Proceedings of the Standing Senate Committee on
Issue 5 - Evidence - Meeting of April 1, 2009
OTTAWA, Wednesday, April 1, 2009
The Standing Senate Committee on National Finance met this day at 6:33 p.m. to examine the following elements contained in Bill C-10, the Budget Implementation Act, 2009: Parts 1-6, Parts 8-10 and Parts 13-15, and in particular those dealing with Employment Insurance (topic: Employment Insurance); and to examine the Estimates laid before Parliament for the fiscal year ending March 31, 2010.
Senator Joseph A. Day (Chair) in the chair.
The Chair: I call to order the meeting of the Standing Senate Committee on National Finance.
We are continuing our study of the Budget Implementation Act, formerly Bill C-10. At the same time, we are studying the Estimates for 2009-2010.
Our primary focus is Part 4 of Bill C-10, the Budget Implementation Act, 2009, which concerns amendments to the Employment Insurance Act. Last week the committee heard testimony from departmental officials on those provisions. Tonight, we will hear from those outside of government and their reaction to the proposed amendments.
Our panel consists of three members this evening.
We are pleased to welcome Michel Bédard, from the Canadian Institute of Actuaries, a member of the task force on the financing of employment insurance. If I am not mistaken, Maître Bédard, you appeared before us last year.
Michel Bédard: Member, Task Force on the Financing of Employment Insurance, Canadian Institute of Actuaries: I am not ``maître'' in the sense of being a lawyer.
The Chair: Mr. Bédard, then.
We are also joined by Mr. Erin Weir, an economist with the United Steelworkers; and Mr. Phil Benson, a lobbyist with Teamsters Canada.
Erin Weir, Economist, United Steelworkers — USW: Thank you, Mr. Chair, for having me back to this committee. I last appeared in May 2008 regarding the Budget Implementation Act, 2008. At that time, I raised concerns about the new financing regime for Employment Insurance. Specifically, I suggested that the reserve fund of $2 billion was inadequate and that if unemployment increased in Canada either the financing board would have to hike premiums or the government would have to inject additional funds into Employment Insurance. Budget 2009 reveals that those concerns were valid. It allocates a further $4.5 billion to Employment Insurance in order to freeze premiums at current levels.
I believe that questions concerning the financing of Employment Insurance remain serious. One of those questions is: What is the purpose of having an independent board to set premiums at a time when government has frozen those premiums for a period of two years.
More importantly, those financing questions have been overtaken by an even more pressing matter, which is the inadequacy of current Employment Insurance benefits for the tens of thousands of Canadians who are losing their jobs every month.
Statistics Canada's most recent labour force survey indicates that more than 100,000 Canadians joined the ranks of the officially unemployed in the month of February. That means that more than 1.4 million Canadians are officially categorized as being unemployed. That is the highest level we have had in more than a decade and the largest number since February 1997.
It is critically important for Employment Insurance to provide adequate benefits to these workers who are losing jobs through no fault of their own. It is also important for the wider economy to provide a source of income to this large and growing segment of the Canadian population so that it can continue to spend and to support the rest of the Canadian economy.
In particular, there were a number of needed improvements to Employment Insurance that were absent from Budget 2009. These fall under three headings: accessibility, level and duration of benefits. All of these areas need to be ameliorated.
In terms of accessibility, the key flaw with the Employment Insurance system is that it fails to provide benefits to most unemployed workers. Only about 40 per cent of unemployed Canadians receive EI benefits. There are a few reasons for this. One is that the hours required to qualify for the program vary depending on the region of the country in which a worker resides. In regions with relatively low unemployment, including Ottawa, fully 700 hours of work are required to qualify for any benefits. This regional variation does not make sense because workers who lose their jobs, even if they happen to live in areas that have had lower rates of unemployment, are still out of a job and still in need of income support. A further barrier to accessibility is that even if workers do qualify on the basis of hours, they have to wait for two weeks before receiving benefits and they need to exhaust all of their severance pay before they collect any benefits. The improvement that we in the Canadian labour movement would propose is that any worker who has at least 360 hours of work anywhere in Canada should qualify for Employment Insurance benefits without having to wait for two weeks and without having to first exhaust severance pay.
The level of Employment Insurance benefits is currently equal to approximately 55 per cent of a worker's previous earnings, to a maximum of $447 per week. This level of benefit is not particularly generous by international standards. For example, French President Nicholas Sarkozy, who had come in on a platform of actually cutting back French unemployment benefits, has recently decided to increase the replacement rate from 60 per cent to 75 per cent. I will not be quite that ambitious but I do think it would be very realistic to increase benefits to somewhere in the neighbourhood of 65 per cent of a worker's previous employment earnings.
Finally, there is the question of duration of benefits. This is critically important during a recession where very few jobs are available and it could take a long time for an unemployed worker to find a new position.
Budget 2009 did take some action on this front by temporarily adding an extra five weeks of benefits, creating a maximum of 50 weeks of benefits. However, it is important to note that this maximum only applies in a few regions of Canada with the highest unemployment rates. We in the United Steelworkers would like to see 50 weeks of benefits available to unemployed Canadians all across the country.
Phil Benson, Lobbyist, Teamsters Canada: Thank you, Mr. Chair. I am the lobbyist for Teamsters Canada. Teamsters Canada is a labour organization with more than 125,000 members. It is affiliated with the International Brotherhood of Teamsters, which has 1.4 million members across North America. We represent several industries including transport — air, truck, rail and port — retail, motion picture, brewery and soft drink, construction, dairy, rail, graphic communications, warehousing and more.
We will make comments on those portions of Bill C-10 dealing with Employment Insurance though we would entertain questions on other aspects of the bill.
There are only a few sections of Bill C-10 that deal with Employment Insurance, yet they are important.
Governments have reformed and tinkered with the unemployment insurance system over the years. In some cases, it would appear for the interests of those other than the unemployed. One area was the decision to keep premium rates artificially high in the 1990s to fill the EI Account. However, the EI revenue was diverted to general revenue and basically applied to the debt.
The new financial arrangement with the fund permits a stand-alone decision for setting premiums separate from the government. Bill C-10 sets the 2010 premium rate under the act at 1.73 per cent.
Though in conflict with the financial arrangement, this action is supportable. It is possible that the EI fund may face a deficit if unemployment rises and is prolonged. Perhaps this would require premium increases. We submit that premium increases or benefit cuts are not sound policy during a recession.
Extending EI benefits is welcome at any time. It is even more important to help offset the difficult times facing Canadian workers. Five extra weeks of benefits may seem too generous to some and too little to others, but it will be important for the unemployed who are running out of benefits.
We do, however, question why that particular extension was granted. For years, Labour and associations representing unemployed workers have pointed out that fewer workers qualify for unemployed benefits today than ever before in the plan's history. In November 2008, four in ten unemployed workers, and even fewer women, qualified for EI. Those who do qualify are eligible, on average, for only 32 weeks of benefits. Some who qualify will only receive 19 weeks under the new provisions. The maximum weekly benefit of $447 today is more than 25 per cent less than in 1996. The average benefit now is just $335.
Teamsters Canada joins with many in labour: We support lowering the entrance requirements so more can qualify for benefits. The CLC, the Canadian Labour Congress, has called for a lower entrance requirement of 360 hours of work.
We support provisions that would increase the length of benefits on a permanent basis. Finally eliminating the short week problem, especially in these difficult times, could lead to more work sharing and reduced unemployment rates.
Though the government did move on the maximum benefit previously, we would support a higher replacement rate of 60 per cent of insured earnings.
One important amendment of the bill provides that the cost of benefit enhancement measures taken will not be charged to the Employment Insurance Account. It is long forgotten that the previously named Unemployment Insurance was used to deliver programs either directly or funding for them because it was seen as an efficient system to do so. At that time, funding for those programs was paid from general revenue and not UI. During the recession of the late 1980s, a decision was made to stop that practice and have UI pay for those policy programs. Of course, during the 1990s, it became very easy to add programs to Employment Insurance because the EI surplus exploded. It is always easy to spend somebody else's money.
Perhaps this is a one-time-only action, and it is supportable to ensure the consistency of premiums and benefits during the recession. We hope it may generate discussion and lead to the re-examination of program funding and move towards policy change. We see this injection of cash as a payback of the $55 billion loan paid by Canadian workers to the state's coffers. We also view it in a positive light, no matter the intention of Parliament.
Though I was intending to limit my discussions to EI, I do want to thank the government for making changes to the Wage Earner Protection Program Act to include severance pay and termination pay under the program. It is welcomed, however, it would be appropriate to increase the level of coverage under that act.
We would like to thank this committee for dealing with that act in such a swift manner as was required at that time. Counter to conventional wisdom, it was proof that Parliament can work for Canadians. I will be pleased to answer any questions you have.
The Chair: Thank you very much and thank you for your compliments.
Mr. Bédard: Honourable senators, thank you for inviting us to appear before your committee. I represent the Canadian Institute of Actuaries.
In the spirit of full disclosure, I should point out first of all that I was the Chief Actuary for the Employment Insurance program from 1991 to 2003. So do not be surprised if you find that I know a thing or two about how the program works.
Thank you for inviting the Canadian Institute of Actuaries back to again share our views on Employment Insurance, specifically on Part 4 of Bill C-10. Our profession holds our duty to the public above all else and it is in that spirit that we are again appearing today.
When we came before this committee last May, we agreed in principle with the government's plan to create the Canada Employment Insurance Financing Board.
But the plan had several flaws, mainly because it allowed the new board to base premium rates looking forward only one year, estimating costs and revenues for the next year only, without any real reserve.
We still think that the creation of the Canada Employment Insurance Financing Board was and is a good idea. However, then and now, we pointed out that the mandate given to the CEIFB had significant flaws in estimating premiums and costs on a single-year basis and without providing any real reserve. Such an approach could only lead to erratic changes in EI premium rates and, even worse, to increases at times of recession, the first of which would have been required in 2010.
As it turns out, of course, the government chose instead to freeze premium rates for 2010 and to delay launching the CEIFB even though if it had created a nominating committee to select the members of that board in July 2008.
