EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 27, 1996

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[English]

The Chairman: Order.

I'd like to welcome the Minister of Human Resources Development, the Hon. Doug Young, to the committee today.

We look forward to your comments, Mr. Minister. I would also like to give you an update as to what this committee and its membership have been working on.

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Mr. Minister, a great deal of work, as you know, has gone into the legislation before this committee. More than 100,000 Canadians participated in social security reform. More than 600 presentations on SSR were made before this committee, and 1,500 briefs were submitted. More than 220 town halls were held by members of Parliament in communities across Canada. Twenty thousand Canadians participated. A million copies of workbooks on the reform were sent to Canadians. The views of all these Canadians form the basis of the proposed employment insurance legislation.

In addition, the experts have had their say. Some 26 detailed evaluations of various aspects of unemployment insurance were undertaken, all of them independent, thorough and scientific.

Since EI was launched in December, 50,000 Canadians have called a 1-800 number for information about the proposals. Another 80,000 hits on the Internet have come from people interested in the proposed legislation. A comprehensive gender assessment of the proposed legislation has been conducted, the first of its kind.

Before the House prorogued, this committee received briefs and heard testimony on Bill C-111 from January 18 to 25. The committee hearings began again once the proposed legislation was reintroduced as Bill C-12, which brings us to today.

In the course of these hearings we expect to receive testimony and briefs from over 100 individuals and organizations, with hearings continuing until the end of April.

Our committee accepted your challenge from the last visit to improve this important piece of legislation. You asked us to suggest improvements that would better reflect the realities faced by many workers, particularly in areas of high unemployment where seasonal work is sometimes the only work available.

Members of Parliament in this committee have responded. A number of suggestions have come forward at committee, which we understand your department is presently reviewing.

First, addressing the problem of the gap, requiring uninterrupted weeks of work to qualify for maximum benefit, some workers, especially in seasonal economies, can't get 16 or 20 weeks of work in a row. Mr. Andy Scott has proposed an amendment, from now on known as the ``Scott amendment'', which proposes that workers be able to count back 26 weeks, or about 6 months, from the time of making a claim to accumulate the weeks of work necessary to qualify.

A second proposal, from Member of Parliament Regan, the ``Regan amendment'', focuses on providing incentives to take on additional work in order to get maximum benefits. Under this proposed formula, workers would become eligible for benefits based on working a minimum number of hours, the equivalent of 14, 16 and up to 22 weeks, depending on the local unemployment rate. However, to get maximum benefits they would need the equivalent of two more weeks more than the entrance standard, so if the entrance requirement is 490 hours, or 14 full-time weeks, to get maximum benefits you would need the equivalent of 16 weeks of full-time work.

The intensity rule was also the subject of two proposed modifications. The intensity rule would reduce the benefit rate by one percentage point to a maximum of 5% for every 20 weeks that a person is on claim during any five-year period.

The ``Augustine amendment'' would introduce a system of work credits so that people who find additional work while on claim would be shielded from the impact of the intensity rule. In addition, Ms Augustine's amendment would exempt claimants who would qualify for the family income supplement, ensuring that children in low-income families and households are not penalized.

Finally, members of our committee have done their research and provided clarification on a number of contentious points. I tabled the policy brief provided by your department on special benefits that clearly indicate these benefits would be maintained in the EI system.

Mr. Nault, your parliamentary secretary, issued a detailed statement spelling out the benefits of employment insurance to working women, particularly women who work part time and women who are low-income single parents.

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We have provided clarification on the new entrance rules, and Andy Scott has explained how the hours-based feature of the proposed system could lead to many seasonal workers qualifying for benefits sooner than they do under the present unemployment insurance program.

In closing, Minister Young, members have obviously been hard at work in this committee and have provided some possible solutions to the challenges we face. Indeed, they are interesting proposals. We of course look forward to hearing your presentation, and we certainly await your response on the proposed amendments that have been brought forward. Thank you very much.

Now I guess you will introduce your team and take the time necessary to go through all the points you need to go through.

[Translation]

The Honorable Douglas Young (Minister of Human Resources Development): Thank you, Mr. Chairman. I'm very pleased to be here today. I would like to introduce the people who are accompanying me: Mr. Jean-Jacques Noreau, Deputy Minister, Ms. Noreen Smith and Ms. Karen Jackson, who have been working on this bill for a very long time. Everything we've accomplished was the result of team work. There are many people from that team in this room today.

I would like to begin today's presentation by thanking all the members of the committee for having undertaken the important work that they are doing and they will continue.

In so far as possible, I have tried to stay abreast of this exercise and follow the presentations that were made before the committee. I must tell you that the government continues to be completely committed to establishing an employment insurance program on July 1st, 1996.

As we all know, Mr. Chairman, many people in this country have expressed concerns and reservations about the bill. I want to assure you that I am aware of these concerns.

We are all aware of the fact that changes in the economy, technological progress and all the rest have created problems. Not only have we lost thousands of jobs in the manufacturing sector, but the jobs that replace them are not always accessible to workers who were laid off because they often require a very different kind of knowledge.

Just because we propose changes doesn't mean that we don't recognize that the impact of unemployment varies not only from one region to another, but also within provinces. For example, in Nova Scotia, in the greater Halifax - Dartmouth, the situation is relatively a good one in terms of unemployment, but in the Cape Breton region, within the same province, the situation is absolutely intolerable.

I wanted to point that out because we often tend to think that we have to talk about the Atlantic region, Ontario, Alberta or British Columbia, but those who are knowledgeable about the matter know that within these provinces there are all kinds of situations that have a major impact on the lives of individuals and families.

[English]

One of the things, Mr. Chairman, that I want to make clear before I get into the substance of my presentation is that having been an elected person in northern New Brunswick since 1978, I hope people will understand that I am acutely aware of the needs and concerns of people whom I am elected to serve - not just those who vote for me, but all of those people who reside in that part of the world.

I want to correct, as I have in the past, the kinds of misconceptions that have arisen, for whatever reason, from people not being completely accurate in reporting on my comments, specifically with respect to demonstrators. I understand why people are anxious in the Gaspé or the Matapedia or northern New Brunswick or other parts of the country. I recognize that. That's why in December Minister Axworthy and I and a number of others indicated we were acutely aware of the need to make changes to the legislation as it was then proposed.

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I have never at any time described those men and women who work in those areas, who are subject to situations over which they have very little control, as being either bored or lazy. No one survives in those parts of the world by being either of those two things. What I did say and what I will be tabling with you today, because I think it's important to have the transcript of what was said in the press scrums and elsewhere, is that I have serious reservations about people who stir up emotions and exploit vulnerable members of our society. I stand by those comments.

But I do regret very much that people have seized on this misinformation to try to spin, again, that somehow we are insensitive or that we would use that kind of language to describe ordinary men and women who are subject to the seasonal industries that exist in their part of the world and who express their concerns whether by a meeting with me or by a meeting with other members of Parliament or by taking whatever measures they feel appropriate to raise their anxieties with publicly elected officials. Those people who are paid year-round, who have full-time jobs, not in industry or in the types of jobs that people have in the Matapedia or in the Gaspé coast or northern New Brunswick, and who came in to take advantage of the situation...I know what they think of me, and I have no qualms about telling them what I think of them.

Mr. Chairman, what I would like to do is tell you that I'm extremely pleased, and I think a lot of my colleagues are very impressed, with the work that has been done by this committee, and the very substantive contribution that has been made to this discussion about how we reform the employment insurance system and that has come out of this committee. We had indicated clearly as a government that we thought the legislation needed to be modified to reflect job market realities better in all parts of the country, and I think you've done that.

I have met with literally thousands of people, not a lot of them happy. I know you've met with many people who have made presentations here. I want to tell you it serves no purpose, other than, I suppose, reducing the chances of stress or heart attack, to have people simply scream or yell ``we don't want any changes'' or ``scrap the bill'' or ``ten forty-two'' or ``we want our UI''. That's not going to change anything, and it's not any kind of contribution, from where I sit, to what we need to do collectively as members of Parliament from all political parties.

I do want to stress that the measures that have been proposed by some members of the committee, which I know reflect input from far beyond the political spectrum, some concerns that have been raised by groups that have appeared before you, have been very useful. What I want to undertake to do today, Mr. Chairman, is to review some of the major proposals, as I understand them, that have been brought before the committee, and make a commitment to you that the department, as Parliament is recessed for the next two weeks, will analyse all of this.

I want to be very candid with you today, and we'll have all kinds of opportunity for questions and perhaps some answers, but the reality is, I appreciate the input, but we have to cost all of this out. We have to analyse how we're going to handle this issue, and not just in trying to make the legislation better. What does it mean in terms of dollars and cents? Where does the money come from? What is the impact on individuals and families of some of the proposals that appear to be very interesting?

