Improving Social Security in
Canada : A Discussion Paper
Produced by:
Human Resources Development
Canada
October 1994
NOTE:
This document was retrieved from the Human Resources Development Canada SOCIAL
SECURITY REFORM (SSR) website and copied
here for information
purposes only. The SSR site is no longer active.
[ Go to Canadian Social Research Links Home Page ]
The world of work
The world of learning
The world of security
The need for a new model
The fiscal context
The scope of reform
Guiding principles for reform
The federal-provincial partnership
Working:
Jobs in a new economy
IntroductionLearning: Making lifelong learning a way of life
A. Employment development services
The need for reform
Direction for reform
Building employment development services that really work
Tools
Management and delivery
Improved access to employment development servicesB. From unemployment to employment insurance
The need for reform
Approaches to reform
Insurance coverage for nonstandard workC. Financing UI and employment development services
Options for adjusting how UI premiums are calculated
Financing employment development servicesD. Meeting the needs of working parents
Child care
Flexible work arrangements
IntroductionSecurity: Building opportunity for people in need
Changing times: the case for lifelong learning
History of the federal government role
How should the federal role evolve?
Issue: continuing access to learning opportunities
Following the present course
Financing lifelong learning: a possible new approach
Keeping access fair: income contingent repayment loans
Supporting the provinces on lifelong learning
The school-to-work transition
Making learning more portable
Learning and new technology
International educational opportunities
IntroductionConclusion
What the federal government does now
The Canada Assistance Plan (CAP)
The Child Tax Benefit
The need for CAP reform
The goals for reform
Approaches to reform
Possible first steps
Longer-term approaches to reform
What can be accomplished by reformKey issues for discussion
How to achieve these reforms
Questions regarding Chapter 2: Working: Jobs in a new economyTOP OF THIS PAGE
Questions regarding Chapter 3: Learning: Making lifelong learning a way of life
Questions regarding Chapter 4: Security: Building opportunity for people in need
"A strong economy is the essence of a strong society. My government will focus
on a jobs and growth agenda. We will work with all our partners — provincial governments,
business, labour, voluntary groups and individual Canadians."
Prime Minister
Jean Chrétien
Québec City, September 18, 1994
In Québec
City on September 18, the Prime Minister outlined four key components of the government’s
jobs and growth agenda:
- reforming social security;
- ensuring a healthy
fiscal climate;
- reviewing government programs and priorities; and
-
strengthening the performance of the Canadian economy in investment, innovation
and trade.
Improving Social Security in Canada is a paper designed to give Canadians an opportunity to participate in the shaping of a crucial element of that agenda — the rebuilding of our social security system.
Clearly, our economic and social priorities are interdependent. We cannot create jobs and growth without modernizing our social, labour market and learning programs. Nor can we have a viable social system without economic health and stability. The challenge becomes one of linking efforts, of combining resources to help Canadians find and keep jobs, while at the same time protecting those who are vulnerable and disadvantaged.
My hope is that Canadians will respond to this invitation in an open, thoughtful and constructive way. The status quo is not good enough. Defending special interests will not work. We must tap into the good will that exists throughout the country to forge agreement on direction and develop the will to change.
My commitment is to listen to and work with all Canadians, different governments, groups and organizations so that we can develop in partnership a social framework that makes sense, is effective and is founded on the basic Canadian values of compassion and justice.
I invite you to join in the discussion and debate.
Lloyd Axworthy
Minister of Human Resources Development
Introduction
Canada’s social security system is a hallmark of our nation. Through it, we have defined ourselves as a country that aspires to give our children the best possible start in life, to enable all Canadians to meet their basic needs, and their families to live with dignity. It is a system dedicated to supporting the most vulnerable in our society, while creating opportunity for all Canadians to improve their lives. Social security embodies the values of justice, tolerance and compassion that mark our country.
This system is the product of a wide network of federal and provincial policies and programs. In some areas, such as unemployment insurance and old age security, the federal lead is clear. In others, such as education, social assistance and social services, the jurisdiction is provincial, often with federal financial support. In still other areas such as labour market training, both levels of government have been active. In many instances, the same individual moves back and forth through the range of services offered by different governments.
Overall, our social security system has been a success, and a source of pride in being Canadian. Together, Canadians have built and sustained a system that is envied in much of the world. It has helped make life better for generations of our citizens. Now it is our task to make sure that it continues to help our children as they grow, to protect those in need, and to offer hope and opportunity for the future.
But the world has changed faster than our programs. In the last decade especially, the sheer relentless force of technological, economic and social change has reshaped our lives and our livelihoods. Government policies and approaches have been too slow in responding. Social security reform is a matter of making choices together about how best to build a social security system for the 21st century.
The context of change
Unemployment Insurance offers a prime example of how programs have lagged behind the pace of economic change. It was designed to help people who lost work by replacing their earnings while they looked for another, similar job. Now, more and more people are finding that they haven’t just lost a job, they’ve lost an occupation, career or industry, victims all to economic change. Many won’t find a similar job again. Not only do they lose income; they are denied the dignity of work. A system that pays people to look for a job similar to the one they lost sometimes simply helps them to find what they can — part-time, low-paying, unskilled jobs. Yet don’t we as a society have a stake in doing more, in helping people who suddenly find their job skills inadequate and out-of-date to retool themselves for the good jobs in today’s economy?
What about Canadians with disabilities? Our systems often wrongly pigeon-hole this group of citizens as unemployable, when technology and economic change have opened up for them new possibilities for participating in the workplace. Trapping people in dependency is both costly and cruel. Our institutions, services and programs must serve people better.
What about children, the future of our country? We must pay attention to a 1993 report of the United Nations Committee on Economic, Social and Cultural Rights which concluded that Canada has simply not done enough to overcome child poverty. Clearly there is a message to us in that stark assessment.
One of the biggest challenges we face today is the affordability of our programs. During the 1950s and 1960s, an industrializing, resources-rich Canada became accustomed to year after year of fast-paced growth — much as Japan experienced an extended economic boom during the 1970s and 1980s. Government revenues expanded accordingly. There was no reason to imagine the economic miracle would falter and that economic growth would cool.
Yet starting in the mid-1970s, that’s exactly what happened. As government revenue growth slackened accordingly, we made up the difference by borrowing. For two decades, as a society we consumed increasingly more than we produced — on credit. The result is one of the highest levels of government debt, proportionately, in the world. Combined, federal and provincial government debt is equivalent to over 98 per cent of the entire annual value of the nation’s economy. The interest costs on that debt are choking governments’ ability to deliver services that the public needs and depends on. Consider: in 1980-81, interest payments by the federal and provincial governments absorbed 15 cents of every dollar of revenues; today it has grown by two-thirds to about 26 cents. The larger the debt gets, the bigger the interest costs and the smaller the budget for services. If the next generation of Canadians is to obtain reasonable government services for the tax dollar, we must change our approach.
The status quo is not an option. Changes in our economy, in our families, in our workplaces, in our communities, and in the financial standing of our country are too dramatic to allow us to tinker at the edges of social policy and programming. The fact is that Canada’s social security system needs to be fixed. It is an important task, something all Canadians will be asked over the coming months to consider carefully and participate in. This generation must use its ingenuity to rebuild our social programs for a new era, just as an earlier generation after the Second World War forged solutions to meet the social needs of the post-war world.
What sort of change?
Undeniably, the “social safety net” we built over the past several decades helped make Canada one of the world’s most successful countries, rich in prosperity and opportunity. Programs such as unemployment insurance, social assistance and social services, child benefits, universal pensions and a national network of widely accessible colleges and universities have made our nation a beacon of civilized values. Those values of compassion, ensuring the basic necessities of food and shelter for all, and sharing opportunity are at the heart of the social security system we’ve inherited. As we undertake the job of redesigning and modernizing it, we must preserve those values.
Yet we must do something more, as well. The next generation of social programs must not just share the wealth, and protect those who are disadvantaged among us, they must actively create opportunity for Canadians and, in so doing, help drive economic growth. By helping to equip Canadians with the skills to excel in today’s — and tomorrow’s — Information Age, our social security system can play a vital role in turning Canada’s shrinking middle class into an expanding one again.
In the past 15 years, mounting worldwide competition and technological change have hurt the big manufacturing plants and resources-based industries that for decades paid the high wages that allowed many Canadians to enjoy prosperity. In recent years, plant closures, layoffs and wage freezes have eroded our standard of living, and created a new and insidious insecurity for many people. As hundreds of thousands of these individuals have prematurely lost their livelihoods, swapping unionized, secure factory jobs for the unemployment rolls or part-time, low-paying jobs in the services industry, whole towns have been hurt and, nationwide, a key pillar of economic growth — consumer purchasing power — has begun to be weakened. As too many older workers and young families have been squeezed out of the middle class, our society increasingly has begun to be polarized between well-educated, highly-skilled Canadians in demand by employers — today’s economic elite — and less educated people without specialized, up-to-date job skills, who have been losing ground.
Thus, the key to dealing with social insecurity can be summed up in a single phrase: helping people get and keep jobs. This means many things, from action to improve the business climate for entrepreneurs, to getting the government’s finances in order. A centrepiece of improving employment prospects is helping people to gain and sharpen the up-to-date skills needed to succeed in today’s job market. Increasingly our competitors are not the enterprises and workers down the street or in the next province, or even across the border, but those across the ocean, for example, in the Pacific Rim or Europe. In our world, computer-literate automobile diagnosticians are replacing car mechanics. Skilled technicians are watching over the robotic machinery performing the work production-line employees and clerical workers used to do. Jobs today need more education and training than ever before. If we seriously want to cut unemployment and recharge our economy, we must focus our resources on improving the ability of young people to enter the labour market, and of adult workers to adjust to workplace change.
To make the most of our future, we need more jobs. And that means pulling in more investment from inside Canada and abroad to create jobs. We need to be an investment magnet. Key to this is to overcome Canada’s “skills deficit” — to offer the best-educated, best-trained workforce in the world, and that must be our common goal in the coming years.
Objectives for reform
Today’s social security system doesn’t deliver enough of what Canadians need, and spends too much money in the wrong places. Building on important social reforms already launched by several provincial governments, this government is eager to play its role, searching with its provincial partners, the private sector and individual Canadians for the best ways to achieve three main objectives:
jobs — helping Canadians get and keep work by ensuring that we have the knowledge and skills to compete with the best labour forces in the world.
support for those most vulnerable — providing income support for those in need, while fostering independence, self-confidence and initiative, and starting to tackle child poverty.
affordability — making sure the social security system is within our means and more efficiently managed, with a real commitment to end waste and abuse.
