[Recorded by Electronic Apparatus]
Wednesday, April 17, 1996
.1538 
[English]
The Chairman: Order.
We have the privilege of having Mr. Grubel in front of us today to hear what he has to say about employment insurance, Bill C-12, and ways and means in which he as a member, and as a member of the Reform Party, would like to improve this bill.
We operate in this fashion. We usually have half an hour per person. There is usually a ten-minute overview of what your major points are. Then we enter into a question-and-answer session.
Mr. Herb Grubel, MP (Capilano - Howe Sound): Thank you, Mr. Chairman.
I'm very pleased to be here. I would like to state at the outset that I'm speaking here, and I interpreted your invitation as asking me to speak, not for the Reform Party but as a technical expert. If you look at the scholarly papers written on the subject of the economics of unemployment insurance, you will see a number of contributions I have made over the last 25 years and which have given me a certain expertise. I've participated in many conferences and have given lots of papers. I have organized a conference myself. That is why I believe I have been invited.
The Reform Party caucus has neither seen nor approved what I'm going to say. I'm here as someone who has positions on this as a technical expert.
Mr. Chairman, I call your attention to my submission, which I will try to read quickly. It's 1,800 words. I think I can read that in less than 15 minutes. Then I will be open to questions from you.
At the outset, let me make one thing perfectly clear. I believe unemployment insurance enhances the economic and social well-being of Canadians. If designed and operated properly, it results in the sharing among all workers of the risk of unemployment costs by forces beyond individual workers' control. As such, it increases efficiency and it is equitable. In addition, it provides a benefit accruing to all, because it reduces the size of business fluctuations. The accumulation of surpluses during prosperity and de-accumulation during recession stabilize aggregate demand. Therefore, lest I be misunderstood, I wish to address the issue of how to make the UI system more efficient and equitable, not how to get rid of it.
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This goal can be achieved by first returning the system to its original insurance function. For this purpose, maternity benefits and expenses for retraining and worker placement facilities should be financed out of general revenue and not out of UI premiums. These social programs have nothing to do with unemployment insurance. They benefit all Canadians, not just those who are employed. Therefore, they should be paid out of funds raised broadly through income and corporation taxes, as well as the GST.
The second approach to making the UI system more efficient and equitable focuses on its operation. In this context, the most outstanding feature of the present system is that it has induced higher unemployment. This effect of UI is now accepted widely among scholars and a broad segment of the population, even politicians.
On December 5, Minister Axworthy argued that the system as it exists discourages unemployed workers from taking ``doughnut jobs''. Giles Gherson, Axworthy's principal secretary, said there is ample evidence that the generosity of benefits has hurt job growth. I quote: ``It's a fact of life in many communities that the UI system has choked off jobs, largely in the service sector''.
Mr. Chairman, the remaining dispute is over the size of this effect. In my first research on this subject, my colleagues and I estimated that the 1972 increases in the generosity of the system resulted in a 2% to 3% higher unemployment rate a few years later. This result was confirmed broadly by a number of other studies.
I have here in the text a reference to a study I have made, and I call your attention to a separate sheet on which I have plotted the unemployment rates in Canada and the United States. Until 1972 they moved very closely together. Since then they have diverged widely. As of February 1996, the latest data available, the unemployment rate in the two countries has diverged by five percentage points. Many economists now attribute a very large proportion of this difference to the increased generosity of the system that was introduced in 1972.
This is a significant effect, a very important effect. The increase in the unemployment rate caused by the UI system imposes significant costs. We can get an idea of the magnitude of this cost by a simple calculation.
Assume that the UI reforms of 1972 did not exist and that therefore the unemployment rate last year was the same as that in the United States. Under these conditions, employment and labour income would have been 3.5%, or $11.5 billion, higher. The actual labour was $318 billion. This is a very rough estimate because, of course, profits of corporations would have been higher and there would have been multiplier effects. A significant amount of national output is lost because of the generosity of the system.
Now, consider what this means for the fiscal balance. Of this increase in income, at least a third would have been paid as taxes, worth $3.3 billion. That automatically would have reduced the deficit by 10%. But that's not the end of the story. In addition, UI premiums would be lower, which would encourage the hiring of workers and leave more disposable income for consumers. Finally, there would be subtle but important gains in economic efficiency, as some workers and industries subsidized implicitly by the system would shrink and the resources would be used in socially more valued occupations and industry.
Can these costs of the present UI system be reduced without imposing undue hardship on workers and without destroying the system's basic insurance function? Yes, they can. Here are my ideas on how these objectives can be achieved.
First and most obvious, the system can be made less generous. The maximum benefits offered by our system now, which are equal to 53% of previous wages, are at or very near the top of benefits paid by all industrial countries. However, the generosity of the UI system also depends on the ease with which workers become eligible, how long they can receive benefits, what industries are covered, and so on.
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It is interesting to note that in recent years the system's generosity has been reduced substantially. This was one of the conclusions reached at a recent conference held here in Ottawa. Some analysts suggested that it may now be no more generous than it was before the 1972 reforms. But the pre-1972 levels are not necessarily ideal. Further cuts in generosity should be considered, as long as they do not impose undue hardships on the neediest.
Second, tougher measures against fraud must be introduced. I want to define fraud briefly. Fraud is when illegal claims are made. It's when people hold jobs or when they make multiple claims, for example.
I have always treated with some skepticism the results of internal system audits that found fraudulent claims to be about 1% of all benefits paid. How did the investigators discover what are deliberately hidden practices? What incentives do they have to show that their bureaucratic and political bosses are running a system that permits lots of fraud?
Now there's evidence that my skepticism may have been warranted. In the equivalent of a social-science experiment, five U.S. states recently introduced systems for the positive identification of people making welfare claims, like difficult-to-forge ID cards and numbers tracked by computers. They found that fraudulent claims were between 8% and 15% of welfare payments, according to a letter published in The Globe and Mail.
The same results may not be obtained for Canada's UI system, but we are not going to find out unless we also introduce modern electronic systems for the positive identification of claimants. I am doubtful that the minister's recent talk about getting tough with cheaters will have much effect, though it is cheap and worth trying.
In this context, I call your attention to the first appendix to my paper in which I have a copy of a question I put on the order paper. We discovered from the public accounts that between 1993-94, recovered fraudulently obtained unemployment insurance benefits rose from $148 million to $155 million, which is an increase in one year of 5%.
Similarly, there is an amazing increase in recovered fraud of 320% in old age security benefits. I asked the minister to please explain how in one year there could have been such dramatic increases. I wonder what system was introduced to obtain these objectives.
After having discussed, first, the possible lowering of benefits, and second, the introduction of tougher measures to reduce fraud, I want to turn to a third category of measures to make the system more efficient.
The following are examples of abuses of the system. These are not fraudulent, but are obvious abuses that have many Canadians very unhappy. I'll give some examples.
A constituent in my riding had accommodated the wishes of three women who wanted to fill one secretarial position in his company by each working four months in rotation. During the eight months they were not working, they collected UI benefits. This practice was curbed by the recent change in UI legislation that made people ineligible if they quit their jobs voluntarily. However, my story suggests both how the system has been diverted from its original purpose, and how it can be improved by a relatively simple change in the law.
Here's a second example. Local governments in Atlantic Canada provide employment just long enough for the workers to become eligible for UI benefits all on a rotational basis to keep the government department fully staffed.
Here's a third example. In some provincial jurisdictions, teachers receive lay-off notices that come into effect at the end of the school year. After the teachers collect UI benefits during the summer, they are rehired as planned.
Here's a fourth example. Automobile companies give lay-off notices to workers before planned reductions in output necessitated by plant maintenance and model changeovers. The workers collect UI benefits during that period, and know they will be rehired at a definite point in time later. This particular abuse of the system has been codified in contracts signed between the unions and the employers.
The schemes just described represent subsidies to workers and employers in specific industries. Some of these are industries that pay wages much above the average.
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The subsidies are paid not by printing money in Ottawa, but by all those other workers in the system who have to pay higher premiums. Many of them have lower wages than those who get the transfers.
The elimination of these subsidies through specific legislation prohibiting them would be efficient and equitable. I believe that most Canadians would welcome such measures.
There is, of course, a problem such that many of the abusers will protest the loss of the subsidies they receive. They will claim that it is their ``right'' to get benefits since they paid UI premiums while they worked. I think it is time for political leadership to face down such individuals. This is my challenge to this committee and the minister.
Here's a fourth measure. The UI system has subsidized workers and employers in the forestry, fishing, construction, hospitality and other seasonal industries. It has been estimated that workers in these industries, year after year, receive benefits six times larger than what they contribute to the UI system through premiums. In addition, these industries have grown or remained in operation as a result of the fact that they can hire some workers at lower wages than they could in the absence of UI benefits during the off-season.
Prices of the goods and services in these industries are lowered and their consumption is inefficiently subsidized. As a result, low-income workers pay premiums that indirectly subsidize the recreational services consumed by such people as rich skiers.
There are no politically easy solutions to the problems created by the systemic subsidy of seasonal industries. Large financial flows in investments are involved. The right mentality is strong among workers, and there are great costs of adjustment for entire regions. However, there are some measures that would alleviate the problems and could be introduced gradually.
The measures involve experience-rated premiums, payable by workers and employers. These rates would be set, such that the ratio of benefits received to premiums paid would become say two or three times, rather than the six times that prevails at present. The difference in premiums would be phased in gradually over five to ten years. There are probably other measures that could be worked out in consultation with affected employers and workers.
