that we might experience in the future. We shouldn't deplete that cap base for other uses or in other departments. It should be strictly used for the EI program.

The present cost of EI is approximately $20 billion, and you're going to reduce it to somewhere around $10 billion. For every billion dollars saved, you're saving 15¢ on premium reductions. Therefore, EI premiums to the small business entrepreneur could be cut in half. This would certainly be very supportive, and it would be an incentive for the business community to work with government in providing new jobs and job creation.

On training, there's no question that training is a key component, certainly in the Atlantic Canada area, and it has to be job focused. It has to hit the growth sector and it has to be driven there.

I spoke earlier about the program that's operational in Charlottetown. I think you'll find that if we have some sort of a combination of cooperative work programs with the small and medium-sized businesses, or even with the larger corporations, there's a benefit in that those people can gain on-the-job experience. The combination of the two will lead to a better skilled workforce.

Failing to merge these training initiatives with the promising growth sectors too often results in a very narrow focus on short-term solutions. We certainly don't want short-term solutions. We don't want a short-term, quick-fix solution that's not going to do anything for our economy in the long run. We've seen that happen before with make-work projects. They come and they go, and there's still a void after that.

With respect to the focus on job creation and economic development, the Atlantic Provinces Chamber of Commerce is front and centre in economic development in the Atlantic provinces. That's what we're all about: supporting the Atlantic businesses so that they can move forward, expand their markets, and so on. Job creation has to be the front part of that. If we're able to create jobs and do it on a regional focus, I think we can have a much stronger marriage between the public and private sectors, and we can work on some good initiatives to do that.

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We applaud the shift from passive income support to active labour market services and a much greater emphasis on active employment measures. We believe that helping unemployed Canadians find jobs is important. However, in Atlantic Canada especially, creating those job opportunities must be our first priority.

The establishment of the $300 million transitional job fund is certainly a step in the right direction, as well. However, there is a relatively small amount of money, and when it is spread over what is likely to be a large geographical area, it will undoubtedly have a very limited impact. We think this fund should be larger, and certainly we think the three-year timeframe is too short. We believe some of our problems with regard to the unemployment insurance programs have been created over a period of years, and we certainly can't correct them over three. We can turn them around, but we can't correct them. So I'm suggesting, and the chamber movement is suggesting, that more time is needed for government to work with the business community to develop those jobs with a skilled workforce.

Unless the expenditure of the transition job fund is carefully meshed with the economic development strategies in the region, we fear that such funds will be too easily siphoned off in one area or another for those traditional make-work projects. As such, they will have little or no impact on the long-term, sustainable development prospects of the region and therefore no lasting impact on sustainable employment. And I think that has to be front and centre with the job creation part of it. We have to look at where we can have sustainable development prospects in the region.

The short-term part of it is not really a solution. It's a band-aid solution at best, and it hasn't worked in the past. With an emerging transition with regard to our economy, we have to look at being more effective in creating those jobs in this region.

From the human resource development side, we know that the economy of Atlantic Canada is in a state of transition. Really, it is throughout much of Canada. But we also realize that the shift in the responsibilities and the downloading of the services and programs to provincial government jurisdictions are putting a lot of pressure on us to perform at the provincial level. We have to make sure that our workforce is prepared to deal with some of the changes our economy is now experiencing, and that of course is on the technology side.

As has been previously stated, as the Atlantic economy restructures it will test the Atlantic workforce. An important aspect both of the new economy and of the evolving transitional economy is that they must adapt to new technologies. The technology-driven change is also knowledge driven. New equipment, often computer based, requires both new skills for its maintenance and repair and new ways of working, since production lines are being replaced by problem-solving teams that demand new types of relationships between managers, supervisors and workers.

We believe, too, from the Atlantic provinces' perspective, that basic education has to be twinned with experience. We have to develop that. We have to look at our efforts to create sustainable employment opportunities, and we must start with a strategic focus on those sectors and subsectors of the regional economy in which we can hope to enjoy competitive advantages, especially in the export markets.

Here in Atlantic Canada we have approximately 2.5 million people. Our economic revenue base is such that we have to look at the global market picture. Certainly, that is what is facing us today. We have to develop a highly skilled labour force and we have to be more competitive.

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Recently, a study conducted by DRI Canada and commissioned by the federal government made a strong case for focusing on six such sectors. They are food processing, forest-based products, mining and materials, diversified manufacturing, information products and services, and business travel and tourism.

We recommend that you take dead aim at one or more of these sectors with an eye to partnering with other levels of government and the private sector to see whether real improvements and long-term sustainable employment can be realized from a more focused and collaborative approach than has been our tradition.

APCC believes strongly as well that training must be far more industry driven than is the case at present. Specifically, more commercially focused training is required, not simply general education. Young people in today's economy, it is often said, need knowledge and skills in four general areas: communication, written and verbal; computer literacy; interpersonal; and technical. However, they also need the experience to go along with that. We see that when many of the younger people don't have employment opportunities and work experience, they are forced to leave the region and they take their primary education talents with them. Far more emphasis must be placed on apprenticeships, internships and co-op education-type programs so that more talented young people do not so often have to leave Atlantic Canada.

In conclusion, APCC is generally supportive of the proposed legislation. We believe it is pointed in the right direction for the most part but needs further improvement and modification as recommended. Once in place, it will certainly need an ambitious action plan and proactive management to oversee its implementation. The federal government must insist that dollars spent be extremely focused and management held accountable for their results. There is always a balance to be struck between the economic development and job placement efforts. This is not a chicken and egg dilemma. The first priority must be jobs and the creation of sustainable employment opportunities. This means a focus on those sectors and subsectors that offer the greatest promise to generate the same, i.e., upgrading them strategically and ensuring that people are trained to make it happen.

As governments proceed to adopt and implement proposed legislation, it is important to remember there are no quick-fix solutions. We should treat with great skepticism any suggestions or implications that such should be the case. Such promises usually illustrate a very shallow appreciation of the deep-seated nature of the problem and serious ignorance of the tremendous long-term challenge to turn things around. Programs and initiatives founded on such thinking are usually very short-lived and seldom, if ever, produce the intended results.

We therefore recommend that you very carefully apply scarce economic and training resources towards encouraging focused and collaborative action in key sectors rather than having funds siphoned off to dead-end initiatives.

I'm just going to finish with a couple of comments. My colleague Mr. Michaud made a very excellent presentation this morning on other opportunities or options that might be available to you. He has taken a great deal of time to study your proposal. He has also provided you with some options that suggest regions that have higher seasonal employment need a very fair and careful look at what your system proposes and maybe what it cannot do for our people. I hope you have very carefully listened to what is being said by those who have been before you from the business environment.