This has shown that, as presently mandated, the CEIFB is not a viable approach to EI financing. In the current context, or at any similar situation in the future, it would not have any real authority and would just represent an additional layer of bureaucracy.
We would not claim to have a crystal ball, but in making our points last year, we used an illustrated unemployment rate of 8 per cent. As it turns out, we are reaching those levels today. That scenario and our insurance background led us to recommend an improved and strengthened CEIFB, which would be an independent and arm's-length body that would ensure predictable and stable financing of the EI system over a five- to seven-year time horizon with a real EI premium stabilization fund in the order of $10 billion to $15 billion. Those are still our recommendations, which indeed have now been strengthened by economic developments over the last year.
At the very least, the recession should give the government pause, time and reason to fine-tune the operational rules for the CEIFB and turn it into the excellent arms-length financing body it should have been in the first place.
In closing, I seek the committee's indulgence by reminding honourable members of the following observations made by this committee last year in response to the 2008 Budget Implementation Act.
The majority of the committee agrees with several witnesses, including the Canadian Institute of Actuaries, who expressed concern that the $2 billion Employment Insurance fund reserve is woefully inadequate. A larger reserve, in the range of $12 billion to $15 billion, is needed, both to permit the Financing Board to avoid dramatic fluctuations in premium rates and to ensure that the fund will be adequate to cover a sharp rise in benefit payments during any future economic downturn.
I will be happy to answer any questions.
The Chair: Thank you, Mr. Bédard. We will start the questioning with Senator De Bané, from Quebec.
Senator De Bané: I am aware that Mr. Bédard was Chief Actuary at the Department of Human Resources Development, and that he was also an actuary at the Unemployment Insurance Commission and at the Employment Insurance Commission.
As well, Mr. Bédard wrote the report of the Canadian Institute of Actuaries' task force on the financing of employment insurance and he has worked as an international expert in Argentina, Chile and Algeria.
Mr. Bédard, you are testifying before this committee as a representative of the Canadian Institute of Actuaries, are you not?
Mr. Bédard: Yes, I am.
Senator De Bané: As such, you are a member of the Canadian actuaries' study committee that is looking at exactly the topic we are discussing this evening. In your opinion and the opinion of the institute you represent, why do you feel that the $2 billion reserve that the Canada Employment Insurance Financing Board has to maintain is clearly inadequate?
Mr. Bédard: First, because the very strict mandate of the financing board bases premium rates on one year only. The Budget Implementation Act, 2008 required the board to reset or re-establish the reserve at $2 billion each year.
If it had a reserve of $10 billion, it would be no more effective because the amount has to be re-established in its entirety each year; it cannot serve as a stabilization fund. As for the figure of $2 billion, if they wanted to stabilize premium rates for a planning period of five to seven years, our studies tell us that they would need a reserve in the order of $10 to 15 billion. This would allow premium rates to remain stable even with the need to handle extra costs that a recession would cause.
Senator De Bané: I would like to ask you another question, but in English this time.
Senator De Bané: Why is it important to you that the office be independent and not under the direction of the government?
Mr. Bédard: It is important because it provides a stable planning environment. It also protects the benefits under the plan. Although the current government may not have gone that way, when there is a recession governments are under pressure, and they tend to cut benefits. When there is a stable planning environment and an arm's length body to administer a real reserve, that temptation is removed.
Consider, for example, the Canada Pension Plan. It is off the books, so even though we have run into difficult times, this has no fiscal impact. We recommend that the Employment Insurance program not have this fiscal implication either, that the financing aspects be moved to an independent body. Of course the government would retain its full authority in terms of benefits and policy directions.
Senator De Bané: That is not your personal opinion but that of the society of actuaries in this country?
Mr. Bédard: Indeed; it is the opinion that is conveyed in our document of December 2007 on EI financing.
Senator De Bané: What do you think about the suggestions to abolish the two-week waiting period and to reduce the entrance requirement to 360 hours?
Mr. Bédard: I cannot speak for the Canadian Institute of Actuaries because the Institute has not yet taken a position on the matter.
Senator De Bané: What is your personal opinion, then?
Mr. Bédard: Speaking personally, and bearing in mind my work with the International Labour Organization, there is an international standard that stipulates that the waiting period should not be longer than seven days. It is in the International Labour Organization's Convention C-168, which Canada has never ratified.
In my opinion, going from a two-week waiting period to one week is justified. If we eliminated the waiting period entirely, we would have to deal with very short periods of unemployment.
It can be compared to the deductible in car insurance. If someone is involved in a minor accident that costs only a hundred dollars or so, the assumption is that the person will have some responsibility for his actions and for what happened.
That said, two weeks can certainly appear to be outside the international standards.
With the reduction to 360 hours, my fear is that a full-time worker working 40 hours per week would need only nine weeks of work. That takes us back to the 1970s, when we saw that it resulted in some less-than-desirable conduct.
The problem is that, since 1996, entrance requirements have been expressed in hours, not in weeks. And when you convert weeks to hours, you multiply by 35, meaning that part-time workers find it much more difficult to meet the new requirements. So my suggestion is to go back to the system based on weeks.
Senator De Bané: This witness has a great deal of credibility, given that he was chief actuary in the Department of Human Resources and Skills Development, an actuary at the Unemployment Insurance Commission and at Employment Insurance, and is now the person preparing the actuarial profession's position on the matter.
Senator Mitchell: Thank you, gentlemen. I am going to the convention in Canmore next week. Will you be there?
Mr. Benson: No, but you will enjoy it. I have been there before, sir.
Senator Mitchell: I have some technical questions. First, in Alberta the benefit is limited to 36 weeks in some cases, so there is a weekly difference.
Mr. Benson: Yes, right across the country. It is based on the unemployment rate in a particular region. If you are in a very low unemployment area, which the province of Alberta has been and we hope will be again soon, the entry requirement is different as is the length of time you receive benefits.
The issue with that, of course, is that although the area may have a low unemployment rate, if the industry you are in has a high unemployment rate, there is no way of changing that. For example, the steel, auto and trucking industries, due to the downturn, have very high unemployment rates. However, if you are stuck in a 5 per cent or 6 per cent unemployed area, you have to meet those requirements.
Senator Mitchell: I think Mr. Weir made the point, if you are unemployed, you are unemployed. It is disproportionately applied to Alberta probably because of our employment situation.
If 36 weeks is relevant, you do not need to specify it because people will get a job after 36 weeks and they will not go over it. It seems redundant; if high employment dictates that 36 weeks is all that is necessary, then high employment will make sure you will not go over 36 weeks without getting a job. Are you arguing that we should level it across the country?
Mr. Weir: To answer your question about the parameters of the program in Alberta, in Calgary and Edmonton the requirement is 700 hours, which is the highest threshold of any region in the country. The minimum duration of benefits is 19 weeks and the maximum is 41 weeks, including the extra five weeks introduced in Budget 2009.
The rural areas of Alberta are a little bit more generous, but still not very generous. I endorse the point that you are making that if a person is unemployed and happens to be in a region with low unemployment and finds a job relatively quickly, that is good. However, that is no justification for making the program more stringent in these areas.
Certainly, there are mass layoffs taking place in Alberta and Saskatchewan and other parts of the country that historically have had low unemployment rates.
Senator Mitchell: Do you accept the argument that there is an eligibility disadvantage for women, given the different nature of their work? If so, what would you do to that fix that?
Mr. Benson: It is clear from the statistics that I mentioned, partly because — again, from the actuary — if you are working in retail or in a particular field where you are trying to balance home life and other things, taking part-time work, you can never actually qualify for Employment Insurance.
There are ways to resolve that; especially with the hourly system, they could resolve it. It has been there since 1995 since they have resolved it — and I am sure from before.
Senator Mitchell: On the clawback issue, I think over $56,000 or $58,000, you begin to pay it back. Is that not a double premium? If I get insurance from an insurance company, I do not think that I have to pay it back ever. In this case, is it not a double premium?
Mr. Benson: The clawback was initially much worse. We worked diligently on changing it. It is much better now than when it was first introduced.
These are legitimate questions for insurance purposes. If people are paying EI premiums from the first hour they work, why are they not receiving some kind of benefit, and why do we punish people who are fortunate enough to be making a good amount of money? As we know, the tax system has many different ways of ensuring that people with higher income pay money back.
Mr. Weir: The other clawback I might highlight is the clawback of severance pay through Employment Insurance. That affects anyone who gets any severance at all, both high- or low-income earners.
Mr. Benson: Also vacation pay.
Senator Nancy Ruth: Let me continue on what Senator Mitchell was talking about in terms of unemployed women. Would you say that the government's new policy for self-employed people — which often includes a great many women because they are working from their homes or otherwise — giving them benefits to maternity, parenting and EI, would help the situation to some degree? Would you agree with that?
Mr. Weir: I have to acknowledge, senator, I am not entirely clear what the government's policy is on that issue. I know the Conservative Party proposed it in the last election campaign and the government has indicated that it will study the possibility.
It could be a very constructive initiative, but the question is how would these Employment Insurance benefits be made available to self-employed workers? It is worth trying but it is not something that has been enacted.
Mr. Benson: In insurance, you are covering or insuring people for a known outcome. An employee is never able to choose his or her layoff time. In fact, if the employee does choose his or her layoff time, except for one exception, he or she is not eligible for benefits.
One of the problems for self-employed people — and this is something I would like to see — is how do we ensure that people who are self-employed are not choosing their own layoff time? The only way you could ensure the self- employed person is not unemployed of their own choosing is falling under the Montreal locomotive test — in fact, being an employee.
Intellectually, I support helping people, but I am not sure how you bring them into EI, as we raised or discussed it. Governments used to pay for these extra programs. Perhaps this is one where the general revenue should be paying for that program rather than Employment Insurance.
Senator Nancy Ruth: We will wait and see when the government introduces the legislation.
Mr. Benson: We will be very excited to look at it.
Mr. Bédard: On the maternity parental benefits, in the province of Quebec, since January 1, 2006, they have been entitled to those benefits. From an administrative perspective, it seems feasible and from a financial perspective also. In terms of regular EI benefits, I would express grave reservations.