Mr. Chairman, I come to my conclusion. Let me summarize my recommendations.
The UI system is an economically and socially worthwhile institution that should and can be maintained. However, since its inception it has been diverted from its original purpose. It should be relieved of its burden of financial social services unrelated to unemployment. It should use modern technology to reduce fraud. It should end clearly identified abuses that create inequitable transfers of income to certain groups of workers. It should curb the permanent subsidization of seasonal industries by the introduction of premiums that reflect the subsidies they receive from other industries.
I believe, Mr. Chairman, that these reforms to the UI system are technically feasible and politically acceptable, if not welcomed, by the majority of Canadians. That's because they will result in lower premiums and taxes, while they continue to offer financial protection to those who have lost their jobs for reasons beyond their control.
Thank you for your patience.
The Chairman: Thank you very much, Mr. Grubel.
We'll move to the questions and answers now. Mr. Dubé, do you have any questions?
[Translation]
Mr. Dubé (Lévis): In a democracy, it is a custom to respect everyone's opinion, even those expressed by other colleagues. If I may, I would like to begin by stating that I do not agree with you when you say that the system is too generous, that, of all the western societies, our system is the most generous one. I say bravo, we have a good system and that is great.
However, over the past few years, we have witnessed cutbacks, and, at the same time, an increase in fraud. However, you have not asked the right question.
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Like you, I have heard witnesses say that some people are cheating, however, there are some families that are so poor... You heard representatives from Campagne 2000 say that one out of five children in Canada was living below the poverty line. Poor children mean poor parents. All the statistics show that poverty is growing in Canada. We must be aware of this factor.
My dear sir, if we were to follow your logic, the solution would be simple: eliminate unemployment insurance and we eliminate the unemployed.
Tell me why you have not associated the cutbacks, which over the past few years have been getting bigger an bigger, with the fact that parents are compelled to lie on their unemployment insurance applications so that they can feed their children.
Are you aware of that? Are there no people in dire straits in your riding? Has your region been spared? I just don't understand this.
[English]
Mr. Grubel: My dear colleague, would you please tell me what have been the reductions in benefits? What have they been?
[Translation]
Mr. Dubé: Cutbacks began with Minister Bernard Valcourt.
[English]
Mr. Grubel: Yes, but what have been the reductions?
[Translation]
Mr. Dubé: This began when the Conservative government decided that it would no longer finance unemployment insurance.
First of all, they compiled a list of all of those who were so called voluntarily withdrawing. With C-17, benefits were reduced from 60 to 55% starting the first year. We're talking about significant reductions here. Now we are planning new cutbacks. You don't make any link between the cutbacks and an increase in fraudulent applications submitted by people who are trying to stretch the elastic band. I am predicting that there will be even more people in extreme situations who will try to save their skins.
Mr. Grubel, the gap between the wealthy and the poor is growing in Canada. When you compare us to the United States... Although I may be proud of our neighbours in many respects, I cannot emulate them when it comes to social programs.
You are entitled to your position and I'm entitled to mine, but I am surprised by the type of position you are advocating.
[English]
Mr. Grubel: Would the honourable member be happy if we could find a solution so that at the same stage of the business cycle we would not have 10.5% unemployment but only 5.5% unemployment? Would the member be happy about that?
[Translation]
Mr. Dubé: Yes, that is the situation in the United States. However, if you were to analyze employment studies in the United States... No, no, the roles are reversed. How many people in Canada, and how many more are there in the United States, that are hit so hard by this that they leave the system and are no longer included in the statistics?
This is not taken into consideration. That is what the American situation is all about. This is my personal opinion and I am not speaking on behalf of my party when I say that the American model is not the example to follow.
[English]
Mr. Grubel: The fact of the matter is the American economy with its system has created many more jobs proportionately than we have in Canada. That is why we have over four million people unemployed. The reason that has been done has been acknowledged by Mr. Axworthy and byMr. Gherson, and I read you the quotation.
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I should also make a distinction that I think is not made clearly enough in these discussions. Fraud means violating a basic, fundamental law that says you cannot collect unemployment insurance while you have a job, you cannot travel between cities and different provinces and collect unemployment insurance from different jurisdictions, and you cannot have multiple identities in order to collect unemployment insurance in the same city.
There is a lot of smoke about the existence of such fraud. I'm sure the member from the Bloc will not be unhappy about measures that would eliminate fraud of this sort. That is what I call fraud.
Second, there exists something called abuse. The system was never intended, dear sir, for teachers who have tenure, and who have by all standards above average income, to have the opportunity to supplement their incomes during summer by being laid off legally so they qualify for unemployment insurance.
The people of Canada who I represent are very unhappy about their benefits going to those people. They want them to go to the people in your riding who are genuinely thrown out of work because of technical change.
I do not understand how the member can possibly be endorsing that we take money from poor, low-income workers who pay premiums and give them to teachers and similar people who are, in my use of the word, abusing the system. Are you in favour of a system that in the summer supplements the income of teachers and of the employees of school boards?
[Translation]
Mr. Dubé: I'm talking about full-time teachers and lecturers who are paid per lecture. Perhaps some further clarification is required, but I am not against reforming the current piece of legislation because I agree with you that it leaves a lot of room for interpretation.
Last week, some advocacy groups for the unemployed told me that 75% of the people who challenge the government decision win their case due to interpretation problems and not due to fraud issues. Sir, there are cheats in all the government programs, in every walk of society, but we are attacking people who are the most disadvantaged.
We could find similar situations in certain regions, but be assured that those who cheat do so in order to survive. If they were able to work, if we were to establish a job development policy, they would prefer to work.
[English]
Mr. Grubel: I call your attention to what I said and I repeat it for you one more time.
I do believe we need an unemployment insurance system. It is good for all Canada. However, I also believe it should be aimed to serve those people who for reasons beyond their control are unemployed. I say that. This is my basic position.
On the other hand, we now have discovered that as a result of making the system as generous as it is - and we now have almost universal agreement among professionals about this, with evenMr. Axworthy and his assistants saying this - it has added to unemployment and resulted in the loss of output, profits and tax revenue. I am asking this committee and society to consider whether or not it might not be worth while to get people to work and have them pay lower taxes, if we take some steps of the sort I have described.
The system was never intended to produce a permanent transfer of six times the amount of money that forestry workers, fishermen and recreational workers are paying into the system. These are government statistics. Permanently, it's being taken away from other, some very low-paid workers for a permanent subsidy to these industries. We can and should do something about it, because it isn't fair to those who have to pay the bill.
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I understand the position of people who are speaking for those who would end up receiving less or would have to make adjustments. I'm speaking as an economist to you here, and I take the position of all those who are asked to pay the bill for all those goodies.
The Chairman: Thank you, Mr. Grubel.
Does anybody have a question for Mr. Grubel?
Mrs. Brown (Calgary Southeast): Yes, I have one question I'd like to put to Herb. Thank you very much.
It was very good to hear your words, Herb. The question I have for you comes out of a conversation I had on an open-line show some weeks ago with a household in Prince Edward Island. I was speaking to a woman who has a family of four children. The household income for the given year of 1994-95 was $12,000.
My concern lies in securing financial support for those households, especially those in eastern Canada, that experience the vagaries of seasonal work. I'd like you to expand upon measures that could - and I stress again ``could'' - be undertaken to ensure their social security needs and concerns are met.
Mr. Grubel: What I am suggesting is what has been used in most countries as a way to limit the size of the seasonal industry, and that is to have them pay a little bit more than those who never get laid off. We would phase this in over ten years gradually so people could make the adjustment.
It just makes no sense. This has not been designed as a system that would permanently take money away from clerks working in supermarkets making minimum wage or people working in the forest at very low wages. They have to pay UI premiums. Where are they going? They may never draw on them. They are going to a permanent subsidy to the person in Prince Edward Island.
I know this poses great hardship. I am here to represent the public interest, the 80% of all Canadians who very rarely are hit by unemployment. They are unhappy about having to commit themselves, through this system, to a permanent transfer. They have no choice. They are asking why they should be required to keep such people in those occupations forever and ever.
I do not know what the answer is, except the one that would gradually phase in measures that would reduce the amount of subsidy these people could receive permanently.
Mrs. Brown: You've addressed the very interesting point of the difficulty of the transition period in itself.
I know the anxiety I heard in this mom's voice as she was talking to me. She said ``What am I going to do? What are we as a family going to do to ensure we can take care of our children in terms of food, clothing, education and all of those basic elements that meet the needs of a household?''. I found that a difficult question to answer as well.
So I was really looking to give some comfort to her by letting her know her worry and concern would indeed be a consideration in any measures that are developed.
Mr. Grubel: Jan, you will see if you read my brief that I said twice the system must be made to protect the interest of those who are most needy. The case you described to me would clearly be of that nature. We just have to do this. We cannot, as we approach reform, drop the people who have been trapped in situations such as this woman has.
We cannot possibly responsibly do this, but neither can we go on permanently asking people with low wages, on one coast or in the middle of Canada, to contribute all of their money perpetually to keep people in those kinds of situations. They are beginning to revolt. That is why we are having all these demands for changes in the UI system.
Mrs. Brown: Thank you.
The Chairman: Are there any questions from the Liberal side? No?
Thank you very much.