Mr. Michaud has identified that his system creates a fair benefit to lower-income workers. It creates advantages for people to work more hours. It identifies that we need a system that supports seasonal business operators. We cannot get away from seasonal businesses in any region of the country, but maybe more so in the Atlantic region. When the ice sets in, there's no fishing and there are no people on the beaches. Some of our primary sector areas here are very seasonal in their own natures. It certainly brings back a perspective where there is some community service work and community involvement for the betterment of the communities overall.

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It would appear that over the last number of years - Statistics that have been used and reported in the employment system for Canada guide in December indicated that in 1982 15% of the UI claimants had collected benefits three or more times before. In the past five years that percentage has increased to approximately 40%.

You have to look deeply into that type of statement as far as percentages are concerned, because there are many factors involved, whether the factors are job sharing or a downsizing of the business workforce. Everybody has had to look at re-engineering his business because of the amount of business available. I think you have to take into consideration the fact that the business community can only assist the UI program to the extent that there is an opportunity there for a profit at the end of the day. In the future if the opportunity isn't there because of some of the changes that have taken place, business cannot and will not employ people until things turn around.

I will close by saying that I certainly appreciate the opportunity to make this presentation. I did not read it in its entirety but I did try to capture the highlights of our presentation. Thank you.

[Translation]

The Chairman: Mrs. Lalonde.

Mrs. Lalonde: Thank you, Mr. Ellsworth. I see that you share our concern that the fund has too large a surplus. You estimate its value at $12 billion. According to official figures, we know that by the end of 1996, even with the lower revenues, the fund will total $5 billion and that next year, reform or no reform, the fund will climb to at least $10 billion.

I don't know how you feel about the government's decision to lower the maximum level of insurable earnings from $42,400 to $39,000. In so doing, the government is providing, this very year, a gift of $500 million to big business, to those who employ many people at these salary levels, and $400 million to workers earning between $39,000 and $42,400. This means a drop of revenue for the fund.

The government could also have chosen to cut UI premiums further instead of favouring capital-intensive businesses. The Canadian Federation of Independent Business, in its submission to our committee, stated that small and medium-sized businesses were truly penalized by this reform and that it was truly disappointed with the process.

Therefore, how do you feel about the decision to lower the maximum level of insurable earnings, a move which shifts the burden of deficit - artificial deficit - reduction to businesses where salaries are under $39,000 and to the workers who earn these salaries, and which enablesMr. Martin to say that he has achieved his objectives?

What is your opinion of the lowering of the maximum level of insurable earnings?

[English]

The Chairman: Mr. Ellsworth.

Mr. Ellsworth: If I understand the question, I think big businesses will certainly benefit more because they have more employees, probably at the higher level. It will benefit them more than it will the small and medium-sized businesses because a number of their employees would not reach that $39,000 cap.

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I don't see why the unemployment insurance program should be identified as a way to cut the deficit. I think we have other ways to cut the deficit. We have ways to bring the program more in line with what it was originally designed for and we certainly have ways to make it fairer, but I would not want to see that money coming directly out of the EI program right now be to the detriment of those who don't have the right to claim or who couldn't claim. I would sooner see more money put back into the EI program from the training component to support the future growth of a skilled workforce.

[Translation]

Mrs. Lalonde: You are concerned and your priority is jobs. You state this very clearly in the conclusion to your brief. In my opinion, you are perfectly correct in saying that priority must first be given to jobs, that is to the creation of sustainable jobs.

Do you not feel that this reform, which cuts $248 million, coupled with the 1994 reforms which took $620 million away from the Atlantic provinces, will have a depressing effect on the economy? I don't have the figures in front of me, but I believe the cuts resulting from the announced reforms total nearly $900 million.

Before going ahead with the cuts, shouldn't the government have focussed on helping regions get back on their feet from a job creation standpoint? You state, quite correctly, that there is no quick-fix solution and I agree entirely with you on this point.

[English]

The Chairman: Do you understand what she's saying?

Mr. Ellsworth: Yes.

The Chairman: Go ahead.

Mr. Ellsworth: You're saying that a large amount of money, $600 million to $900 million, has been cut from UI but not put back into the economy. Am I correct in saying that?

[Translation]

Mrs. Lalonde: That's correct.

[English]

Mr. Ellsworth: We stated in the report that the first priority is certainly jobs. That's what we have to focus on, and through proper training and cooperation with the business community we can create more jobs. Businesses can't create jobs themselves. There has to be some assistance, because the cost is significant. The bottom-line profits are not there to allow the small and medium-sized businesses to hire additional people or to extend the period of employment for the sake of making sure they qualify for UI.

Yet there's a lot of pressure - And you're putting a lot of pressure on the small to medium-sized business to do that because the worker is looking at the ways and means of that survival side when they're not employed in the seasonal jobs.

We do need more money to come back into the region to support the training aspect and to focus on those growth-sector areas that will create sustainable jobs for the future. Certainly some of that money has to be returned to - I alluded to the $300 million fund. That's not a large amount of money when you spread it around the geographic region we're talking about.

[Translation]

Mrs. Lalonde: That's right. Over three years. The $900 million taken out, that's each year.

Thank you very much.

[English]

The Chairman: Thank you, Madame Lalonde.

Mr. McCormick has a brief question and then Mr. Easter does.

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Mr. McCormick: Good day, Mr. Ellsworth. I am very pleased to see your support for the shift from passive to active measures in employment insurance.

EI represents an additional $800 million, a reinvestment in results-based employability measures. Mr. Ellsworth, can you describe to us what advantages you see in the approach we're taking? Which of the five tools in part II do you think will be the most valuable in getting Canadians back to work?

Mr. Ellsworth: I guess the advantages of getting people back to work - Again, I go back to the idea of cooperative measures, of working with the business community to develop a strategy that's focused on giving those people the skills they need in order to do the job today in the new economy. Whether that's through the kind of cooperative work initiatives we've talked about, through employment initiatives, the benefits can be far-reaching if we focus on using the money wisely, not as a quick fix.

You indicated that you had five initiatives. I am just quickly looking for those.

Mr. McCormick: Actually, the five initiatives include the wage subsidies, the earning supplements, the self-employment assistance, the job creation partnerships, and the skills loans and grants, which, of course, are with the provincial counterpart's authorization.

Mr. Ellsworth: Yes. I certainly see those programs as being of benefit to the region. I think they have to be developed very carefully so that they're focused with the business community to make sure we're working in areas where the new jobs being created are going to be sustained. There's no sense in going out and trying to train people for jobs that will not be available to them in five years' time.