Senator Nancy Ruth: Mr. Benson, you said that it was possible that EI premiums would be increased. My understanding from the government's policy is that the premiums fixed at least for two years; that the government will pay the costs and they are frozen until 2010, at $1.73 per $100. What do you know that I do not?
Mr. Benson: I congratulate the government for doing those two things. I have been studying EI for over 20 years, and if one looks back to 1989, 1991-92, the deficit position was $6.8 billion — it might have been $8 billion.
When you were faced with the situation at that time, it was a loan. The Employment Insurance system had to repay that loan to the government. The problem we got into was an Auditor General's report that thought Prime Minister Mulroney was hiding money on the books and he had to bring it forward. That led to it going into the general revenue from a consolidated revenue account, which is identical to the CPP, by the way. They both sit in a consolidated revenue account. It was by accident.
If we are stuck with a $2-billion mandate — that you must maintain $2 billion — with an unemployment rate of 7 per cent, 8 per cent, or 9 per cent, from my historical analysis, looking at the $6 billion or $8 billion deficit, only one of two things can happen: premiums must go up or benefits must be cut. However, the government is not doing that and I am very pleased.
Senator Nancy Ruth: That is right; they are not doing it at least for a couple of years.
This is a general question for both of you. EI relates to those who get EI, and then there is that 50 per cent of the population that is not eligible for EI. You men have a number of resources that can figure out economic models. What would it cost the EI system if everyone including part-time non-unionized employees could get EI?
Mr. Weir: That is a question better directed to the actuary on the panel, but given that a minority of workers qualify for Employment Insurance benefits right now, it would clearly be relatively expensive to enlarge the eligible proportion of workers. I suppose that cost would have to be balanced against the fact that the Government of Canada, over the years, accumulated a surplus of some $54 billion.
Senator Nancy Ruth: It is a fictional surplus.
Mr. Weir: The money was there and was used for certain purposes. There is no reason that the government should not be obliged to put money—
Senator Nancy Ruth: As a Conservative, I am happy to have you comment on that against the Liberals.
Mr. Weir: I am not suggesting that it was a Conservative government. I am saying that the Government of Canada, as an institution, withdrew billions of dollars from the Employment Insurance program. Now that tens of thousands of Canadians are losing their jobs every month through no fault of their own, it seems to me that the money should be put back —
Senator Nancy Ruth: I am just curious, Mr. Bédard, what you think the cost is of employing people.
The Chair: Senator Nancy Ruth, let Mr. Weir finish answering the question.
Have you finished Mr. Weir?
Senator Nancy Ruth: He is not answering the question. I would like Mr. Bédard to answer the question.
Mr. Weir: I am finished, thanks.
The Chair: I apologize.
Mr. Benson: To answer the question, if we look at it a different way, the majority of people working, who cannot seem to qualify for benefits, are all required to pay Employment Insurance premiums from the first dollar they earn. I do not know about you, but if I were paying for insurance and my good hands person went like this — I would not be pleased. We have to look at this rationally and reasonably. We have to examine it and ask ourselves why women are having a harder time getting Employment Insurance and why certain other workers are not.
We have to look seriously at what we can do about it. There are all sorts of policies and procedures and ideas to come forward to deal with it. Will it cost money? Certainly it will cost money. Then again, for whatever period of time, it was not your government but it was the Liberal government that allowed the Employment Insurance Account to accumulate. By the way, the $10-billion or $15-billion figure was the number we had determined as being an appropriate amount to have in there; it is gone. It is spilled milk.
When we take money from people, in the form of premiums, and then tell them we will not cover them when they become unemployed, there is something wrong. We have to examine this as a pure fairness and justice issue, in particular for women and youth. We have to look at that seriously.
Senator Nancy Ruth: I understand your argument but I am curious about what a number would be.
Mr. Bédard: I do not know what the number would be. In all fairness, if you talk to 100 working people on the street, you will find most of them will qualify for EI. When you compare the number of unemployed with the number of people receiving benefits, the ratio is about 40 per cent. About 80 per cent to 85 per cent of people would qualify initially and then some would fall off benefits after a while. Other people never worked in a premium-paying position previously or others still just came into the labour force. There are a number of reasons that some people do not collect EI. You could reduce the eligibility requirement to 360 hours but you would probably not increase the ratio of EI beneficiaries to unemployed beyond 55 per cent. I am venturing a number and this is a wild guess but that is not the problem. The problem is that many people were not covered by EI to begin with; they were self-employed or not in the labour force.
The Chair: Thank you, Senator Nancy Ruth.
Senator Rivard: My first question goes to Mr. Bédard. First, as a representative of the Canadian Institute of Actuaries, you are suggesting that the reserve should be $10 billion to $15 billion, whereas it is presently only $2 billion.
As I recall, unemployment statistics are announced on the first Friday of the month. If memory serves, the unemployment rate had risen to 7.7 per cent at the beginning of March.
What percentage could we handle and for how long if your $10 billion to $15 billion proposal was in place and the rate went up to 8.5 per cent?
Would the reserve be enough to last two or three years?
Mr. Bédard: The problem with the $2 billion is not just the amount, but also the mechanism established in the act. You can have a reserve of $10 billion if you like, but it would have no stabilizing effect because the act requires the amount to be re-established each year in its entirety.
It is wrong to call it a reserve. Do not ask me what it really does. It is a bank account that comes with a lot of complicated accounting. It is an exchange of transactions between the employment insurance account and the financing board. The $2 billion is not a reserve.
In terms of the amount needed to stabilize the premium rates with a financing system in place over a five- to seven- year period, it is somewhere in the neighbourhood of $10 to $15 billion. The current premium rate of $1.73 was based on an unemployment rate of 6.5 per cent. Every unemployment point costs approximately $1.6 billion a year. If the unemployment rate rose this year to an average of 8.5 per cent, without the government's amendments, the cost of the plan would increase by more than $3 billion. Therefore, the sum of $2 billion, even if it were a real reserve, would clearly be inadequate.
Senator Rivard: I would like to ask the actuary and former senior official a question. Back when an extra $40 to $45 billion was sitting in the employment insurance fund and the governments of the day used that money to pay for other expenses, surely you reported the surplus to those in charge? Do you feel frustrated at all because your profession told you that the reserve was much too high?
Mr. Bédard: In my opinion, it is not appropriate to say how I felt back then. One thing is certain: at that time, my job was to produce reports on what was desirable.
Senator Rivard: But as a senior public servant and actuary, did you still make the government aware of the fact that the reserve was much too high?
Mr. Bédard: I was given a mandate, and yes, every year, I said that the premium rates were too high and that the growing reserve was too high. That is obvious.
Senator Rivard: We can draw a comparison with car insurance or home insurance because the rate is tied to the value of the insured property and to the amount of the deductible.
As far as employment insurance is concerned, the plan sets out a two-week deductible, which equates to $1.73 a week. If the government were to decide to compensate unemployed workers starting on the first day of their unemployment, the premium rate might not be adequate to finance the system. It would increase to perhaps $1.85 or $1.88.
There is no free lunch. The income and the expenditures all come out of the same pot. I think we need to make adjustments accordingly. Do you agree?
Mr. Bédard: Given that Service Canada is having trouble handling all of the benefit claims, requiring them to process a lot of very short-term claims will make it very difficult to manage the claims of those who remain unemployed longer and who need the benefits more. It will have an administrative impact.
Senator Rivard: You answered my last question about the administrative impact. Thank you very much.
Mr. Weir: May I add a point on this notion of the analogy to insurance and the deductible versus the waiting period? We have public health insurance in Canada that includes first dollar coverage. We do not ask Canadians to pay a deductible on their health care expenses before they can avail themselves of the public program. There is room to distinguish between private insurance on the one hand and social insurance on the other hand.
Senator Rivard: The costs are established by the government.
Mr. Weir: It is a point well taken. There are tradeoffs involved, and certainly if this committee were to recommend a waiting period of one week as opposed to two, as Mr. Bédard suggested, we would regard that as a huge improvement over the status quo.
Senator Rivard: If you have health insurance for medicine, if we have to pay 20 per cent of the premium it goes with 80 per cent. If we wish to add 100 per cent, the premium will be higher. It is the same for Employment Insurance.
Senator Ringuette: In your example, with EI you get only 50 per cent, instead of your example with medication, which is 80 per cent. One must take that premise into consideration.
Mr. Benson: We spent a lot of time looking at first-hour coverage. I agree with Mr. Bédard that the payments could be smaller. In other words, if someone has fewer hours as a ratio of what is required, their benefit would either be smaller or of a shorter duration. However, if you have employment that is not paying a lot of money, a little cheque is better than no cheque, and some cheque is better than nothing.
It goes back to that first hour, as we said — back in 1995 when we were talking about it — if we are going to pay premiums from the first hour, we are smart enough to get coverage without breaking the bank. We must be reasonable, but there should be a way to get a cheque into somebody's hands.
Senator Rivard: Then it is possible, but you have to pay for it.
Mr. Benson: We have to pay for it.
Senator Callbeck: Mr. Benson, you mentioned changes you would like to see, like 360 hours, 60 per cent earnings, and you said more work sharing. I would like to know more about the work-sharing program. I know it pays a certain per cent of the wages. Is it always same per cent?
Mr. Benson: I raised it because I know the government has moved on work sharing, and it is a good thing. One of the problems with work sharing is it is a formal agreement. In other words you must enter into an agreement, do this and then Employment Insurance.
When times are tough many people will not enter into a formal agreement. Let us imagine a situation where you are asked to work shorter hours this week and you will be kept on, and if you do that for five weeks and get laid off, your benefits drop and the duration of your claim drops.
The work-sharing program itself is excellent, and they are working on rolling out improvements, which is great. However, there are many people who are not aware of it and do not know how it works, they get caught and they get punished for trying to save their job and their employer's job. This goes back to the creation of the program dealing with the short-week issue.
Senator Callbeck: What percentage of the wage is paid?
Mr. Benson: I am not 100 per cent sure.
Mr. Weir: The United Steelworkers represents a number of workplaces where work sharing is currently in effect. There is some flexibility, but the most common arrangement is that workers would go in for four — as opposed to five — days a week and they would receive Employment Insurance benefits for the fifth day. At most that would be 55 per cent of the money that they otherwise would have earned working on that day.