Mr. Grubel: My pleasure. Thank you.
The Chairman: I'm sure you'll be using your House of Commons time to speak eloquently on this particular matter as a member of Parliament.
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Mr. Grubel: I thank you very much for this opportunity to speak here. I would like to reiterate one more time, since people may not have heard it at the beginning, that I'm here wearing my hat as a professional economist who has been writing papers on this subject for 25 years and that the views I've expressed are not those of the Reform Party. They have not even had a chance to see them, much less approve them.
The Chairman: We are aware of the fact that you are a member of Parliament who can also express himself in the House of Commons.
Mrs. Brown: Mr. Chairman, before we proceed, I would beg the indulgence of the committee for just a few moments. At the outset of our committee work we always indicated we were going to be cooperative and flexible. It's my understanding that the Caledon Institute, which was to be present today at 5 p.m., is not going to appear. It's my understanding also that they are not going to reschedule. So I would ask your indulgence and that of the committee if I may move this motion: that the agenda for the HRD committee for today be amended to include the leader of the NDP to present to the committee in the absence of the Caledon Institute.
Mr. Dubé: I second it.
Mr. McCormick (Hastings - Frontenac - Lennox and Addington): I have a question. Is Mr. Charest available today?
Mrs. Brown: Mr. Charest wasn't part of my consideration, Larry.
Mr. McCormick: I just wondered whether the gentleman was available.
Mrs. Brown: I don't think he's in the House. Is he ever in the House? I don't think he's ever around. He's out there on the stump.
Mr. McCormick: I certainly wouldn't buy that.
Mrs. Brown: That's a party of two. It's dust, as we've often said.
The Chairman: Before we can deal with that motion we're going to hear from the other two groups that need to present and that are here already. Then we will deal with that motion.
The next presenters are from the Centrale des syndicats démocratiques. Welcome. I'd like to express to you our warmest and sincerest gratitude for attending today's hearings on Bill C-12, an act respecting employment insurance in Canada. The representatives of the Centrale des syndicats démocratiques are Mr. Claude Gingras, president, and François Vaudreuil, vice-president.
Welcome, gentlemen. As you know, our mandate in this committee is to improve the legislation, Bill C-12. We have benefited a great deal from hundreds of Canadians who have forwarded their briefs or appeared before the committee, a cross-section of Canadians representing labour groups, business groups, and local stakeholders. Of course we've benefited a great deal from them, and I'm sure we'll benefit a great deal from your point of view as we attempt to improve this piece of legislation.
Mr. Nault (Kenora - Rainy River): Mr. Chairman, my understanding is there's a brief for this witness. Can we have them handed out?
The Chairman: Yes, that's usually done automatically, but thank you, Mr. Nault, for bringing it up.
Mr. Nault: I'd like to have it before they start.
The Chairman: You may begin.
[Translation]
Mr. Claude Gingras (President, Centrale des syndicats démocratiques): The CSD is pleased to be given this opportunity to make a presentation on Bill C-12. For at least a decade, the country's economic and political decision-makers, have been unable to put people back to work.
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We must acknowledge that, contrary to the promises made, free trade has, as of yet, been unable to create the wealth needed to allow people to live comfortably.
The CSD feels that Bill C-12 will not provide any dynamic response to this situation. On the contrary, we believe that the additional cuts set out in the bill are contrary to the liberal principles of progress, on which the country was build and has made its reputation.
If the bill is enacted in its present form, the CSD is afraid that it will exacerbate the disparities between rich and poor, between the privileged who have jobs and those who are excluded, while at the same time legitimizing the federal government's actions as it dips in the Fund to reduce its deficit, primarily on the back of the unemployed.
The current unemployment insurance reform should have been an opportunity to reassure the public about the government's intention to continue playing a positive role in the redistribution of wealth in our society. On this point, the CSD believes that it can play a role in constructing a new philosophy that should inspire the federal government.
That is why, in addition to commenting on the bill itself, the CSD is submitting an innovating proposal designed to rejuvenate the entire dynamic of adaptation and unemployment assistance services, which are called employment benefits in the bill.
The basic design of any reform of the unemployment insurance system should have provided a response to the new reality faced by working women and men, which has been shaped by recessions and the profound changes in the economy that have transformed their full-time, permanent jobs into insecure jobs, when it hasn't simply left them looking in at the labour market from the outside.
This reform should also have provided a response to working people who have been knocked about by the globalization of the economy and the introduction of the new technology. In this sense, the categories of employment adaptation and training must be doubly patriated: to the provinces and then to the community organizations.
This reform should have brought with it hope for all working men and women and should have been brought about, as was promised during the election campaign, in a way that respected their dignity and their fundamental rights.
To that end, innovations would have had to be made, while jealously preserving the basic principles of the system, which have helped to make our country a place where equal opportunity is a fundamental right. The most intelligent effort to adapt the system to the reality of the labour market will never be anything but vain and futile if they're flatly torpedoed by cuts in eligibility, the amount of benefits and the length of benefit periods.
The CSD rejects the vision of the neo-liberals who have demonstrated their inability to resolve the problems of unemployment by deregulating certain sectors and cutting social programs, while falsely claiming that all Canadians are going to get collectively rich simply be reducing the deficit. Profound changes in the social security system has become necessary because of the alarming growth in poverty.
The CSD believes that it is urgent that the government take on the task of promoting a humanized division of the way that the State must discharge its responsibilities to its citizens, one that is radically different from the bureaucratic and blaming approach toward the jobless that has developed in recent years.
There is no valid argument to justify additional cuts to the unemployment insurance system, which has already been too deeply cut by the preceding government and the government that is now proposing fresh reductions.
On the other hand, we believe that certain practices and fields of jurisdiction need to be reviewed so that the safety net which our social programs have created, may become a true trampoline to propel the greatest possible number of people toward decent jobs.
Real savings for the government should come only through reducing demand - not because we have eliminated claimants and sent them off to other programs, such as social assistance, but because decent, sustainable jobs have been created.
Given the short time we have available for this presentation, we have chosen to comment on a number of measures contained in the bill. However, it is clear that unless significant amendments revamp the bill in depth, which does not seem to be the government's preferred option, the CSD would demand the complete withdrawal of Bill C-12.
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According to the bill, eligibility for the system will no longer be based on the number of weeks but on the number of hours. The CSD finds this worthwhile only insofar as it opens up access to the system to a broader range of workers, thereby recognizing the substantial transformations that have occurred in the labour market and in employment outside the traditional framework.
However, the CSD is opposed to any disguised method of reducing the number of people who are entitled to benefits while expanding the pool of ineligible premium payers.
With respect to the objective underlying this measure, which is to reduce black market labour, let us hope that it will be achieved, because we know very well that the people responsible for it are not the workers, who are in fact the victims. What pressure can they bring to bear to have the hours they work all reported? These are the questions of workers that have so far remained unanswered.
Nothing could be farther from the truth, and one of the great disappointments in this reform is that it is the unemployed who will bear the cost of the cuts when they have no power over the people who give out the jobs.
With respect to the use of the total number of hours worked as a standard for eligibility, there is also the specific problem, but one that will grow in the future, that is posed by compressed hours. For example, employees who work 12 hours a day on Saturdays and Sundays, giving them a 24-hour work week, but who are paid under the terms of their employment for 40 hours, see this as a serious problem. The new system for calculating hours worked will only recognize 24 hours eligible for unemployment insurance, whereas they are paid in compensation of 40 hours of work.
These new provisions do not take these types of work schedules into account, although they are very popular in some industries that are trying to maximize the length of time their equipment is being used, particularly in the textile and agri-food sectors and in municipal government.
This also raises a very important issue. We are referring to the study that has been begun in Quebec, at least, of the question of adopting an action plan for planning and reducing working hours. The government, in cooperation with its management and union partners, is preparing to enact legislation to encourage the implementation of measures to increase flexibility and reduce working hours, to assist in maintaining or creating jobs.
The CSD is asking that the bill be amended so that in the case of compressed schedules the topped-up equivalent would be used for calculating the hours for eligibility for the system. This means that the remuneration that workers actually receive should be taken into account. Thus, a person who is paid for the equivalent of 40 hours must be credited for 40 for entitlement purposes.
People who are making their first claim will have to accumulate 910 hours, or six weeks more than at present, to qualify. The CSD is asking that the bill be amended by removing the provisions in section 7 which establish harsher standards for a person who is entering or re-entering the labour market and ensuring that person.
The CSD believes, on the contrary, that a person in this situation needs the system's financial assistance more than anyone else. Contrary to assertions, these people are not happy to remain in a cycle of dependency on insurance, but are suffering from conditions caused by a difficult environment and a lack of the tools they need to help them adapt.
The Bill proposes that average earnings be calculated by dividing an employee's total earnings by a divisor, that is, a number of weeks between 16 and 20, depending on the regional rate of unemployment.
The CSD agrees with the principle introduced - total earnings - since, unlike the present system, this would allow for short periods without income. However, the Centrale is opposed to using a divisor to establish the amount of the benefits an ensured person would receive.
The CSD is asking that the divisor formula be changed and replaced with a formula that provides for the total amount of earnings required in order to qualify, that is, between 180 and 300 hours, to be divided by the number of weeks worked in order to establish average weekly earnings.
In the event that the divisor formula were retained, despite our submissions, the CND is asking that the regulatory mechanism established for increasing the divisor be removed from the bill. Transparency requires that if the minister wants to slash benefits once again, he do so by a statutory amendment and follow the parliamentary process in place for that purpose.