This is an ambitious agenda. Just as putting today’s social safety net in place took decades to complete, a durable, dynamic “new generation” social security system will have to be constructed step by step. Reform cannot be accomplished overnight. We will have to navigate uncharted waters, testing new ideas and learning by doing. New solutions, once defined, will take several years to implement properly, and will likely require phasing in. The availability of funds will also govern the timing of the reform agenda.
The indispensable starting point is for Canadians to decide on a plan and to establish a framework that will give direction to social security reform as we prepare for the 21st century. This will not be easy, as there are many competing, complex forces at work. First, we must hold a vigorous debate around the nation. To provoke ideas and interest, this Discussion Paper introduces a number of ideas for addressing options for reform in three broad areas: working, learning and security.
Discussion of social security for seniors and the health care system, two important components of Canada’s social security system, are outside the scope of this Discussion Paper. This is because they are not linked to our central theme: how to improve opportunity and access to jobs for Canadians.
Partners in reform
This Discussion Paper presents the federal government’s ideas for improving and modernizing the federal dimension of Canada’s social security system. The fact is that the problems faced by Canadians in seeking opportunity and security in a rapidly-changing world seldom conform neatly to the jurisdictional responsibility of either level of government. Crucial elements of the system, notably education and social assistance, are the mandate of provincial and territorial governments. The federal government has no intention of intruding where it should not. But both levels of government have a stake in social security reform. Both levels of government need to focus on what people need, and each must bring to the table what it can. The federal government is committed to working with the provinces and territories so that reform of federal and provincial programs is mutually reinforcing. This is what federalism is all about.
Ultimately, of course, neither the federal nor the provincial governments own the issues laid out in this Paper. They are the domain of employers, workers, communities, voluntary groups, families and the individual. While governments can and must provide leadership, they must answer to the people. All Canadians must share in finding the solutions we need to the problems of working, learning and security in the 1990s and beyond. This is an essential task to complete, if we are to preserve a social security system worthy of Canadians and equal to the times.
Social security programs in Canada
The foundations of Canada’s social security system were laid after the Great Depression and the Second World War. From the 1940s to the 1970s, successive federal and provincial governments tackled social injustice and economic insecurity.
Today, the “social safety net” comprises a wide range of federal, provincial and joint federal-provincial programs. Other than Old Age Security, the Guaranteed Income Supplement, the Canada Pension Plan and federal support to health care which are
outside the scope of this review, the most important federal components are:
n Unemployment Insurance, introduced in 1942 and expanded significantly in 1971
n Child benefits, principally the Child Tax Benefit (including the Working Income Supplement), which replaced Family Allowances and other tax measures in 1993
n Canada Student Loans Program, introduced in 1964
n Federal support for post-secondary education, which is delivered through financial transfers to the provinces (Established Programs Financing), and which expanded rapidly after new legislation in 1967
n Canada Assistance Plan, created in 1966 to support provinces in the provision of social assistance and services
n Vocational Rehabilitation of Disabled Persons program, introduced in 1961
n Federal support for employment, which expanded rapidly after new legislation in 1967, and more recently through Developmental Uses under Unemployment Insurance, and the Canadian Jobs Strategy
Federal expenditures on these programs for 1994-1995
are illustrated in the chart on the following page.
The context of reform
The world of work
The changes sweeping through society are being driven by a fundamental reshaping of the economy in Canada and around the world. At the root of this reshaping, technological innovation is transforming the way we work and do business. Most striking are personal computers. Ten years ago these devices were novelties; today they are indispensable. Other technologies, also based on the microchip, are revolutionizing manufacturing, with robots and computer-directed processes increasingly predominant. Telecommunications technology is experiencing spectacular advances in speed and efficiency, allowing instant contact virtually anywhere on the globe. In all these areas, the speed of operation is constantly accelerating, altering our very sense of the rhythm of work.
This “microchip revolution” has contributed to a broader phenomenon, usually described as the “globalization” of the economy. Investors can now move billions of dollars of capital between continents in seconds. Production is increasingly rationalized on a global scale with multinational corporations assigning various component manufacturing and assembly operations to wherever the cost-effectiveness is greatest. Liberalization of trade and investment policies world-wide has complemented and accelerated the trend.
Consequences in Canada are numerous. Notwithstanding the fluctuations of the business cycle, in the long haul unskilled and labour-intensive manufacturing is declining here as Third World producers expand. Services and knowledge-based industries are the major areas of economic growth. However, these areas are increasingly polarized between the highly-skilled technicians, for example, who participate in designing the computers we use, and the jobs in such areas as fast foods. Overall, economic change is continuous and much more rapid than even a decade or two ago.
The nature of work is changing as a result. There are two major aspects of this. First, on average, the skills levels required in the workplace are rising, with specific skills changing continuously.
The following chart illustrates the projected occupational skills requirements from 1990 to the year 2000, compared with the 1991 labour force.
As the chart shows, nearly half (45 per cent) of the new jobs created in the 1990s are expected to require more than 16 years of education and training. What cannot be shown so easily on a chart is that people operating at this skills level must expect to renew those skills regularly. As anyone who works with a computer knows, for example, every year or so there are new computers and new software to be deciphered.
At the same time, work is becoming less permanent, providing less security but potentially also more individual freedom. Indeed much of the job creation over the past fifteen years has been part-time. Today, about four of every ten jobs in Canada fall outside the traditional full-time, 40 hours a week mould. This contrasts with the situation as recently as 1976 when over 70 per cent of jobs offered standard work hours.
Overall, the Canadian economy has been very successful in generating jobs. Between 1971 and 1993, the number of jobs rose from 8 million to over 12 million. Even allowing for recessions, the ratio of employment to population in Canada rose from about 55 per cent in the late 1960s to 58 per cent in 1993. Between October 1993 and August 1994, over 270,000 jobs have been created in Canada.
Nevertheless, unemployment has been persistent. More worrying, it has risen steadily from decade to decade since the Second World War. This point is illustrated in the chart on the next page.
An apparent decoupling of economic growth from job growth now seems to afflict most advanced industrial countries. Total unemployment was fairly stable between the 1950s and the early 1970s in the 24 countries then belonging to the Organization for Economic Cooperation and Development (OECD). Since then, the unemployment total has more than tripled, with steep increases in the early 1980s and the early 1990s. Canada, with a current unemployment rate of just over 10 per cent is comparable to the European Union, where unemployment averages 10-11 per cent.
Much of what we are seeing is structural unemployment; that is, it is not much affected by the ups and downs of business cycles. In the past decade, the service sector has expanded, while traditional manufacturing and resource sectors have stagnated or shrunk. As a result, many Canadians who formerly enjoyed steady employment with the same employer, perhaps punctuated with occasional layoffs as the business cycle fluctuated, are finding themselves permanently displaced from certain sectors or occupations. Too often, they live in regions or communities with few alternative employment opportunities. They are the victims of structural unemployment.
Those losing their jobs are also finding it more difficult to locate other work. Last year, 13 per cent of unemployed Canadians had been out of work for a year or more. That is three times the level of long-term unemployment in 1976. In Europe, long-term unemployment has become an even more serious problem. In Britain, for example, 33 per cent of the unemployed are long-term.
Long-term unemployment in Canada is particularly pervasive among certain groups, such as Aboriginal people, persons with disabilities, or those in regions dependent on a single industry or resource. For example, the unemployment rate for Aboriginal people is roughly twice that of the rest of the Canadian population. Aboriginal communities have identified employment and economic development issues as a priority for reform.
Youth unemployment is another world-wide phenomenon in which Canada shares. In 1993, 18 per cent of Canadian youth in the labour force were unemployed, much higher than the average rate. In some European countries the rate is as high as 30 per cent. Interestingly, the countries with the lowest youth unemployment rates, Austria and Germany, have comprehensive apprenticeship programs.
For too many of those who find jobs, the jobs do not last long. Almost 40 per cent of the people on Unemployment Insurance in 1993 had claimed UI benefits at least three times in the previous five years - and the number is rising. The number of such “frequent claimants” has almost doubled between 1980 and the early 1990s. Details are given in the chart on p. 44.
Even for those who have managed to escape the unemployment rolls, the world of paid work is not the stable place it was just 20 years ago. No one is sheltered from the changes sweeping through the economy. Gone for many is the idea of “lifetime employment” with a single employer, once the automatic reward for hard work and loyal service. Reflecting the high degree of fluidity that now characterizes the world of work, in any given year up to one-quarter of all employees have been in their jobs for a year or less.
Another big change absorbed by the world of work during the past two decades has been the steady rise in the number of women entering the paid labour market. The typical nuclear family of the 1950s and 1960s — Mom, Dad and the kids, with Dad working in paid employment and Mom working to support the family’s needs in the home — is now in a minority. Today for more than 70 per cent of all married couples with children, both partners work outside the home. The participation of women in the paid labour force has provided enormous gains to both women themselves and to society. But the sheer magnitude of the shift has also posed new challenges for families, communities and governments to make the necessary adjustments for child care and family-friendly work arrangements.
While the word “work” is traditionally used to mean paid work, Canadians and their governments are increasingly recognizing the value and contribution of unpaid work to the well-being of Canadians. Women continue to carry the largest share of these unpaid responsibilities. A 1992 survey showed that nearly 75 per cent of all working women in dual-earner families with a youngest child under ten suffered what is called “time crunch stress”, a stark illustration of the growing problem women face reconciling the demands of work and family.
The world of learning
The key to getting — and keeping a job — in the workplace of tomorrow will be up-to-date skills. This requires a continuing commitment to education and training from individual Canadians, employers, and governments. If Canadians are to regain a measure of security in the tumultuous, uncertain new world of work, their world of learning will have to catch up. Adapting to technological and economic change is the biggest challenge facing the world of learning.
Job openings today require higher levels of education as well as more advanced and specialized skills. Even many lower-skill jobs that once required only basic schooling now call for high school graduates at a minimum.
As the graph below shows, in the past three years jobs held by university graduates expanded 17 per cent, while the number of jobs held by people not completing high school fell 19 per cent.