Senator Callbeck: Is it hard for a company to qualify for this program?
Mr. Weir: I believe one of the things the government has announced recently is to relax the reporting requirements somewhat for work sharing. I believe that an effort is being made to make it more widely available.
Senator Callbeck: It is not really that widely known?
Mr. Benson: From my experience, no. Other than for larger employers, unionized, steel workers, UAW, we have a lot of small companies, and they tend to lay off their employees. They do not tend to go into work-sharing agreements. If you have to expend money to make a plan to do all of this, you have to be a large company that wants to maintain the pool of talent they have and do not want it to go anywhere.
Senator Callbeck: Have you heard complaints about waiting times? It is supposed to be 28 days to get a cheque.
Mr. Benson: I am laughing. How many people have collected Employment Insurance? Put up our hands.
I have not collected in probably — being blessed — 25 years or 30 years. It has never been 20 days or 28 days in the history of the program. It has always been longer. Part of the reason for that two-week hold-up could be vacation pay, severance pay, processing time; for some reason there has always been a delay. It is not new. It is nothing I blame this government for, it has been there under Prime Minister Mulroney and Prime Minister Chrétien; it does not matter. It takes a long time for all the paperwork to get together.
I know the staff is working hard. I have full confidence that the people are trying their best. It just takes a long time to get a cheque into somebody's hands.
Senator Callbeck: With the number of claims going up it will take a lot more workers to process the claims. I have heard many complaints in my own province.
Mr. Benson: To be fair, policy decisions always come back to bite you. How many times has the government — all governments and the state — reorganized where workers are? We do not need workers here or there. To be honest, if you talked to HRSDC four years ago planning forward to have the claimants and the people sitting there — under the excellent service now with the storefront — I am sure they did not plan for a recession caused by bankers in the United States.
I am not saying bad guys at all; you said it. That is just a fact of life. I am sure they made planning decisions, as every company has done, and they are caught in the crunch and bearing the political problems. Absolutely there will be delays.
Mr. Weir: I would like to elaborate on the number of claims. There is a tendency to focus on the unemployment rate as a percentage, which is higher than it should be and is rising. More striking is the absolute number of workers who are unemployed. It is above 1.4 million, which is the highest level in well over a decade.
It stands to reason that there are far more people claiming Employment Insurance benefits now and that there is a real strain on the system. That probably explains why people are having real problems getting their claims processed in a timely fashion.
Senator Callbeck: Mr. Bédard, I want to clarify one thing. The rate has been set for two years. When the board takes over, they are to set that rate at a break-even point. You talked about huge fluctuations, but does the act not limit how much the rates can be increased?
Mr. Bédard: You are correct. They can only be increased by 0.15 per cent each year. However, the way the legislation was designed last year, there is a cut-off date of December 31, 2008. Therefore, the board would have to make up excess costs incurred beginning on January 1, 2009 due to high unemployment. They would get some credit from the provision in the 2009 Budget Implementation Act, where the government says it will credit an amount to the EI Account as of August 1, 2010.
Nevertheless, the board would be faced with a situation where they would have to raise premium rates in 2011, 2012 and probably for the foreseeable future, for four, five or six years. Even in 2011, does one think the recession will be over by then, and would that be the appropriate time to raise premium rates?
I suspect the board will not be launched next year. The fact that the government is holding back on it probably demonstrates that — as we suggested last year — the way it has been designed is not the right way.
As of March 31, 2008, the EI Account posted a $57-billion surplus. The surplus as of March 31, 2006 was $51 billion, so even over the last two years the surplus grown by $6 billion.
The Chair: We have a briefing note from the Government of Canada that indicates that the board can increase the rate by a maximum of 15 cents.
Mr. Bédard: That is correct; it is 0.15 per cent.
The Chair: Not per cent, cents.
Mr. Bédard: That is cents per hundred dollars of insurable earnings. The premium rate is currently 1.73 per cent, so the maximum it could increase from that rate would be to 1.88 per cent, then to 2.03 per cent, then to 2.18 per cent. It would have to enter on to such a track in order to recover costs that have been incurred since January 1, 2009.
I would like to point to an incongruity in the Budget Implementation Act, 2009. In Part 4, concerning the Employment Insurance Act, section 73.1 presumes that the board will come into force some time, because otherwise it makes no sense, of course. The government is saying that it will credit some amount to the EI Account, which is currently in surplus by $57 billion. It sounds incongruous to credit such an amount to a fund that is in such a large surplus.
In addition, section 73.1 was clearly written by people who did not grasp what they were doing. It says in here that the estimated costs that will be covered in this credit are $2.9 billion, yet these costs are to address the measures in the act. The only measure addressed in the act is the five-week extension. All the rest is being done either according to regulatory powers or by increasing the spending under Part 2 of the legislation, which is already authorized.
The only impact of this legislation is the five weeks, and that costs $1.15 billion, so I do not know what the $2.9 billion expressed in this provision is doing there. The only amount that the government could credit under this, as it is worded, is $1.15 billion, if the estimates are correct.
This provision is strange in its wording, and in the amount.
The Chair: I understand what you are saying. It says in section 73.1, ``. . . the cost is estimated to be. . .'' which is very unusual wording in legislation.
Mr. Bédard: In the budget documents, you can see the $2.9 billion. The cost of the extra five weeks of EI benefits is $1.15 billion; Employment Insurance for long-tenured workers is $500 million. There are other items as well, and they all add up to $2.9 billion, but the only item covered by the legislation is the first item that I indicated, the extra five weeks of benefits for $1.15 billion.
The Chair: My point is that the $2.9 billion is estimated. It does not say that it cannot be more or less.
Mr. Bédard: I agree, but the $2.9 billion itself was an error, because the other measures are not in the legislation.
The Chair: I take your point. It is very strange wording for a law.
Mr. Bédard: I understand that the government lawyer was under pressure when writing this provision.
The Chair: A lawyer did not write this section.
Mr. Bédard: I do not know.
The Chair: I can tell you that. I am glad you brought that up because I was going to ask that question.
Mr. Bédard: This provision would temper what the CEIFB would have to do in terms of raising premium rates. However, it does not deal with the additional regular benefit cost due to rising unemployment, which is the larger part of the additional cost.
The Chair: Was there not a figure estimated by the government of $4.5 billion for the next two years to keep the rate fixed?
Mr. Bédard: I think so.
The Chair: That is obviously not included in here.
Mr. Bédard: No, it is not.
The Chair: Thank you for bringing that to our attention.
Senator Ringuette: My first question is for Mr. Bédard. Based on your experience as the former actuary and on your organization's report, can you tell us how much it costs to administer the employment insurance program?
Mr. Bédard: I do not have those figures handy. I believe it is in the neighbourhood of $1.5 or $1.6 billion a year. That includes not only the cost of administering the program but also the cost of Part 2, which represents a significant portion. The cost of administering benefits is less than half of that $1.5 or $1.6 billion figure. The most expensive thing to administer is Part 2, the training and the agreements with the provinces.
Senator Ringuette: That leads me to my second question.
Mr. Benson and Mr. Weir, how many of your members are currently unemployed?
Mr. Benson: I am sorry; I do not have that number. I know that layoffs started in the fall in transportation. There was a slowdown in transportation. I will not know the absolute numbers until June or July.
Mr. Weir: Roughly speaking, I would say that our union has lost about 15 per cent of its dues-paying membership, in both Canada and the United States, since the economic crisis began. Of course, the situation continues to worsen every day.
It is interesting that Statistics Canada's labour force survey only asks about unionization if they say they are employed. It does not ask unemployed workers whether they are a member of a union.
Senator Ringuette: That is true.
Mr. Weir: National statistics do not address the point you have raised.
Senator Ringuette: So you can determine that based on union dues.
Mr. Weir: Yes, we can speak to our own membership, but it is impossible to say for the entire country because there is no attempt to survey unemployed workers on whether they are or were union members.
Senator Ringuette: That is true.
I have a question with regard to training for the unemployed. There has been a switch from it being a federal responsibility to it being a provincial responsibility with some federal financial help. We lost 216,000 jobs in January and February. If one half of these people are entitled to unemployment, that is 108,000 people in two months. However, there is only funding to train an additional 10,000 unemployed. An additional 10,000 does not even cover 10 per cent of the unemployed in one month. What recommendations can we make to the government on compensation? After the five additional weeks, these unemployed workers will be on provincial social assistance.
How can we ensure that more Canadians have access to training? They will need it. Also, how can you be helpful in your involvement in sector councils?
Mr. Weir: I would not purport to say that there is a ``silver bullet'' solution to that massive problem. Certainly, our union is strongly in favour of greater investments in training, both within and without the Employment Insurance program.
I am glad you mentioned sector councils. Although they are outside the ambit of Employment Insurance, they are something that we are very involved in and that are tremendously useful in providing training and adjustment for unemployed workers.
One of the things conspicuous by its absence in Budget 2009 was sector councils. There simply was not any new money for sector councils in the budget, even though, as I think your question suggests, sector councils are a logical part of the solution to this crisis.
Mr. Benson: Training is always an interesting topic. We have to ask, training for what? An awful lot of people unemployed on this round are people who have a lot of skills. People who work in factories are losing their jobs. Therefore, again, training for what?
The problem with the training, to go back to the 1988 to 1991 and through the 1993, 1994 and 1995 amendments, was that the decision was made for example, that there were far too many trades; they were all unemployed and clogging up the system and costing too much. They did two things. First, they wanted to get them out of the trades and, second, they convinced them to become self-employed so they would never turn to EI again. At the time, I remember begging it not to happen because, if the tar sands and nuclear power plants go, we will not have enough people. We will have to import them and look what happened.
That is one of the problems. When you look at the issue, it is a matter of ``training for what?'' I think quite often training is short-term. It is based upon the principle of getting somebody off of Employment Insurance and is not always about getting them a career or job that will last for a long time.
The question being: Do people actually require university and college degrees to hold a meaningful job? I do not agree with that, being a tradesman, as well.
Senator Ringuette: Nor do I.