So what we will do today, from my point of view, at least, is give you some impression of how we feel about some of the proposals that have been made. When we come back in April, after Easter, the department will provide to you cost analysis, gender analysis, impacts on various parts of the country.

There is one thing I want to make clear. At the end of the day, what the Minister of Finance said in the budget last year about what the fiscal, financial parameters are for employment insurance will not change. I've said that and the government has reaffirmed it. We have to work within those parameters. We can work inside and that's what we will do. We will provide you with all of that information.

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Now, Mr. Chairman, let me deal with the proposal from Mr. Scott, the member for Fredericton, with respect to the 26-week reference period. There is no doubt that one of the real problems that was put forward by people who've spoken to me, those who took the time to explain specifically what the gaps, in terms of revenue, meant to them, was a very valid point. For those around this table who understand it, I appreciate the fact that you've come forward with proposals.

To suggest that someone who is laid off today go back 14 weeks - if that's the entrance requirement - and simply calculate benefits on the basis of the income over that period of time chronologically would have an enormous impact. When we looked at this in a preliminary way we discovered, for example, that the impact would be greater in Manitoba than it would be in some of the Atlantic provinces because of work patterns. There are tremendous impacts in the construction industry and the transportation industry, where people work for two or three weeks, then are off for a period of time and come back into the system.

There's a tendency to think this only occurs in certain natural resource-based industries. That is not the case. There are many, many work activities that have interruptions where, if a person is laid off, to go into that kind of a calculation is really not appropriate. I think as a government we will want to look very carefully at this proposed solution to the gaps problem that Mr. Scott, the member for Fredericton, has brought forward. We will provide you with the analysis. We think the 26-week period will address a tremendously high percentage of the problems individuals would face if the present system, as proposed, was maintained. We think it has been a useful contribution for people across the country.

May I also say, Mr. Chairman, that whatever we do will have to be equitable across the country. We're hearing a lot of people talk about fairness, about making sure there's equity in the system. I think any changes we make will have to reflect that. In our analysis we will deal with what goes on in each of these changes, how it impacts in the various regions across the country and so forth. There will be no attempt to try to disguise what the impact of any of the changes are. Then the committee and the government will have to make some decisions.

Mr. Regan has put forward a proposal concerning the divisor, which not a lot of people understand. People think they're going to get 55% of their benefits. But as you know, Mr. Chairman and members of the committee, the divisor certainly eliminates that, unless you're in a situation where both the eligibility requirements and the divisor are identical. We think this notion of the divisor being tied to the entrance requirements and the employment rate is a very interesting one. It brings equity to the system, because there was quite a difference in situations in very high unemployment areas as opposed to high employment areas. I think the proposal made by the member for Halifax West is also useful. But we'll have to see what the financial implications of a number of these suggestions are.

The other area, Mr. Chairman, that I know has a tremendous impact is the exemption that Ms Augustine has proposed for low-income families. Mr. Chairman, I have to be candid. When this proposal was first brought to my attention my first instinct, because I didn't understand it, was to reject it out of hand, because I think there has to be equity in the system and there has to be fairness. But when I understood the connection to the child tax benefit, to the top-up of $2,500, where we've already recognized that anybody earning less than $26,000 as a household has already been identified by the tax system, as well as by the original reform, as a group of people who need to be helped, it was more acceptable to me.

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But what really clinched it for me, Mr. Chairman, was the fact that it does not include individuals. Mr. Chairman, I think we have to recognize that some of the things we do have to be family based. A lot of what we do has to recognize the household, the family. So I'm supportive of this approach.

Also, on a preliminary basis, I have asked the department to look at where the impact is, and there's no doubt that the huge impact of this suggestion by Ms Augustine is on single-parent families and urban households. If you look at the impact in Toronto or the impact in other cities where you have the working poor, single-parent families, this is something that I think reflects - I hope - all of our collective commitment to try to take care of people in situations in society in which their income is really not at an acceptable level.

Now, Mr. Chairman, I don't suffer from any naivety on this. I've listened to and read some of the transcripts of materials brought before you. The one thing I think we could agree on is that nobody likes anything that we're doing. We have people coming in and saying that if we're going to take care of low-income families, we should be doing it through another program.

Look at what's happening in provinces across the country. Let's look at what's happening in the province of Ontario. Let's look at what's happening in the province of British Columbia. We're into a lawsuit on mobility. Let's look at what's just been announced for the province of Quebec in terms of social assistance benefits and what the future holds.

I think that, where we can, we have an obligation to recognize that we may have to be creative and innovative in trying to address the needs of families. If somebody wants to argue with me about whether or not we should be helping households with an income of $26,000 or less a year, I'm prepared to take on that argument. It won't be one of the sadder days of my career, because if as a society and as a government we're incapable of recognizing that by whatever means - municipal, provincial, federal, employment insurance programs, child tax credits, or anything else - we can't collectively do everything we can to try to help people in that area, I think we've got a serious problem.

So although initially - because I didn't understand it, to be quite candid about it - I was not terribly warm to this suggestion, I think it's very useful now that I have looked at it and it was explained to me and I see how it connects into other things we're doing.

Generally, Mr. Chairman, I think we have been able to see work done by the committee that's been constructive.

If we have people who just don't want to have any change, people who think we're going to have an impact on 10 and 42, and people who have nothing more constructive to say than scrap it, get rid of it, or we don't want anything to do with it - that won't get us anywhere. But I do think this kind of work is extremely useful.

I also understand there's been some difficulty with some of the entrance requirements, the maternity benefits, and so forth, and I hope we'll be able to deal with those. I don't want to go into all of the detail.

We're going to make some changes as a government. We'll have to make some very difficult decisions as to what we can and cannot do.

But the one area that I don't think has been addressed, Mr. Chairman, and that I will deal with before I conclude is that I don't think Canadians in the business community or those 90% of Canadians who are in the labour market - who are working - will accept a new piece of employment insurance legislation that does not deal with problems, real or perceived, of abuse or misuse of the system. So, Mr. Chairman, I want to tell you that, although we will look at these amendments and other amendments that I hope will be forthcoming.... Today, as a matter of fact, I will table a series of technical amendments that we at the department feel are important for your consideration. We will also table some other material that I will describe.

But I want to make it clear today that I will be proposing on behalf of the government some measures that will go further, in terms of disincentives, than what is in the existing legislation. Let me give you a general idea of what I have in mind.

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Mr. Chairman, I think anybody who abuses the system needs to be made aware that this will not be tolerated. One of the things we find everywhere in the country when we talk to people about this is that there is a belief that there is some abuse. I believe it's limited, but whether or not it's limited or it's widespread, the fact remains that a lot of people think it has to be dealt with.

I'm going to be suggesting, Mr. Chairman, that anyone who abuses the system for the first time will be penalized when coming back into the system. I don't think increasing fines and that type of thing is the way to go. The entrance requirements will change, for repeat offenders, to at least doubling the entrance requirements.

As well, Mr. Chairman, I was appalled to see, when I looked into this area, that 100,000 to 125,000 people a year are found to have misused the system. When I inquired as to how many companies were involved, it was about 300. I couldn't believe that 100,000 to 125,000 people could somehow get around the system without collusion or connivance with employers. I was then told that a lot of the employers are shell companies. They have no assets. If you assess a fine or anything against them, there is nothing there.

What we're going to do is propose that there be a director or shareholder liability, personal liability, where there is found to be improper activity. We think that to have 200 or 300 companies found wanting when there are over 100,000 individuals found.... There is an imbalance. We think there has to be also an obligation on the part of people to actively seek work without it causing a burden on companies or businesses they have to contact. We'll develop some systems.

I want to make it clear, Mr. Chairman, that the penalties I'm talking about are not fines. I think people should work their way back into the system. When you drive a car and you lose three points, or five points, you're penalized. When you do it two or three times, you lose your driver's licence. I don't see fines being the deterrent. I believe increasing the re-entry requirements for people so that they work their way back into the system after they've attempted to cheat it is the way to do it, because I don't want to see us increasing revenues as a result of fines.

Let me give you an example, Mr. Chairman. If somebody works 16 weeks and then is eligible for UI, if they cheat the system the next time they would be expected to work 24 weeks to get in the system. If they did it a second time, it would be 32 weeks to get in the system. That's the kind of thing that takes away the notion that you're after fine money or that you're trying to raise funds through indirect ways.

If people want to take advantage of the system, usually they don't have the financial capacity to pay fines anyway. So we think it's far more important to make sure they understand that if they abuse the system they will be asked to work a little bit harder to get back into it the second or third time around.