I think that people have the right to express their views on these issues because they are not purely political decisions.
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The CSD is also totally opposed to reducing the rate of benefits based on previous claims for benefits. We deplore the fact that the jobless are being blamed for their situation. They are to be held responsible for the cost of events over which they have little control: whether or not their jobs continue to exist.
Employers have long used the unemployment insurance system to stabilize their labour costs, and they have never been penalized in any way.
The CSD has already pointed out this fact and recommended that the government establish a registry of businesses that make extensive use of the system, and increase their premiums based on that information.
If it is true that businesses are reluctant to hire new employees because of the supposedly exorbitant costs they represent in terms of benefits, they would then think twice before laying employees off if it costs them to do so. A layoff would then become truly the final step, the last resort, and the ones who are really responsible for this situation would be the ones penalized. Benefit claimants are not always responsible for layoffs and unemployment.
The CSD is therefore asking that all measures designed to reduced the benefit rate based on the benefits that a claimant has received in the past be withdrawn from the bill, and be replaced by a system involving a registry and variable premiums, designed to hold employers, the real architects of the layoffs, accountable.
Claimants who have received more than 20 weeks of benefits over the last five years and whose income is over $39,000 will have to repay up to 100% of their benefits.
What an appealing measure - at least in appearance. Let us make the rich pay. Are we about to realize a dream long cherished?
Unfortunately not, because with the present employment crisis, which does not seem to be at all about to reverse itself, there are no rich people on employment insurance. This measure will seriously impede real access to programs.
If the highest paid employees who contribute to the system are in fact no longer able to benefit from it, or have to repay the benefits they receive, the day is not far off when they will no longer want to contribute to it.
If the system is challenged by the highest paid employees, it is a good bet that politicians, desperate to satisfy the middle class, will give into the pressure and put an end to a system that is not wanted any longer because it no longer addresses a substantial and influential segment of their constituency. This doesn't even take into account the potential proliferation of private income-insurance plans which would be addressed specifically to the highest paid employees, thereby eroding their interest in the existing system.
The CSD is asking that the bill be amended to maintain the maximum insurable earnings of $42,380 per year for 1995 and that this figure be indexed to the cost of living in subsequent years.
Given the unarguable necessity of adopting measures that benefit families, and the commitments made by our governments in this respect in the wake of the International Year of the Family, the CSD recommends that we take the opportunity presented by the legislative amendments to the employment insurance system to improve the terms and conditions of maternity and parental leave.
We have a clear proposal in this regard. This is an aspect concerning family care, and unemployment insurance. We want the committee to seriously consider this matter because this ia new factor to which the CSD would like to draw attention.
Governments' disengagement from health and social services benefits, when combined with the aging of the population and early discharge from institutions, means that more and more people are going to have to count on their families to support them in the event of illness or accident.
Family care givers are therefore going to become increasingly important in our society. Working women and men may have to take time off from work to help their fathers, mothers, spouses and children whose health makes this necessary as a result of illness or accident.
The new employment insurance system will have to reflect this new phenomenon, which has already become a reality of our time.
The CSD is also asking that the bill be amended so that the reserve established in the employment insurance fund is capitalized and may be used only for the purposes for which it was created. This protection is essential for the people who pay into the system, who would not want to have done to them what the Société d'assurance automobile did to Quebec users.
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We also think that the employer's basic premium remain at 1.4% of its employees' premium.
With the exception of the $100 million saved through administrative simplification, we reject the additional $2 billion cut for which provision is made. Rather, the CSD is of the opinion that the slashes already made are more than sufficient, since they allow the fund to generate operating surpluses.
These cuts have caused enough pain already, and they continue to deprive claimants of income that is absolutely necessary to them. Enough! We feel it would be wiser to have a genuine assessment of the economic, social and human costs of unemployment.
In order to better manage employment assistance programs, avoid provincial-federal overlap and find quick and effective ways of getting people back to work, the CSD is asking that the percentage of premiums paid by workers and employers which is used for purposes other than employment insurance benefits and maternity, parental, adoption, illness, work sharing and fishers' benefits be paid to the government of Quebec, or to the government of other provinces, which will make it available under training and job creation programs to be redefined.
We have also submitted for your attention a proposal concerning employment insurance benefits. With regard to the introduction of these five employment benefits, we must rethink ways of doing things to allow unions to be further involved in the provision of these employment programs and in the introduction of measures aimed at ensuring the development of employment in Quebec.
The five new employment benefits are clearly inadequate for getting people back to work. We need more measures and more financial resources if we are to hope to be able to accomplish this; most importantly, these measures and resources need to be better targeted.
Quebec's industrial structure and requirements are unique, not to say "distinct", in terms of vocational training. This fact, combined with the lack of success experienced in the job creation programs that have been in place over the years, is sufficient to convince us of the imperative need to patriate everything other than employment insurance benefits and maternity, parental, adoption, sickness, work sharing and fishers' benefits to Quebec.
The CSD is convinced that the way to create jobs is undoubtedly to have a better trained labour force and an industrial development strategy focusing on creating decent jobs. Naturally, we feel that the government of Quebec for Quebeckers, and probably the provincial government of other provinces for others, in cooperation with organizations in the community, are in the best position to take charge of this task.
Those are the comments we wish to make. We are at your disposal to answer your questions.
[English]
The Chairman: Thank you very much.
Now we'll move to the question-and-answer session. Mr. Dubé.
[Translation]
Mr. Dubé: I would like to thank the witnesses for the high quality of their brief. I would like to say at the outset that we are almost in complete agreement with each of your recommendations, but I would like to hear your views on certain points.
You talked about decent jobs and so on, and we agree about that. As a matter of fact, it's quite surprising. We no longer refer to unemployment insurance, but employment insurance. Moreover, the bill contains cutbacks, reductions in entitlements, etc.
You rejected several points in the proposal, but you seemed to agree with one. You seem to want to maintain the principle of an hour-based system, which is a new element; that is that you would count hours rather than weeks to measure eligibility.
Next, you talk about black market labour. You seem to think that adding up all hours worked would be one way to reduce black market labour. However, you don't seem sure about this and you do express some reservations. I would therefore like to know what your reservations are with regard to this system.
I will come back later with other questions.
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Mr. Gingras: With regard to the hourly system, we are almost in agreement because the system must achieve a certain level of flexibility. Under the current system, the number of weeks required to qualify does not necessarily respond to the new reality and the new work schedules that are being set in the workplace.
We have to come back to a formula that allows us to count the time worked in a cumulative way because there are now all kinds of workers, those who work for many employers, the self-employed and all kinds of new categories of workers.
The unemployment insurance or unemployment insurance system must adjust to this new reality of increasingly flexible and different schedules but are not as stereotypical as those we used to have in the past. We now see weekend schedules, evening schedules, part-time schedules. There are all kinds of schedules. By requiring weeks with a minimum number of hours, significant categories of workers were excluded from unemployment insurance, and some workers kept jobs with fewer hours in order to avoid having to participate in the system.
We think that the fact that we're coming back to the notion of qualifying hours should broaden the coverage of Quebec workers and eliminate the tendency to create precarious employment, with fewer working hours, to avoid having to contribute to the system.
We are therefore in favour of this change because we think this may eliminate black market labour which was beyond any kind of control. In fact, we used to have overly rigid regulations that did not necessarily correspond to the economic reality of many people.
Mr. Dubé: And that confirms your positive aspect.
On the other hand, you would appear to be in favour of the return to the status quo in the case of the $42,000 ceiling for insurable earnings. Some union organizations other than Quebec ones went so far as to recommend the ceiling be increased whereas you are advocating the status quo. You know that this would mean a loss of $900 million in revenue for unemployment insurance, that's a lot.
If we were to carry your logic a bit further, would you be willing to recommend that there be no ceiling? After all, the people you represent earn average wages and not $100,000 or more. Would you give some consideration to this suggestion made by other unions?
Mr. Gingras: If you're talking about improving the unemployment insurance system, we would certainly not disagree with measures having that as their aim but still we think that benefits should be kept within a reasonable framework and an attempt should be made to control costs.
We chose the lesser of two evils. Our thinking is that once a certain level is reached, there's no reason not to have a temporary ceiling and it may be decided at a later point to have some indexing. However we cannot go along with the idea that we should forego revenue in order to create unemployment insurance fund surpluses that will be used for purposes other than compensating the victims of unemployment, as is now the case.
Mr. Dubé: I have a question on that and I'd like to explain my point of view. We have been reflecting on this in the committee but if these ceilings were allowed to increase and we were able to control benefit costs, it would probably make it possible for us to decrease employer and employee premiums assuming the government were to establish a certain limit to UI surpluses and their use in paying off the deficit. Business has often claimed that premiums constitute an obstacle to job development. What do you think?
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Mr. Gingras: We've suggested a different way of proceeding. You know that some employers make use of the unemployment insurance fund to stabilize their payroll costs. Rather than plan their production and provide for relatively equal production periods for which they hire workers, they resort to periodic layoffs.
At the present time we are attempting to assist the victims and we would prefer a solution other than constantly cutting back the benefits of those who have made several unemployment insurance claims. If these people have a regular subscription to unemployment insurance, it may not always be their fault because they do not always have control over their job situation. Responsibility often lies with the employer who decides to lay them off because he did not properly plan for production.