I am going to zero in for a minute on the seasonal employee. We have many seasonal employees in this region who have worked for a number of years for the same employer. They've provided very good service. It's a requirement for those businesses to have that kind of skilled workforce in order to provide the services, whether it's in the tourism industry, a restaurant or whatever.

It's important for those people to feel they have a place in society where they can progress with the kinds of changes taking place in the economy today even though they have seasonal jobs. The federal and provincial governments have to do a lot of twinning and a lot of working with the business community to make sure we're focusing strictly on the areas where we can get the greatest benefit down the road, and that has to be through developing a better skilled workforce in those particular areas.

The Chairman: Mr. Easter.

Mr. Easter: Thank you, Mr. Chairman.

Welcome, Eric. I find your brief interesting, especially your appendix of seven points, which really don't directly relate to this committee's work but are important just the same.

As for the employment measures, I think it's important to understand that the objective of this bill is to establish a contract with the province in those employment measures. It may be something that the chamber wants to keep in mind as we move down the road in developing those initiatives to develop a skilled workforce.

To a certain extent, one of the criticisms of the business community - and I think we've talked about this before as well - is that to a great extent the business community attacks the UI premiums and the cost of the program when I think we ought to recognize that especially in Atlantic Canada there are two ways of looking at this. It can be looked at as a cost or as an investment.

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I think the dollars collected by those in unemployment in the off-season are extremely important to the business community - the dollars are spent there. It's extremely important to the business community in terms of its evolving business as well.

I think this bill tries to maintain that in the future, to ensure - especially with the amendments - that the safety net is there for the seasonal workers in the off-season. It should also help the business community. Would you agree?

Mr. Ellsworth: Yes, I would agree. Certainly we have to make sure we don't pull the foundation out from under what we have now. We have to build on it and to reshape it so that there is sufficient disposable income for those people on seasonal employment to make it through those periods of time until they can get back to work. Certainly, those dollars are important dollars in every community here in the Atlantic region.

Mr. Easter: What's your view on the topping up of the family income supplement? We've had a fair bit of controversy around that point, and I'm wondering what the chamber's view might be on it.

Mr. Ellsworth: I don't know. I can't really speak on it, other than to say that I don't know whether it's enough to bridge the gap. I guess I'm a little bit at a loss to give you a complete answer on that, Wayne.

Mr. Easter: Okay, thanks.

The Chairman: Thank you, Mr. Easter.

Thank you, Mr. Ellsworth. Thank you very much for your input. Have a good day.

We're going to take a two-minute break.

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The Chairman: We will hear next from Mr. van Audenrode. Can you hear us, sir?

Professor Marc van Audenrode (Individual Presentation): Yes, I can.

The Chairman: Wonderful. Thank you very much for offering to participate in the improvement of Bill C-12, an act respecting employment insurance in Canada. As members of the committee, we of course await your specific encouragement to improve Bill C-12.

We have approximately half an hour. Perhaps you can use ten to fifteen minutes for your presentation, and then we'll engage in a question-and-answer session.

Thank you very much.

[Translation]

Mr. Van Audenrode: The Canadian economy has been suffering for over 15 years from a persistent high unemployment rate.

Unable to find a solution to this problem, our various governments have often been tempted to shoot the messenger and to find a solution to the problem of unemployment in attacks on the unemployed rather than on our economic problems.

They have been supported in this approach by the high rate of collective anxiety among the public at large. We can ultimately convince ourselves that we will never share their fate.

The result is that over the past few years, unemployment insurance has become one of our favourite national obsessions, and the usual suspect par excellence when we are looking for the causes of our labour market problems.

No economist can deny that the UI system introduced in 1971 was too generous. It failed to find a balance between the requirements of an insurance plan, the social safety net, and those of a program encouraging people to get back to work, which are the two sides of a balanced unemployment insurance system.

This error was, however, corrected over the 1970s and 1980s. In 1985, according to economist Michael Burda's calculations, eight OECD countries had a more generous UI system than Canada's, and the Canadian system was only slightly more generous than those of France, Norway and Sweden. Therefore, Canada fell within the average range of OECD countries.

Furthermore, to my knowledge, not one of those countries has developed a collective hysteria about its unemployment insurance system comparable to the hysteria that has developed here in Canada.

The message that emerges from all the possible measurements of the generosity of Canada's UI system is that overall, our system is not exceptionally generous compared with the other members of the OECD, and that its generosity has been dwindling steadily for the past 20 years. The speed at which it is dwindling has been accelerating in recent years. Let me quote you a figure. In 1990, nearly 99% of weeks of unemployment were covered by UI. In 1994, that figure had fallen to 70%, and by December of last year, to 68%.

In fact, over the past five years, the unemployed are the one group in Canadian society who have contributed the most to helping put public finances in order. This group has contributed more than the military.

The aim of my presentation is to prove three things to you: firstly, that Canada's UI system is not exceptionally generous; secondly, that in many respects, our system works well and thus is not really in need of an in-depth reform; thirdly, that many of the proposed changes will have impacts that are hard to assess. I will come back to this point later.

I won't go into detail about the generosity of the system, because I'm certain many other witnesses will focus on this aspect.

We are suffering from the delusion that we have a Rolls Royce of a UI program, when in fact it is only a Lada, or even worse, a Tarabant.

As I have said, our system earns an average rating when compared to OECD countries, the valid standard of comparison in the context of economic globalization. Even compared to most of our neighbours to the South, our system is not overly generous and the latest reforms have helped considerably to import into Canada the social model found in Alabama or Mississippi, which may not have been the objective at the outset.

If the premise underlying the desire to reform the UI system is this belief that the present system is too generous, I believe that premise is wrong.

In many respects, the existing system works well. We have two income security systems. It is very important to bear this in mind and I will come back to this point later.

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Welfare is the helping hand of last resort, while UI exists essentially to smooth transitions on the labour market. The raison d'être of UI is just that: to maintain a very strong link between unemployed workers and the labour market.

UI enables people without jobs to look for the jobs they are best suited to, by freeing them from the fear of destitution. That is what it was created to do, and that is what it does. Declining UI coverage over the past five years has lead to an unprecedented decline in the level of activity, not only in Canada but also in all other OECD countries, and in a rise in the number of participants in social welfare programs.

We have decided here in Canada that there is a level of destitution below which we do not want people to fall. That is why we have a social welfare system in place. Each time the generosity of the UI system is reduced, the social welfare system becomes more attractive and workers are pressured into cutting their ties to the labour market. The results are fairly catastrophic. As my colleagues from Laval University demonstrated, when a person becomes a social welfare recipient, he remains so for a long time.