Mr. Benson: I have both. Perhaps we should be looking at things like how we help students go to school and how we help people go back to school. For somebody who is qualified for EI, can part of the training be going to a community college to become a nurse assistant or dental assistant? There are lots of things we can look at. Again, there are costs. Whether it is short-term pain for long-term gain, I am not sure.
I would like to see the analysis, though, of exactly who is laid off.
Senator Ringuette: You bring up two issues. One issue deals with temporary foreign workers; the issue that, in 2007, 201,000 temporary worker visas were given for people to come to Canada, many of them with skills that are part of the skill sets of the 216,000 that were laid off in the last three months.
Mr. Benson: Correct.
Senator Ringuette: You do not have any funding for the sector councils, so I guess it they do not exist anymore?
Mr. Benson: No, we have sector councils.
Senator Ringuette: I am sorry, I did not hear that.
Mr. Benson: We participate in sector councils. They are fine.
Mr. Weir: There is no new funding for sector councils but they have their existing budgets.
Senator Ringuette: Okay, so you can still function. Will you look at the labour market and the shift that will have to be done in the short-, medium- and long-term with regards to fulfilling job opportunities in the Canadian market for Canadians? Will that be part of your mandate?
Mr. Benson: To be blunt about it, at the behest of the department, sector councils were looking at ways to make it easier for people to come in to fill vacancies and temporary jobs. That was certainly over our objection.
Senator Ringuette, I appreciate the question because when times are tough like these, we have to ask those questions.
Senator Ringuette: Yes.
Mr. Benson: There are times when we need temporary workers to come in to the country, but an awful lot of them were simply brought in because it was cheaper, easier and we did not want to train people.
I remember education budgets. Do we really become a society that believes that and invests money in it or do we just continue to pay lip service to it? In all seriousness, these are very important policy questions.
Senator Ringuette: I agree. I think this is a chaotic time. You need a time of chaos to look at the big picture and figure out where you want to be in 10 years or 20 years, and review all of this.
This brings me to the self-employed; all these women that pay into the system on an hourly rate but do not have access to Employment Insurance for different reasons. There are other people that do not qualify. They then have access to the provincial social funding program.
All in all, I have counted 26 different income supporting programs in Canada, either federal or provincial. All 26 have their very nice bureaucracy to administer the cheques being sent to EI recipients, CPP and all that. There are 26 different programs with 26 different administrations. That is why I asked you that question Mr. Bédard.
That represents a lot of money. Maybe it is time in our broader look not only at labour market requirements and future EI requirements to also question how we can be more efficient in ensuring that no one falls through the cracks because there is a program for every crack, or there should be.
Maybe it is time that we look at the entire system. Mr. Bédard, have you looked at that from your standpoint?
Mr. Bédard: That is a very broad question. Should we reform the entire social security and welfare system?
Senator Ringuette: We are going to reform the entire automobile industry. We could do the same for social programs.
Senator Neufeld: The work sharing program, although not perfect, went over quite well in the province I represent. I am speaking mostly about the forest industry which was hit tremendously hard. I know it was taken over.
Companies worked on it; unions worked on it; and, to my knowledge — although there would have been some problems, I am sure — I think it worked pretty well. I appreciate what you said about work sharing, Mr. Benson.
The other thing that has come forward is that rates are frozen for two years at $1.73. I appreciate and respect Mr. Bédard's opinion, as an actuary, about what kind of money you would need to actually move forward over the years. However, what has also come into the discussion is the fact that we are talking speculatively, correct?
The board has not been formed, to my knowledge; at least, that is what they told us here the other night and from discussion that you had, you are not sure that will happen.
The matter is statutory and if the unemployment rate rises, more funding will need to be put into Employment Insurance and the government will have to do so out of general revenue.
We can speculate about that all we want and come up with a ghost behind every tree. However, there are more serious things that we have to look at in the future, so we have some tough times coming. We have to be vigilant to ensure that workers are looked after. The government is attempting to do this in the best way that it can. I get that from your discussion and from you, Mr. Benson. I appreciate that.
Mr. Weir, you said that only 40 per cent of the unemployed receive EI. I want to put on the record that Mr. Bédard laid some of the reasons out clearly. There are many reasons. When officials from the agency testified before the committee, they laid out many of the same reasons that Mr. Bédard mentioned. It is not as though only 40 per cent of them can receive benefits although they are paying into it. There are some reasons for it.
Mr. Weir, you said that you would like the hours of eligibility dropped to 360 hours across Canada with waiting period. If someone has paid EI premiums and is receiving severance for six months, using the numbers that Mr. Bédard gave us, about $10 billion to $15 billion would have to be in the Canada Employment Insurance fund if they were to make things work over the next five to seven years. Have you costed that out? Do you know what those costs would be either to the federal treasury or to those workers to have that kind of extended benefits? It is easy to say this or that should happen. I appreciate that you are advocating on behalf of the people you represent, but there is a cost to it.
We are experiencing some big economic difficulties in Canada and around the world. We have to be vigilant about how we can look after as many people as possible without making the revenue available to those people way up here.
Can you tell me what that cost would be?
Mr. Weir: No, I cannot give you the cost. My reason is the same as the reason that Mr. Bédard gave to a similar question: There are massive fluctuations, to which you alluded as well, in terms of the number of workers who are unemployed. However, you are correct to note that there would be a significant cost to enhancing Employment Insurance benefits. We are of the view that the government should be willing to pay that cost in the short term to ensure that people who lose jobs through no fault of their own are able to live with dignity. It would also help to stimulate the economy because people would have income to spend, thereby mitigating the effects of these economic problems.
There is no doubt that Employment Insurance is a large program and that to expand it significantly would entail a significant cost.
Senator Neufeld: Do I understand then that rates should not increase but the government — the people — should fund those new benefits. Is that what we should be looking at?
Mr. Weir: Yes, my vision of how the Employment Insurance system would work is that in good times, when employment is increasing and unemployment is decreasing, the fund would run a surplus. Government would be able to use those dollars to run deficits at times when unemployment is increasing and people are losing their jobs. That is the conception of the program as an automatic stabilizer.
In fact, the program did accumulate vast surpluses. We have just received an updated number from Mr. Bédard of $57 billion, I believe. During the years when employment was increasing and unemployment was decreasing, the Government of Canada was all too happy to collect more money in premiums than it was paying out in benefits. Now, the shoe is on the other foot; people are losing their jobs, and it is reasonable to expect the Government of Canada to pay out more in benefits than it is collecting in premiums.
Senator Neufeld: I do not specifically disagree with part of what you said. It is not just what the government says because this is statutory — it has to be paid. If the government has to run a deficit to look after Employment Insurance, it will do so. That is a matter of fact.
I was referring to the cost of better benefits, which you did not cost out, for the unemployed. I appreciate that you have not costed that out and that it is something that you say you would like.
Is the union that you represent in Canada and in the U.S.?
Mr. Weir: The number of dues-paying members lost being in the neighbourhood of 15 per cent would apply on both sides of the border. That is true of our Canadian membership and it is approximately the same figure for our American membership.
Senator Neufeld: Do all of those people working in the union that you represent pay into EI. Can you tell me what percentage of those people that are unemployed are receiving benefits? Is it 40 per cent or is it higher?
Mr. Weir: In terms of our union members receiving Employment Insurance, I do not have a figure. My suspicion is that the percentage would be much higher than 40 per cent because we are talking about full-time workers in permanent jobs who would accumulate the requisite number of hours. Of course, one of the issues with Employment Insurance is that the workers who are most likely to be unemployed, some of whom are in our union, are part-time workers in contingent positions. That group of people would experience the most difficulty in accumulating the requisite number of hours to qualify.
Senator Neufeld: You would agree with me that the percentage of unemployed union members receiving Employment Insurance is high, compared to the 40 per cent because they pay into the program for one thing and probably because of good representation on behalf of you or others.
I agree with Mr. Benson — training for what? We have to be careful about training dollars. We have to ensure that we put dollars into training for jobs that will be there. I will speak about British Columbia. We had a very low unemployment rate, in fact, the lowest it has ever been in the history of the province. It is climbing up now. People were coming in on visas from other countries to fill jobs that British Columbians and Canadians would not take, in many cases. I am not saying that it was 100 per cent, but in many cases.
In the town where I come from, we pay $14 an hour to work at Tim Hortons plus numerous benefits but we still could not get anybody to work at that facility. We could not get people to work in the fruit-growing industry or the wine industry — anywhere that entailed some form of manual labour. The unemployment rate was so low.
I would suggest that even today with the unemployment rate going up, people that have worked in industries that were making $35 per hour to $40 per hour will not work at Tim Hortons. We have to be careful when we talk about all these lost jobs. I understand that but many of them are jobs that people, unfortunately for whatever reason, do not fill. We need to find a way to bring people in to work those jobs so that those services can continue. I know that the vacancies are dropping off dramatically so some people must be taking those jobs.
Mr. Benson: That is a great point. I talked about all the things that Teamsters Canada does. We are also in the winery business and in food processing. I am proud to say we also represent migrant Mexican farm workers.
There is certainly a case for it. After long thought, our position was that there is probably, one might say, a flaw in the immigration provisions for Canada; we always want the brightest and the best.
There was a human rights complaint in British Columbia. I can send you the case explaining the complaints about the abuses that some of these workers face. We gave the case serious consideration, and came to the conclusion that if people are good enough to come here to work, whether at Tim Hortons, in a hotel or those 5,000 Chinese workers working in the tar sands in Alberta, they are probably good enough to let them immigrate.
There is something abusive about the Temporary Foreign Worker Program, not just in Canada but also in similar programs throughout the world. An international labour organization talks about this subject. We claim that we are a society of immigrants, but just the right kind. If there is a mesh there with the employers and workers, our position is, why not give them immigration status?
There are two reasons for that. One is self-serving; when they are immigrants we can sign them up as union members, represent them and hopefully get them a good life. Also, if they are going to contribute to our country, they should be able to contribute fully to our country as citizens. That is another aspect of this temporary workers program that should be looked at. The idea is if they are good enough to work here they should be good enough to stay here. I would be proud to have most of them as Canadians.
Senator Ringuette: I agree with you. The temporary foreign workers go back to their home country and take the rewards of their labour with them. However, with permanent immigration in Canada, they buy homes, groceries, cars and they make major investments in our country. There is a major difference. I applaud you for having put that policy forward.