We maintain that employers who practice frequent layoffs and thus occasion a significant amount of unemployment insurance should pay a higher premium on their payroll because of their practice of using unemployment insurance to stabilize their labour costs. Conversely, those who create jobs and contribute to improving the job situation should be favoured by the unemployment insurance system. This is the kind of treatment that we would advocate for employer premiums to UI.
[English]
Mrs. Brown: Mr. Chairman, I have a couple of points I'd like to make, and I'll follow them up with a question.
I'm not going to focus on the minutiae of the details within the text of your presentation, but I think that what you had to say really highlights the ideological differences with which we come to this table to try to resolve this issue of unemployment insurance in Canada. On the one hand, I believe it to be illogical in the context of what you have said on page 4:
- On the other hand, we believe that certain practices and fields of jurisdiction need to be
reviewed so that the safety net which our social programs have created may become a true
trampoline to propel the greatest possible number of people toward decent jobs.
The second thing I wanted to say is that because it is illogical, it demonstrates our ideological differences. I have to ask you this question: How does a safety net create jobs? I don't understand your rationale in those terms. I don`t understand that statement on the basis of the rationale as you have stated it.
[Translation]
Mr. Gingras: In our proposal, we say that a minimum social security net is required if we really wish to assist the work environment to take responsibility, to create jobs and to take the necessary steps for repositioning. At the present time we observe that businesses undergoing restructuring to improve competitiveness implement technological changes that are followed by temporary layoffs. We must recognize that businesses which are reorganizing through the introduction of new technology are doing so to face competition in an increasingly global market. This competition goes beyond our territorial limits and we will have to make increasing use of this system through programs to look after workers who lose their jobs temporarily because of automation or reorganization or because they are no longer qualified.
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The safety net would be for people who are temporarily laid off because of repositioning for the future and probably to create new jobs to be more competitive. We think that something has to be done to look after these workers.
Secondly, we are attempting to develop means to improve the employability of those who are unable to find work in their field. Work must be done to improve their employability and the development of quality jobs.
For that reason, a greater investment must be made in measures aimed at allowing these workers to occupy new jobs in our society.
You may think there is some contradiction in our position but we feel that it is logical to have programs so that people can adjust and envisage the future with some optimism after an experience that can be very traumatic.
It is claimed that within the next few years most workers will probably have to change their jobs between five and six times during their working life. That's what you call mobility. If there is not a basic safety net for workers as part of this vast endeavour to improve competitiveness, there will no longer be any confidence and we will find ourselves in a totally inadequate social system.
[English]
Mrs. Brown: I have to say that I think you are trying to make this particular program all things to all people. You mentioned social programs support, a welfare component, a job training component, and unemployment insurance in that period of time when people lose their jobs on a short-term basis.
The point I'm trying to make, which certainly reiterates Dr. Grubel's comments earlier today, is that social programs have nothing to do with unemployment insurance. To me, it is illogical to put everything into a single basket when what we're looking at here is changing a process and changing a program to reflect true unemployment insurance principles.
These other elements you are talking about really belong within a different framework, not within this particular piece of legislation.
That's all I have to say, Mr. Chairman. Thank you.
The Chairman: Is that more of a comment than a question?
Mrs. Brown: It's just a response to his answer.
The Chairman: Mr. Regan.
[Translation]
Mr. Regan (Halifax-West): Gentlemen, I'd like to thank you for coming and welcome you here today.
It was said that the new employment insurance program was funded by the Canadian poor and that the well off were paying less. I'm not at all in agreement.
[English]
I think the suggestion that we are making these changes on the backs of the poor is quite inaccurate. In fact, there are a number of things that help people in low-income groups, even before you consider the amendments put forward by members of this committee, including Mr. Scott and me.
[Translation]
Is there a problem? I'll wait.
Mr. Gingras: I have trouble understanding you.
Mr. Regan: Then I'll repeat my question.
[English]
I was saying that it has been suggested that the new program will be financed by the poor, but I suggest to you that in fact the vast majority of the reduction in this program is at the higher end, for people who are high-end users.
It has been my impression that some union groups have been very opposed to it because some of their higher-income people are the ones who are being hit hardest by these changes, especially because of the high-income clawback.
Let me give you some examples of how it will impact on people with higher incomes, as opposed to those with low incomes.
Premiums will be refunded to anyone making less than $2,000: 1.3 million low-income Canadians will get premium refunds. Now, it's true that some part-time workers will pay premiums for the first time, but they also have their work insured for the first time.
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We will no longer have a system that creates an incentive to hire only part-time. That is a very important change that should reduce the amount of involuntary part-time work in this country, and that's a very positive thing.
For higher-income earners, the premiums would be reduced, but so would their benefits. At the most, individuals earning over $39,000 will see their premiums reduced by $120 a year. That's not a great deal of reduction for those high-income users, but if they become unemployed, they could face a benefit reduction equal to 13 times that amount, as much as $1575 over a 45-week claim period.
Also, as a group, these individuals will continue to be high net contributors; that is, they receive much less in benefits than what they pay into the system. I therefore suggest to you that the idea that these changes are being financed by the poor is absolute nonsense and that in fact they are primarily being financed by those who are better off, as I think it should be.
When you consider the fact that we have the family income supplement for low-income people, when you consider the changes Ms Augustine has put forward, which would exempt low-income families from the intensity rule, when you consider the changes we want to make to the gap and to the divisor, this ends up being a program that helps people who are low-income while in fact being a little bit harder on those who make good money.
I can tell you that in my riding, people have complained to me about the idea of those who make $50,000 or $60,000 a year every year, year after year, and every year also perhaps collect $10,000 more in unemployment insurance. That's been a constant refrain in my riding. That has to change, but I'm not hearing any support for that kind of change from the union groups that come before us.
[Translation]
Mr. Gingras: We do not at all agree. A system like the employment or unemployment insurance scheme must serve the interests of workers. Don't you think that workers plan for their spending in relation to the wages they receive?
A worker receiving $40,000 or $45,000 a year takes on financial responsibilities in keeping with his income. But a worker may lose his job and find himself on unemployment insurance without necessarily choosing to be in this position. It is a very difficult period and he may have to relocate in order to find a new job and earn a decent living.
So I don't agree with your proposal to dip into the funding and to remove their entitlement to benefits. You say that they will be given this right but that they will have to return the money.
Mr. Regan: I wasn't talking about someone...
Mr. Gingras: But the duration of benefits...
Mr. Regan: I'm talking about someone earning $60,000 or $50,000 a year and who also draws around $10,000 in employment insurance. The example you gave is different.
Mr. Gingras: But you are suggesting a system in which people earning $39,000 will have to pay back a part of the benefits they receive, and once they reach $50,000...
Mr. Regan: I didn't hear your answer to my question about whether or not you are in favour of changing the system in the case of persons earning the amount I mentioned. I think that generally speaking the people of Canada are strongly in favour of this change to the system.
Mr. Gingras: We believe that if a person contributes to the system and we are certainly in favour of universality, then the person should be able to benefit. As we said in our brief, high-income earners who contribute to the system will certainly want to put an end to this because they personally will be unable to access the system when they want to make use of it. They will pay premiums without being able to benefit.
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[English]
The Chairman: Mr. Allmand.
[Translation]
Mr. Allmand (Notre-Dame-de-Grâce): A number of witnesses who appeared before our committee, particularly those representing the employers, claim that premiums were too high and called for a greater reduction in premiums. I'd like to ask you whether the workers in your unions believe that present premiums are too high and whether you are asking for them to be reduced or whether you are satisfied with the present level.
Mr. Gingras: When you refer to premiums, are you referring to the benefits or the contributions to the system?
Mr. Allmand: The contribution.
Mr. Gingras: There is no doubt that any premium taken from the payroll does have an effect on business competitiveness. In our view the present premium is a reasonable one and it should be kept at a reasonable level.
That means that there should be sound management so that unemployment insurance resources contribute to the creation of quality jobs and different programs aimed at increasing labour employability and decreasing the number of those who depend on UI. It's not by excluding people from UI that we will achieve this result but by creating quality jobs.
We do not believe that premiums are too high at the present time and we consider that businesses are still competitive in Canada and Quebec in spite of the premium level. This is the price we must pay for the measures required to help labour readjustment and repositioning for the sake of competitiveness.
Mr. Allmand: Employers have said that if premiums were reduced, we would be able to create more jobs. Do you consider that to be a kind of propaganda?
Mr. Gingras: It's a fact that if working conditions are brought down to the level of Mexico, we may create jobs but I'm not convinced that we would be proud to live in this kind of society or that workers would be satisfied. That is not the kind of model we are advocating.
We need tools to develop the work environment along with a sound and competitive economy. We have to be realistic and realize that we may not be competitive in all fields and at the same time keep in mind that some redistribution of wealth is necessary for the least advantaged. In view of present conditions, we should attempt to have a system that is in keeping with the aspirations of our people. We should not destroy what we already have but attempt to maintain a quality of life and improve it if possible.
A dynamic and responsible economy improves the quality of life of citizens rather than causing a deterioration as has been the case for some years now.
[English]
The Chairman: On behalf of the committee, I'd like to thank you very much for your very kind contribution to the hearings. As always, all your points are duly noted and we'll take them into consideration as we attempt to improve Bill C-12. Thank you very much.
Mr. Gingras: Thank you.