In our studies with Professors Pierre-Yves Crémieux, Pierre Fortin and Paul Storer from the University of Quebec at Montreal, a considerable amount of evidence was found that the existing UI system works well.

Firstly, contrary to firmly established conventional wisdom, UI does not lead people to look for work less zealously. The image of the unemployed worker sitting on a sofa swilling beer and watching television until his benefits run out is quite simply false. We have succeeded in isolating many characteristics that influence the intensity of an unemployed person's search for work, but never did we manage to link in any significant way an unemployed person's UI status with the intensity of his search.

Secondly, making UI available to an unemployed person ultimately enables him to find work that pays better. According to our calculations, an unemployed person who receives UI benefits, as opposed to an unemployed person not eligible for benefits, generally ends up finding work that pays from 7% to 9% more, all other things being equal.

Of course, the price to be paid for this is a slightly longer period of unemployment for those receiving UI benefits. According to our calculations, an unemployed worker receiving UI is generally without a job for about four weeks longer than persons not eligible for benefits.

Our findings have led us to conclude that Canada's UI system is economically viable, both from the individual and the social standpoints. The system's costs are justifiable solely from the perspective of the economic benefits it generates, without even taking into account the social benefits.

[English]

The current UI system is often criticized for two reasons: its massive, and some people say abusive, use by seasonal workers and seasonal firms; and the addictive effect it has on repeat users.

Once again, our students bring out some new information. It is true that seasonal workers behave differently from other workers when they're unemployed. They search with less intensity and tend to come back more often to UI, but they also have a higher probability of leaving an employment. Furthermore, and maybe more importantly, nothing in our results allowed us to conclude that these behavioural differences are linked to the workers' characteristics rather than to the kinds of jobs these people have. Secondly, we didn't find any evidence of unemployment insurance having an addictive effect in the sense that those who tasted UI would come back more often and stay on UI for longer periods.

These results, which differ from the results of other studies of Canadian unemployed workers, can be explained by the fact that in our study we were able to control for the individual characteristics of the unemployed, which was not done in other studies. Some workers apparently, unfortunately, have piled up against them many characteristics - so that the kinds of jobs they get bring them back into UI often and for very long periods. Once again, it is linked to the person's characteristics and not to the UI parameters. Also note that this result, although it is different from the results of other studies about Canada, is actually completely consistent and comparable with the results that have been found for the U.S. by people such as Burda and others.

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We believe that it is not by changing the UI parameters one will make Canadian workers younger or more educated. What our results indicate is that individual characteristics seem to drive an individual's unemployment experience.

Of course it would be difficult for me, after having told you I think the system is working very well, to be overenthusiastic about the proposed change. I do not have any objections to some of the proposed measures, which are interesting, such as the reduction of the maximum benefits to 45 weeks, the switch to an hourly system from a weekly system, the better accounting of needs and income in determining the after-tax replacement rate. All of these things are sound, but some of the other measures, such as the new rating system for the unemployed and the reduction in the maximum insurable earnings, worry me.

What worries me the most about this reform is its magnitude and its complexity, and it does so for two reasons. While it isn't easy to understand the impact of a very precise change in any system, it is often impossible to figure out what the exact consequence of a complete overhaul would be. I, like many other economists, could give you a very precise estimate of the impact of the reduction in the number of weeks of benefits, for example. I am personally incapable of figuring out what the result of this reform will be, and I believe nobody is. All the proposed measures will interact and their global impact isn't predictable.

I have a few examples. First, this reform makes a lot of the fact that people with jobs of 15 hours or less will now be covered. In the meantime, the switch into an hourly system will make it incredibly difficult for somebody holding one of these jobs to actually be eligible for benefits. They will be covered but not eligible; it won't change much in that situation.

Another example is that the other system gives seasonal workers an incentive to work hard for a few weeks while the new system of measurement of the benefits gives them an incentive to work for long weeks. What will be the combined effect of these two measures, I don't know.

In more general terms, there are five or six different measures that will impact differently on seasonal workers. Nobody can tell us what the global impact of these five or six measures will be.

The second problem with the magnitude of this reform is that I believe the estimates of the financial impact of this reform are not credible. The whole purpose of this reform is to change Canadian workers' behaviour, yet these impacts are measured by applying the new UI parameters to the existing behaviour. In a few months at best, if the reform is successful, these figures will be irrelevant and we won't know where we are going.

I don't have time to review each and every proposed measure. Let me just leave you with a few questions. The first one is how many of these jobs of 15 hours or less will simply disappear as a result of the reform, killed not by the few cents in the payroll tax but simply because a lot of a small entrepreneurs will draw away from the paperwork?

A reduction in the maximum insurable earnings is also a reduction in the payment made by high-wage people to the system. The question is, does the Canadian global tax system and transfer system really need another reduction in its progressivity?

Third, as far as I know, no other country has a system of rating like the one proposed here. One has a system of rating up front, which is the U.S., but the question is whether it is really time for a social experiment of this magnitude in Canada.

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As a conclusion, I would say that the UI system is not working that badly. It has its defaults and its imperfections, but it also has many qualities. The ever so pressing need that we feel to reform UI in Canada is based partly on incorrect information and partly on forgetting some of the specificities of this country.

Of course there are many Canadians working in seasonal activities, and these seasonal activities deliver many repeat users into our system. But isn't that just the price to pay if we don't want everybody in Canada to live in Montreal, Toronto and Vancouver and if we don't want to make the Gaspé Peninsula and the maritime provinces into giant Disneylands?

Second, we too often forget one part of the employment equation. By reducing the generosity of UI, we make both work and welfare relatively more attractive. If we do not deliver jobs, the second effect will clearly dominate. The experience over the last five years tells us that this second effect clearly has dominated.

My personal areas of research have brought me to talk to you about the UI part of the reform and very little about the reform of training programs. And that saddens me, because I believe this is the right direction to look at. All the results I have presented here show you that Canada is not suffering from the parameters of its UI system. It's suffering from the parameters of its workforce. I believe education, training and employment initiatives are positive measures we have to look into long before we look into reforming UI. Thank you.

The Vice-Chair (Ms Augustine): Thank you, Dr. Van Audenrode. We'll have a round of questions. Mrs. Lalonde from the Bloc will start.

[Translation]

Mrs. Lalonde: Thank you very much. You have brought a breath of fresh air to these proceedings.

Many of the questions that you raise are extremely important and once again, I hope that the committee members will take note of them.

Since our time is limited, I will go directly to the heart of the study that you conducted. You indicated that your study, unlike others, had enabled you to take into account individual characteristics and that, in your opinion, this explains the different results obtained. Could you elaborate further on this point for us?