Provincial and territorial governments, supported by the federal government, have created a strong education system in Canada. This country leads the OECD countries in the proportion of adults with some post-secondary education. However, while we can take pride in our learning systems, we have no cause for complacency:
Almost 3 million Canadians have very limited literacy skills. Another 4 million have some difficulty with everyday reading tasks.
Every year, most of the 250,000 young people who leave high school for the labour market, do so without further structured education or training to smooth the transition.
Too many young people leave school prematurely and many of those who do drop out never acquire the basic skills and qualifications for a decent job.
Many Canadians, either on social assistance or working for low wages, would like to upgrade their occupational skills, but cannot afford to do so.
The world of security
Many Canadian families lost economic ground during the 1980s and early 1990s. Overall, average disposable family incomes have not grown since the early 1980s.
In recent years, increasing numbers of Canadians who cannot find jobs have turned to social assistance. In March 1993, 3 million Canadians (nearly 40 per cent of whom were children) depended on social assistance. This compares to 1.4 million recipients in the same month in 1981 — a doubling in just 12 years.
While definitions vary from province to province, provincial data indicate that 45 per cent of heads of households receiving social assistance were “employable” in March 1993. This group would be more employable if they had greater access to basic skills development and job training. Then as more jobs become available, they would be ready to take them. Another 28 per cent of households are headed by lone or single parents who may be able to find work if they receive a combination of training and employment supports such as child care. A further 20 per cent are persons with disabilities, some of whom would be in the labour force if they could access disability-related supports and services. The following chart shows the breakdown of social assistance households by reason for receiving assistance.
Lone-parent families, mostly headed by women, have increased in the past 15 years from 11 per cent to 16 per cent of all families with children under 18. Almost 60 per cent of these families must survive on low incomes. Single mothers, especially those with children under six years old, face a particularly difficult time in gaining employment.
The following chart shows that paid employment for this group has fallen since 1987.
Undoubtedly one key reason why there is such a close link between poor children and lone-parent families is inadequate, unreliable or unpaid child support payments. Many separated or divorced non-custodial parents are not living up to their obligation. This leaves many lone-parent families in a precarious financial position.
Too many children in Canada start out their lives in poverty. Indeed, last year more than 1.1 million children lived in households that received social assistance. Seventy per cent of these children lived in lone-parent households. Many children of the working poor also face deprivation. Although there are different measures of poverty, one common estimate is that as many as one in five Canadian children are growing up poor in a nation that boasts one of the highest standards of living in the world. Many organizations have decried the devastating impact of child poverty on human development. The Caledon Institute of Social Policy notes that:
“Poor kids have higher than average rates of ill health and accidents. They tend to perform worse at school (many can’t learn properly because they’re hungry). They have higher than average school drop-out rates. This educational legacy translates into bleak job prospects and low incomes down the road. The cycle of poverty continues.”
The need for a new model
While the various pieces of the social security system have evolved considerably over the years, the fundamental approach has remained fairly static — to furnish basic income support to people and families in need, supplemented by an array of government services. The tumultuous social and economic changes of the past decade and a half have left us with a system that is out of date and in need of reform.
First, the system is geared to help people where change was the exception, not the rule, so it does too little to help people adjust to change. As noted earlier, Unemployment Insurance is a classic case. Today, almost 40 per cent of regular UI claimants have used the program at least three times in the last five years. Many are on a treadmill. They need help getting off.
Long-term unemployment, and the growing number of people who repeatedly fall back on Unemployment Insurance, show that people aren’t getting the help they need to help themselves. Too many young people leave school unprepared for the world of work. Too many people on social assistance or in low-wage jobs can’t afford — or are not allowed by the system — to upgrade their skills. Too many people with careers derailed by change are not receiving the appropriate training.
The second way the system is out of touch concerns those most vulnerable in our society, especially children. It is well established that the first few years of life are critical to the development of human potential. Although social assistance programs recognize the needs of families in setting benefit levels, and the Child Tax Benefit targets children specifically, the result is often insufficient to meet the reasonable costs of child-rearing. Our failure to treat such assistance as an investment in the future generation’s well-being sows seeds of future social costs. Our system also fails to enforce the payment of child support on which many lone-parent families must rely.
Thirdly, the system tends to capture those who come within its ambit. Adults who want to escape from dependence on social assistance find the rules stacked against them. Getting training is extremely difficult, with little financial support available. If they take a job, most of what they earn is deducted from their social assistance cheques, and they could lose other benefits such as free dental services. Similarly, our system tends too often to pigeon-hole persons with disabilities as unemployable. Gaining access to facilities and training that would permit partial or full participation in the labour force requires luck and unwavering persistence. It almost seems our present social security system is designed to keep people dependent on it, rather than investing in their integration into the regular world of work.
Fourthly, the system fails to focus on individuals and their real needs. One-size-fits-all programming, conceived a generation ago, is now too often aimed at the wrong targets. Over time, as governments have tried to plug the gaps, a program jungle has grown up. Too little coordination and potentially overlapping clienteles justifiably have fed widespread concerns about waste, abuse and unfairness. Some people get more assistance than they need while others do not get enough or, just as bad, expensive services that don’t work.
Finally, services are treated as costs, not investments. The emphasis is squarely on remedial assistance, not prevention.
Canadians recognize that our existing social security system needs to be redesigned. The House of Commons Standing Committee on Human Resources Development concluded in its interim consultations report earlier this year:
“Canadians said clearly that although our social programs have served us well in the past, fundamental change is now necessary. An historic opportunity is available to build a new social security system from the ground up .... Many Canadians have advanced the view that rather than modifying the status quo, this process should build a new foundation.”
The fiscal context
Combined spending on Unemployment Insurance and social assistance has grown as a proportion of the Gross Domestic Product from 2.7 per cent in 1972 to 4.8 per cent in 1992, an increase of over 75 per cent.
Such increases are simply not sustainable. Reform of social security cannot be contemplated in isolation from the fiscal realities facing governments in Canada. Until the fiscal situation of governments improves, there will be no new money for new programs, including social programs. And existing expenditures must be brought under control and in some instances reduced.
The reform of social security must take place within the fiscal parameters required to meet the government’s target of reducing the deficit to 3 per cent of GDP by 1996-97. The federal Budget of 1994 included measures which will reduce spending on Unemployment Insurance by at least $2.4 billion in a full year, and foresaw significant additional reductions in Unemployment Insurance spending as a result of the social security review. Post-reform social security transfers to provinces under the Canada Assistance Plan (CAP) and the post-secondary education component of Established Programs Financing (EPF-PSE) can be no higher in 1996-97 and beyond than in 1993-94, when CAP transfers totalled $7.74 billion and EPF-PSE totalled $6.07 billion. If further measures are required to achieve the government’s deficit target, they will be included in the 1995 Budget.
Our challenge therefore is to bring our social programs into line with current realities, including fiscal realities.
The ideas for comprehensive reform outlined in this Discussion Paper are grouped around three core elements of the social security system that are considered crucial to creating opportunity and promoting self-reliance in our society: Working, Learning and Security.
Under the Working heading, this Discussion Paper groups federal government employment and social security programs and employer-provided services and policies that deal directly with the individual’s relationship with the world of work. This includes Unemployment Insurance, which can offer income support during temporary and unforeseen periods of job loss, facilitating the process of searching for another job and rejoining the work force.
A second set of programs, loosely grouped under the heading of Employment Development Services, includes measures aimed at getting unemployed individuals back into the work force. Job counselling, occupational training assistance, mobility grants, and low-wage income supplements are the sorts of programs and incentives that are presented for consideration. Of course, employment development services are not restricted to government programs. Increasingly, industry sector councils run by management and labour representatives, are working with governments and educational institutions to offer counselling and re-employment training.
With a majority of parents with young children both engaged in paid work outside the home, child care also becomes a crucial factor in employment. As well, a host of employer or union-provided services in the workplace, from day care facilities to parental leave arrangements, form an important part of the employment-social security link.
The next grouping falls under the Learning heading. Education is a provincial responsibility under the Constitution. Although education serves a wide range of social objectives, it is the links between learning and the world of work that are of primary interest in this Paper. The federal government’s economic responsibilities, including its concern for individual opportunity, are at the core of its long-standing commitment to helping provinces and the private sector provide access to lifelong learning for all Canadians. Notwithstanding tough fiscal pressures on federal support to post-secondary education, a first-rate learning system must generate and renew the skills we need for success and fulfillment in the world of work.
The notion that learning is only for children and for young adults about to embark on a lifetime career is now obsolete. Increasingly, to keep abreast of changing job requirements, learning new skills and knowledge is being viewed as a lifelong preoccupation. Our post-secondary education and training institutions, as well as many less formal routes to learning, are providing growing numbers of adults with opportunities to adapt to the demands and opportunities of the labour market. The federal government has long supported these efforts, and is now considering how best to help preserve and broaden Canadians’ access to higher learning.
The third component, Security, forms the traditional heart of the social safety net, encompassing the federal government’s Canada Assistance Plan contribution to the provinces for social assistance and social services, as well as the federal Child Tax Benefit. These programs, if well designed, can have more positive economic impacts on people’s lives, foster personal independence and act as a springboard to employment.
Policies that work together more effectively to alleviate child poverty and deprivation today can pay dividends tomorrow by reducing the next generation’s ranks of unemployed.
Guiding principles for reform
The options for change outlined in this Discussion Paper are intended to stimulate debate among Canadians. They are not cast in stone. Their primary purpose is to give shape and meaning to the philosophy and principles of a social security system reformed to meet modern needs. What follows are a set of complementary guiding principles which the government hopes will give definition and purpose to the reform debate.
Creating opportunity
Opportunity must be the watchword of our redesigned social security system. Our aspiration is to build a social security system that enables all Canadians, children and adults alike, to obtain a fair and equal opportunity to exploit their talents, lead fulfilling lives, and experience the dignity of work.
Investing in people
The best way of making the most of a rapidly changing world is to ensure that people have the tools needed to adapt to change. Canada must invest first and foremost in its people.
The traditional approach to social security has centred on providing income support and basic services to those in need. This “safety net” approach is incomplete. Too often it shortchanges people by dealing with the symptoms of their income insecurity, not the causes.
Mutual responsibility
Providing basic support for those in need and those who cannot work is unquestioned. But for those with the potential to help themselves, improved government support must be targeted at those who demonstrate a willingness and commitment to self-help.