The Chairman: The next presentation will be from Rural Dignity of Canada. We'll just take a two-minute break for this presenter to set up.
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The Chairman: Order, please. We're going to hear from Madam Helen Forsey from Rural Dignity.
Welcome to our committee hearings on Bill C-12. As you know, we are presently reviewing an act respecting employment insurance here in Canada.
As I stated earlier, we have benefited a great deal from input from Canadians from coast to coast to coast. This bill is really an offspring of our social security review program that heard from over 100,000 Canadians from coast to coast to coast. We have benefited a great deal from their input.
I would like to hear from you and I'm sure that we will also benefit from your input. You have approximately half an hour, with ten to fifteen minutes for a presentation followed by ten to fifteen minutes of questions and answers. Thank you very much.
Ms Helen Forsey (Rural Dignity of Canada): Thank you very much, Mr. Chairman.Mr. Chairman, members of the committee, ladies and gentlemen, I am delighted to be here today representing Rural Dignity of Canada, which is a grassroots network of rural women and men working to preserve rural communities and to promote understanding of rural concerns.
We're involved in the unemployment insurance issue because it profoundly affects so many rural Canadians.
[Translation]
Rural Dignity of Canada wishes to express its profound disappointment and opposition with respect to the new unemployment insurance legislation now before this committee. This reform does nothing to respond to the urgent need of our rural population.
[English]
Rural Canada will be hard hit by Bill C-12. We're dismayed not only by key elements of the legislation, but by the assumptions on which it is apparently based. We're calling for fundamental changes both to the bill itself and to the attitudes and the assumptions behind much of it. For us as rural people it's a matter of survival.
[Translation]
Rural Dignity therefore demands that serious changes be made to this bill. This reform must be based for respect for rural populations and communities and must offer real support for the creation of sustainable, self sufficient local economy.
[English]
Rural Dignity appreciates the hundreds of hours of hard work that the members of the committee have put into this process. We know that you've faced a difficult and largely thankless task and that many of you have made a huge effort to come up with real improvements to our present unemployment insurance system. Our criticisms are directed at the bill and at the policies that surround it, not at committee members. We do hope that the information and analysis we provide will help you to argue powerfully for the major changes that rural people need if we are to survive.
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For us the proposed UI cutbacks and accompanying changes are just the latest in a series of body blows to rural communities, including many aboriginal communities. Rural Canada has already been seriously weakened by years of neglect and bad policy. Bill C-12 threatens to fragment and cripple rural economies further, leading to even greater despair and depopulation of the countryside.
[Translation]
Nearly all the proposed changes will do serious arm in rural Canada. While the unemployment insurance fund accumulates surpluses, residents of rural communities will have to do without; some of them will even lose their homes. This situation jeopardizes all efforts for sustainable development in rural areas.
[English]
In this short oral presentation I want to highlight the impact Bill C-12 would have on rural people and refer you to our written brief for more detail. I will also address two other equally important aspects of Rural Dignity's analysis: the shabbiness of the government's rationales for the proposals and the critical importance of the political context into which they fit.
Rural Dignity has four main points to make about the particular proposals in Bill C-12. First, rural people in communities will be devastated by the new reductions in UI benefits and by changes that make those benefits harder to get. Cutting $1.2 billion, or perhaps even more, from the UI fund definitely means disqualifying some claimants and reducing payments to many others. We know from the government's own data much of this will come from the rural poor. For example, in rural New Brunswick workers in the logging, forestry, agriculture, and mining sectors would suffer a drop of nearly 20% in benefits if the changes were to be implemented as they stand. That's from the Saint John Telegraph Journal in January.
Although Rural Dignity supports making part-time work insurable, for example - that aspect of the recommendations - we strongly oppose the new eligibility restrictions and benefit reductions. We also reject the averaging of earnings over a fixed period of consecutive weeks, including weeks with no income. Why do we reject these measures? Because of what they would mean in real human terms.
These cuts would reduce even further the meagre amount of money still circulating in our struggling rural economies. As the economic base is eroded in our villages and countryside, a vicious cycle ensues. Individuals and families run out of money and hope. Tensions rise and social problems such as alcoholism and violence increase. In despair, more and more people leave the community in search of work elsewhere. Services are reduced and local businesses fold. More money and human resources drain out of the local economy. The downward spiral of rural depopulation continues. We're seeing this every day already, and the proposals will only make it worse.
This is the devastating reality behind the recent protests in Quebec and New Brunswick, which reflect the anger and fear felt all across the country. When the minister haughtily dismisses these protests, he dismisses rural people and workers everywhere, for the protesters speak for us all. Our livelihoods, homes, and families are already threatened. We simply cannot cope with something like Bill C-12, which will make our struggle even harder.
Secondly, of necessity, rural work is largely seasonal work, and the proposed changes to UI fail to respect this reality. Farming, fishing, forestry, and tourism are mainly seasonal enterprises. All are vital to the Canadian economy. The government will be undercutting the very basis of our primary and renewable industries if it penalizes their workers through the intensity rule and the consecutive weeks requirement.
[Translation]
The vitality of rural communities will be hard hit by this attack on seasonal workers. Outside urban areas, all jobs in primary industries and tourism are determined by the seasons and the weather. A reform that jeopardizes its employees and these jobs jeopardizes the rural communities that depend on them.
[English]
Thirdly, the rural unemployment problem is due not to a lack of motivation or training but to a continuing lack of sustainable decently paid work in our rural communities. Bill C-12 assumes anyone can get a job if they just try hard enough or get proper training. This makes a mockery of our rural reality. Alternatives to seasonal jobs or unemployment are simply not generally available in rural areas. With the devastating changes imposed on the rural economy over the past few decades, or past few years, by free trade and other measures, there just isn't enough paid year-round work in our communities to provide a decent living for everyone. A lot of this is due to government policies at various levels.
For example, in primary sectors such as forestry taxpayer dollars are actually being used to throw people out of work. Governments encourage capital-intensive mechanization through tax breaks, loans, and loan guarantees to large corporations. Meanwhile, wood allocation policies and administrative barriers discourage smaller community-based labour-intensive operations. Rural people are forced to stand by and watch as the large companies bring in machines to replace human labour, ravaging the environment and robbing us of our livelihoods at the same time. And to add insult to injury, we're now being told that the problems are somehow our fault and that we must pay the penalty in reduced UI benefits and further restrictive conditions. We reject this as an outrage against justice and common sense.
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Fourthly, given the lack of rural jobs, the assumed alternatives to unemployment for individuals in rural areas are largely unrealistic or unacceptable. What are the rural unemployed supposed to do when they can no longer get UI or when the shrivelled benefits they do get are not enough to support their families? The stock answers seem to be to get retraining, go on welfare, or move. The new proposals add a number of employment benefits, but for most people in rural areas these answers just don't work. At best, they represent a band-aid, stop-gap approach, and band-aids won't heal the wounds that the governments continue to inflict on us.
Rural Dignity is especially uneasy about the provincialization or even possible privatization of responsibility for many of these alternatives, notably training and welfare. Provinces are joining the race to the bottom of the rate scale and the small municipalities face bankruptcy. Who will pay for food and housing for rural people stranded by this abdication of governmental responsibility for fair distribution of wealth and opportunity?
Now I want to say something about the rationales given for the proposals by the government, notably in its written material.
[Translation]
In the view of rural dignity, the attitudes that have given rise to bill C-12 are just as problematical as these specific proposals. If the government does not change his attitude, rural Canadians can only expect even more examples of disastrous policy.
[English]
Firstly, in the way they're presented, the proposals show an appalling lack of understanding and respect for workers and the unemployed, and particularly those in rural areas. The ministry's booklet, A 21st Century Employment System for Canada, is filled with arrogant false assumptions and gross ignorance of rural realities. In our written brief we cite from the booklet an appalling number of examples of condescending attitudes and insulting assumptions. The committee might want to suggest to ministry officials that misleading us, patronizing us and insulting us is hardly the way to win support from rural citizens for policy changes that affect us so profoundly.
Secondly, the idea that UI should operate like private, commercial insurance is wrong-headed and misleading, but we seem to keep hearing these comparisons. Private insurance exists to make a profit. This is emphatically not the case for UI, which services national, social and economic goals and is geared to the collective good, we hope. Both may be called insurance, but they work on completely different principles. Airplanes and cars are both forms of transportation, but we don't try to drive a Twin Otter along a highway or fly a Chevrolet.
The former minister attempted to defend the proposed intensity rule by comparing UI to fire insurance or auto insurance, under which costs to the individual increase with frequent use. But rural lay-offs are not the result of careless smoking or poor driving skills. They are a function of the inherent seasonality of many rural industries. Again, the insult implied in the comparison is mind-boggling.
Thirdly, the government's claim that cuts are necessary to save the program - this is another one we keep hearing - simply do not stand up to scrutiny. Such a spurious argument serves only to distract attention from the fact the government wants to fight the deficit on the backs of workers and employers. Our written brief documents this position in great detail.
Let me give a single example of this faulty and hypocritical reasoning. The former minister claimed that public support for UI is declining because people who pay premiums and never draw UI are tired of subsidizing the rest. This implies that joblessness is a coveted prize that employed Canadians are somehow missing out on. But you don't hear fire insurance policy holders objecting when their houses do not burn down. They go on paying their premiums without complaint, even though the money goes to subsidize fire victims.