Mr. Van Audenrode: That is the likely explanation. Most of the other UI studies carried out to date relied essentially on administrative data. This data revealed that many of the same names often showed up on unemployment insurance lists for extended periods of time - Everyone is familiar with the figures that indicate a small percentage of the population bears an enormous share of UI costs.

That is a fact. The question that arises, however, is whether these individuals often end up on UI because the UI system is poor or because, in light of their individual characteristics, they fair poorly under current economic conditions.

Our study seems to indicate that the second explanation is correct. My conclusion is based on the fact that once the variables that characterize these individuals are isolated, more dependence is noted. In other words, if you are older and not well-educated, it is clear that you will often be dependent on UI for extended periods of time, and this has nothing to do with the parameters of the UI program.

Mrs Lalonde: Thank you. This information is extremely valuable to us.

Could you also elaborate further on one of the rather dramatic conclusions that you have drawn, namely that it is impossible to assess the impacts of this reform. That was also my impression.

Could you elaborate further, since the changes are numerous and complex. As you know, a great many stakeholders or groups who have expressed a collective interest in this bill have asked that it be withdrawn, not because they do not want to discuss changes, but because the changes are too numerous and too complex for amendments made at random in the text to alter the very nature of the reform process.

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Mr. Van Audenrode: Basically, the problem relates to the way all programs and economic policies, regardless of their nature, are assessed. When you change the rules of the game, people's behaviour changes. We know this for a fact and unfortunately, it cannot be taken into account. The same thing occurs when efforts are made to assess any economic policies.

The problem becomes especially striking when a policy is formulated with a view to getting people to alter their behaviour. The only way to assess the impact of such a policy is to observe what is happening today and try to make these variables conform to new program parameters.

Having said this, I am still convinced that the calculations that have been made are cautious and give a very clear indication of what is going to happen in the next few months. Beyond that, I think we will have to monitor developments very closely.

Mrs. Lalonde: Thank you.

[English]

The Vice-Chair (Ms Augustine): Thank you.

We'll now move to the Liberal side with Mr. Allmand's question.

Mr. Allmand: Thank you very much.

Professor Van Audenrode, since you're an economist I want to raise with you a point that's been raised by many of the business witnesses who have appeared before this committee. Many of them have said the reduction in premiums in the bill doesn't go far enough. They repeat over and over that payroll taxes are the killers of jobs.

I'm not an economist but I'd like your view on this. It seems to me that in the OECD countries, some of the most prosperous countries in the world, they've had payroll taxes for many years for pensions, for unemployment insurance and for other things. In those countries they have, for the most part, low rates of unemployment. We've had payroll taxes in Canada going back to the end of the Second World War.

How legitimate is this argument that payroll taxes kill jobs? The push is for even lower and lower premiums into the fund, and if we push this argument to its logical conclusion we'll end up with no fund at all.

Prof. Van Audenrode: It's clear that if you reduce the payroll tax too much there won't be any more benefits. The fund will go bankrupt.

It is clear that payroll taxes reduce employment. If you increase the wage cost of doing business, that reduces employment. The estimates I have seen presented by business people and sometimes presented by people opposing payroll taxes are clearly out of range.

I don't see why a dollar you pay into the government's pocket should have a more negative impact on employment than a dollar you pay into a worker's pocket. Basically all the estimates I've seen on the impact of payroll taxes on employment are way out of range compared to what we know about the impact of real wages, individual wages, on employment.

It's clear that if you reduce payroll taxes you might increase employment a little, but it will be marginal, in the same way that if you reduce wages a little you might increase employment a little. It will be marginal.

Mr. Allmand: We've seen some cases where, when we reduce payroll taxes or taxes of any kind, the companies in question, due to globalization, will invest in other countries where they have even lower wages instead of investing those savings in jobs in Canada.

Prof. Van Audenrode: Yes, that's possible.

Mr. Allmand: Thank you.

Prof. Van Audenrode: I know this has been some people's favourite argument. I definitely believe it's clearly overblown.

I believe the paperwork this payroll tax represents is a killer of jobs for small businesses, and that's much more important than the few cents the payroll tax represents.

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The Vice-Chair (Ms Augustine): Dr. Van Audenrode, we have one more question from the Liberal side, from Mr. Nault.

Mr. Nault (Kenora - Rainy River): Thank you, Madam Chairman.

I wanted to ask our witness about his research that indicates that seasonal workers search less extensively for other work while on UI, which obviously suggests that UI is not being used as a temporary income support until they find another job but is simply part of their annual compensation package.

I come from the railway industry, where that's used on a regular basis year in and year out. I'd be interested in knowing whether you see that as a problem with today's economy. Older railway workers who came into the system in the 1940s and 1950s, when UI was not very generous, tell me that it was accepted they would look for secondary jobs in times of lay-off. In most cases they were very successful. Yes, they were low-paying jobs, but that was accepted as part of the job when as a unionist you had a situation where you didn't have the seniority to stay working year-round.

Can you tell me what your conclusion is? Do you accept that as part of the system in Canada now? Or should we be attempting behavioural change so people would be looking for other employment instead of basically just staying on UI as a supplement to their incomes?

Prof. Van Audenrode: I think your analysis of the results about seasonal workers is correct. It is clear that to some extent seasonal workers wait for the season to come back and that can explain why they search less. The question is, how can we change that? And I guess the answer to that question depends on whether there are other jobs available out there in many regions.

I think the whole debate regarding seasonal workers, which is crucial, is to find the right balance between having a social contract with people who live in regions that are heavily dependent on seasonal work and giving them the right incentives to try to go into other businesses.

But as you know, there is not much accounting sense in developing large businesses north of Quebec City. The big market is to the south, and in many instances you want to be as close as possible to the southern border. That leads me to believe that in many Canadian regions seasonal work will be the backbone of the economy for many more years. If you kill seasonal jobs you kill the economy in these regions too.

Mr. Nault: Let me see if I can move this away to some extent from just seasonal workers and go to workers or employers who use UI as a form of a compensation package. That of course is very extensive in Canada and is a much larger thing than even the argument about seasonal workers who can't find other employment when their seasonal work shuts down - for example, if you're a fisherman, because of ice coming in.

Do you not think that behavioural change needs to be looked at very closely? Is it fair? Is it acceptable for Canadians to expect other employees who pay into the system to allow employers to use that as a compensation package?

Prof. Van Audenrode: I don't believe it's fair. I think it's much more widespread than we believe. I believe that this also happens in the U.S. Let's not bang our heads. This is part of any unemployment insurance system. I also believe in what the U.S. system tells us. This is not industry-specific; it's firm-specific. There are some firms that use the system and some others that don't.