Preventing future problems
Our social safety system has been developed to cure a series of ills we loosely define as “insecurity”, much as our health system has, until recently, concentrated on curing people who become sick. But curing people is generally a lot more costly in the long run — both for society and the individual — than measures that might have prevented the problem in the first place.
That’s why this Paper advocates a shift in spending towards initiatives that could prevent a share of tomorrow’s social insecurity, such as assigning a greater emphasis to tackling child poverty.
Putting people’s needs first
Putting people’s needs first means creating a flexible, constantly evolving network of supports, delivered by governments, employers, labour unions and the voluntary sector to help Canadians work, learn, and prosper. Tomorrow’s social security must address the particular needs of individuals, and not force people to meet the arbitrary requirements of narrowly-defined programs and services. Programs must serve people, not vice-versa.
Greater fairness
The 1994 Budget noted that the current social security system — in particular the rules governing federal support for social assistance under the Canada Assistance Plan — has led to disparities in such federal support in different parts of the country. Potential reforms set out in this Discussion Paper need to be assessed in terms of their ability to achieve greater fairness in federal support throughout Canada.
Affordability
Any reformed social security system must meet the test of affordability, both now and in the future. A social security system that is financially unsustainable is a dead end. Therefore, social security reform must in part entail making difficult choices about the best use of available funds.
The federal-provincial partnership
Social security reform requires going beyond the content of policies and programs to find ways to modernize how they are managed and delivered. Canadians demand and deserve the best possible service, the elimination of waste and abuse in administration, and duplication among programs offered by different governments. In short, they want the best value for their tax dollars.
If there is one feature of Canadian politics that most people are tired of, it is the constant tug of war between federal and provincial governments over questions of jurisdiction. Altogether too much energy has gone into bickering, and not nearly enough into meeting people’s needs.
This situation can and must change. The federal government is committed to:
increased collaboration and cooperation with the provinces and territories in order to simplify access to services, and minimize duplication and waste; and
clarification of roles and responsibilities, consistent with the Constitution, based on who is best able to accomplish what is required in the interests of individual Canadians.
The provinces and territories, local communities, and private groups have undertaken many innovations over recent years in searching for better ways to deal with long-standing social problems. Such experimentation must continue to flourish. The federal government is ready to contribute to such activities. Over the past months, a series of cost-shared Strategic Initiatives have been announced by the federal government in collaboration with most of the provinces.
connections
“Trying to slow the pace of change ... would only make delayed adjustment more painful. All policies should therefore be harnessed to promote adjustment to change, while taking care to reinforce social cohesion ....”
The OECD Jobs Study: Facts, Analysis, Strategies, 1994
“Opportunity must be the watchword of our rede-signed social security system. Our aspiration is to build a social security system that enables all Canadians, children and adults alike, to obtain a fair and equal opportunity to exploit their talents, lead fulfilling lives, and experience the dignity of work.”
Strategic Initiatives
In the February 1994 Budget, the federal government announced that it would support innovative approaches to meet social security needs developed in partnership with the provinces and territories. The government will provide $800 million for these initiatives.
These Strategic Initiatives are a key part of Social Security Reform. They are designed to:
n test new options for reform in training, income security and social services and learning;
n explore ways to help people move from welfare to work; and
n find more cost-effective approaches to labour market programs.
Working: Jobs in a new economy
Introduction
The best form of social security comes from having a job. That’s why the centre-piece of this reform must be helping people to prepare themselves for work in a changing world. How can we substantially improve Canada’s investment in helping people get and keep jobs? The answer lies in part in better access to more personalized career counselling, more focused training, more opportunities for work experience, and in some cases, earnings supplementation for low-wage workers. Today, these services exist, but they are inadequate. They do not reach enough people; they are too fragmented; and they do not fit individual needs or local job markets well enough. The starting point for reform is to design the best possible system of services and supports — a springboard that will truly help the unemployed get back to work.
Canadians want to work, and place a high value on the dignity, independence and self-respect that work brings. The federal government is committed to building an economy and a future where more jobs are available. Part of that commitment is ensuring that we invest in people, in order to reduce the skills deficit that limits opportunities for growth, and adds to this country’s fiscal deficit.
This Chapter also looks at how the Unemployment Insurance program must change to support the goals of independence and self-sufficiency. Reform of the UI program is an integral step towards helping people adapt to change. It can help us increase our investment in employment development services, and create jobs by lowering premium rates. The Chapter concludes by discussing the problems of parents juggling the demands of work and child-rearing.
A. Employment development services
We use the term “employment development services” to describe a wide range of measures designed to help people having difficulty finding and keeping a job. These include such things as personal counselling on career goals and opportunities and job search strategies, provision of labour market and job information, classroom and on-the-job training, work experience projects, and earnings supplementation that makes it easier for workers facing employment barriers to enter the labour force.
The role of the federal government in helping people improve their skills derives from its general responsibility to foster better national economic performance, a specific concern to minimize the extent and consequences of unemployment, and its interest in fostering labour mobility and equality of opportunity across Canada. The federal government currently spends $1.4 billion annually from general government revenues on employment programs and services for persons seeking to enter or re-enter the labour force. The UI program provides $1.9 billion, or 11 per cent of total UI benefits, on adjustment programs and services and extended income support for Unemployment Insurance claimants.
In the short term, employment development services are more expensive than simply providing people with income support. But unlike income support, these services are designed to help people become more employable. They represent an important investment if they successfully help people get off UI or social assistance, and back into paid work.
The need for reform
Do employment development services in fact help people get jobs? Today the answer is yes - sometimes - when assistance is carefully tailored to an individual’s needs, and linked to real job opportunities. However, the system now is too hit-or-miss. That’s why the results have been inadequate. Too many people end up in programs that have little to do with their aptitudes or opportunities. Many get training for jobs that don’t exist locally. Many are shunted from one program to another, when all they really need is basic counselling on how they can best fit into the job market.
There are many reasons why today’s programs don’t work as well as they should. There are too many mismatched programs, with inconsistent rules and too much red tape. Course offerings are driven too much by what is available, rather than by what is needed. In many cases success is measured by how many people pass through a program. The outcomes achieved - whether or not people actually get jobs - are frequently not assessed. Programs offered by different levels of government are often not coordinated. In short, the system must change.
Directions for reform
There is an urgent need to rethink employment development programs so that they focus squarely on one simple objective: helping people find good jobs.
The key to such a system is flexibility — to meet the real needs of people, to adapt to the very different conditions in different communities. People may need help for diverse reasons. Some may have work-related problems that are symptoms of deeply-rooted social problems — often arising in childhood, and then passed on through failures in school and early job experiences. Some may be highly skilled, but need information on how and where to market those skills. Some may live in communities with few job opportunities, and need to explore alternatives such as self-employment, or mobility.
But in each case, the fundamental need is the same: a job. An enhanced system of employment development services should:
create opportunities for employment, helping people who are without work to find work;
emphasize prevention, helping people to avoid unemployment by building the skills and work experience needed to adapt in a constantly changing environment;
address individual needs and local opportunities, driven by what works best in a given situation, rather than by rules and regulations;
encourage mutual responsibility, by engaging the client in deciding on an individual action plan, with appropriate follow-up;
facilitate adaptation, so that recent immigrants who come to Canada with needed job skills and professional qualifications can more easily gain access to employment services, and succeed in the transition into the Canadian labour market;
ensure effectiveness, by minimizing waste, and ensuring compatibility between federal and provincial programs, as well as placing a priority on finding out what works and what doesn’t, and adjusting accordingly;
strengthen partnerships, not only with the provincial and territorial governments, but also with communities, learning institutions, employers, unions and sectoral organizations, as well as individuals and families, in developing skills and job opportunities.
Experience here in Canada and in other countries has taught a number of lessons about what works and what doesn’t work. For example, we know that training programs that involve employers directly tend to work better than those that are exclusively classroom-based. We know that subsidized work placement for the long-term unemployed can be effective, whereas simple short-term job creation has little impact. We know that self-employment and business development initiatives have a high benefit-cost ratio. We know that training programs that require the students to put in some of their own money work better than when students make no investment of their own. The federal and provincial governments have begun to recognize these lessons, and experiment with innovative, cooperative solutions.
It is essential to bring the partners together at the national, provincial and local levels to create people-centred, results-oriented employment development services. The federal government is prepared to see a larger provincial role in building such services. As an immediate step, the federal government has offered the provinces greater responsibility for the planning and delivery of many federal employment programs and services, and has also invited the provinces to take the lead in setting up a network of “single window” offices that would serve all Canadians, whether they were seeking help from federal or provincial programs.
Building employment development services that really work
What is needed is a renewed and strengthened set of employment development services capable of providing more highly structured and predictable assistance to the unemployed. In the first instance, this ought to feature, as a matter of course, individual needs assessment and career counselling, as well as accurate labour market information, to help individuals make informed choices about the kinds of training and employment options available. The role of counselling would be to help each individual draw up a personal reemployment plan, including training courses as appropriate, that would suit the individual’s aptitudes and experience, as well as the labour market. In each case, the actual support package must be drawn from a wide array of options. These would range from basic skills upgrading, through institutional training and community employment, to support services including child care and employment supports for persons with disabilities.
We will have to face some tough choices. Not everyone can be retrained at public expense. So priorities will have to be set. For example, it may make little sense to push an older worker to take extensive retraining about which he or she may be ambivalent, while denying a training opportunity to an employable social assistance recipient. Then there will be issues about how much to invest in individual workers, according to what criteria, and how many times people can “come back for more”. Greater community involvement in decision-making will help in sorting out these issues.
Building a new model of employment development services is obviously an ambitious task. Central to the success of such services is a shift to greater coordination of the activities of all partners within a flexible, locally-managed, community-based structure. Such a cooperative approach is needed to get people into real jobs. We simply cannot afford to train people for yesterday’s jobs. That is why business, labour and community groups must play a larger role in defining needs and delivering employment development programs and services. Such comprehensive local delivery would also encourage ongoing assessment of the effectiveness of particular programs, and the flexibility to shift resources into more effective interventions.
Tools
1. Enhanced needs assessment and counselling
In 1993 the Organization for Economic Cooperation and Development (OECD) reviewed employment programs in various countries. The review concluded that, to be successful, they must be tailored to individual needs. “Off-the-shelf” services and general approaches simply do not work. An approach that tailors employment development services to individual needs would put a greater emphasis on assessing those needs, and on individual counselling.