Thirdly, I want to address the political context in which these proposals are made. First, rural Canadians have many reasons to mistrust proposals that come from a government that has pulled the rug out from under us on so many levels. Despite a few hard-won concessions, like the moratorium on post office closures, which is unfortunately now under review again along with the rest of Canada Post's operations -
Mr. McCormick: Thank you for giving the Liberals some credit for that.
Ms Forsey: Oh yes, I'll give credit where credit is due - as long as they don't go back on it.
By and large, this government has not been a friend to rural people. By signing NAFTA, it has put at risk our natural resources and our orderly marketing systems for farm products. With its cowardly decapitation of the Canada Assistance Plan and its flirtation with decentralization and privatization scenarios, it has weakened national standards and has left us at the mercy of deficit-obsessed and power-hungry provincial governments. It continues to slash vital services that rural people depend on: the CBC, passenger trains and branch rail lines, rural health and social services.
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In sum, the entire political context surrounding the UI reforms ignores the needs of rural communities.
[Translation]
So far this government has shown no understanding or respect for the legitimate and urgent needs of the rural population. Unfortunately the present bill is but another indication of this attitude.
[English]
Second, there appears to be a fundamental lack of honesty about the right-wing bias of the government's approach to UI reform. As we show in our written brief, reality is in sharp contrast to many of the government's claims about UI.
Despite all the propaganda, we in Rural Dignity are fully aware of who wins and who loses in this system of runaway free trade and corporate technocracy. While the banks are raking in record profits with the government's blessing and tax breaks, the working poor are being forced to cough up cash to fight the deficit through UI reform.
Rural workers and communities cannot and will not continue to pay for a so-called economic recovery that takes our natural and human resources and exploits them to profit distant shareholders and millionaire executives.
Third, Bill C-12 will further damage the cause of national unity among rural Quebeckers, who will blame the federal system for the hardships it will cause. As a national organization based in Quebec with strong membership among rural Québécois, Rural Dignity feels obliged to point out the terrible damage that measures such as Bill C-12 will do and are doing to federalism.
The issues raised in our brief so far reflect the reality of rural Quebeckers equally with those of other rural Canadians. But there is an important difference: the Québécois will, understandably, blame Canada for their lost UI benefits and eligibility. Bill C-12 will feed their simmering anger at and alienation from the federal government. It will confirm their suspicion that Canada neither understands nor cares about their reality and that therefore a separate Quebec is the only solution.
Many Quebeckers already cite Canada's swing to the right as a reason to separate. They say that they have nothing to lose. Bill C-12 and other attacks on the social safety net hand them their arguments on a silver platter.
To us in Rural Dignity it seems absolutely incredible that at this crucial point in our history, when the future of our nation hangs in the balance, the government should be choosing to take steps that are guaranteed to alienate such an important segment of the Quebec population - not to mention the rest of us.
We urge you, as parliamentarians, to reconsider most seriously not only this bill but the whole regressive package of which it forms a part. In its place, rural Quebeckers and other rural Canadians demand economic and social policies geared towards sustainability and self-reliance, not runaway corporate profits.
We need meaningful, sustainable jobs in our home communities, where we can continue to make the vital contributions to our society that we have always made.
[Translation]
Whatever our language, French, English or Aboriginal, rural people need jobs, housing and health care; education and communication; post offices and railways; and a social safety net that works.
Government policies and services must respect us, our communities and our environment. For the sake of our country and all of its citizens, listen to us and act while the opportunity still exists.
[English]
To sum up, Bill C-12 means disaster for rural people, our communities, and Canada itself. In particular, it asks rural people to pay the price for others' prosperity. We say no. We are unwilling to subsidize corporate profits by suffering added hardship in the countryside. We're unwilling to leave our rural homes and go down the road to doubtful dead-end city jobs at starvation wages. We're unwilling to sacrifice the potential vitality of our rural communities for fiscal goals that could be achieved in other ways.
Bill C-12 would make it impossible for many working families in rural areas to scrape together enough money to live on for the year. Rural workers are not trying to make heaps of money or get something for nothing. They're just trying to keep their heads above water, support their families, and continue to live in their home communities. Surely you, as committee members, do not consider these to be unreasonable expectations.
In conclusion, let a rural Newfoundlander involved in Rural Dignity consultations last year for this committee sum it up:
- A strong sense of family, that's what builds communities, your province and your nation.
That's what the political system should be serving. Rather than pulling away from families and
communities, it should be building on to. And then the question becomes, what is the system
doing really? How is it implementing, or how is it damaging this?
Any reform of UI or of any other aspect of government policy must implement, not damage, this sense of community. It must be based first and foremost on respect for people, not on the worship of profit. It must provide real support for equitable, self-reliant, and environmentally sustainable local economies.
[Translation]
Bill C-12 does not meet these criteria and must be changed. In the written version of our presentation, we make specific recommendations and I'll be pleased to answer your questions. Thank you.
[English]
The Chairman: Thank you very much.
We will move to questions. Mr. Dubé.
[Translation]
Mr. Dubé: I'd like to thank you, Mrs. Forsey, for presenting the point of view of our rural population. It agrees in all points with the position taken by Solidarité rurale in Quebec. The experiences in Quebec are the same.
I myself am a native of the Lower-St-Lawrence from the county of Rivière-du-Loup and 25 years ago I had to make the difficult choice you referred to, that is leave my area for a more urban one. Many others did likewise. But there are lots of people who are unable to do so.
One of the things preventing them from doing this, and I think it must be explained, is that people and families with solid roots have property that is impossible to sell when the area is undergoing a decline. That is the case in my native village.
I myself have an older brother who is the owner of a garage he would like to sell. But who is going to buy something in a region experiencing a pronounced economic decline. That is the reality, as you pointed out. Politicians reflect to some extent public opinion and your movement must continue to do its work in educating and sensitizing people to this situation.
I am mostly in agreement with your analysis. However I did not read your recommendations. To improve the situation - and let's just set aside the bill for a moment - what main recommendations would you make to increase the amount of work available in rural areas?
Let me give you the example of the Beauce region in Quebec where, as a result of an extraordinary degree of solidarity, a number of villages have succeeded in maintaining the unemployment rate at under 4%. Everybody, the municipality and former inhabitants of the region, send money out of solidarity or start up businesses. In Quebec, the Beauce region constitutes an example of this very closely knit solidarity. With respect to employment insurance, do you think the government should have taken an approach that would allow local communities to develop in better ways?
Ms Forsey: I agree completely with you. However, I don't have any solutions to propose. What I know of rural Quebec is an inspiration to me. In our province we do not have the same level of organization or public political awareness that I observed in the lower St-Lawrence and Gaspé Peninsula and it is an inspiration to me. It is shown in the Caisses Populaires, the Cooperatives and the kinds of cooperation between credit unions and workers. These things either do not exist or are not found to the same extent in our area.
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In our written presentation, I attempted to deal with specific points in the bill. So I'm afraid I'm not able to provide further information on your question relating to the ways of developing the rural environment.
[English]
When I worked in international development there was a poster that always caught my eye. It showed somebody struggling along with a great big rich guy in a top hat on their back. It said ``The first thing to do is to get off our backs''.
I think that is a big part of our point in this brief. Many things could be done to take away the unnecessarily added, unfair burdens that are being put on ordinary people and on rural people in particular by the transnational corporations, by the big money, by all the special privileges and tax breaks and all the rest that the big corporations get, in contrast to the ordinary citizen. If they would get off our backs and let us come together in solidarity and cooperation in small businesses, in community associations, and do some exchanging and some learning from each other, particularly between my two main examples, Ontario, where I live, and Quebec, where I have friends, that would be a great start.
The Chairman: No question, Mrs. Brown? Mr. McCormick.
Mr. McCormick: Thank you very much for appearing, Ms Forsey. Glad to have you here, Helen.
I'm not sure whether this was set up to be a CCF afternoon or not. I think there is some connection in the room, one I'll let everybody put together. Certainly at another time we will debate, discuss, and argue, and I will remind you about how credit unions in Ontario have helped tens of thousands of individuals also in this province - and they do a wonderful job in Quebec.
I have good news for you today. Whether it's my responsibility in the riding I happen to be able to represent in eastern Ontario that I haven't got enough information to you or not, I'm not sure, or whether you've been getting too much misinformation out of your headquarters in Quebec.... And I would never fault Quebec; it's a wonderful province. But you know, on this committee we've had many people find fault with the fact that we're going to take away a few dollars from the people who make the most money and we're going to share that money with the working poor.
I want to run a couple of numbers by you, a couple of facts that will be recognized by people around this table. When we review the program each year, they're going to say it's helping the people in our riding of Hastings-Frontenac-Lennox and Addington.
By the way, ladies and gentlemen, eastern Ontario has nineteen ridings between Oshawa and the Quebec border. HFL and A has the second-lowest income, the second-highest unemployment. That's why I've been following this bill and I'm glad to sit on this committee. We will have a lot of winners, and they will be in the majority, because 350,000 claimants in low-income families will get a supplement. They're going to get more than they got before, under the old employment system. People on low incomes are going to get at least 7% more. If it's a single-parent family, they're going to get 10% more. I think we should recognize that and commend the government for it.
You mentioned seasonal workers. But many thousands of seasonal workers will now be eligible for EI because of going to the hours-based system.
I want specifically to ask you about part II of our bill, which I'm excited about. Many of the small business aspects are great too. It's where we're going to move from passive to active employment benefits and services. These will be available to many people in our area.