There may be some people here, Mr. Chairman, who condone that kind of activity. If there are, then we'll let them explain why they do.

As we go through this, I think we will look forward to hearing from the committee as to what they believe is appropriate in terms of deterrents or sanctions. Again, I am not a believer in fines, where people normally have their situation picked up only when they re-enter the system and there's a withholding through Revenue Canada or whatever.

The other point I want to make is that we haven't addressed the question of regulations dealing with the fishing industry. As you know, it's a different arrangement because of the nature of that industry. We will not be dealing with the fishing industry until we've determined exactly what the rules of employment insurance will be, because we believe that to the extent it is possible, any regulations or arrangements for the fishing industry should reflect as closely as possible what we're going to be doing with employment insurance.

Again, Mr. Chairman, thank you very much. I hope when we come back after Easter we will be able to give you some really substantive analysis of the implications and the costs of the proposals that the hard-working members of this committee have made thus far.

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The Chairman: Thank you for your remarks, Mr. Young. Of course we are looking forward to receiving an assessment of the various proposals the members of Parliament have made to date. I think it's necessary for us to have those so we can continue on with our work.

Now we'll have the Q and A session of these hearings. We'll begin with the Bloc Québecois and Madam Lalonde.

[Translation]

Mrs. Lalonde (Mercier): I must tell you at the outset that I'm somewhat troubled by the last statements that I've heard. If this committee is not some sort of stage play, I would like to get answers to the following question.

Minister, why did you decide to reduce that ceiling of maximum insurable earnings from $42,400 to $39,000, thus depriving the fund of $900 million and giving a $500 million gift to large corporations who do not create jobs?

Instead of cutting off low income earners,why didn't you allow those who earn $45,000, $48,000 or $50,000 a year to pay fair unemployment insurance premiums even though they use the system less often? As a matter of fact, it's a good idea to have them pay even if they use it less often and large corporations also have to pay their share. Big companies provide fewer jobs and they are the winners here. In fact, the Canadian Federation of Independent Business told us that small and medium-sized businesses were the losers, which comes to the same thing.

Mr. Young: Would you like me to respond or would you prefer to finish your intervention?

Mrs. Lalonde: I simply want to add that the Human Resource Development Department own figures forecast an accumulated surplus of $5.516 billion in 1996, without the reform.

Why haven't we taken advantage of the situation where workers and companies jointly contribute to a fund to ensure that it's used to finance a real unemployment insurance system instead of building a punitive system like the one you've presented here this afternoon?

Mr. Young: In regard to the first question, the unemployment insurance is not funded only by corporations, small medium or large, but also by employees. When you eliminate a certain number of people and set a ceiling, it's not only the large corporations that benefit, but also employees in this sector who no longer have to pay unemployment insurance premiums.

I think it's unfair to ask individuals, workers, as well as the private sector to pay premiums for which they will receive no benefits. That's why we set the ceiling at $39,000.

There is a very well-known system through which we get money from the more fortunate individuals in our society. That's the well known income tax system. We therefore felt that in order to protect the integrity of the program, the $39,000 ceiling was a reasonable figure.

Now if some people think that it's preferable to raise the ceiling to $50,000, $60,000 or $70,000, they can always make proposals. For our part, we felt that there should be a limit and we set it at $39,000.

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I will now answer the second question the honourable member asked me about the Unemployment Insurance Fund.

Up until last year, the Unemployment Insurance Fund was in a deficit, that had been going on for a few years. When the Unemployment Insurance Fund is subject to such high demand that it is in a deficit situation, the government of Canada must compensate for that deficit.

The deficit was wiped out during fiscal 1995 and from then on, we were able to start accumulating a surplus. Right now, the surplus is probably between $1 and 2 billion.

The Minister of Finance has already recognized that we will have to set a limit on the Unemployment Insurance Fund surplus. The debate continues to determine whether the ceiling should be $5, 6 or 7 billion. We are very well aware of what happened last time.

When we are in a recession and jobs are lost, the number of benefit claims is very high and we start moving toward a deficit. We saw that situation happen and therefore, premiums were increased to over $3 per $100. That means that when there is less economic activity, we penalize workers as well as business by increasing premiums.

Therefore, we feel it is wise and prudent to create a reserve in the Unemployment Insurance Fund for the future. Once that reserve is established, we will have to reduce the premiums to allow small and medium-sized business particularly to create jobs, as they regularly tell us that premiums are too high.

Without wanting to make any commitments on behalf of the Minister of Finance, who will make a decision with his cabinet colleagues at some point, I do hope that a reasonable amount will be kept in reserve for the Unemployment Insurance Fund. We will then be in a position to drastically reduce premiums. We will thus be giving the private sector an incentive to create jobs and we will have lightened the burden of premiums that workers must pay.

Mrs. Lalonde: Minister, there is a reserve!

At the end of 1996, without the reform, there will already be $5.5 billion. Because of the application of Bill C-12, this year there will be a reduction of $900 million. Why have you chosen to reduce the ceiling on the maximum insurable salary?

If you haven't seen this, take a look: it's $900 million less this year. And you'll have to compensate for that amount through additional cuts for workers and business.

As you know, and even though this is a concern for everyone, that $5 billion surplus was used to pay down the deficit last year, and that will be the case this year and next year. Why should people who earn $39,000 or less and the companies that hire them be the only ones to contribute to this fund? It doesn't make sense. Why have you lowered the ceiling from $42,400 to $39,000? Why shouldn't university professors pay unemployment insurance premium? And what about journalists who make big salaries, and businesses?

Why should it only be people who earn less than $39,000 who pay unemployment insurance premiums? There's no social justice or equity in that. Premiums were reduced for high earners and companies that hire them and who pay big salaries, and instead, we make low wage earners pay premiums, very low wage earners, while reducing the benefits of others. That's what this reform does.

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We are not against the reform of the system, on the contrary, but why not take advantage of this reserve to have a true reform rather than get into a project that has been roundly criticized in every aspect by various groups who've appeared before us?

Mr. Young: First of all, it is not true that the $5 billion unemployment insurance fund surplus was used to absorb the deficit last year. That's not the case. Last year, we had a surplus in the current account, and we have to pay the deficit that had already accumulated.

We are now in a limited surplus position. However, the honourable member is correct in saying that at the end of 1996, the fund surplus will be approximately $5 billion. As a matter of fact, this surplus increases month after month, and that's a good thing after the deficit period that we had for many years.

But when we're talking about the $39,000 ceiling, we mustn't forget that it used to be $42,000. I'm wondering why the honourable member isn't referring to $45,000, $50,000 or $60,000.

Mr. Chairman, it is my understanding that the honourable member would prefer to have these people pay premiums. Of course, they will also receive more benefits. By reducing premiums, we've also reduced benefits. And that's what's going on right now.

What's happening now is that people whose ceiling was reduced to $39,000, employees as well as employers, are not paying, but the benefits are also reduced in case of job loss.

We can always examine this proposal more closely, though no one seems to support it, and see what happens to people who are eligible for unemployment insurance once the bill is adopted by Parliament. We're talking about hundreds of thousands of women who were exploited by working 12, 13 or 14 hours a week and that nobody talks about!

For the first time, these people will be eligible for unemployment insurance and I believe they will also have the opportunity to be part of a much broader system that includes the Canada Pension Plan, the compensation system in the provinces and everything else.

Of course, those who want to protect benefits for people who earn $45,000, $50,000 and $60,000 a year will be disappointed by the bill that sets a ceiling of $39,000 as the amount eligible for unemployment insurance.

[English]

The Chairman: We're going to go to the Reform Party. Mr. Johnson.

Mr. Johnston (Wetaskiwin): Good afternoon, Mr. Minister.

If I could go back to your analogy about the speeding ticket, certainly if you're convicted of breaking the speed limit you do get demerits deducted. But it is also generally accompanied by a fine. At least the last time I was caught speeding it certainly was.

That brings up a question. If we have companies that are cooperating with individuals who work for them to falsify records, when does that become fraud? Is it fraud, or is it simply a mistake? What position are you going to take on that and what direction are you going to go on it?

Mr. Young: The great difficulty, of course, is in proving.... Fraud is relatively straightforward - I don't want to get into the legal definitions - but collusion is more difficult; that kind of intent and how it works. Fraud is fairly straightforward.

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The difficulty with the corporate or company organizations involved in the process of using the system is that many of them are fly-by-night operations, shell operations, where they have a series of employees working for them, the equipment or whatever is used is leased - it belongs to another company - so if you do move against them, there's just a shell. There's nothing there. You can apply fines, you can try to develop various kinds of sanctions, but nobody is home when you call. Next year they are up and running again under another name. Another company is incorporated. That's why we decided to look at director's liability, shareholder's liability, which is a personal liability, as opposed to a corporate liability.