As a 1990 Canadian Labour Market and Productivity Centre study reported:
“Effective counselling support services are vital to the success of labour market programs. Counselling is the best way to identify those most likely to benefit from labour market programs and those most at risk of experiencing long-term unemployment.”
Currently about 10 per cent of UI claimants receive employment and career counselling. If more individual assessment and counselling were provided “up front”, counsellors could better ensure appropriate help. More individuals, then, in collaboration with their counsellors, could create plans to pinpoint the programs which would best suit their circumstances.
Such a tailored plan could draw from a menu of services available not only from the federal government, but from provincial governments, municipal agencies, and organizations in the community. These could include:
A wide range of flexible options, so that assistance could be adapted to individual and local needs. These services could include training, work experience, literacy and other basic skills training, mobility assistance, self-employment assistance, access to information on job vacancies and community employment development.
A variety of income and other supports to encourage, for example, the participation of people who have additional needs. These could include earnings supplements to help displaced workers start new careers with new employers; supports and services for persons with disabilities; child care allowances; support for older workers and long-term unemployed; and wage subsidies to encourage employers to provide work experience for people with limited skills.
Up-to-date labour market and training information and feedback on what works — to identify at the local level what kinds of programs are most effective for different types of participants.
Special initiatives to address the needs of communities facing severe economic decline, and especially disadvantaged groups in society.
Enhanced “front-end” services such as needs assessment and counselling are expensive. Reallocation from existing expenditures is the only way to provide them to more people. These resources could come from savings generated through reform of the Unemployment Insurance program, discussed in section B of this Chapter, and through savings achieved by “working smarter” and streamlining other parts of the employment development services system.
2. Labour market information
In its 1994 report Putting the Pieces Together, the Canadian Labour Force Development Board writes that:
“Labour market information is the life-blood of a transition system. It should flow continuously in a permanent loop ... [It] is necessary for making informed career choices in the education system, making appropriate career decisions, determining the nature and extent of training programs, and providing effective career and employment counselling.”
The report also suggests that new technologies can be used to build such a continuous information loop — the “electronic hiring hall”. Using this approach, both employers and employees could feed information about their respective requirements and skills into a computerized system, and get back a list of either potential jobs or applicants for immediate action. Such an “electronic hiring hall” could be accessed from a Canada Employment Centre, or a provincial or municipal office, or a home or business terminal that could be connected to a regularly updated network. Delivery, therefore, would be highly decentralized, less costly and more efficient.
3. Enhancing basic skills
One fundamental obstacle to successful skills development faced by many Canadians is their lack of basic learning skills. As noted in Chapter 1, millions of adult Canadians are not functionally literate, or have weak numeracy skills, seriously hampering their ability to participate in the job market. These skills are not only required for most jobs; they are the foundation for development of more advanced skills. People lacking such skills are disadvantaged in today’s world and will be more so in the future, unless they get help. Increasingly, they find their skills inadequate for jobs which are becoming more and more information-intensive. In designing enhanced employment development services, Canadians will have to decide how basic skills training can best be improved, and what priority such training should receive.
The past ten years have seen great progress in recognizing and tackling literacy problems in Canada. Governments, together with many parts of the learning system, the private sector, and voluntary organizations, have created innovative approaches and new opportunities for people of all ages to acquire these vital skills. One of the most intensive efforts to combat illiteracy, for example, has been undertaken by the government of New Brunswick, which has set up a network of community-based literacy education for adults in church basements and community centres.
The federal government has contributed actively to literacy, particularly through the purchase of institutional training and the provision of income support to trainees. As well, the National Literacy Secretariat has worked with partners in this field to promote research and development, and public understanding on literacy issues, especially workforce literacy.
But more needs to be done, recognizing that basic skills are the prerequisite for employment success. One of the biggest challenges is to make appropriate training more accessible. If people can’t get to the training, then new ways must be found to take training to the people. Frontier College, one of Canada’s leading innovators in community-based training, is exploring a variety of approaches. These could involve, for example, the application of new learning technologies, and providing training in the workplace or on-site at public housing projects, youth shelters and other community centres.
4. Institutional training
Training delivered by public educational institutions will remain an important part of the employability enhancement tool kit. At present, the federal government spends about $450 million annually to purchase blocks of seats in institutional training programs. Clients are then referred to the available seats by local Canada Employment Centres.
Such training, however, may not always be as cost-effective as possible. Adult learners may not benefit most from formal classroom instruction, unless it is linked to practical on-the-job experience. In beefing up our employment development effort, it will be critical to ensure that the types of training available meet the needs of those seeking work. This will involve expanding the experiments with varied training formats — classroom training, on-the-job training, computer-based training, distance learning.
5. Workplace training
Enhanced employment development services could give employers a greater role in training. In fact, some of the most effective training today takes place in the workplace — designed by employers to improve productivity and cost performance by combining work experience with skills development. In a growing number of cases employees and their unions are helping shape such training.
While there are payoffs for the employer from work-based training, these may be indirect or longer-term. Such training has important benefits for society because well-trained workers are more employable, and can adapt more easily if they are forced to change jobs. It may therefore be appropriate for governments to consider incentives for employers to undertake these activities. This would apply especially to small- and medium-sized businesses which often lack the resources to do much formal training on their own.
Commentators have suggested various ways to promote employer-led training, such as employer tax credits, levies for training, wage subsidies and direct government assistance, paid educational leave, individual training accounts and work-sharing arrangements. These possibilities will need to be explored fully, bearing in mind that it makes good business sense for employers to invest in developing their employees.
International examples of apprenticeship systems also suggest ways to incorporate employer-based training into employment services. Germany for example, has created the widely acclaimed dual apprenticeship system, a combination of on-the-job training with classroom learning. The apprenticeships are regulated by business and industry to assure a system which is highly responsive to ever-changing labour market demands. We should explore how this and other international models could help us address Canadian skills problems.
There has been considerable progress in mobilizing private sector training and championing a training culture in Canada through sector councils. These councils represent employers and workers within a sector or industry. With initial start-up funding from the government, they identify current and future training needs within the sector, establish occupational or skills standards, and develop an industry-led training program.
One of these councils’ goals has been to establish up-to-date, industry-wide, skills standards for the various occupations in the particular industry. This includes undertaking long-term human resource planning to identify formally the job requirements the industry expects to encounter in coming years. Such planning permits action to avoid bottlenecks by making sure colleges and universities are turning out enough graduates with the right skills. In some instances – the Canadian automobile repair sector, for example – this has meant the sector councils working closely with the educational sector, first to develop new training curricula, then to help train the college teachers to meet the new standards, and finally to launch co-operative training programs for students. It is a natural step for many of these councils to move more aggressively into addressing the issue of smoothing school-to-work transitions. Each of these training programs is intended to be financed by the industry once it is up and running. Sector councils are already active in the steel, electronic, tourism, horticulture, auto repair and several other industries.
These councils have shown how partnerships in developing training programs can benefit industries and workers alike. The sector council approach is particularly attractive, as a small government investment in start up can lever a considerable training commitment by the industry. For example, the training fund of the Sectoral Skills Council of the Electrical and Electronic Industry in Ontario is funded equally by four partners: the federal and provincial governments, the employers and the workers. A new employment development services system could make this “leverage” principle a central part of its approach to training.
6. Innovative approaches to employment
In some cases, direct employment measures — for example, earnings supplementation — may prove the most effective way to help integrate and reintegrate individuals into the workforce. In this approach, the earnings supplement would replace whatever insurance or social assistance benefits the worker would otherwise receive. The key is to ensure that direct employment initiatives are carefully targeted to clients who are most likely to benefit.
According to the 1994 OECD Jobs Study:
“Job creation measures are often an important component of active labour policies. But their impact has often been disappointing . . . Targeting job creation to particular groups can produce better outcomes for programme participants and for society as a whole. In general, young people and the long-term unemployed are the best targets.”
Well-targeted direct employment measures could take a number of forms. For example, many people who find themselves out of work have the skills, ideas and entrepreneurial drive to create their own employment. They may want to use their unemployment benefits to help start a new business. In some cases — in communities where few alternatives for employment exist — self-employment assistance may be the optimal choice for the individual, and an economic stimulus for the community itself.
Another option would be to provide wages for unemployed workers to perform useful work in their communities which would otherwise be left undone. The recently-announced Atlantic Groundfish Strategy (TAGS) has developed a model for what can be done in areas where there are few alternate employment opportunities and individuals have limited mobility. In this initiative, employment is combined with training to help individuals contribute to local community development, while improving their skills through training and work experience. An underlying principle is mutual responsibility: individuals should participate in these programs in return for receiving income support.
The same general approach could be applied elsewhere. The voluntary sector and the environmental field are two growing areas where people could gain productive work experience, likely in conjunction with other training opportunities. More ingenuity is needed in seeking out such possibilities.
As another example, Australia has recently adopted an intriguing approach to wage subsidies. The value of the subsidy increases according to the length of time the individual is unemployed, in order to encourage employers to take on the long-term unemployed. Then the subsidy decreases over time after he or she is hired, as the worker’s value to the employer can be expected to increase. The subsidy is eliminated after six months of employment, but employers get an extra bonus if they retain workers for a year.
Such initiatives hold considerable promise, since they appear to avoid the pitfalls of many short-term job creation schemes that have proved unsuccessful in the past. The federal government will test the effectiveness of earnings supplementation as a re-employment incentive, starting this autumn in projects involving up to 50,000 UI claimants across Canada.
Management and delivery
1. Managing by results
Rigorous assessment of results should be the basis for developing enhanced employment development services. The emphasis must shift from following inflexible rules and procedures towards getting people the training and other help they need to get jobs.
Existing programs ensure accountability by setting up rules and controls to make sure that these rules are followed. There are rules to determine the amount of support to which an individual is entitled, the kinds of services that can be provided to different individuals, the standards that service providers must adhere to, and so on. This kind of accountability still makes sense. But it is not enough. The emphasis is too bureaucratic to allow for decentralized decision-making, working with partners and doing what works best.