Some people abuse the system. I tend to believe that the way to fix it is not to kill the system but to make sure people won't abuse it.

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Mr. Nault: One of the problems I have with your brief is that you tend to focus on our Americanizing the system. My understanding is that the Americans request at least 26 weeks on average to qualify for their unemployment insurance. That's a large step away from where we are today, where you can get unemployment insurance after as little as 12 weeks. I think comparing us with the Americans is pushing the envelope a little. I wanted to put that on the record because I think it's a false impression when people suggest that we're going in the direction of the Americans.

The other issue that I think is most important in your brief is the one where you suggest that the impact of the proposed changes is unpredictable. And I know that economists always have trouble predicting things. That's probably why we're in the mess we're in today when it comes to our deficit, because I know economists predicted we should spend more than we collect.

I'd like to know how you perceive our putting a monitoring system in place - which is all throughout your brief - as a way of making sure we don't continue to make changes until we know what the impacts are. How would you see the Government of Canada doing that in order to do the proper analysis you suggest in your brief?

Prof. Van Audenrode: I think HRDC has very good evaluation groups and they should do that. They potentially could do that.

To come back to your comparison with the U.S., I agree that on the entrance requirement we are still more restrictive than the U.S. If you take the measure of the most UI generosity you can think of - and economists have a very wide imagination and have come up with many of them - we are about at the medium of the U.S. states. That's where we are. We are on the average in the OECD. I'm not saying that we are falling into a system of a developing country. I'm saying we are just being average, not exceptionally generous.

Mr. Nault: Thank you very much. Madam Chairman, I'm quite used to being average where I come from. I want to thank the witness very much.

I am very interested in the issue of the monitoring of the behavioural change, which is what our witness has suggested in his brief. It is important to see whether in fact we're spending all our time making these changes and not getting the kind of results we want. The minister has said very explicitly in the not-too-distant past that the monitoring issue is as important as anything else in this bill, and I'd certainly be interested in our witness's views if he could give us some supplementary information as to how he thinks we should implement that.

The Vice-Chair (Ms Augustine): Thank you very much, Mr. Nault.

Thank you, Doctor, for being with us today. If there is anything you would like to send to the committee for further reference, we'd appreciate hearing from you.

We'll take a break at this point and bring this session to a close. Thank you very much, Doctor Van Audenrode.

Prof. Van Audenrode: Thank you.

The Vice-Chair (Ms Augustine): We have one other presentation. We'll take a two-minute break. Thank you.

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[Translation]

The Vice-Chair (Ms Augustine): Welcome.

[English]

Welcome to the Standing Committee on Human Resources Development

[Translation]

to the Association coopérative d'économie familiale du Québec.

[English]

Welcome, Mr. Germain. Would you please identify the individual with you. I know you're an analyst and spokesperson for the group. I'd like you to introduce your companion.

[Translation]

Mr. Daniel Germain (Analyst, Association coopérative d'économie familiale du Québec, Spokesperson for the Fédération nationale des associations de consommateurs du Québec): Allow me to introduce Mr. Richard Dagenais, an analyst with the Fédération nationale des associations de consommateurs du Québec and a member as well of the ACEF du Québec.

With your permission, I will now read our synopsis.

[English]

The Vice-Chair (Ms Augustine): You may begin, sir. At the end we'll have some questions from the committee.

[Translation]

Mr. Germain: The Fédération nationale des associations de consommateurs du Québec has observed with regret that Canadian social programs are being eroded. We believe that Bill C-12 is an integral part of this process and that it therefore threatens the standard of living of our clients.

With all due respect, we would like to remind the minister and the committee members that the UI system represents in the eyes of many Canadians a heritage won through the struggles and hard work of their parents and grandparents, a heritage which stands as a bulwark against the barbarity of the free marketplace.

In 1942, Sir William Beveridge said that the function of a social security system is to support employment so as to eliminate unemployment, provide free health services and promote support for the family. In other words, it is up to the government to control the most harmful effects of social and economic situations by passing legislation that enables society to assume the risks associated with fluctuations in the economy. Social justice is not only just, it performs a real economic function.

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It is strange, to say the least, that the Minister of Human Resources Development has tabled a bill that impoverishes those who are excluded from the labour market at a time when they have the most need of a system that provides them with adequate protection in these times of turbulence and economic realignment.

According to its drafters, Bill C-12 should make it more worthwhile to work rather than to collect unemployment insurance by encouraging recipients to return to work more quickly. The measures put forward to motivate them to return to work range from tightening eligibility criteria to reducing the amount and the actual benefit.

The bill also provides penalties for those who are frequently unemployed. How can such measures really encourage the unemployed to return promptly to the workforce when there is currently a crisis of employment in Canada that appears to be far from over? Will the federal government abdicate its responsibilities toward the regions, families and individuals by abandoning proper economic governance in favour of natural market activity?

When the government no longer plays its role as development officer, the regions must bear the economic burden of the economic recovery and job creation, even though, in many cases, the activities involved in economic diversification could take years.

When the government reduces unemployment insurance benefits, it is acknowledging that unemployment is primarily the responsibility of individuals and that an overly-generous insurance plan represses individual initiative.

It was Mr. Axworthy, the former minister and promoter of the reform bill, who tried in 1995 to get Canadians to swallow the idea that it is not the shortage of work that causes a third of the unemployed to remain unemployed for more than six months, causing plan costs to double since 1982, but rather the ease with which people can receive benefits. It is offensive to hear such ideas when jobs are steadily disappearing right across Canada.

What interests is Bill C-12 defending when it makes society's poor bear the brunt of the socioeconomic costs of the new economy that is spreading across Canada?

The rhetoric by the Minister of Human Resources Development is intended to convince Canadians that Bill C-12 is a good piece of legislation because it will cover more workers and will make it easier to create jobs. In fact, a close analysis of clauses 7, 10, 12, 14, 15, 17 and 145 leads us to conclude that the bill tightens the eligibility criteria and reduces the duration and the amount of benefits.

Canadians will be able to tell their children and grandchildren that the federal government has passed legislation that reduces low- and middle-income households to poverty.

Consequently, we recommend the following:

Whereas:

- unemployment insurance must guarantee a type of continuity and sufficiency of income for families that are affected by a job loss;

- for the people of Quebec, unemployment insurance is a heritage that, along with all of Canada's and Quebec's social programs, forms a protective barrier against the ravages of the free market;

- the unemployment insurance system has already been subjected to enough cutbacks and these measures have further impoverished low- and middle-income households;

- Bill C-12 will cause further deterioration in the already fragile situation of low- and middle-income households who are victims of unemployment and will contribute to a lower standard of living, a reduction in consumption, an economic slowdown and further job losses; and

- the federal government committed itself to improving the social safety net and aiming for full employment at the World Summit for Social Development in 1995;

the Fédération nationale des associations de consommateurs du Québec requests that the government remove from its bill the measures that will lead to the tightening of eligibility criteria and to a reduction in the duration and amount of benefits. These measures conflict with the principles the federal government is committed to defending.