Senator Di Nino: Since the issue was brought up, let me introduce my own thoughts on it. I do not disagree with the general philosophy that the temporary worker should be granted some privileges about staying. I do not think it is quite the same as saying because they are working, let us give them citizenship. I am sure you feel the same way.
I have been in some places in the world where these temporary workers come from; they are a great source of revenue for their own regions. We have to consider that from a humanitarian standpoint. If they stay here, they might have extra money to send home, but not as much as in the position of a temporary worker. I do not think the foreign remittances, which are huge and bring huge revenue for the governments, would reduce — if not stop completely — from these workers. It is a much more complex issue. That is an issue that I have seen first-hand and I know the value on the other side.
All governments have to struggle with this issue between fairness, need and costs. It is very simple to say let us give everyone everything, but somebody has to pay. The people who must to pay are those who are working. I have some difficulty with some of the suggestions without associating some value to it.
The previous government — I am not saying this to be overly critical, although I have in the past, but just in general — were not of the same political stripe and changed the Employment Insurance and reduced it in a number of ways that you would be critical of. They had to govern. Leadership is about making tough decisions, and they had to make their decisions based on what they thought was in the best interest of the vast majority of people. I am not being critical this time when I talk about the reduction in the Employment Insurance file that they had to make, for the reasons they felt were appropriate. They did not get up in the morning and wonder how to screw the people of the country. They did not do that. That is not the kind of country we have. We must be sure that the information we are dealing with is correct.
Mr. Benson: Agreed.
Senator Di Nino: It is important to repeat that when we talk about a reserve. Mr. Benson, Mr. Weir and Mr. Bédard, you all touched on it; $2 billion is not enough. There is always the guarantee of the Government of Canada that whatever is needed will be paid. It is important that we emphasize that as well. We do not want people to think this is a bad bunch of people who will go out there and not do what is important on behalf of those people.
The 40-per-cent accessibility, Mr. Bédard, I think you said of those who are currently in the system is about 85 per cent. Is that correct?
Mr. Bédard: As Mr. Weir suggested, most people do get benefits initially.
Senator Di Nino: That is important as well.
The other issue I would like clarification on is the first-hour type of payment and the clawbacks and the reduced waiting period. We do not have, and we should not have, a means test for collecting Employment Insurance. You lose your job, you apply and you get paid.
There are people who could be getting a lengthy allowance from their employer for three, four or five months. Some get nothing and there are some others who have other resources who will not be affected in the same way as others.
I fundamentally believe that when you try to apply that fairness and need versus cost test, you have to have some balance. This is what all governments have struggled to do throughout time. I have some disagreement with the position that Mr. Weir and Mr. Benson have taken, which is we should increase the number of weeks that we pay; we should increase the amount of money we pay; we should decrease the entry period; and we should pay them from day one without any clawbacks or any other fairness-balancing procedure.
Mr. Benson: I want to thank you, because I addressed the significance and importance of the government putting in the $2.9 billion. I addressed it and thanked the government for doing it. I would like to see more. There is no insult about that. I am supportive.
As to the other point, we have the Consolidated Revenue Fund and it must stay in existence. We will not get into why. Over a period of a dozen years, Canadian workers — not the fact that employers contribute; it is all wages — contributed $57 billion to the welfare of the country. The $57 billion, along with the $35 billion taken from the federal pension plan, is the money that has paid off the debt, which all Canadians enjoyed; lower interest rates, benefits and everything.
We must go back. Today, the maximum weekly benefit is 25 per cent less than in 1996. I can remember talking about whether we should go from 60 per cent to 70 per cent coverage. The government is giving money back. When I talked about the Auditor General's report, it was because Prime Minister Mulroney was hiding money on the books and you had to take the Consolidated Revenue Fund money as a deficit. Quite rightly he argued it was a loan; you have to pay it back with interest. Workers have done that. They got $57 billion.
If you look at it, senators, there is blue sky and one has to have a beginning ``ask'' regarding what we would like to see. Canadian workers have paid and paid so that every Canadian has benefitted.
Senator Di Nino: We do not disagree. It is their money.
Mr. Benson: Now we are turning around and simply stating, if you think 40 per cent is okay, say that. Should it be 46 per cent or 48 per cent? Should we address the issue of why women are not getting the same coverage? If that is an issue, should we look at and ask, ``Should we pay it?''
I agree. There is a limit. Even with the $57 billion — fiction or real; it is in the Consolidated Revenue Fund — I know the money has been put elsewhere, but it is important the government is putting money back in. If we do not ask those questions, what kind of society do we have? They are valuable questions to ask.
Sitting around these tables as I did, we were having discussing about how to increase coverage and promote various aspects of justice and various things we would like to see in our society.
The 1995 reforms were based on the tough times — the recession — we went through in 1991, 1992 and 1993. At the same time, it was supposed to be kept at $10 billion to $15 billion and ended up at $57 billion.
That is the issue. Should we just say, ``That is the way it is'' or should we say, ``There is some injustice; there are some things we question and are worried about — are they worth looking at?''
From the teamsters' position, we are putting it forward as a statement: Here are some things we think are wrong and here are some possibilities for changes. We do not have the expectation that we will receive all we are asking for, but it is worth the discussion.
Senator Di Nino: We are talking about restricting this to the discussion on Bill C-10. If you look through the record, you will find comments I have made that are supportive of your position in the past 10 years, from the cuts made by the previous governments, and that is fine. That is a dialogue and a discussion that we should have continuously. As it relates to this document, there has to be recognition that fairness and a balance is what is being attempted. I think that is the only point.
Mr. Benson: In my comments, I congratulated the government for doing that.
Mr. Weir: I emphasize that I think the Government of Canada did the right thing by freezing Employment Insurance premiums at current levels and indicating that it would financially back-stop that. One point I noted is that it seems to contradict the essence of the regime proposed in Budget 2008, but, ultimately, the government is doing the right thing by putting more money into the system.
In terms of the question of fairness, which is a crucially important one, I agree that Employment Insurance is not means tested or targeted in the same way as provincial social assistance programs, for example. However, I do not think that makes it less fair. It is serving a different purpose. The goal of Employment Insurance is not necessarily to redistribute income to the absolute poorest members of society. Rather, it is to stabilize earnings for a broad range of workers and we need both types of public policies in this country. The one is not a substitute for the other.
On the question of costs, which of course is also very important, the perspective from which I would approach is that the Government of Canada is running large deficits with a view to trying to stimulate the Canadian economy. A particularly effective way of stimulating the economy is to put funds in the hands of the people who have been directly harmed by the recession and are certain to go into the economy and spend those dollars if they receive them.
Therefore, I would argue that, given that money is being spent, Employment Insurance should perhaps be a slightly higher priority for the allocation of that money.
Senator Di Nino: We do not disagree with the principle. I will say that when you are leading and have to make decisions, you make the best decisions you can always for the benefit of all the people. There are many other components of this.
Let me ask about the current difficulty that people are having — the famous 28 days, which has not been something that any government has been able to achieve, probably throughout history. This government has admitted it and is attempting to deal with it. You cannot succeed in the first week. Hopefully, they will succeed in the twelfth week or ninth week, or some week. I believe there was a $60-million number that was put into the kitty to hire more people, to expand the services, et cetera.
Is that something that you want to comment on or agree with?
Mr. Benson: We made a comment about the stand-alone nature of the EI Account. The government is making positive steps. Certainly, putting more money in to help alleviate it is wise. I said earlier that it is not this government's problem; from my experience, it is one that has been occurring since the 1970s, so it is nothing new.
Believe it or not, sometimes those little steps are what really count. We can talk about the interest, all the levels and talk intellectually about 360 hours or 700 hours. However, what really counts to people is that, if I am laid off this Friday, I have a cheque three or four weeks down the road. Therefore, yes, it is a positive step.
Senator Di Nino: A little humour if I may, Mr. Chair. I am from an Italian background. It is shocking, I know. Grey hair is a blessing. There is an Italian saying which I will paraphrase: Old age is awful, but the alternative is worse. So thank God for grey hair.
Mr. Benson: I am Scottish and we have the same expression.
Senator Gerstein: The economic plan contains investments in infrastructure, building and transportation. Would I be correct in assuming this will have a great impact on your unions and, if so, — I know it is difficult to quantify without knowing the specific projects — could you give us some idea as to how it might affect employment in your respective unions?
Mr. Benson: Thank you. That is a fabulous question, senator.
I remember during the discussions around the budget, there was a great to-do about where projects were. I will pick on Mr. Abbott's riding and Revelstoke. There were complaints about it. All that part of the Pacific Gateway is critical to our membership — air, rail and ports. We supported that project and did not know why there was such a kerfuffle. To be blunt, some of the border crossing issues they were talking about, such as the Blue Water Bridge and getting the Windsor Bridge and tunnel going — and whatever else we can get — was good news.
There are two types of infrastructure coming out of that industry. People talk about ``shovel ready'' and pot holes and they are great for creating jobs today and they are needed. However, some of the other infrastructure projects they are talking about through the Revelstoke pass and the Pacific Gateway are needed investments that will mean jobs today, tomorrow and in the future. People do not understand and would be shocked to find out that 70 per cent to 80 per cent of trade of Canada-America crosses the Ambassador Bridge, which is Teamster Canada, by the way.
That is the point: People do not understand that quite often these projects can pay dividends along the line. One of the big issues for the auto sector, of course, is how do we get the parts around? Every delay at the border is the potential of losing a plant in Ontario. We fight with the provincial government over some of the things they are trying to do because they do not understand the implications they could have on our manufacturing sector. We are addressing it from transportation; we are not in that sector at all. Some of these things — the long-run projects — are exciting and will pay dividends in the future.
Mr. Weir: Like Mr. Benson, I applaud infrastructure spending. Perhaps the only question I raise is whether enough is being undertaken. I echo Mr. Benson that these infrastructure projects can make a major contribution to productivity in the long term.