A new approach to accountability would place more importance on results. A clear demonstration of the results achieved from an investment in people is the best means for ensuring that tax dollars have been spent wisely. With improved technology and a new mindset such an approach is increasingly feasible. If measurement focuses more on results, then the whole incentive structure for managing programs and services shifts towards getting good results. There is less need for bureaucratic controls on who delivers the service, or the content of the service itself.
2. Focusing on the community
The range of options currently provided by government programs and services at the local level is not as flexible as it should be in addressing local needs and opportunities. Unemployed workers in Corner Brook, Newfoundland are not likely to have the same needs as their counterparts in Montreal, Medicine Hat, or Kamloops. A flexible approach to employment development makes as much sense for communities as it does for individuals. It may be more effective for governments to set broad goals, and let local communities determine how best to achieve those goals.
Such an approach would, of course, require ensuring that those who make decisions at the local level are accountable for achieving results in a cost-effective manner. This challenge of designing local level accountability, however, should not stand in the way of decentralizing real decision-making power. People who are out of work and need help want the right mix of services at the right time. The best capability for making decisions about that mix often lies with those who are most directly affected — the businesses, workers and others involved in the local labour market. Local leaders are also likely to have the best understanding of the relevance of local community college courses, and the greatest ability to persuade the colleges to stay in touch with changing local needs. Communities should thus have more ownership of the solutions to the problems they face. This may in fact be the best way to foster innovation and perseverance in tackling problems and developing lasting solutions. To achieve real jobs for people, non-governmental groups must become key players in decisions about employment development, because the private sector is where most of the jobs are.
Enhanced employment development services could make community-focused projects that take programs directly to the people the rule rather than the exception. For example, counselling and mentoring could be contracted to local organizations who know the labour market, understand the skills that may be required, and are familiar with the local services available.
3. Towards a new federal-provincial partnership
Renewed employment development services should be designed to improve service, eliminate any duplication and waste, and improve efficiency. Achieving these goals will depend on close cooperation between the federal and provincial governments. The common challenge is to deliver what works best in meeting people’s needs. The federal government has an open mind on the issue of who is best suited to deliver such services, whether the federal government, the provincial and territorial governments, local communities, the private sector, or some combination of these options. The federal government expects consideration of this issue to be an important theme in public consultations on social security reform. The conclusions may vary with the particular needs, interests and capacities of the various provinces.
In the meantime, the federal government has invited each province and territory to enter into a new three-year Labour Force Development Agreement. The purpose would be to move toward a clearer division of responsibility, while improving service to the public. Interested provinces and territories could assume responsibility for:
strategic planning related to various federal employment development services, including institutional and workplace training, as well as project-based training;
managing the purchase of institutional training;
planning and implementing a network of “single window” offices, that would assemble under one roof programs and services provided by both levels of government, including unemployment insurance, training, welfare and other labour market programs; and
managing a variety of other federal programs, such as cooperative education and Canada Employment Centres for Students. The list of programs could vary, depending on the interests of each province or territory.
The federal government looks forward to working with the provinces to harmonize services at the local level. This will simplify the system for individuals and remove waste. People will find it easier to benefit from programs and services offered by both governments. The guiding principle should be that local managers and their non-governmental partners decide on cost-effective solutions that really work for the people in their community.
As part of establishing a wide consensus on the best approach to employment development services, recognizing that this may vary across the country in different types of communities, it will be important to determine how best to deliver these services. The federal government is prepared to consider an expanded role for provinces and the private sector in managing and delivering federal employment development services, where this makes sense in the interest of individual Canadians.
Improved access to employment development services
The federal government intends to discuss with provinces whether they would be interested in making enhanced employment programs more available to social assistance recipients who need them.
a. Social assistance recipients and others outside the labour force
At present, both the federal and provincial governments invest in skills development programs for social assistance recipients. The federal government spends about $1.4 billion on programs and services targeted to new entrants and re-entrants to the labour force, the long-term unemployed, and employed persons who need skills upgrading. Some of this investment supports social assistance recipients under federal-provincial agreements. The federal government looks forward to discussions with the provinces on cooperative approaches to developing “single window” employment development services that could be accessible to those who need help beyond simple income support.
Many successful initiatives now underway show that timely opportunities for social assistance recipients can greatly improve their opportunities for finding stable employment. For example, through the Self-Sufficiency Project in New Brunswick and British Columbia, time-limited earnings supplements are offered to long-term social assistance recipients to help them establish themselves in full-time jobs.
In New Brunswick there is a joint federal-provincial project called “N.B. Works”. It helps social assistance recipients to become more employable by addressing individual needs, with educational upgrading, skills training, employment experience, counselling and supports. The recent Strategic Initiatives agreements by the federal government to support the jobLink program in Ontario and a project for lone parents in Manitoba provide further examples of cooperation.
b. Access for persons with disabilities
Employment development services can be made more available to persons with disabilities. These services can also deal better with the particular barriers they face. Discussions with the provinces should examine ways to accomplish this. Efforts might focus on creating partnerships among employers, the disabled community, and the provinces to remove barriers and to provide accommodations such as accessible workplaces, flexible working conditions, appropriate training and proactive disability management policies.
In addition, discussions between the provinces and the federal government could look at updating the approach to vocational rehabilitation. Some employers find that workplace-based reintegration programs that help employees who become disabled return to work can save financial and human resources.
The Vocational Rehabilitation of Disabled Persons Act (VRDP) is a federal instrument for providing funds to the provinces to integrate persons with disabilities into training and employment programs. The current Act, implemented in 1961, is outdated. Following on earlier federal-provincial efforts which resulted in several improvements, a further process of renewal should be considered. VRDP could be linked directly to employment development services as a bridge to mainstream training and employment opportunities.
However desirable these various possibilities for building employment development services that really work, change will depend on finding funds for reallocation primarily from reforms to the Unemployment Insurance program.
B. From Unemployment to Employment Insurance
Unemployment Insurance was introduced in 1942 to provide temporary financial assistance for workers between jobs, and to facilitate job searches. It originally covered a limited number of workers — less than half of the work force. Today the UI program covers almost the entire full-time labour force, and about 75 per cent of part-time workers. Designed as insurance against the risk of temporary unemployment in a few industries, it must now operate in an economy where the risk of structural unemployment, including recurring unemployment and long-term unemployment, is growing in almost all sectors of the economy.
Reform of the Unemployment Insurance (UI) program is central to the goal of encouraging employment. A smaller, better-targeted UI program would permit funds to be reallocated to reducing employer and employee premium rates, and to strengthening our investment in employment development services. Lower payroll taxes encourage employers to add jobs because the cost of hiring people is reduced. Better employment development services help workers adapt to the changing labour market. Important issues for consideration in debating UI reform will include how best to adjust the program, and how best to allocate to premium relief and employment development services the resulting reduction in program costs.
The need for reform
There have been many studies of the UI program over the past decade. They concluded that fundamental reform is needed.
The UI program is out of date. It works well for most UI claimants, who only require temporary income support while looking for a job. But it does not work well for the growing number of Canadians who need help adjusting to changes in the labour market, at a time when adjustment is essential.
Often, the program discourages adjustment. For example, UI does not encourage unskilled workers in seasonal industries to improve their skills during periods of unemployment. Short periods of work, alternating with periods of UI benefits, appears to be the only choice for them, and thus becomes a way of life.
The program rules are open to abuse. The UI program allows some employers and industries to organize their work schedules around the weeks required to qualify for UI. A recent study by Statistics Canada reports that some businesses have structured their basic hiring and compensation practices around the UI program — for example, planning layoffs to coincide with UI qualification periods, and recalls with the end of UI benefits.
High employer and employee premiums discourage job creation. Payroll taxes are generally a drag on employment. As well, premium rates tend to increase during the latter parts of a recession, in order to even out deficits and surpluses in the UI account over a reasonable period of time. During a prolonged recession, this tax on jobs is increasing precisely at the time when jobs are most scarce and businesses are least able to bear the tax.
Some people are left out. Changes in the labour market have increased the number of working Canadians who are not covered by insurance under the existing UI rules. This particularly affects women and youth, who tend to predominate in nonstandard work.
Canada needs a financially sustainable UI program, and a program that recognizes individual responsibility to work towards self-sufficiency. While the federal government remains committed to providing income support to those who truly need it, Canadians want to ensure that limited resources are used to achieve the best possible results.
People using the UI program are not to blame for these problems. It is often the system which is at fault. Rules which encourage individuals and their employers to organize their work around the UI system every year need to be changed if the system is to be fair. At the same time, Canadians who find themselves in continuously unstable work situations need practical help, and in too many cases the current system does not provide it. The fundamental challenge for reform is to design a program that does a better job investing in people, and helping them get steady employment.
Approaches to reform
While there are many different options for reform, this paper concentrates on two basic approaches to changing UI. The first approach involves the design of a new employment insurance program focused on addressing the skills and employment problems of people who have frequent recourse to UI. The second approach is less targeted, aiming to reduce reliance on UI more generally. The reform strategy selected may draw elements from both approaches. Since the first approach is new and more comprehensive, it is described in greater detail.
Approach 1: Design a new Employment Insurance program
This approach involves fundamental changes to the UI program. It would more closely integrate UI with employment development services. This approach recognizes that for some people, employment problems are deep-seated, and temporary income support is often not enough to help them get back to work. The frequency of claims made over a given period may be the clearest way to identify those for whom the system is not working. For example, in today’s labour market it may be normal for some people to become unemployed once or twice over a business cycle. Those who become unemployed three or more times in the same period, however, show quite different unemployment patterns. Unemployment in this group is structural; it continues to increase regardless of the variations of the business cycle, as the following graph shows:
Under the approach outlined here, occasional claimants — people who experience temporary, infrequent unemployment — would continue to receive earnings replacement and employment services as necessary, while they look for work. Frequent claimants — people who experience recurring unemployment and reliance on UI — would receive lower benefits, combined with more active assistance in finding a job. Income support could be conditional on their willingness to participate in programs that make them more employable.
Of course, it should be recognized that frequent claimants of UI face many different kinds of circumstances. For example, they include:
highly-skilled, well-paid workers whose skills may be in demand only during certain parts of the year or the business cycle — such as those in the skilled construction trades;
workers in occupations in demand for a single season, such as those in certain resource-based industries;
workers in communities with especially high unemployment rates, where jobs of any kind are scarce;
workers who lack basic skills, or more specialized skills in demand by local employers; and
workers for employers who intentionally make decisions about hiring and layoffs around the availability and duration of UI benefits, as well as workers who make similar calculations about when they will work.