But I wouldn't want to mislead the hon. member, Mr. Chairman, about fines. We have a process in place now where there are fines. For example, last year fraud resulted in over $100 million in penalties arising from the fraud and another $100 million in repayment. That stays in place.

What I'm saying is there's been some demand, and I think there's a recognition because of real and perceived abuse, that people pay a price. If you impose higher fines, all people would say is oh, well, it's just another tax; it's just another grab by the government.

The fines that are there will stay. What we're saying is we want to add another element. That is, if you cheat the system and it took you 20 weeks to be eligible for UI in a region in Canada, the next time it's going to cost you 30 weeks of work. So you actually get back in by the sweat of your brow...rather than just by increasing fines. It's a combination of the two.

To go back to the driving analogy, if you lose your licence, depending on what it's for and so forth, you might be required to take driver training again. You might have to go through various types of programs to regain your right to drive.

We just think it's like anything else. We have to try to put up as many deterrents as possible.

Mr. Johnston: Along that same line, Mr. Chairman, although I understand what the minister is saying, that some companies you just simply can't go after because there's nothing to go after, it seems to me in those cases the employee or the person who is actually applying for the benefits is the one who is taking the whole brunt of that discipline, so to speak. Although I know it's a difficult task, certainly those companies ought to have some sanctions placed against them as well.

Mr. Young: That's why as opposed to that so-called figment, or legal entity, we're going to go after the individual or the people. These are not the large corporations or even the medium-sized corporations. They are often designed not just for employment insurance manipulation but also for other reasons. That's why you see more and more this notion of imposing personal liability on shareholders or directors.

Mr. Johnston: Mr. Minister, I have had some concerns expressed to me by employers in my constituency. One in particular is an operator of some quick-service restaurants, and he indicates to me that his employer costs, he reckons, would increase by some 30% if the part-time provisions in Bill C-12 become law. He currently employs around 90 people, most of whom are students who are making payments on student loans or else using the money to offset university tuition. He said his customers are very price-sensitive and he hasn't the option of raising prices in order to recover the extra premiums he will be paying out.

He went on to say the deployment of this payroll tax runs counter to this government's job creation objectives and is inconsistent with its position that payroll taxes kill jobs. He goes on to say he probably won't have any choice but to reduce his number of new hires, and he will even have to restrict hours on the employees he does have.

Mr. Young: We are concerned about this issue. It has been brought to our attention. Really, it's a conundrum. I think what we have to consider is the offset between....

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For the students there's a student rebate, and for small businesses there's also a refund program.

Perhaps after this is over we will be able to make sure that the hon. member will get some information on it. It may not be totally satisfactory, but we can get into the detail of how that works.

There is a much larger question, which is why there has been a tremendous growth industry in this country not just in the food business but in the accommodations area, and so on, where tens of thousands of women, especially, work less than 15 hours a week. You have to ask yourself why those people should pay the price. Whether it's a small or medium-sized business, you have to ask yourself why tens of thousands, if not hundreds of thousands, of people, mainly women, have worked 14 hours a week - not 10 or 11 or 12, not 16 or 17 or 18. The magic number has been 15, because that's when it cuts in, that's when you start to have to take care of benefits.

If the woman who is 40 years of age who has worked in a business like that for 10 or 15 years slips and falls, is disabled, has a health problem, or whatever, it is not covered by anything.

We have to make decisions in our society as to whether or not any sector of our economy is going to be supported by that kind of artificial arrangement, where, arbitrarily, 15 hours makes it or breaks it.

I understand the implications for individuals, smaller companies, small operations. That's why we've looked at special arrangements for rebates for small business, and we'll try to accommodate it.

It is a serious problem. One of the reasons why we have gone to the hour-based system at the request over the years.... Now a lot of people are saying we shouldn't do it. It has come from many areas. People are asking why it is that every hour they work isn't worth the same as every hour somebody else works, only because they work a limited number of hours a week.

It's a trade-off. It will have an impact. I don't dismiss that at all. I understand the impact. Some companies will have to arrange their business.

I've even had people suggest, on entrance requirements, that people will work 15 hours a week for 40 or 50 weeks in order to get into the system. What is magic about 15 hours a week? Is it a woman or a young person, or whoever, who works two seven-and-a-half-hour days a week? Is it a person who works five days a week three hours a day? Is it somebody who works two hours a day seven days a week with one extra hour somewhere? How does this work?

It really is a result of a lot of businesses - not improperly, because it was the way in which things were done - tailoring their human resource requirements to avoid having to take people into the system.

The reason we have compensation in provinces, the reason we have the Canada Pension Plan, the reason we have employment insurance, the reason we have these kinds of protections is for people in the workplace.

If we can accommodate the need to make sure that people are properly protected with the need to try to find some flexibility to accommodate small business, we'll do that. But that was a judgment call that had to be made.

I'll be happy to try to provide the hon. member with more specific detail on the area he raised in his query.

The Chairman: We'll move to the Liberal side and Ms Augustine.

Ms Augustine (Etobicoke - Lakeshore): Mr. Minister, I'm very pleased to see you here.

I'm also very pleased to see that you've taken my amendment and the other amendment seriously, because we spent a good deal of time thinking about it, agonizing about it, and finding ways and means whereby we could make fairness and equity the themes running through much of the work that went into this.

Mr. Scott and I also have shared some experiences in terms of having been across the country in the first exercise, and we heard a good deal - and from my own past life I know a good deal - about people who are really struggling to make ends meet and to ensure that their families are well provided for.

I thank you for the consideration that is going to be given to that intensity rule. I ask that, as you do this, you keep in mind the gender analysis, the number of single parents with children, the number of families headed by women, who would be affected by this. I'd like to see those numbers.

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I would ask at this point if you can speak briefly - maybe with your officials - to whether or not you have any numbers in terms of the working income supplement and how that works with the child tax benefit. In other words, who will benefit from the increase in that working income supplement?

Mr. Young: Mr. Chairman, I think there's a series of measures - and I alluded to them in my opening remarks - that the government has brought forward. For example, in the budget, as you know, the working income supplement will go to $1,000 a year in two years, incrementally. There's a child tax credit; there's the $2,500 top-up in the employment insurance arrangements for households with incomes of $26,000 or less.

The only number I have, Mr. Chairman, and I had to do it because.... The $26,000, I think, is very clever in that it's an existing benchmark on other issues.

Now, I can't give you the breakdown, Ms Augustine. We'll be doing that over the next two weeks. We'll get you the gender analysis, we'll get you the single-parent families, and also a breakdown of where in the country this is going to have an impact.

Many of these changes are far-reaching right across the country. A preliminary indication is quite surprising in terms of where the major impact is. People might think it's going to be in Tracadie, New Brunswick. It's not. It's in Toronto. There is a little bit of a difference in the size of the city, but that's where it will happen.

Let me say that we did get the numbers for the family supplement. There are 350,000 families, claimants under the family supplement. Now, how many of those will be affected by the intensity rule is hard - maybe half. If the supplement is coming in, we know their income is limited, but whether or not they're the working poor or not in the workforce at all, it's hard to tell. We'll have those numbers for you.

Just to give you an idea, theoretically at least, of how many people what you suggested could affect, it is 350,000 claimants. That's the number in the system already, that we know of, because of another program. We'll give you that breakdown. But certainly it has enormous potential to assist people, as I said earlier, Mr. Chairman, that we've already identified as being in need, because we've said they get the $2,500 as an addition if their income as a household is under $26,000.

The Chairman: Mr. Regan.

Mr. Regan (Halifax West): Thank you, Mr. Chairman.

Thank you, Mr. Minister, for coming before us today. I certainly must say I was anxious to hear your response today to the proposals put forward by Ms Augustine, Mr. Scott and by me. I think you'll find them helpful - I hope. I would like to hear that you're going to use them, obviously, but I hope we'll hear that the department finds them possible and we will proceed with those amendments.

In my riding, when I discuss these issues and the whole question of changes to this bill, I find there is strong support for various parts of the bill, but particularly for those parts that deal with people who are high-income users - particularly the clawback. The clawback provides the people, for instance, making $50,000 a year, who in the past could perhaps year after year earn that much and then collect maybe $10,000 more in UI every year.... People in my area are saying that's not what it should be designed for. That's what we have to get rid of. That's why I'm pleased to see the clawback. So there's great support for that.

I think there is a view out there that abuse is widespread. It's not my view. I think it's very limited. But that's certainly a view and a concern of the public, and I think there's great support for the kinds of measures you're suggesting to deal with abusers, to make it very clear that we're not going to put up with people who want to rip off the rest of people who want to legitimately use it.