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Consequently, the FNACQ demands that clauses 7(2), 7(3), 7(4), 10(8) and 12(2), as well as clauses 14, 15, 17, and 145 be amended so as not to require employees to work longer in order to be entitled to reduced benefits for a shorter length of time.

One way of achieving this result would be to at least maintain the current legislative measures which, despite their imperfections, are more acceptable to workers than the conditions set out in Bill C-12.

We thank the ministers and the members of the committee for their attention to our presentation. If you have any questions regarding the technical aspects of our comments about the various clauses, we will be happy to answer them.

[English]

The Vice-Chair (Ms Augustine): Thank you very much.

We'll now do a round for five minutes, starting with the Bloc. Madame Lalonde.

[Translation]

Mrs. Lalonde: Welcome and thank you very much for your brief. I do not have a copy of the legislation in front of me. Which new clauses in particular are you prepared to support, provided your recommendations are accepted?

Mr. Germain: If the government changes over to a system based on hours, eligibility criteria will be tightened. Take, for example, clause 7(2) which, for all intents and purposes, states that for the Quebec region, if the unemployment rate is between 9% and 10%, the minimum qualifying period will be 16 weeks; on the basis of 35 hours per week, this gives 560 hours of insurable employment.

In the case of a part-time worker - as many people are - who works 15 hours per week, that individual will have to work 37 weeks to accumulate 560 hours. This is a far cry from 16 weeks. We feel that under the circumstances, using an hourly calculation penalizes considerably the ever-growing number of part-time workers.

As for clauses 7(3) and 7(4) respecting new entrants, we are flabbergasted by the proposed requirement of 910 hours. A person who is fortunate enough to work 35 hours per week must accumulate 26 weeks in the case of a first job. This would be quite a feat given current economic conditions. I am thinking here about part-time, seasonal or casual workers. For instance, in the case of teaching assistants, only those hours spent in the classroom are counted, not the hours spent on course preparation. These individuals will have to accumulate at leat 51 weeks of work at the rate of 18 hours per week. If they work only 15 hours per week, they end up with only 60 weeks of work and this is more than the qualifying period allows. In our opinion, it will be difficult for workers holding down their first job as well as for seasonal workers to satisfy the minimum requirements.

We also have a problem with clause 10(8) which reduces the benefit period. People will say that reducing the benefit period from 50 to 45 weeks is insignificant. This reduction might seem acceptable, but if we take a closer look at the legislation, particularly at clause 12(2), we grasp all of the ramifications of this provision which introduces a 45-week benefit period. This is a theoretical maximum period and, in order to qualify for the full period, a person would, among other things, have to be employed in a region where unemployment is running at 16% and work 52 weeks in a year, or approximately 1,800 hours.

For the average person, this is an almost impossible feat. For example, a person working 20 hours a week in a region where unemployment is hovering between 9% and 10% will have to work 28 weeks to accumulate the required 560 hours. The table in Schedule I of the bill shows that this person would be entitled to 20 weeks of benefits.

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To qualify for the maximum benefit period in this region, or 44 weeks of benefits, this same individual will have to work 1,820 hours over 52 weeks at the rate of 35 hours a week.

Given the current job turnover rate, it is no easy task to find work. Even with the best of intentions, people often have a great deal of difficulty finding a job, despite intensive efforts on their part.

We have even more of a problem with the fact that persons who are frequently unemployed are being penalized. Clause 14 penalizes them by reducing the rate of their benefits by 1% for each 20 weeks of benefits received over the five years preceding the claim, up to a maximum reduction of 50%.

Is it reasonable to shift the burden of restructuring the economy onto the shoulders of workers? That is what we find deplorable.

We have to stop saying that people cannot find work because they lack motivation and so on. Many people have trouble finding employment because of their lack of training, but here again, they are not given all the necessary tools to acquire this training.

We also have a problem with clause 15, one of the worst provisions in the bill. Calculations will be made on the basis of the last 20 weeks of work, not on the 20 best weeks. A person has no way of knowing when he is going to be laid off, and employers often cut back gradually on a worker's hours.

Take, for example, a person who has not worked an entire year and who earns $300 per week on the basis of 35 hours of work per week. The worker files a claim for UI benefits. He had worked for 12 consecutive weeks before being laid off temporarily for eight weeks. Subsequently, he was hired back by his employer.

Using the old method of calculation, the worker would be entitled to 28 weeks of benefits. This calculation is based on the 20 best weeks and the worker received an average of $300 per week. The worker earned $6,000 and received a reasonable rate of benefit. Henceforth, the eight weeks of lay off will be taken into account. Now, the calculation is no longer based on the 20 best weeks. The worker will be credited with only two weeks at $300, eight weeks at no income whatsoever and eight weeks at $300. His average salary for the 20 weeks falls to $180 and, if we take into account the fact that benefits are reduced to 55% of average weekly earnings, this worker would be entitled to the princely sum of $99 per week.

How can someone receiving this income reasonably be expected to get by and actively search for a job?

Our clients often come to us for financial advice, when they are at the end of their rope. They don't even have the money to buy stamps and envelopes to mail out their resumes.

After sending out 200 or 300 resumes, they tell us they can't afford to continue any longer. Are you aware of the cost of mailing a letter? It's not 45 cents, but closer to 70 cents. The average mailing costs between $2 and $2.50. Do the calculations for yourself. They can no longer afford to spend $99 a week.

Clause 17 represents another loss. The maximum rate of weekly benefits falls from $438 to $413.

Under clause 145, the maximum level of insurable earnings falls from $42,380 to $39,000. One can argue that $39,000 is a fairly decent salary. However, if you are a single parent, your eligibility requirements are affected.

Furthermore, the clause mentions the word repayment. In the past, a person earning over $60,000 could be asked to repay some of the benefits, but repayment was requested only when that person's income exceeded $39,000. Now, a factor of 1.25 will be used to calculate income.

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If a person filed for benefits in 1992 and this year, finds a job that pays over $39,000, he will have to repay some of the benefits.

In our opinion, this range of measures is not conducive to job creation. The government is being purely rhetorical when it says that we must go along with natural market activity, that an invisible force will handle everything and that individuals are responsible for their fate.