A new employment insurance system would need to take into account the variety of challenges faced by frequent claimants, and the potential impact of reform on different industries and regions in Canada. The government is discussing the potential impact of reform with the construction and other industries, and would consult closely with all industries that might be affected. It should be possible to work out with those in seasonal industries such as tourism, innovative approaches that ensure an income base, yet provide more opportunity for work and training in the off-season. Arrangements would also need to take into account the unique characteristics of particular industries, such as the fisheries.
In the framework outlined below for discussion:
occasional claimants would have access to Basic Insurance benefits, similar to the UI benefits now in place;
frequent claimants would receive Adjustment Insurance benefits, which could be paid at a lower rate than Basic Insurance, or be subject to an income test, or have a different duration;
depending on their labour market needs and the resources available, both frequent and occasional claimants could have access to an individualized package of employment development services designed to enhance their prospects for employment.
The capacity to provide better employment development services as part of UI reform would depend on whether additional funds are invested in these services. This in turn depends on the option for UI reform chosen, and how the resources this reform frees up would be divided between these services, and lowering UI premiums.
Basic insurance
Basic insurance would be available to occasional claimants of the insurance program. The eligibility requirements, benefit levels, and duration of benefits would be modelled on the present UI program, although changes could be considered in each of these areas.
It would also be important to maintain the assistance this group of unemployed receives today, to help them find and keep a new job. In addition, basic insurance would include the sickness, parental, maternity and adoption benefits available in the current UI program.
Basic insurance would help individuals to overcome structural barriers to employment, but would not address the fundamental structural problems experienced by particular regions or industries. Specific action plans outside the UI program may be needed to address particularly difficult adjustment situations, for example, those faced by workers in industries undergoing massive adjustments such as the East Coast groundfish industry, and older workers facing labour market adjustment problems.
Adjustment insurance
Adjustment insurance would be available to frequent claimants. Careful consideration would need to be given to defining “frequency” for this purpose. As discussed above, three or more claims in a five-year period seem to indicate a need for adjustment assistance. Different definitions would affect people differently, however. For example, a definition of frequency as three claims in five years would encompass about 38 per cent of existing UI claimants, while four claims in five years would cover about 24 per cent of claimants. Three claims in three years would affect about 27 per cent of claimants. The benefits which are paid to these groupings under the existing UI rules are in the order of $6 billion, $3.9 billion, and $4.3 billion respectively.
A new Employment Insurance program would need to take account of the regional differences in the Canadian workforce. Decisions would be needed about how any UI funds freed up would be reinvested regionally — for example, to what extent regional investments would be proportional to the impact of UI reform.
A new system could be structured whereby, after an initial number of claims of basic insurance, frequent claimants would no longer be eligible for basic insurance but would receive adjustment benefits, and expanded access to a broader range of employment development programs. The kinds of adjustment assistance available to claimants would have to allow for different needs and circumstances, and provide programs and services that work for the individual. The frequency rule would start to affect people gradually, as their claims history identifies them as frequent claimants. The employment development services they require could thus be built up over time.
In designing an adjustment insurance program such as this, there are many choices to consider. These include:
The duration of benefits: Adjustment benefits could have the same duration as current UI benefits, which range from 17 to 50 weeks. Or they could be shortened. It may make sense, however, to allow longer periods in some cases to meet the needs of individual claimants. For example, if a claimant’s ability to find stable employment would improve with a longer training and work experience program, benefits could be provided to make it possible to complete that course, as is now the case with UI Developmental Uses programs.
The level of benefits: The right level of benefits would depend on several factors. For example, for frequent claimants, UI has taken on more the character of an income supplement than an insurance scheme. As such, need may more appropriately play a larger role in determining the level of support. Since frequent claimants could expect a larger investment in employment development, lower income support may be sensible. Overall, benefit levels for frequent claimants would also depend on how much money Canadians want to put into income support and how much into employment services.
Income testing: As a means to target resources where they are most needed, adjustment insurance benefits could also be income-tested, based on an assessment of a claimant’s individual or family income. For example, in 1992, about 3 per cent of all UI claimants had incomes of $50,000 or more in the year they became unemployed. About 40 per cent were in families with incomes of $50,000 or more. Income testing for frequent claimants could prevent those individuals who have a very good income from using the income support system simply because it is there, rather than because it is needed. Such testing would not necessarily affect access to employment development services. In a time of limited resources, Canadians need to consider carefully whether income-tested benefits would make sense.
Participation in employment development programs: Many people claiming adjustment benefits would need access to employment programs such as training, counselling, or job finding assistance. Canadians may wish to debate whether access to and the level of adjustment insurance benefits should be conditional on a willingness to participate in such adjustment programs or other useful community service, and how such an obligation should best be accommodated within the resources available for employment development services.
Decisions on each of these issues must take into account the overriding goal of reforming the Unemployment Insurance program, and the potential impact of any decisions on provincial social assistance programs. The goal is to structure the program so that it is fair to all and provides the right opportunities to help people end their insurance claims, and gain secure employment.
Approach 2: Adjust the existing UI program
The second approach to UI reform would not distinguish between occasional and frequent claimants, but could be combined with such an approach. It would retain the shape of the present program more or less intact, but it would involve either, or both of, the following:
increasing the number of weeks of work required to qualify for UI; or
reducing the amount of benefits available, by shortening the duration and/or lowering the level of benefits.
Conventional adjustments such as these have been the foundation for many changes to UI in the past, including the changes announced in the 1994 federal Budget.
Increasing entrance requirements
Benefits would be better linked to the length of an individual’s employment, and insurance would relate to a loss of substantial employment income. Some analysts believe that this approach would also encourage employment, because a short work history before making a UI claim has proven to be likely to lead to recurring claims in the future.
One option under this approach would be simply to increase entrance requirements. For example, the current 12-20 weeks requirement could be raised to 14-20 weeks, or any other desired range. Entrance requirements could also be set at the same level in all parts of the country, instead of at levels which vary with the local unemployment rate, as is now the case. If the requirement were raised to 14-20 weeks, approximately 42,000 claimants would be affected, resulting in reduced UI expenditures in the order of $350 million.
Alternatively, Canada could adopt an approach used here prior to 1971, and still in use in some other countries: basing eligibility on a worker’s employment history over two years, rather than one year. For example, the 12-week minimum work requirement currently used is equivalent to a requirement for 24 weeks of work over two years. The entrance requirement could be increased to 26 weeks over a two-year period, or some other level.
Depending on implementation details, for example, a 26 week requirement could affect about 75,000 claimants, reducing UI expenditures by about $400 million. This approach could give an individual more time, and therefore greater flexibility and opportunity, to find the extra weeks of work needed to meet higher entrance requirements. This in turn might promote greater labour force attachment with less dislocation than an increase in entrance requirements alone.
Such entrance-based approaches have merit. However, they have a limited capacity to shift the focus of the UI program towards promoting employment, because they do not help identify those who need the most help adjusting to change. Higher entrance requirements alone may disqualify people who most need assistance to improve their labour market attachment. In addition, people who have few opportunities to obtain longer periods of work, might face undue hardship.
This could also have difficult economic repercussions for regions with weak labour markets, particularly where only short-term seasonal work is readily available. Similar difficulties could arise with particular groups such as women, members of visible minorities, persons with disabilities or Aboriginal people. In such cases it will be essential for program changes to address the underlying problems that often lead to dependency on UI.
Reducing benefit levels or duration
At present, UI benefits are based on a dual rate scheme. Most claimants are eligible for an earnings replacement rate of 55 per cent, while those with low earnings and with dependents are eligible for a 60 per cent rate. Benefit durations range from 17 to 50 weeks, depending on the number of weeks worked and the local unemployment rate. Several changes have been made to benefit durations and levels in recent years.
Further reductions in the benefit levels are possible. For example, reducing the current earnings replacement rate by 5 percentage points (to 50 per cent and 55 per cent), would affect all claimants, resulting in reduced UI expenditures of about $1.5 billion. One variant of this approach would be to introduce a graduated benefit rate which decreases the benefit available with each subsequent claim.
The duration of benefits is currently linked to conditions in local labour markets. In regions with higher unemployment, claimants can receive benefits for a longer time. This aspect of the program could be reduced, or eliminated, on the grounds that it may help in the short term but discourages longer-term adjustment. In addition, the maximum duration of 50 weeks could be shortened. However, any changes would need to ensure that the benefit period provides Canadians with enough time for an effective job search. Reduced benefit durations could have significant implications for those in highly seasonal employment. The design of the UI program must not ignore the underlying structure of the Canadian economy, and changes should support economic and labour market adjustment where it is feasible and required.
In summary, while adjusting the existing UI program could result in an increase in resources devoted to employment development services, across-the-board changes to UI eligibility criteria on their own would do little to identify or address the labour market difficulties of those affected. People who would lose their benefits would not necessarily be directed to assistance through employment development services.
Insurance coverage for nonstandard work
Whichever reforms are made, the UI program will need to consider the needs of workers in “nonstandard” employment, who have increased significantly over the last decade. This includes part-time, temporary, self-employed or multiple job holders. Most of these workers are women. In 1993, more than 60 per cent of all jobs created were part-time. Many of these nonstandard workers are not fully covered by unemployment insurance for all the hours worked, and some are excluded from coverage entirely. Some firms adopt such working arrangements specifically to avoid paying insurance premiums.
In addition, the current program does not cover self-employed workers at all, other than those in the fishing industry. There is a reason for this exclusion. It is difficult to tell when there is no work for self-employed individuals, as opposed to when they voluntarily stop working. Because of the potential for abuse, very few unemployment insurance programs around the world cover self-employed workers. Nevertheless, some jurisdictions such as Denmark and California have adopted programs in this area which deserve further study.
Despite the challenges in providing coverage for self-employment, part-time work and multiple jobs, these types of nonstandard work are growing in significance. The issue of providing improved insurance coverage needs to be reexamined. Practical solutions might be found by exploring and testing different options.
