FEWO Committee Report

CURRENT CONTEXT

Employment Insurance (EI) is a federal program, administered through Human Resources and Skills Development Canada (HRSDC). The Employment Insurance Act identifies two benefits programs – regular benefits for people who have lost their job and cannot find work, and special benefits which provide temporary income replacement for Canadians who experience loss of employment when they become new parents (maternity and parental benefits), when they are sick (sickness benefits) or when they must care for a family member who is seriously ill with a significant risk of death (compassionate care benefits). Maternity and parental benefits under Employment Insurance are available in order to allow a claimant to remain at home to care for newborn or adopted children. Combined, maternity and parental benefits are payable for a maximum of 50 weeks.

While the extension of the parental benefit to 35 weeks from 10 weeks in 2001 received widespread approval, critics of the maternity and parental benefits program point to the low level of maternity and parental benefits and the limited scope of coverage for these benefits. In the roundtable discussions, with equality-seeking organizations and women's groups, organized by this committee in the fall of 2004, many groups identified parental benefits as a priority area for action by the Committee. ^[1]

The purpose of maternity and parental benefits is to replace, in part, employment income. A Supreme Court decision which was handed down in the period during which this committee was studying the issue of maternity and parental benefits notes that “the social nature of unemployment insurance requires that Parliament be able to adapt the plan to the new realities of the workplace.” ^[2] Witnesses who have come to this committee have given compelling evidence that the maternity and parental benefits under Employment Insurance currently have not adapted to the new realities of the workplace.

This committee set out to determine whether to extend maternity and parental benefits under the current Employment Insurance program to self-employed parents. The Committee also sought clarification about the measures which would be required in such a maternity and parental benefit program to respect the particular needs of self-employed workers. The Committee members shared a number of principles and assumptions which guided them in their study. They viewed the question of expanding parental benefits to self-employed workers as a question of women's equality; as an investment in the well-being of families and in children; and as an important question to help women and men balance their work and family life in a changing labour force.

WHAT THE COMMITTEE HEARD

The Committee held eight meetings on this question. Unfortunately, the Committee was unable to hear from all of the witnesses it wished to consult. It did not hear, for example, from representatives from each province and territory. It is for this reason that the Committee is submitting an interim, and not final, report. During the course of its study, the Committee canvassed groups which represent the broad diversity of the self-employed in Canada. The Committee heard the perspective of low-income self-employed workers, such as cleaners and home child-care providers. The Committee also heard the perspectives of self-employed workers in higher-income professional groups, such as lawyers. It spoke to women entrepreneurs, and heard from experts who have studied the public policy challenges arising from the changing workforce and from the Department of Human Resources and Skills Development Canada. These meetings allowed the Committee to conclude that self-employed workers are not a monolithic group and that their needs are varied and complex.

The Committee also heard that the majority of self-employed women are low-income earners. Family child-care providers are a case in point. According to the testimony from the Child Care Human Resources Sector Council, over half of the more than 300,000 people working in child care are self-employed with an average annual income of $15,600 before business deductions. In addition, the Committee was presented with the following examples of self-employed workers who use the services of the Workers' Action Centre in Toronto:

There's Maria, a night cleaner for a large department store in Toronto, who earns less than $5 an hour; a group of newspaper carriers … who also earn less than $5 an hour and who deliver a major daily in Toronto; and Fatima, a salesperson who sells credit cards for major banks, who at times has earned less than $1 an hour. ^[3]

The Committee heard about the challenges self-employed workers face with respect to their work-life balance. Describing the balancing act of a new baby and the need to work, witnesses talked about relying on family members to help with care-giving, about resuming child care work as soon as possible, and about the pressure to continue working.

As a partner in a law firm, I had a caesarean. The first month, nobody bothered me. After that, for the remaining three months when I stayed home, I called work pretty much every day. That was my balancing. I went in once a week, sometimes twice a week. I suspect that's what's going on, that you never really have a break. When you are in charge of a business and you have clients, you can't really take that time off. ^[4]

OUTSTANDING QUESTIONS FOR THE COMMITTEE

In the course of its study, members of the Committee became aware of the complex issues faced by both self-employed workers and contingent workers. ^[5] The Committee is mindful that it has left many questions unanswered. For example, while the Committee favoured the Quebec model for expanding maternity and parental benefits to self-employed workers, it did not have the chance to explore whether special benefit coverage should be extended to self-employed workers under the Employment Insurance Act or whether it would be better for the provinces to opt out of EI's special benefit coverage and develop their own coverage, as Quebec is doing.

Committee members did not have time to thoroughly explore the relative merits of mandatory versus voluntary contribution to Employment Insurance for self-employed workers, although it heard testimony supporting both positions. For example, the Committee heard that if there were a choice between voluntary and mandatory participation in the maternity and parental benefits program for self-employed women, women would choose not to participate because they would feel they could not afford it. ^[6] The Committee also heard that some self-employed people turn to self-employment for the freedom it provides them from participating in programs such as Employment Insurance. Other witnesses noted that an insurance program like Employment Insurance works on the notion of pooled risk, and thus would need to be mandatory to be viable.