I'm trying to imagine how that would work in the Maritimes which for years have relied on a seasonal economy. How are Maritimers reasonably expected to manage? The government says: "Let the economy run its course, let people show some initiative". How is this possible? It will take years for these economies to diversify. In the meantime, what are these people supposed to do? Starve? Beg? We wonder. Thank you for your attention.

Mrs. Lalonde: Thank you very much. You have stated your position very eloquently.

[English]

The Vice-Chair (Ms Augustine): Thank you for your very full answer. We'll go to the Liberals.

Hopefully, Mr. McCormick, you will ask your question very concisely and we'll get a concise answer.

Mr. McCormick: Thank you, Madam Chair.

Thank you, Mr. Germain. You just spoke about your concern for the people who could not afford a stamp and the envelope. I am glad to see that you're looking after the good intentions of these people, because I believe this EI bill was designed to help those people. Certainly when we look at the fact that up to 45% of the social assistance recipients will be eligible for the five tools, I think it's really commendable that we are going to encourage people to help themselves.

You mentioned that now there'll be only 45 weeks of coverage compared with 50, but I expect that you will agree the main objective of this EI reform is to improve the employability of individuals through the active measures rather than just giving them a passive income. I wonder if you want to give me a positive comment on that, sir.

[Translation]

Mr. Germain: The question that comes to mind is this: what makes the government think that it can make people more employable by reducing their support income?

If we significantly reduce incomes at a time when persons must seek training or find employment, they will experience economic problems. It will hinder their search for a job, because there are costs associated with finding work and receiving training.

The government argues that UI reform will improve people's chances of finding work. That is highly theoretical. Essentially, the proposed legislation is a coercive measure. What the government is saying is that if people are forced to work, if their bread and butter is taken away from them, they will have to make other arrangements. That is how we interpret the government's position.

The proposed legislation contains measures for improving training opportunities, but here again, people must have access to these measures. Courses are not accessible to everyone and not necessarily to those who are in need of them.

If you really want to improve people's chances of finding work, then do so by all means, but don't reduce household incomes. That is the main point we want to get across.

[English]

The Vice-Chair (Ms Augustine): Thank you so much for your presentation, for being with us today, and for leaving us some recommendations. Do stay engaged with us as we work to make this the best possible piece of legislation this committee can recommend.

Thank you, gentlemen.

Mr. Allmand: I'll return to the point of order that I raised earlier this morning. I want to say I was absolutely shocked when I read the list of witnesses for this week and saw that Mr. Grubel, a member of Parliament, was allocated 30 minutes to appear as a witness.

Now, my point of order was not directed against Mr. Grubel personally, but against any member of Parliament appearing before this committee as a witness.

The purpose of committee hearings, and there's a long tradition to this, is to hear those who are not in Parliament, to hear from Canadian citizens and groups and experts outside Parliament. Members of Parliament have the right to express their views in the House of Commons and in committee. It's interesting to note that the party from which Mr. Grubel comes has not been present here at all this morning to express its views, and I would say that half the time they have no representative here.

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I supported the provision whereby the different parties could choose witnesses based on a 60-20-20 formula, but I approved that with the understanding that they would pick those witnesses from among those who applied from the general public, not to appoint another member of Parliament.

There has been an exception to the rule that members of Parliament could appear before committees for certain controversial issues such as gun control. In that case, we gave notices to all members of Parliament, allowing them the chance to appear on the last day of the hearings. They got only five minutes each, with no questions. To give the right to come as a witness to a member of Parliament who has a right to speak in the House of Commons and to appear before this committee to represent his party each day in this committee, as a member of the committee, I think is totally wrong.

I want to put my objection on the record. It is not addressed to Mr. Grubel personally, but it is addressed to the principle of the matter.

The Vice-Chair (Ms Augustine): Do we have another speaker on the topic?

Mr. McCormick: Madam Chair, I would support Mr. Allmand on this. If it were from another party that often sits on this committee, that would be another story, but when we see an absence here 80% of the time by the third party, I see no need for this. I agree. Thank you.

[Translation]

The Vice-Chairman (Ms Augustine): Mrs. Lalonde.

Mrs. Lalonde: Many groups have expressed an interest in appearing before the committee and have been unable to do so. This concerns me. This is especially true in the case of groups from Quebec. I agree with your position. We didn't select any groups from the Gaspé region and this was an oversight on our part. One name had been submitted, but it seems you reached the limit of 20 without getting around to them. Would it be possible to accommodate this group, since there are a great many seasonal workers in the Gaspé region?

[English]

The Vice-Chair (Ms Augustine): Okay. I'll hear from Mr. Nault and ask for proposals as to which way we can proceed.

Mr. Nault, please.

Mr. Nault: Madam Chair, it is obviously a somewhat frustrating process that we've set up, quite frankly. If I had to go back and revisit it, now that we know what we do know about the 60-20-20, I certainly would not have agreed to it in the next go-round of the committee. Because of the way the regional parties are based, we've had a disproportionate number of witnesses from certain provinces - in particular, Quebec - on this committee compared with that of other parts of Canada. I don't think that is helpful, and it is causing problems for a lot of members of Parliament from across the country besides Quebec, which has had a disproportionate number of witnesses.

Unfortunately, in Mr. Allmand's case, it can be brought up as an order of business through a motion of some sort later on, in the business of the committee. But we did not go into the specifics as to who the parties could ask to be present at the witness table. We didn't go into minute detail as to whether a member of Parliament could be one of those or not. We just said that it was up to the three parties around this table to choose, based on their units. Fortunately or unfortunately, whichever way you want to portray this, Reform has decided to call as one of its witnesses a member of Parliament. We didn't elaborate and say that we wouldn't allow that. Whatever happens on other committees is neither here nor there. This committee has its own mind and can decide on its own in the end where it should go.

I think we should just leave it at that for this morning, and if a member wants to bring a motion forward suggesting changes to the work plan, which was approved a number of months ago now, then so be it, but quite frankly, we've laid it out for ourselves. We're now almost to clause-by-clause, and it's a little late in the process to say that we don't like what was decided over a month and a half ago.

Those are my comments. Thank you.

[Translation]

Mrs. Lalonde: One group has cancelled their appearance and I will try to have them slotted into that position. Thank you.

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[English]

The Vice-Chair (Ms Augustine): I think at this time we'll leave that discussion for consideration or for a motion that may be brought up by an individual member. Because it came up in committee, the hon. gentleman may decide, in the interest of the general public, to give up his space, but we'll leave this.

Mr. Allmand: It would be good of him to do that.

The Vice-Chair (Ms Augustine): This brings our meeting to a close until 3:30 p.m.

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