In the short-term, most of the employment they create is in the construction sector, which is important because there have been major job losses in that area. You asked about my union specifically. The United Steelworkers do not represent construction workers so that would not have a direct effect on our members. We do represent a great many workers in manufacturing. I suppose there is a real question as to whether these infrastructure projects will create demand for products manufactured in Canada. Part of that question hinges on whether the Government of Canada is prepared to use procurement policy to ensure there is a link between public dollars being invested in infrastructure and the purchase of goods produced here in Canada.
Certainly, we and the Canadian Auto Workers and other components of the Canadian labour movement have proposed a buy-Canadian policy to achieve that outcome. That infrastructure definitely will create jobs in the construction sector and it could create jobs in the manufacturing sector if the government is prepared to institute appropriate procurement policies.
Mr. Benson: People miss the link. For example, from the Teamsters the link with the Steelworkers is we look after the docks that offload the ingots and take them over to the plant. It goes from there to the rolling plant and crosses the border 16 times and something happens. We also represent construction. I will make that declaration; of course it will help us. It is that link.
When governments of all levels make decisions on expenditures, quite often they are done for political reasons. Those links are important. It is critical for the federal, provincial and municipal governments to work together to get some of these projects through. We know the NIMBY factor that exists, but sometimes for the good of the economy we have to overlook that and get stuff done. It is worthwhile and some of the projects are just excellent.
Senator Neufeld: Many jobs will be created, including long-term jobs. In British Columbia, some of the money that the province has spent is for long-term projects.
I do not have a problem with maintaining and trying to get the material from Canada but we have to be careful about protectionism. I remember not long ago when the U.S. administration said it was going to use only American steel. At that time, I heard all kinds of people from Canadian unions saying that the U.S. could not do that. The Canadian unions had mills that they wanted to keep operating.
I believe we should endeavour to do everything we can to create that employment in Canada and the ancillary services we need to make those things happen, but we have to be careful not to fall into a protectionist area that could harm us in the end.
Senator Eggleton: Gentlemen, I would like to explore some ideas as to what to do about the people who have fallen into the cracks.
Of the people who qualify for Employment Insurance, I understand over 80 per cent of them get it. That sounds good, although I think there are some problems on what they get. First, there is the two-week waiting period, not to mention the processing period of longer than 28 days in many cases. The government has — congratulations to them — added five weeks at the end. That is good but we are still only talking about a maximum of 55 per cent of their earnings which helps but it is still leaves them in a challenging situation. It also depends in which part of the country you are unemployed as to your qualification period. A lot fewer people in Toronto qualify than people in some other parts of the country. If you are unemployed, you are unemployed and I think these inequities should be removed.
Over 80 per cent of those who qualify for EI get it but of the unemployed only talking about 40 per cent will actually receive EI. That means many unemployed people are not going to get it.
What do we do about that? I heard you talk a little bit about, well, first hour, or getting rid of the two weeks, which might help. However, there are still many people that do not get it. There are women. You, Mr. Benson, talked a couple of times about women or part-time employees, and there are self-employed people. That subject needs examination. There is a large body of people — 60 per cent — who do not get it now.
What will happen? What can we do about them? We could say they will fall back to the social assistance programs in the provinces, but certainly in Ontario you have to be destitute and give up all your assets. That does not really relate to people who are looking to retrain or do whatever they can to get another job.
We have a growing body of people out there who are not going to be able to get Employment Insurance under the rules as they are today. What do we do about them? They are falling into the cracks. What are your ideas to help them?
Mr. Weir: You put your finger on one idea, which is the notion that provincial social assistance programs require people to dispose of their assets before they can qualify. In a serious recession, provincial governments could reasonably say, ``We are going to make social assistance available to people who do have some assets.'' I do not think that social assistance is a very good substitute for Employment Insurance, but that would make it available to a broader range of people on more reasonable terms.
The reforms to Employment Insurance that Mr. Benson and I have proposed would increase that fraction of unemployed workers who qualify. It would not increase it to 100 per cent, admittedly, but I think we should aim for a target that is somewhat higher than the 40 per cent that we have today. It is a combination of improving the accessibility of Employment Insurance, and then enhancing other programs for workers who still could not qualify for enhanced Employment Insurance.
Mr. Benson: I discussed before that if we do not ask the questions then we are satisfied with the solutions. However, if we can all agree there are some inequities, problems and issues, it is certainly worthy of examining and asking ourselves whether that is what we want, or do we want something else.
I am one of the few people who have had the misfortune of actually reading the three major studies going back to 1948. You can see the difference in discussion but no one was talking about having 40 per cent of people covered and the limitations that we have put on. I do agree. I was participating in a rolling draft during the 1995 reforms. All of labour recognized we were in tough times. Things had to bend a bit and change. We were hopeful there were more improvements as money rolled in. It did not happen. No slam to your government or this government. That is a fact of life. Those things happen.
Perhaps it is a bigger question than this committee is able to deal with today, but it is one of the important questions to ask, because it deals with the fundamental issues. If women are not covered as much, is it because they are working in a particular kind of job? Do women particularly need more training to obtain better jobs? What do we have to do to give them a hand-up instead of a handout?
There are many things we have to ask. We talked about things like reducing waiting periods. We talked about changing the hours and restructuring how you pay people that would get more people in. It depends on how you set your goal and how you set the debate to find the solutions.
Trust me; there are many people working on those issues that will show up with pages and pages of hopes and expectations.
Mr. Bédard: There are no magic solutions. I would look at the individual groups that are having difficulties and see how you can help them. I agree that there is a problem with part-time workers, most of whom are women. I think the hour-based system introduced in 1996 did not favour this particular group.
On self-employed workers, I am not aware of any country in the world that insures self-employed workers. I believe South Korea is now covering self-employed business owners, but I do not know how they are doing it.
I can see that when a business closes down, there is a discrete event; you can figure that the owner is indeed losing his or her livelihood. However, for someone who is self-employed and going from contract to contract, how would you determine when that person is out of work, and ensure that it would not be so discretionary that it would be unmanageable?
You have to look at the different situations and see what you can do about them. As for the 55 per cent benefit rate, no one gets rich on 55 per cent with a ceiling as it is now, so there might be some room for improvement there. There are different things that one could look at.
I totally disagree with the clawback from an insurance perspective. It is quite arbitrary, and it is especially arbitrary in its application because it is applied on the calendar year basis. Depending on how one's pattern of earnings develops, two people having the same earning stream but just having the timing different over the different months of the year would be affected very differently. Again, since someone paid their premiums, why should they have to pay something back? I just do not get that.
Senator Eggleton: Chair, maybe this committee could study EI and what it does, and what it does not do, and how it could be improved. Maybe we could help the government along.
The Chair: In the second round, Senator Neufeld posed a very important point with respect to protectionist measures. However, before we go to the second round, I would like to have two or three points of clarification.
First, are you familiar with the pilot project that has been in place, which provided for up to 50 weeks — the extra five weeks — for regions with greater than 10 per cent unemployment? Were you familiar with that project?
Mr. Weir: I am familiar with the fact that there was such a pilot project. I would not purport to be an expert on its results.
The Chair: I want to bring to your attention that it took this legislation to cancel that particular project.
Did all regions with over 10 per cent unemployment have the extra five weeks in this pilot project? That is what we are cancelling.
Mr. Weir: My understanding is that the addition of the five weeks of benefits in all regions would offset the removal of the pilot project in high unemployment regions.
We used to have up to 50 weeks of benefits, in certain regions, for the pilot project. Now we have up to 50 weeks of benefits in those same high unemployment regions through the additional five weeks.
The Chair: This act cancelled the pilot project that provided for an extra five weeks for all regions with over 10 per cent unemployment. Then, if you look at the schedules, you will see that this act gives them back again, but only for a period of 15 months, to September 2010.
You were talking to Senator Mitchell about schedules. The two schedules at the back have very strange wording. At page 224, there is a schedule 1 that is introduced in section 224(1); and then section 224(2) introduces another schedule. If you flip over and see coming into force, you will see that one of these schedules is for a period of 15 months and the other schedule comes into effect after that, in September 2010. The old schedule is being brought back. You are quite right, Mr. Bédard, if you look at the Employment Insurance Act, you will see that.
For a period of 15 months, a new schedule is being brought in and then it is dropping back. The new schedule that is being brought in for that period of 15 months affects the lower unemployment areas. The unemployment areas of 10 per cent or more, which more and more regions are moving into, are not impacted because it just changes it from a pilot project to a project that runs for 15 months. Do you agree?
Mr. Bédard: Yes.
The Chair: I looked and looked at this, and I kept saying this is not quite as profound as it looks. You have just confirmed my observations.
Mr. Bédard, would you look at that famous section 73.1 on page 224 for me one more time and help me — what is the Employment Insurance Account that will be reimbursed?
Mr. Bédard: The Employment Insurance Account exists and will continue to exist. It is the account that is charged with the cost of EI benefits and is credited with premium revenues. All of this money transits, of course, through the Consolidated Revenue Fund.
The Chair: Is it a notional account within the Consolidated Revenue Fund?
Mr. Bédard: Is it a notional account? It is in the account where EI transactions are posted. There is no money in the bank, of course. What this has represented is an IOU by the government. The government has decided to tear up the IOU, which is another problem.
The Chair: Even though there is no money in the account, this is the account where you could determine that there was $57 million surplus build-up; is that correct.
Mr. Bédard: Yes.
Mr. Benson: As to the notional aspect, one has to look at what the consolidated revenue account is. It can only be used for the purposes set out under the act, which is Employment Insurance — that is gone. I will point out when that account was $6.8 billion, which is the number that comes to my mind — it might be $8 billion — that was not notional at all. Employment Insurance and workers had to pay that back with interest.
It is kind of funny that when workers owed the money, it was not notional. We had no discussion about the notionality of the money; but when it was a surplus, we are talking about a notional account.
Again, it is a new government and an old government —we will share the blame around a bit. At least the Conservatives, as I say, have been honest about it, but that is the point. Quite bluntly, it is funny that when we owed the money, it was not notional and when it is the other way around, we have these intellectual discussions about notionality. It does not help the discussion.
The Chair: Can you tell me how you would put money into this account? How does that happen if it does not have money in it? Do you just pretend? You put a figure here, do you?
Mr. Bédard: The government is just creating a notional entry into a notional account, if you will.