In terms of legitimate users, I think there is support for maintaining a strong system - as strong as possible. I think there is support for trying to avoid hardships that might occur if we do not make the amendments, the kinds of things proposed by my colleagues Mr. Scott and Ms Augustine, to deal with the issue of the gap and the intensity rule, which I think could have an effect of creating hardships on people in low-income groups in this country.

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The other thing is I think it's important that we make this fairer. That's why I put the divisor forward in my proposal, as you know. I think it would make it more equitable across the country. At the moment the present system seems to say that if you're in an area of highest unemployment, you should have a lot of incentive to work as much as possible because you're going to have to work four more weeks beyond the eligibility period to get the full benefits, but if you're in an area where there's low unemployment and it's easiest to get additional work, we're not going to ask you to do that because you don't really need an incentive. To me that makes no sense. I think we need to make it fairer, and that's the reason for my proposal.

I want to move on for a moment to part II of the bill, which deals with active measures. My understanding is that some of these measures, particularly the transition measures, will be focused on high unemployment communities. It seems to me that there are communities within communities. For example, my riding has a relatively low unemployment rate compared with that of the rest of the Atlantic region, but there are communities within my area, for instance, minority communities or people with disabilities, who face greater obstacles within those groups, have a higher rate of unemployment within those groups, and face obstacles to employment. I'm wondering whether these measures are targeted towards those groups as high unemployment communities.

Second, in relation to the question of targeted wage subsidies, one concern we've heard expressed before the committee is companies abusing them or taking advantage of them to get low-wage employees. I wonder how this bill will deal with that.

Last, I'd like to hear some more about job creation partnerships and how they're going to work in actuality.

Thank you.

Mr. Young: Mr. Chairman, I think the point of a community within a community is one we have to be extremely sensitive about. I would hope that as we work with our partners...because in part II - I want to emphasize this - the provinces will be our partners. We're going to be negotiating with the provinces. It will probably vary a great deal from province to province.

I will be tabling today copies of my letter to all my colleagues in all the provinces. What they have asked us and where we are in discussions vary from province to province. You will get copies of all that to see what we intend to do. Anything we do on active measures will have to be done in cooperation, in consultation with the provinces. I don't want to speculate on how that will finally wind up. I hope we'll have negotiations that will move ahead rapidly and that we will demonstrate our commitment to making sure that we have a delivery system that respects the client and avoids as much duplication and confusion as possible. I would hope that with our partners we'll be flexible enough to be able to recognize that. As I said earlier, within provinces there are great differences and within communities there can be differences.

With respect to wage subsidies, this gives me an opportunity to say that in all this stuff we're going to be monitoring very closely. In the original bill, as you know, there was a monitoring function. If that's the direction, it's going to become even more important now that we try to convince our colleagues in government that we need to get some flexibility on how we finance these changes. The changes you have proposed around this committee table are going to cost some money, and it's going to have to come from somewhere.

I think the monitoring process will have to demonstrate there's going to be behavioural change. I think behavioural change will result in more people working more, making sure no work is passed up, because every hour counts. There'll be no incentive or disincentive. I hope people will recognize that the fine-tuning of the system is such that you just can't risk not taking whatever opportunity to work there is available.

With respect to the corporate side or the business side, that monitoring process is going to be tight as well to make sure that if there are any abuses in wage subsidies or anybody trying to get cute, we'll pick it up very quickly.

The monitoring process is an integral part of all of this. I could give you numbers that are astronomical. If you get behavioural change, whereby people on employment insurance work an extra week, it can mean half a billion dollars. The numbers are mind-boggling.

If you get behavioural change because we demonstrate to people that we'll support them with employment insurance, there'll be wage subsidies, there'll be transition funds, there'll be reinvestment funds.... There's also a tremendous burden on individuals to take whatever work is available, to do whatever is required to help themselves. If we get that behavioural change you're going to see significant benefits to the economy, more productivity and less dependence. I think we have to monitor that, the same as we do with other indicators.

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When a finance minister comes before the country, they project interest rates, gross domestic product, inflation rates, etc. We're prepared...and we will be making the argument that this legislation, at the end of the day, will be monitored in such a way that we'll be able to track what's right about it and what's wrong about it.

Mr. Chairman, I make an absolute commitment to all members of the committee that as we do this monitoring.... I'm not talking about two, three, or four years down the road. I'm saying if we get this in place July 1, 1996, the monitoring process will begin immediately. If we see there's something that's having an impact on a group of people within our society that we didn't foresee or that's unfair or inequitable, we'll correct it. I have no problem saying mea culpa. I've made more mistakes than most people. Governments tend to make mistakes. There's nothing new about that. The problem is, do you have the guts, do you have the commitment, when you make a mistake, to say, yes, we made a mistake and now let's correct it?

The monitoring process in this legislation is designed to do a lot of that. I make a commitment to the committee that not only with respect to the matters brought up by the member for Halifax West, but also on the broad implications of the implementation of this legislation, that we will be very meticulous in tracking its impact.

The Chairman: Mr. Scott.

Mr. Scott (Fredericton - York - Sunbury): Thank you very much, Mr. Chair.

Welcome, Mr. Minister. I'd like to explore a little bit your fundamental perception of the program. Ms Augustine alluded to the fact that she and I spent some time going across the country talking about the social security review and social programs generally. I've always viewed unemployment insurance as having a significant income supplement component for those people who find themselves working in industries that are seasonal. I've been somewhat distressed to find a number of people who don't share that view and see this as pure insurance. I would like to get a reaction.

For instance, as your department tries to find the money in the system, I would hope that we would look at the high end in the program. There are regular benefits that are going to people who have high incomes. I would be interested, in fact, if an analysis is done - I'm sure it is - in having that be provided, to know where the money going into the system comes from so that we can assess the exercise to try the find the moneys necessary to attend to our proposed amendments.

But more than anything, Mr. Minister, I'd like to be assured that your view of the program includes the kind of social measures that are obvious - low-income protection and so on. Those measures in large part have been challenged by many people who I thought would have been more supportive of what I consider to be socially progressive elements in this package.

Mr. Young: Let me say that I understand, I think, to some extent the arguments that have been made about those who would subscribe to the pure insurance concept. I think employment insurance by its very nature, and certainly the way it has evolved over the years in this country, is not one of pure insurance. I think it's a recognition of social obligation.

Can I say, Mr. Chairman...because I've had this argument - or good talks, actually; they haven't all been arguments - and discussions with people on this notion of every cent you put in you should get it out, fairness and equity, fair share. Let me use a couple of the examples I have used.

I am extremely happy as an individual who has paid life insurance for many years on term life that my wife hasn't collected yet. As a matter of fact, when I get to age 65 and I will have paid then, in some cases, for well over 40 years, I'm going to be the happiest guy in town that nobody has collected on.

If I am paying into the employment insurance fund for 25 or 35 years as a Canadian citizen and I never have to collect it.... I think those people are very happy. I also think they're very fortunate.

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If I have supplemental health insurance and I go to my grave without ever having collected anything back from the premiums that I paid into my personal health insurance, then I will have been a very fortunate human being.

So I have difficulty with people who want fairness in these areas. I think there's a reason why we don't call things death insurance, but, rather, we call them life insurance. I think there's a reason why we call things health insurance, as opposed to sickness insurance.

From my point of view, I have no reservations about saying that many of the people I've talked to in the last month and a half, and certainly many of the people I've known in the last many years, who've been faced with problems of employment and losing their jobs, and so forth, would be more than happy to trade their benefits from this system for the standard of living and the comfort and the state of mind that has been enjoyed by the people who have had security in their employment environment.

When you're talking about fairness and equity and fair share and all the rest of it, you have to be very careful. If everybody wants to take out of the employment insurance system what they put into it, on a dollar-for-dollar basis, then it's going to be a heck of a mess. I think people would want to rethink that on the basis that the less you take out of your term life insurance, your health insurance, or your employment insurance, probably the better off you are.

The Chairman: We'll move to the Bloc for the second round.

Mr. Crête.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): I'm very glad to see that after the theatre, we've come down to reality. Let's talk about reality, Minister.

What people back home are asking does not correspond to the content of briefs and amendments prepared in advance. Minister, I would like to know if you will maintain this decision to penalize resource-based regions that are not developed because they are guilty of having a regional economy.

Will the intensity rule be maintained? Do you really want to clear out regions by maintaining the 910 hour requirement for new claimants? Will you keep that sword of Damoclès over the heads of women because they clearly told us about the systemic discrimination in this reform?