Approximately 45% of all the people who are receiving social assistance benefits who have had any attachment to the workforce in the last three years - and in the case of maternal benefits it will be raised to five years - will be able to access those five tools that are available, including targeted wage subsidies, targeted earning supplements, self-employment, which will be a winner in the Sharbot Lake and other Frontenac County areas, and job creation partnerships.
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Would you not commend many of these programs that will make a considerable difference for the working poor in all areas of our country, and certainly in some of the ridings we're very familiar with?
Ms Forsey: Thanks, Larry. I stand corrected on the all-embracing negativity of my approach.
Mr. McCormick: I'll be able to get used to it; that's fine.
Ms Forsey: In our written brief I put in a few sentences of appreciation.
Mr. McCormick: I must review that brief this evening - bedtime reading.
Ms Forsey: I felt that way for a number of reasons, partly because of the distrust this government has earned from rural people by the measures I mentioned briefly in my presentation and at greater length in our written presentation, and also because of the overwhelming importance that both the Minister of Human Resources Development and the Minister of Finance have given to the fiscal framework for this bill.
We find it very hard to believe this is some kind of gift for rural people. We just find it very hard to believe that, given the specifics that have been quoted, such as that quote I took from the Saint John newspaper. My information is not misinformation, and for this brief it hasn't mainly come from Quebec; it's come from New Brunswick. I'm not sure that makes it any better for you, under the circumstances.
When you're taking $1.2 billion out of the fund and putting it into general revenues and towards fighting the deficit, we find it very hard to believe this is for the benefit of rural people or is going to benefit rural people by and large.
Look at the kinds of tax breaks the rich continue to get. That's the way things are, I suppose, but I don't believe it has to be the way things are. We voted the Liberals in in order to make changes to that. That was the old Tory way, and I didn't think that was going to be the Liberal way. But with the exception of a few things that we appreciate, which you've mentioned, we haven't seen anything like enough of the kind of change I believe rural and urban Canadians elected the Liberals to implement.
Mr. McCormick: First of all, to clear up one misunderstanding that may be out there in Canada for everybody to look at in the newspapers and in some of the rumour mills, none of this money from the UI will go against the deficit. That is against the law. It will not happen. I just wish you could hear some of the conversations in our caucus when people want to put even more money into these employment programs. That's actually really good news.
Some of us have asked to look at actual cases of people who walk into our unemployment offices. We've looked at people wearing many different hats in our society, and I hope to be able to forward you some of these tables in the next couple of weeks. You're going to recognize that with the income supplement and the various different applications that are available, especially for the low-income people....
Helen, again, what about those five tools? What about those people who do want to help themselves, the people who fall through the cracks? I realize that can happen to anyone today, but the fact is these people on social assistance can be eligible for this. Can you give me a comment on that, please?
Ms Forsey: I hope the five tools will actually work in rural areas. They were one of the things I was at least willing to suspend my mistrust on. We'll see.
Mr. McCormick: Thank you.
The Chairman: Mr. Scott.
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Mr. Scott (Fredericton - York - Sunbury): Thank you very much for the presentation. There are a couple of things I'd like to explore.
First of all, are you aware of the amendments that have been proposed?
Ms Forsey: No, I'm afraid I'm not.
Mr. Scott: On the question of the consecutive weeks of work, I've made an amendment that would not count weeks of work where there are zeros. Basically, the reason you're getting a lot of your information out of New Brunswick is that this would have been very harmful. That's the reason that many of us from that part of the country have been fighting that, and we have made an amendment.
There's an amendment proposed to the divisor, the period of time against which your benefits are calculated. In fact, instead of it being a set number up to twenty, it would actually be two weeks more than what would be eligibility. The reason I mention that is that it also is going to mean that some of the reductions in benefits that would have been associated with the earlier provision are gone.
Ms Augustine has proposed that anyone who's qualified for the working income supplement, the family income supplement section, would also be exempted from the intensity rule. So that would be gone. That's the reason that there are significant increases in benefits for working families who would be eligible for the income supplement. As Larry mentioned, it could be as high as 12% to 14%.
I'd like to explore another benefit of this, specifically as it relates to seasonal employees. For the last six or seven years, the way unemployment insurance has been ``reformed'' - and that includes the first couple of exercises by this government, so this is not a partisan observation - has basically been by making it harder to get, by making eligibility tougher and duration of benefits less. That's been the course of action.
As far as seasonal workers are concerned, because we've put the value on hours of work rather than weeks of work, the fact of the matter is that if they work more than 35 hours in a week, every one of those people will be in a stronger position than they were in terms of eligibility and duration. If you're familiar with seasonals, you'll know that 87% of the people in New Brunswick work more than 35 hours a week.
I accept the fact that it will be harder if you're not in the labour force because of the re-entry and entry requirements. But the fact of the matter is that for the people who are currently in the system, who I think are the ones who are most afraid, there will be a significant net increase in eligibility. The duration of benefits will also improve because the value is being placed on hours of work.
To put it in very simple terms, if you work a 70-hour week today, that's worth one week. When this bill is passed, if you work a 70-hour week it's worth two weeks. In the seasonal industries or if you're working multiple jobs, that happens a lot. So the impact of this bill on the present labour force is going to be that, for the first time in a large number of years, people in my own constituency will be able to get into the system more easily than they could before it was passed, if they're in the current community of people who are in involved in unemployment insurance. I accept the fact that if they're not it will be tougher.
You don't have to accept that the government has not necessarily done a lot of things that would make you believe we're motivated to do these kinds of things. Bob White told us here this week that if you work more than 35 hours a week it benefits you. That statement was made in this committee.
Ms Forsey: In our written brief we did say that we support the part-time and cumulative hours aspect of it. We support the aspects of it that improve things for claimants. We believe that most of this bill, particularly given what it sums up to.... The $1.2 billion has to come from somewhere. I don't think there are that many high earners on unemployment insurance that it can all come from them. Somebody show me that and maybe I'll believe it.
Mr. Scott: Could I just put a question then? Are you one of those who would subscribe to the notion that part of the unemployment insurance program and the employment insurance program has a social policy objective, that this is not intended to be pure insurance?
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Ms Forsey: Yes. I'm somewhat familiar with the conditions that the original idea came out of.
Mr. Scott: Okay, that being the case, if income supplement.... Particularly for rural areas and the seasonals, people can't make enough money in the short period of time to live for the year and that's the way they make ends meet. I think we both understand that.
What happens if people take that opportunity who really can't make just claims on that income supplement argument? If you're making quite a bit of money and have an annual scheduled lay-off, can you make the claim that you should get an income supplement through the unemployment insurance system?
Ms Forsey: I'm just not familiar with that many people who are in that situation, so I don't really feel qualified to comment.
Mr. Scott: If you're working in an automobile plant and the automobile plant has a scheduled lay-off so that they can retool for next year's cars and you get unemployment insurance for a month....
Ms Forsey: Well, I agree with the clawback. Certainly, with all those.... I mean, hey, I'm a bloody socialist. You don't need to ask those questions. There, now I've told you.
Mr. Scott: There have been other socialists here who don't agree, so that's why I'm putting the question.
That said, if we could find the money to deal with this at the expense of people who've taken a social program and used it in a fashion that I think is less justifiable, particularly when you consider that there are all kinds of minimum wage people paying into the system who never draw on it.... If they are in fact contributing, and if people who are making larger amounts of money and drawing are using the argument that there's an income supplement component to this.... They're not unemployed. I'm not talking about someone who's lost his job. I'm talking about somebody who's on a scheduled lay-off. If we could find the money there, would it be less reprehensible to you?
Ms Forsey: If you could find the money there and -
Mr. Scott: And move it downward.
Ms Forsey: With.... We're talking above a certain income level.
Mr. Scott: Yes.
Ms Forsey: Oh yes. Much less so. But I'd like to see the money found at even higher levels, let's say.
Mr. Scott: Yes, but we're constrained to UI for this purpose.
Ms Forsey: But the fiscal framework is sacred, according to the new minister. So if the fiscal framework for UI is sacred, then yes, we're confined to UI, but at the same time I was trying to expand the context of the discussion and ask why the fiscal framework and these cuts to UI have to be sacred and certain other things....
Mr. Scott: But if we could get it all in the clawback, is that so bad? I'm not saying we are, and I'm not trying to lead you down a path you don't want to go down. I'm just asking about if we could get it all in the clawback, if we could get it all in the high end.
Ms Forsey: Then I would be much less generally opposed to the changes and I would want to look at the specific cases, as Larry suggested. Let's look at specific cases, what it's going to mean for someone in this situation, that situation. Yes, and I believe that it might well end up overall as an improvement in that case, but I find the premise hard to swallow.
Mr. Scott: I accept that. Thank you.
The Chairman: Thank you very much, Ms Forsey. As you know, this committee has really enjoyed different points of view and different perspectives. We try to put them all together and come up with something that is fair to the Canadians who access unemployment insurance. Thanks again for your input.
Now, Ms Brown, you have a motion you want the committee to deal with. The motion is that the Standing Committee on Human Resources Development amend its agenda for April 17, 1996, to include Mrs. Alexa McDonough, the leader of the New Democratic Party of Canada. It's moved by Mrs. Jan Brown, MP, Calgary Southeast.
Motion negatived
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The Chairman: The meeting is adjourned.