Some witnesses expressed a preference for a program which would offer different options within the maternity and parental benefits program in which applicants could choose to have more weeks at less money or more money for fewer weeks. ^[7] This need for flexibility is supported by studies conducted by Human Resources and Skills Development Canada, which noted that most self-employed workers could only take a period of less than three months off for the birth of a child. While the Committee flags this observation, it does not feel it has enough information at this time to propose concrete suggestions to address the need for flexibility within the EI maternity and parental benefits program.

The Committee heard testimony calling for a higher income replacement rate and raising the maximum insurable earnings level from the current ceiling of $39 000. In the new Quebec model, the income replacement rate will be between 70% and 75% for the first weeks of leave, followed by a period at a lower rate (see Appendix B). The Committee heard that the current income replacement rate of 55% in the Employment Insurance program is inadequate for families ^[8] with a particularly negative impact on low-income workers. The Committee heard that the maximum insurable amount of $39 000 has remained unchanged for over a decade. In Quebec, the maximum insurable earnings will be set at $57,000. This will provide for increased benefits. The Committee heard that this increase is also expected to make it more viable for fathers to participate in parental leave:

This is now an economic choice. In a couple, the woman is most often the one that takes the parental leave since she earns less money. With higher insurable earnings, it will be interesting to observe how many men choose to opt in. ^[9]

While the Committee flags the issues of the replacement rate and the maximum insurable earnings level, it does not have a detailed proposal at this time to address these issues.

Finally, the Committee did not turn its attention to whether the full range of special benefits under the Employment Insurance Program, such as sickness benefits and compassionate care benefits, should be made available to self-employed workers.

These are among the questions the Committee will want to pursue in its final report on this subject.

SCOPE OF COVERAGE OF EMPLOYMENT INSURANCE MATERNITY BENEFITS

How much longer do we need to keep looking at these statistics to say the labour market realities are changing and there are more self-employed women, not necessarily because they want to be, but because they have to be? That reality needs to be addressed. ^[10]

In the modern workplace, many Canadians work in part-time or seasonal work. Some do so voluntarily. For many, it is not a choice. In the modern workplace, many Canadians strike out as private entrepreneurs. Some do so because they want more challenge; they want to do more meaningful work. They are drawn by the ability to do their own thing, to create something meaningful, to run a business as they envision it, and to do work as they want to. ^[11] Others are forced to call themselves entrepreneurs by employers who wish to pay lower wages or to avoid following labour standards. For these workers self-employment has nothing to do with entrepreneurship, but is rather a last resort, a job taken under less than favourable terms because often there are no other options. ^[12] All of these workers have one thing in common – new parenthood brings with it difficult decisions about how long they can afford to take time off without the benefit of an income replacement program.

Due to the nature of their work, some employees do not have the number of work hours necessary to qualify for maternity and parental benefits. Other workers, such as self-employed workers ^[13] are not covered under the Employment Insurance Act and therefore never have access to these benefits.

Several equality-seeking organizations and women's organizations have expressed concern about EI's treatment of self-employed workers. They note that denying these workers access to Employment Insurance special benefits (i.e., sickness, maternity, parental and compassionate care benefits) results in a significant component of the Canadian workforce which is unable to access these benefits. Witnesses who appeared before this Committee noted that many contingent workers combine self-employed work and employed work. Thus, while these workers pay into the Employment Insurance system in their paid employment, only part of their income is insured.

The Prime Minister's Task Force on Women Entrepreneurs recommended that the federal government extend maternity leave benefits to self-employed women. The question of extending Employment Insurance coverage to self-employed workers was also the subject of a recommendation from the Standing Committee on Human Resources Development and the Status of Persons with Disabilities in 2001 ^[14] and again in 2005. ^[15] These reports recommended that “the Government consider developing a framework for extending Employment Insurance coverage, both in terms of regular and special benefits, to self-employed workers.”

In its 2001 response, the government invited further study on issues such as mandatory versus voluntary coverage for maternity and parental benefits, international experience and public and private sector models. ^[16] The government response in 2005 went further, noting that “the introduction of Quebec's (parental insurance) plan will provide important information for all governments concerning the practical and policy considerations associated with extending this type of coverage to the self-employed” and that “recent trends suggest the self-employed are more interested than in the past in paying for Employment Insurance maternity and parental benefits coverage.”The government response goes on to say:

it is important that the EI program continue to adapt to changes in the composition and needs of Canada's workforce – including the needs of self-employed workers. For that reason, policy development priorities of HRSDC include gaining a further understanding of the needs of the self-employed – and how best to meet these needs, particularly in relation to special benefits. This knowledge will be important as we consider the potential for extending EI coverage to the self-employed. ^[17]

The Committee now calls on the government to develop concrete policy recommendations to extend Employment Insurance to self-employed workers.