These are not unimportant amendments. These are fundamental problems about which people are asking questions. Where we come from, they are certainly not professional agitators. They are three regional county municipalities, among others, and about 40 mayors who unanimously adopted resolutions demanding the withdrawal of this reform. I would like to know if there's a basis for all this.

My last comment concerns the system that you're developing with the amendments before us. The inadequate uses you make will not tally up to 125,000 but rather 250,000 because you will multiply their effects.

Mr. Young: Today we are at one stage in the work of the committee. I hope I made sufficient comments on the proposals of members. If the honourable member has no other suggestion than to withdraw the bill, we will see, when the time comes, whether that is also the government's decision. I think that at the outset of my presentation, I stated clearly that it was the government's intention to implement an employment insurance Act in Canada on July 1st, 1996.

I do not want to prejudge the report of the committee without taking into consideration the statements by members of the committee and the testimony of various groups and individuals who will appear before you. If the honourable member is asking me whether we will withdraw the bill and go back to a 10-42 system or something of that kind, my answer is no, Mr. Chairman. That's not what we're going to do.

Mr. Crête: The member from New Brunswick has not answered the first part of my question. Do you still maintain that resource-based regions have acted voluntarily, as you've indicated in this reform?

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Mr. Young: I said that the proposal that was made concerning the intensity rule, with an exemption for households with an income of less than $26,000, seemed to me very interesting.

If the honourable member has other suggestions to make, we will examine them. For the moment, except for a rather general demand that the bill be withdrawn, I have not heard many concrete suggestions from the Bloc Québécois. However, we hope to have proposals that could be useful to us.

Mr. Dubé (Lévis): We strongly believe that it would be best to table a new bill because there would be too many changes to be made in this one during clause by clause consideration.

Personally, I'm somewhat disappointed, Minister. Immediately after your appointment, you had come to meet with the committee and at that time, I had detected in you a very positive attitude. I remember that I had said that because you were from a region... Andy Scott, Mr. LeBlanc and I were part of a sub-committee that had travelled to Acadia last year. All the testimony was quite extraordinary. This afternoon, I'm disappointed to hear you say that you no longer share that view.

You now seem to be listening to people from your department. There are allegedly from 100,000 to 125,000 people who abuse the system. I look after this issue and I'm wondering where you found those figures. I found that terrible.

Secondly, I would like to discuss the youth issue. Today, you're not talking about an employment insurance system but rather a punishment insurance system.

What I find even more scandalous is that in this bill - I know it was your predecessor and not you who developed it - we're even trying to punish new entrants into the job market. We're asking them to work 910 hours! They have never clamed unemployment insurance benefits, but they're being punished in advance.

There is something in this that disturbs and disappoints me a great deal. There were pre-consultations throughout Canada before this reform. We heard very many people last year and this year we're starting all over again to hear the same criticism. It has been noted that these measures are bad, but we must realize that it's not a compromise that will make them any better.

Those are my general comments and I'd like to get back to more specific matters, Minister. Why punish people in advance when they have not yet claimed unemployment insurance by doubling the requirements, by requiring 910 hours a year. Do you find that acceptable?

Mr. Young: For some time now, we were called to order on many occasions by intervenors telling us that the employment insurance program should be a simple insurance system that reflects experience and reality.

All kinds of proposals were presented. I want to give you an example because there are two elements in the honourable member's statement that are very valid and I would like to answer them.

First of all, I will answer the question concerning newcomers into the job market. It may not be the case everywhere, but we will try to stick to known experiences.

.1650

If someone learns to drive and drives for the first time, he will have to pay higher insurance premiums than someone who's been driving for a long time. That's just one example and I think that's happened to many of us. And if you have an accident, the premiums will of course increase.

There are all kinds of examples that lead us to say that before you enter the job market, you should be prepared.

Let's take the example of youngsters who drop out of school. They must know that this will not make their life any easier. It's important that they know that entering the job market without being well-prepared, in any province, means running the risk of ending up being a welfare recipient with benefits that aren't very high. New Brunswick, for instance, has the lowest rates in the country. So we shouldn't have them believe that it will be easy for them to get into the employment insurance program.

Perhaps they're other viewpoints. It varies from region to region and the situation is more difficult in regions where there are not sufficient jobs. The criteria can be flexible, but it will be interesting to see what solutions will be proposed.

How should we give access to the employment insurance program to someone who's 17 and who says to himself: "I'm in tenth grade, I don't like school very much, I'm leaving, I'll find a job and then I'll get on to employment insurance or welfare"?

I'm prepared to listen to all suggestions. I've listened to the proposals of our colleagues and I would like to respond to the honourable member who thinks I invented the figure I just quoted. It's incredible!

In the past five years, they're were certainly more than 100,000 people who abused and defrauded the system who were caught in flagrante delicto. That was the figure I quoted. That figure is well below the annual average, sir. That doesn't mean that I believe that that number of people is abusing the system right now. That's not it at all.

I would point out to you, sir, that 100,000 to 125,000 people were found guilty of having abused the system, of having committed fraud, and were penalized. I hope you're not too surprised by this reality which is well-known to those who work in this program.

Mr. Dubé: These cases should be exposed, without naming names, of course.

Mr. Young: We can provide you with the figures for the past few years. In fact, those of us who've been members of Parliament for a long time are constantly being confronted with the situations where people appear before some tribunal, and have some problems or some disaster happen to them. So I can tell you that the current system is already the cause of these problems and that that 100,000 figure is not something I just tossed around carelessly.

Mr. Dubé: This needs to be discussed.

Mr. Young: These are known facts. There's nothing new about this. That figure has been quoted for a very long time now.

Mr. Dubé: You're talking about fraud, and it must be understood that this is serious. Fraud is getting into the system by making false statements.

Mr. Young: Yes, and one is penalized for trying to circumvent the system.

Mr. Dubé: Oh no, that's not the same. If someone is penalized, he can challenge it and demand that his case be reviewed.

Mr. Young: Sir, you can play on words as much as you want, I'm saying that over 100 000 people, last year, the year before, the year before that,...

Mr. Dubé: Committed fraud...

Mr. Young: ... abused the system, defrauded it, obtained benefits to which they were not entitled and were found responsible for those actions.

I will not elaborate further, but I must also say that 20 per cent of these people repeat this offence two and three times. Those of us who have been members of Parliament for a long time know that there is abuse in any kind of system.

There is abuse of the employment insurance system, as there is abuse of the tax system, as there is abuse of the speed limit on our roads. There is abuse everywhere, and you have to quote figures when you know them.

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[English]

Mr. Johnston: Mr. Minister, your predecessor projected that this legislation could save $1.9 billion in the system. We have today suggested three amendments from members. If those amendments are adopted, would that $1.9 billion still hold or would that make a difference?

Mr. Young: No, the Minister of Finance was clear. Just to make sure we do understand each other, though, the $1.9 billion was subject to a reinvestment fund, so the net in the budget as called for by the Minister of Finance last year was $1.2 billion, and that has to be respected. I have no doubt the Minister of Finance will insist on that. I want to indicate to the members that when we come back with the analysis and so forth we'll have to determine how we're going to handle any reallocation.

I want to go back, Mr. Chairman, to the whole question of behavioural change, because I think that's a critical part of the package. As we institute a number of measures that will remove disincentives, I think we have to take that into account.

But there's no question, Mr. Chairman, in direct response to the hon. member's question, that the budget undertakings will be respected.

The Chairman: Are there any more questions, Mr. Johnston?

Mr. Johnston: Just on that one word the minister used, Mr. Chairman. ``Reallocation'' is a very interesting word and sometimes it can be bandied about.

Mr. Young: Mr. Chairman, I think the hon. member has a right to be assured that the bottom line, because it applies to a budget document, it applies to the deficit, it applies to all of our fiscal management program, is that it will be respected. Everything we do in reallocation...we can reallocate within the department, but all of our program review objectives have to be met. But if we have $10 to spend and it was originally designed to spend $7 and $3, as long as you spend $6 and $4 and you come out to the $10, that's it. You can't get to $11. That's the point - and it won't.

The Chairman: Is that clear - $7 plus $3 is $10?

Mr. Johnston: Yes, even in Liberal math, Mr. Chairman.

The Chairman: Mr. Allmand.

Mr. Allmand (Notre-Dame-de-Grâce): I have just a few questions of fact. I would like to clear up this business of abuse.

Minister, how much was paid out in benefits in 1995?

Mr. Young: Are you talking about abuse?

Mr. Allmand: No, total benefits. How much was paid?

Mr. Young: We'll get you that.

Mr. Allmand: I'd like to know, because when you use the word ``abuse'', I'm not clear whether ``abuse'' equals ``illegality''. I'd like to know, knowing the total amount of the benefits paid last year, what percentage was obtained by abuse or by illegality, if they are the same thing. It hasn't seemed clear to me in the exchanges you've had already.