The Chair: Okay. We have already talked about the fact that this section does not say how much; it just says they estimate $2.9 billion. You said if you read the section, it can be $1.15 billion — and the wording is ``out of the benefit enhancement measures.'' That is the wording; is that correct?
Mr. Bédard: Yes, indeed.
The Chair: Would not a fixed rate be a benefit enhancement measure?
Mr. Bédard: You mean the premium rate itself?
The Chair: Yes.
Mr. Bédard: I do not think so. It is not a benefit enhancement measure. It is the revenue side. It is something else entirely. Benefits under the Employment Insurance Act are benefits paid to individuals.
The Chair: Okay.
Mr. Bédard: Unless that interpretation can be stretched somehow.
The Chair: I am not asking you to stretch it. I am just wondering why the $4.5 billion is not accounted for here as being something that the government is giving as something extra.
Mr. Bédard: Because it has to be paid back, basically. Apart from this particular entry under 73.1, the rest, under current legislation, will have to be made up through EI premiums eventually. That might occur in 2015 or 2020. For now, the government indicates its intention to collect that money.
The Chair: Looking at the increased unemployment, can you make any comment with respect to the $4.5-billion estimate that the government made prior to preparing this document?
Mr. Bédard: I have already indicated that the sensitivity of EI program costs to the unemployment rate is about $1.6 billion to each percentage point in the unemployment rate, so $4.5 billion corresponds to roughly 3 percentage points, so 1.5 points per year. Those were the estimates made at that time. Are they still valid? Will they remain valid? I would not say it is anybody's guess, but time will tell if the $4.5 billion turns out to be the correct amount.
Mr. Benson: When you think of Teamsters, you think of trucks, but Teamsters members in Canada and the United States do many things including rail and cargo. In fact, our members have the largest market share. We could be parochial and say it does not matter whether stuff comes from China because every boatload that shows up in Vancouver is another Teamster job, being blunt about it. At the same time, we have to have a broader perspective.
Protectionism does not help, but at the same time, fair trade does help. It does not help our industries when we have supposed free trade. Think about the debacle with the forest industry, for example, and that was with a good friend, the United States. We go overseas and we know how difficult it is to set up shop in Japan, for example, and the non- trade barriers that they put in place. Fair trade is good. Free trade, if it is not truly free, is not that good. At the end of the day, if our factories and our people are not working, we will not have anything to ship internally. We might be able to take it to a port and pick it up. It is important to our membership that our manufacturing base, our forestry base, and our dairy farmers be successful, but fairly.
Mr. Weir: To answer the question with respect to the steel industry and the debate about Buy America policies, steel trade is integrated across the Canada-U.S. border. The production process really happens between the two countries, but the trade flows are quite balanced. Canada buys about as much steel from the United States as it sells to the United States, so neither country is in a position to gain anything by interfering with that trade in steel.
When the international president of our union appeared before the steel caucus at the American House of Representatives on Capitol Hill, he spoke in favour of the Buy America provisions but also made the case that Canada should be explicitly exempted from those provisions. I would make the same argument with respect to buy Canadian policies. One of the advantages of the Government of Canada instituting those policies is that it would be able to say to the Americans, ``We will give you an exemption from these procurement requirements if you exempt Canadian producers from Buy America policies.''
The trade problem that I think needs to be addressed is the huge deficit that we have with offshore steel. Canada buys anywhere from $3 to $9 of steel from offshore for every $1 we are able to export overseas. It does not make any sense to put public dollars into stimulating the economy here if that stimulus just leaks out of the economy through a trade deficit. That not only makes Canadian stimulus spending less effective, it also reduces the incentive for countries overseas to undertake stimulus packages. It is important to address the international trade dimensions of stimulus policies.
Senator Neufeld: I appreciate that, and I think I said that we have to be careful about trying to grow something in Canada. I also caution a bit about trade protectionism, and I think that is fair and I think you folks will agree with me that we have to be careful. It will never be perfect where everyone is happy, but we have to come to some balance. I do not remember all of the newspaper reports, but I do remember that the United Steelworkers in the U.S., and I do not know who the person is, pushed pretty heavily for Buy America. I guess I can understand that if you are in the U.S., but I do not think that does anything for Canada, and that is why I say we have to be careful about it. Thank goodness everybody came to their senses about it at the end of the day, to a degree, and I think that bodes well for good negotiations on both sides of the border, which is what we need to maintain. That is what I was trying to point out.
Senator De Bané: Mr. Bédard, can you give us an idea of the unemployment rate in certain sectors as a result of the current situation?
I was looking at the U.S. figures. In the manufacturing sector, the unemployment rate is very high, but among professionals, it is barely 3 per cent. Can you tell us the unemployment rate in Canada's manufacturing sector, specifically?
Mr. Bédard: Unfortunately, I do not have those figures handy, but they are certainly available through Statistics Canada.
Senator De Bané: We are seeing more and more analyses indicating that the current crisis may have serious consequences not only on employment but also on the structure of economic activity.
The Detroit area, the 11th largest urban community in the U.S. today, has been devastated in a way that we could not have imagined. I worry that we may be entering a phase where the programs we are studying will not be adequate to deal with the severity and duration of the crisis before us. According to a number of studies, the crisis in the 1930s is not really the benchmark we should be using, but the crisis that happened around 1875, which lasted 25 years.
If indeed the centre of gravity moves from New York to the major financial centres in Asia, that could mean a change whose impact we have barely begun to measure. Do you have any thoughts on that?
Mr. Bédard: I do not have any particular insight into the situation. I do not deny it. It is entirely possible that we are living through a unique time in history, but as to quantifying what that means, I must admit that I cannot.
Senator De Bané: I will refer to just one paragraph.
Perhaps no major city in the U.S. today looks more beleaguered than Detroit, where in October the average home price was $18,000, and some 45,000 properties were in some form of foreclosure. A recent listing of tax foreclosures in Wayne County, which encompasses Detroit, ran to 137 pages in the Detroit Free Press. The city's public school system, facing a budget deficit of $408 million, was taken over by the state in December. Dozens of schools have been closed since 2005 because of the declining enrolment. Just 10 per cent of Detroit's adult residents are college graduates, and in December, the city jobless rate was 21 per cent.
This seems to be a very serious crisis. To what extent do those measures take stock of the severity of what might unfortunately happen?
Senator Di Nino: My office went through some United Steelworkers websites. On the same day in two districts, the big headline was ``Making Buy America work for Canada.'' That sounds to me like protectionism. I do not want to get into a debate on this other than to say that if we want to go back to the dirty thirties, let us become involved in protectionism. It is the worst single thing that the world can do today. Whether you mean it or not, it sends a message, and I think the Steelworkers should be cognizant of the pitfalls. This kind of message could lead people to believe that they should not buy anything made in Canada, Mexico, China or anywhere else. That would be very bad.
Mr. Weir: I have seen those headlines. May I respond?
Senator Di Nino: Of course. I just do not want to get into a debate.
Mr. Weir: That is understandable.
As a practical matter, there is the question of whether Canada's interests are best served by lecturing the United States about the virtues of global free trade or by trying to ensure that Canada is exempted from particular ``Buy America'' policies.
Senator Di Nino: That scares me even more.
Mr. Weir: Our union has taken the latter route.
With regard to the analogy to the Great Depression, the big problem with the Smoot-Hawley Tariff Act that increased tariffs in the United States was that it did not provide any fiscal stimulus. It was essentially the United States using tariffs to grab a larger slice of a shrinking economic pie.
Today's Buy America provisions are part of a major stimulus package. They are trying to ensure that the stimulus package actually stimulates the American economy. I will conclude by saying that the economic activity created by President Obama's stimulus bill will increase global trade far more than the Buy America provisions of that bill might reduce it.
Those provisions need to be understood as exactly that, provisions of a stimulus bill that will help the United States and the rest of the world.
Senator Di Nino: I do not agree with you. I will leave it at that.
The Chair: Thank you. We will leave it like that.
Gentlemen, we have had a lot of discussion this evening and our time is now up. Our discussion has been quite esoteric, but when it comes right down to it, our responsibility is to review the terms of Bill C-10 to understand what the government is attempting to achieve and to understand how much that will cost the public purse and whether there are any unexpected consequences from some of these provisions.
If you have any other thoughts later, we would be pleased to hear from you on any of the specific items in the budget implementation bill, Bill C-10. There will be others, because some of the provisions in the budget itself have not appeared in this Budget Implementation Act, 2009. We anticipate that they will appear in other budget implementation acts later.
As Mr. Bédard indicated with regard to section 73.1 and the enhancement measures, there is only one now but, presumably, others that have been promised in the budget will be forthcoming in other budget implementation acts.
Which one did you say was valued at $1.15 billion?
Mr. Bédard: The five-week extension was valued at that in the budget documents.
The Chair: Since we have you here and since you used to work in this area for the federal government, is there a reason a section would be deemed to come into force on the second Sunday before the day on which the act receives Royal Assent? Do they have to use those terms due to how the Employment Insurance Act is administered?
Mr. Bédard: It may go back to the waiting period. It backdates by two weeks.
The Chair: Are they trying to pick up the two-week waiting period?
Mr. Bédard: Yes, for those who established their claim two weeks before the week of Royal Assent.
The Chair: Does it runs from Sunday to Sunday?
Mr. Bédard: Yes.
Senator Mitchell: It could be eight days. It could be on a Monday, and you just have Sunday to Sunday, so it does not really address two weeks.
The Chair: These are very strange provisions. It would be nice to understand them.
Mr. Bédard: It could have been two weeks before, three weeks before or four weeks before. The government had to set some date in the legislation.
The Chair: It would normally be when it receives Royal Assent.
Mr. Bédard: Is it not a bit more generous if they backdate it somewhat?
The Chair: We regularly see it backdated to the day of the budget, because that is the day people start planning.
Mr. Benson: If they had done that, people who had just started in the system would not qualify for the extra benefits. By backdating it two weeks, it covers the two-week waiting period so that everyone who was in the system would be covered. That is how I understand the legislation.
The Chair: I appreciate your help. I did not know how to take it.
Honourable senators, our time is up.
We thank our witnesses very much.
(The committee adjourned.)