Mr. Young: The total pay-outs are some $13.5 billion.

Mr. Allmand: How much of that do you have information to say was obtained by abuse or illegality, if they're not the same thing?

Mr. Young: Overpayments amounted to something like $100 million.

Mr. Allmand: Overpayments, though, are sometimes caused by the -

Mr. Young: Let's be precise.

Mr. Allmand: That's why I'd like to be precise.

Mr. Young: Let's go back to it again. Some 119,000 claimants were penalized in 1995-96 for fraud against UI.

Mr. Allmand: What percentage of total benefits is that?

Mr. Young: I'll have to give you that.

Mr. Allmand: We'll leave that for the minute, Mr. Chair. I'd really like to know, because in the past we were told the percentage of abuse, while always too high, was a very small percentage of total benefits paid. But let's leave that for the moment.

Mr. Young: I think the critical number here is not to try to suggest, any more than with income tax or anything else, that everybody is abusing the system. There is no way we want to leave that impression. What we are saying is that over 100,000 persons a year in the last four or five years have taken advantage of the system and have been penalized for it.

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We can get into all the semantics, into whether it's criminal activity, fraudulent activity, or whatever, but the penalized claimants have been put through the system and it has been determined that they were in contravention of the act. That's over 100,000 people a year, regardless of the amounts. Usually the fines, if I'm not mistaken, have been in the neighbourhood of $900 or $1,000, and the claims have probably been somewhere in that neighbourhood as well.

Mr. Allmand: My only point in asking these questions, Mr. Chair, is that very often we don't have the right figures on these things. People who do not like unemployment insurance, who oppose unemployment insurance, exaggerate these figures to cut back on legitimate benefits for people who really deserve it. I think to be fair we should be very clear on what in fact abuse is, compared with the total amount of benefits paid.

My next question is also one of fact. In answering questions with respect to the projected surplus in the fund this year, which is said to be about $5 billion more or less, you said that the government is aiming for reserves in the future, so that when there is a recession or a downturn and unemployment goes up, you have a reserve in place to save the government from the pay-outs it must make into the fund when there is a demand beyond what is there.

I would like to know what has been the net cost to the government to cover demands on the fund when it's had a deficit, let's say since 1990 or over the last 10 years. The system has always been one to have a surplus in good times to cover the deficit in bad times. If you're saying the surplus in reserve hasn't been enough, I'd like to know what the net cost to the government has been after they've been repaid by surpluses in good times - costs based on interest rates to lend to the fund, to pay to the fund, which got repaid after the surplus built up. I'd like to really know what the net cost has been to the government over the years, considering the fact that they no longer pay into the fund since the Conservative amendments of a few years ago.

Could you please get me that, although probably not today?

Mr. Young: Actually we have it available here. Let me be clear that the cost we're referring to is the interest in 1995, $94 million, because the fund started to pick up in 1995. We had a surplus on the current account in 1995. In 1994 the interest was $310 million to the government, in 1993 it was $405 million, in 1992 it was $255 million.

Mr. Chairman, the real reason for trying to maintain a reserve in the UI account is not just to protect the government's interest and its concern about going into a deficit. You may recall the tremendous jump in premiums a few years ago, premiums that are paid by private sector employers and employees. When you're in a terrible down cycle and everybody's cutting back, all of a sudden you go from x to y.

Mr. Allmand: I agree. I accept that. What I'd like to see is a paper with the net cost to the government because of interest payments and so on, since about 1990.

Mr. Young: We have it here from 1992, and I've just given it to you. We'll get it from 1990; we'll have it printed.

Mr. Allmand: Okay.

My last question is the following. We are told that in 1990, 87% of the unemployed were covered by unemployment insurance. Now in 1996 only 46% are covered by unemployment insurance. I'd like to know what percentage of the unemployed you believe will still be covered if this bill becomes law. We are told that despite moving to the hours system, because of the higher eligibility requirements and because of the shorter benefit period, even less than 46% of the unemployed will be covered. Have you tried to assess the impact with respect to coverage in those terms?

Mr. Young: Yes, Mr. Chairman.

Since the member has asked a fairly detailed question on a trend that has been downward in terms of the total number of people covered by EI - there are all kinds of reasons for that - I think we would be better to prepare a comprehensive and detailed reply. There's no doubt that our view of it now is that this trend is beginning to reverse - but that has a lot to do with how the economy works - and especially, I think, without getting into a lot of the detail, is the number of people who were, for example, in sectors where there not very often were major lay-offs, especially the manufacturing sector. I think the last four or five years have been very tough on us. There's been a major meltdown in the manufacturing sector.

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We'll provide you with information on the history and we'll also try to provide you with some notion of where we think the trend is going.

The Chairman: Thank you. Mrs. Terrana.

Mrs. Terrana (Vancouver East): Most of the concerns I had have been addressed by these proposed amendments, but I still have a couple of concerns. We talk about equity, and then we also establish a $39,000-income threshold for clawback. But consider our country the way it is, how much more expensive it is to live in Vancouver than it is to live in Halifax. I would like to leave this with you. This is a concern I have. I know it would impact on people in the areas where the cost of living is higher much more than it would on others.

My second concern has to do with the re-entry of people, the 910 hours you have to work when you have newly entered the workforce. Many women stay home and raise children. It's then very difficult for them to get back into the workforce. There is a lot of uncertainty on their part. They've lost their confidence. This is, I think, quite a burden for them to have to face. That's the other concern I have that I would like to leave with you.

Mr. Young: Mr. Chairman, two things. On the re-entrance into the workforce, I'm sure it is going to be a major challenge for some people and of course the women the member has referred to, in some areas, depending upon employment levels and all the rest of it. I want to make it clear that it seems to have escaped some people that work in the previous year is credited as well. It's not coming back in the first year.

If they're going to work part of the year or get into part-time work, I think there are advantages to the fact that every hour worked counts, because there's always a balancing off here. There's no doubt that for some people in special situations, particular situations, it may be somewhat more difficult. How those numbers compare with the improved situation that thousands of other women will find themselves in by being in the system for the first time is something we have to look at.

The re-entry question is a complicated one. You have to use specific examples to try to deal with it. To suggest that someone who's been out of the workforce is coming back in, or a new entry.... As I was saying to my friend in the opposition earlier, if someone is coming out into the workforce only to see if they can work long enough to get into the EI system, it's questionable as to whether or not we should have it designed that way. But I do understand the problem, and we'll have to look at how we credit the previous years, employment history and so forth.

On the question of setting standards, I was intrigued, as I said, by Ms Augustine's suggestion on the intensity rule of using the $26,000. The $26,000 is used as a benchmark for household incomes. I suppose it's arbitrary, but what I've asked for and what I've found is a look at how provinces do it. There are a lot of numbers extant in the country, province by province, for social assistance, for supplemental benefits, etc. I honestly think the $26,000 number for child credits.... If you look at most provinces in the country, we're at the top end. If you look at social assistance regimes and provincial regimes, we're there.

If you look at the $39,000 clawback, I don't think you'll find too many systems that are any more generous than that in recognizing upper levels. It also, of course, has a bias in the sense that, as you put it, there are some areas of the country where the cost of living is higher. It usually is true also that where the cost of living is higher, it's because opportunity is higher and because salaries are higher. Very few people go to parts of the country to seek work because of benefits in employment insurance. Usually there's some relationship between cost of living, opportunity, standard of living and levels of income.

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So I think the $39,000 would be beneficial in areas where there are higher levels of income. Where you find regions of the country with less robust economies, there'll be a lot fewer people who will have to worry about $39,000 being a clawback figure. They won't be anywhere near to it.

The Chairman: Mr. McCormick.

Mr. McCormick (Hastings - Frontenac - Lennox and Addington): Thank you very much for appearing here today, Mr. Minister.

I'm very glad to see you and to see us at least recognizing the abuse in the system. What I've heard from Canadians, especially from many Canadians in my riding in eastern Ontario, is that they want the department and the minister at least to acknowledge that. I'm sure that they're even going to agree to pay an extra Bluenose dime on the price of their hamburgers or whatever in that ``Mc'' industry so that we can allow good Canadians to come into the system.

We've talked too much about abuse. Today all of us recognize that anyone can fall through the cracks in the system and end up on social assistance or welfare or whatever. It's these people who I understand this legislation can really help. In part II these people will be offered the opportunity to help themselves get back into the system.

I've heard that the bill will allow people who have had an attachment to the workforce in the last few years to come into this system and to access these five tools, as we've called them: the wage subsidies, the targeted earning supplement, and the self-employment and the job creation partnerships. But what I would like to hear from you, to get it on the record, is how many people this might help or be available for. There are people in our communities who really want to help themselves but have not been able to do so because of the previous legislation. Will each of these five tools be available for these people?

Mr. Young: I have to be extremely careful in how I address part II of the legislation. As you know, the Speech from the Throne discussed how the Government of Canada would approach a number of manpower training and labour market issues. I'm going to be tabling letters to the provinces on how we're going to try to cooperate and work with them. So I want to be extremely careful not to have somebody point a finger at me and say, ``Well, the minister appeared before the committee and said that the Government of Canada was going to do this, that, and everything else'', because there is a tremendous need to negotiate, to find ways in which to work together.

I would like to say that we believe that our allowing to come into the system people who are now on social assistance or who are out of it but have had some attachment in the past could affect nearly 45% of the people who are capable of working, who are of an age at which they would be seeking work, who are on social assistance.

This responds to a great problem that the provinces have identified, that there has been a lot of downloading and they're carrying the burden of a lot of people who, as you have put it, have fallen through the cracks and, for all kinds of reasons, have not been able to find work over the past few years.

So we recognized that we had to be more flexible and extend that attachment to the workforce to the people who would need, we hope, to benefit from whatever arrangements we can arrive at with the provinces in order to try to get them back into a working environment.

Mr. McCormick: I look forward to hearing more on this as we go along, and I trust that our provinces will use the wise power they've had bestowed on them and will make these decisions to work with us on this.

When we can give these individuals the hope that will help them fulfil their desire to make a difference in their lives - the ones who really want to - it will be a great fact of this bill, Mr. Minister.

[Translation]

Mr. Crête: I have a question that does not necessarily deal with aspects of the debate on this reform, but rather a very concrete reality. It's the whole issue of insurability.

There is an absolutely incredible bottleneck of claims by people who are being refused the right to be insurable because of certain family links or other reasons of this type. These cases are dealt with by Revenue Canada which has far fewer service points than Human Resource Development Canada.

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I had already written to your predecessor about this and he had answered that he was going to strike a joint committee.

There are no changes to be considered if the bill is passed as is. But I think the situation will get more complicated if more stringent regulations are added.

Quite often, when the person is not insurable, it is defendable and many eventually win. But some can wait four months, six months or a year and if they go to court, they can spend two or three years without receiving any benefits.

It seems to me there should be a solution to this. All this should be put in the hands of Employment Centres who have far more service points, which would facilitate the settlement of cases.

Mr. Young: I think that's a very valid suggestion. I must admit to the honourable member that I myself experienced as a member of Parliament. I believe there are situations that are not legitimate, and we know the results then. But there are also other circumstances where everything is done according to the rules, and the waiting periods and bottlenecks described by the member are then unacceptable.

We are therefore trying to find mechanisms to improve the situation in two or three respects. First of all, we try to determine situations in advance to avoid that this happens and secondly, we try to solve certain situations that come back year after year because the same questions are asked of the same individual in the same circumstances. It's very delicate.

As you know, it's not just the issue of family links, but also the corporate issue, when someone holds 40 per cent or less of the shares in a corporation. However, I completely agree with the honourable member about the fact that we need suggestions, because I think the current mechanism is not efficient and does not provide the desired level of service.

[English]

The Chairman: Mr. Johnston.

Mr. Johnston: Actually, Mr. Chairman, I was asking the minister about savings there. His math was maybe a little too simplified, but he did indicate that....

Instead of $1.9 billion, you said $1.2 billion. Could you explain that? There's a $700-million discrepancy.

Mr. Young: Actually it's about $800 million. I'm just rounding the numbers off.

The $800 million reinvestment fund is from the CRF. But it was taken into account when we did the calculation on employment insurance.

Mr. Jean-Jacques Noreau (Deputy Minister, Department of Human Resources Development): Mr. Chairman, the reduction in benefits as per the proposed reform, C-11 - we'll have to see what it means with the proposed amendments - would generally produce savings of about $2 billion. But you'll remember that over time there is a reinvestment of $800 million in part II, the employment measures. That's why the minister says the net savings will be $1.2 billion at maturity in the year 2000-01.

Mr. Johnston: So $800 million in training?

Mr. Noreau: Employment measures.

Mr. Young: Yes, they can be wage subsidies; they can be many different things.

The Chairman: Mr. Easter, a brief question.

Mr. Easter (Malpeque): I certainly welcome your response, Mr. Minister, to some of the amendments put forward. We'll see where it leads.

As you're well aware, I'm one of the ones on this side, along with a number of others, who had some serious concerns about the bill initially. I think we've moved forward to try to change the bill constructively and improve it.

I just want to say for the record that I'm absolutely shocked at the comment by the member for Lévis that he would say they will put a lot of proposals in at clause-by-clause. I see that as a cop-out. We're at least willing to put our proposals forward, to test them, to see where they come out, and to try constructively to improve this bill.

One of the concerns I continue to have is I know how difficult it was to achieve the family income supplement in the bill. Mr. Nault and I have discussed this a number of times, both of us coming out of the farm and union movement. We're concerned that some of the witnesses coming forward, even social activists, are saying that the family income supplement should be taken out.

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I wonder if you could relate to us how important you see the family income supplement being as a factor in terms of social security reform.

Second, from your experience in cabinet, is it realistic to think that if the family income supplement is dropped from this bill, we're going to get it anywhere else in terms of government measures.

An hon. member: That's a good question.

An hon. member: Right on!

Mr. Young: I thought it was a major achievement in the budget to have the working income supplement going to $1,000 over a couple of years. I think it was an indication of the government's concern about low-income families and, again, a commitment to the family concept and trying to support family values.

I don't want to speculate on what the chances are for an income supplement for families with incomes of less than $26,000 who have access to the employment insurance program in one way or another, on what would happen in order to try to get it somewhere else.

I can tell the hon. member that I have no intention of trying to find out.

I am going to try, and I hope the committee will support me in keeping it where it is. We have it there now; it's an integral part of the bill. It was very useful as a benchmark for the kind of suggestion Ms Augustine made, which has been very helpful. It ties in.

Why would you give somebody $2,500 as a top-up and then go into the other side of it and penalize them with an intensity rule? It seems to me that it was incongruous. We're looking at the same people and we're hitting them as we're helping them.

I can only say, without betraying any confidences of cabinet or any speculation on my part, that if it's okay with everybody, then we'll try to keep it where it is.

I'm very concerned. I understand the theory of it all, when people come in and say it shouldn't be there; it should be somewhere else. It should be this. It should be that.

When I deal with real families with real problems, with real challenges, I like to be able to help them with real money, rather than say we'll take it out of here and maybe somehow we'll get it somewhere else. Too many of those folks have been jerked around like that too many times, and I don't intend to be part of it.

The Chairman: Mr. Minister, on behalf of the committee members, I thank you for appearing.

We've covered a lot of ground. We've talked about the gap issue, the intensity rule, the job creation, the issue of abuse, and the issue of re-employment measures. We've dealt with some positive amendments by members of Parliament. We've also dealt with the behavioural change issue, of which we need to remind ourselves as we deal with this particular issue.

I can tell you that the experience of this committee has been that we've heard from members of the Canadian society, the individuals who use unemployment insurance during the times when they are most in need. It is our hope, and we are determined, to make sure that the bill that will come out of this committee will be an improved one. It will be fair to all Canadians.

We certainly appreciate the openness you have expressed in changing the features of the bill that may be viewed as being regressive.

Mr. Young: Thank you very much.

On a number of occasions I made allusions to documents that we would table. They include the letters to my colleagues in the provinces and some other information that might be useful to the committee in dealing with a couple of matters that have been raised. I hope the committee will accept them and include them in their document records.

I thank you very much for the opportunity to come.

Mr. Chairman, I would like to arrange that upon your return, at the convenience of the committee, officials of the department might be able to come in with some statistical analysis, gender analysis, impact data, pertaining to questions asked by the hon. member from Notre-Dame-de-Grâce and others, so we will be able to continue to work with you in trying to find some ways to develop an employment insurance system in the country that is fair and equitable and will work.

[Translation]

Mrs. Lalonde: Will we have the regulations for the clause by clause consideration of the bill? Secondly, I would like to know what this text entitled "List of possible technical amendments" is all about.

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Mr. Young: Mr. Chairman, these are the technical amendments that the department is planning to submit to you for examination. These are really corrections of a technical nature.

In response to the question on regulations, we will not have regulations before we have a bill.

Mrs. Lalonde: When will we have them then?

Mr. Young: Not before we have a bill. We can't prepare regulations without having a bill.

Mrs. Lalonde: There are a lot of references to regulations in the bill.

[English]

The Chairman: The meeting is adjourned.

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