C. Financing UI and employment development services
The UI program is funded entirely through employer and worker premiums. The total of premiums collected in 1993 was $18.5 billion. For 1994, employees pay $3.07 each week per $100 of earnings, to a maximum insured weekly pay of $780; employers pay 1.4 times the employee share, or $4.30. A portion of the UI Account is used to pay for some employment development services for UI claimants (in 1994, the amount is $1.9 billion), through the UI Developmental Uses Fund. Employment services for people who are not on UI are paid from the federal government’s Consolidated Revenue Fund. For 1993-94, this latter amount was about $1.4 billion.
Both employers and workers have expressed serious concerns about the way the Unemployment Insurance program and employment development services are funded. The process of reform must include a fundamental debate about this issue. The federal government has asked the joint labour-management Canadian Labour Market and Productivity Centre for advice on UI reform, including how the issue of UI financing can be addressed most effectively by the labour market partners.
A number of reforms are possible with respect to financing both UI and employment services. This section discusses some options for adjusting the way UI premiums are calculated, and then looks at alternative arrangements for funding employment development services.
Options for adjusting how UI premiums are calculated
Unemployment insurance premiums are a form of payroll tax. Currently, they represent 42 per cent of federal and provincial payroll taxes and are the largest source of federal revenue next to personal income taxes.
It is widely agreed that, at least in the short run, payroll taxes discourage job creation, so there is merit to any reform that would lower premiums. At the same time, both employees and employers benefit from the income support and employment services which flow from these taxes. The issue is finding the right balance between the burden represented by premiums, and the benefits they entail.
There are a number of options that might help to improve this balance:
1. Adjusting premiums during recessions
Premiums should be set to ensure that they are not at their highest when a recession is deepest, making it even more difficult for employers to hire. Unemployment Insurance is intended, in part, to soften the impact of recessions. Benefit payments do this by sustaining much of the purchasing power of unemployed workers. The stabilizing impact of UI payments has varied over the last 15 years, reflecting changes in the size of the UI program relative to the economy.
Recent estimates show that during a recession, UI reduces the decline in GDP by 10-12 per cent and reduces job losses by 10-14 per cent. However, during a prolonged recession, the UI premium rate often rises to stabilize the UI Account, which partly offsets the anti-recessionary effects of UI benefit payments. The premium setting formula should be examined to find ways of avoiding such untimely rate increases. One approach which merits consideration would be to allow the UI Account to build up a substantial surplus during periods of economic growth. This surplus would provide a cushion in the next economic downturn against the need to raise premium rates, so that premiums can be maintained at a lower, relatively steady rate.
2. Adjusting the earnings subject to UI premiums
Consideration could be given to requiring employers to pay premiums on their total payroll; that is, the upper and lower limits on earnings subject to employer premiums could be removed. With a broader base, the premium rate for employers would fall. This would eliminate the present incentive to create part-time jobs under 15 hours per week to avoid UI premiums under the existing rules. It would also lessen the incentive for firms to pay overtime rather than create new jobs. The employee premium base would be the same as now.
A possible drawback to this option would be that for some employers, a larger premium base might lead to higher total premiums, despite a reduction in the premium rate, with possible negative consequences for job creation. Consideration could also be given to adjusting the balance between the shares paid by employers and employees. As noted earlier, employers currently pay 1.4 times the employee premiums.
3. Experience rating
Some people suggest introducing a “user pay” feature into UI premiums. This means that the premium rate an individual or employer pays would depend on how often they have used the program in the past. This would make UI premiums more consistent with private insurance programs, where a higher number of claims results in higher premiums. It would also address concerns that some industries, where use of the program is relatively low, are being forced to cross-subsidize other industries.
This approach could be implemented in the UI program as it is in provincial workers’ compensation programs, where it is called “experience rating.” Experience rating concepts could be implemented at either an industry or an employer level. Higher premium rates for frequent-claimant employers would more accurately reflect the costs of operating seasonally or cyclically sensitive industries, thus providing a better basis for investment decisions in those sectors.
However, for many industries and firms, especially smaller firms in seasonal industries, full experience rating might make it difficult to stay in business. An alternative might be to use partial experience rating, where a single industry covers only a part of the higher costs it imposes on the insurance system. The merits of such an approach would have to be weighed against any extra administrative complexity and paper burden for employers that might arise.
It should be noted that the concept of Adjustment Insurance would introduce an element of experience rating into the benefit side of the UI program, and may offer an administratively simpler and more effective approach to addressing these issues.
4. Reduced premiums for employers who support training
Another option that should be examined is reducing premiums for employers who support training to an appropriately certified standard. This would include employers who upgrade the skills of their own workers, as well as those who provide work experience and on-the-job training for the unemployed.
In a sense, this option is based on the same rationale that would support experience rating. Employers who support training are making an investment that might lessen the burden on the UI Account. This could be seen as a contribution to the broader employment goals of a reformed UI and employment development services system.
Financing employment development services
As discussed earlier, the principal source of funds for enhanced employment development services for more people would be reallocation from a reformed UI program. The extent of such a reallocation will of course depend on both the extent of UI reform, and the split of resulting “savings” between premium reductions and enhanced employment development services. In considering these options, it will be necessary to balance two ways of encouraging job creation: reducing payroll taxes, and improving employment development services.
A secondary source of “savings” for reallocation will be administrative simplification. For example, new technologies are available to automate many services that are now labour intensive, such as posting job openings and maintaining hardcopy claimant records. Similarly, the bureaucratic red tape and thousands of hours devoted by both employers and government employees to handling Records of Employment could be significantly reduced through a simplification of the legislation, coupled with greater use of technology. These actions would free up time and resources to devote to more value-added services such as individual counselling.
Current financing arrangements separate participants into two groups: UI claimants who have access to the Developmental Uses funds associated with the Unemployment Insurance system, and others whose access to training is financed from the federal government’s Consolidated Revenue Fund. Ideally, reform would make it easier for a flexible range of employment services to be accessible based on individual needs, rather than program funding rules.
D. Meeting the needs of working parents
Changes in the economy and the workplace are affecting the needs of working parents. Any discussion of social security reform based on improving access to employment must take these changing needs into account. The challenge is not only to have the right skills for employment. It includes having the opportunity to take a job. For an increasing number of Canadians, this opportunity depends on finding new ways to balance work and family responsibilities.
Child care
Most Canadian parents - including lone parents and those with pre-school children - are now in the labour force. Finding and paying for child care is one of their biggest concerns. In many cases, the lack of affordable, high quality child care is an insurmountable barrier to a job.
The federal government now spends over $400 million on child care services, mainly through the Canada Assistance Plan. Currently there are 360,000 regulated child care spaces across Canada for children under 13; approximately 150,000 of these spaces are subsidized for low-income families. Some 270,000 spaces are available for the one million pre-school children with parents working or studying more than 20 hours per week.
The federal government sees child care as a priority for the reform of social security programs, lying at the heart of the three areas addressed by this Discussion Paper: working, learning and security. It is a critical support for employment, because it provides working parents with the assurance of quality care for their children. But child care is more than an employment measure if it also provides children with a good environment in which to grow and learn. Effective child care can help to ensure the future employment success of children who might otherwise be at risk.
The federal government is committed to supporting the provinces with a view to expanding the availability of child care in Canada. The Government’s campaign platform outlined a commitment of $720 million over three years to provide for the subsidization or creation of up to 150,000 spaces. As a first step, the February 1994 Budget set aside $360 million over two years for this purpose, to begin after a year of 3 per cent economic growth. Forecasts for 1994 indicate growth in excess of 3 per cent, which would allow the new funds to be phased in, starting in 1995-96.
The design and delivery of child care and social services are provincial responsibilities. Accordingly, the federal government will need to agree with the provinces on how this money should best be spent in pursuit of a better-designed framework for child care. There are a number of ways that the funding for child care could be used. In some parts of Canada, new spaces are required; in others affordability is the problem. In still other areas, new types of child care are needed, to accommodate such things as nonstandard work. The choices made are important. Any additional investment over the next several years could pay multiple dividends in the future from a more productive work force, jobs for child care workers, reduced pressure on overburdened income support programs, and enhanced development of children.
Some provinces are interested in developing new child care services within a broader perspective of child development. Such an approach would facilitate access to facilities like community-based family resource centres, perhaps building on provincial initiatives such as Ontario’s “Better Beginnings, Better Futures” program. Under provincial direction, services could be tailored to meet the specific needs and utilize the resources of a particular community.
There are a number of potential advantages to expanding regulated child care within the context of community-based child development services. One advantage is cost and efficiency. Child development services could be planned and delivered along with regulated child care at the community level, using the same facilities wherever possible. Families could access, in one place, a range of different services and supports from various sources.
Linking child care and child development could represent a comprehensive and preventative approach to social problems at the earliest point of life. Rather than using our money to rectify social problems which eventually occur as a result of a lack of support or security for young children, investment at the front end could save us enormously in both human and financial costs ten or twenty years down the line.
One example of the federal government’s commitment to early childhood development is the plan to spend $100 million, through 1997-98, to support Head Start pilot projects for pre-school Aboriginal children within urban centres and large Northern communities. Their success could serve as the basis for future expansion. Health Canada is consulting with Aboriginal, provincial and territorial representatives on the design of this program. A portion of the new funding for child care will also be allocated for on-reserve child care.
Flexible work arrangements
Rigid work arrangements can affect people’s lives and their productivity at work, and sometimes act as barriers to employment. Policies concerning issues such as part-time work and flexible work schedules have a direct impact on the growing number of parents who must balance family and work responsibilities. Flexible work time, a compressed work week and job sharing formulas are examples of supportive arrangements that take into account the needs of many of today’s workers.
The Minister’s Advisory Group on Working Time and the Distribution of Work is exploring a range of issues related to work distribution, working time and flexible working arrangements in Canadian society. Its report to the Minister this fall will be made public to stimulate debate on these important issues.
The federal government is continuing to assess its own employment practices to learn how it can provide greater opportunities for flexible work arrangements. It will also continue to support the development and exchange of materials on flexible work arrangements and make this information readily available to employers and unions throughout the country.
Strategic Initiatives
Strengthening partnerships
Strategic Initiatives announced recently in collaboration with the provinces seek innovative ways to coordinate services and involve communities:
n in Manitoba, “Taking Charge!” will give up to 4,000 single parents on welfare the tools and training they need to get jobs, build careers and provide a better future for themselves and their children. Working out of a storefront, the program involves the community in delivering services tailored to the personal career plans of each participant. They will work with employers, job placement agencies, and other single parents who serve as mentors and role models to improve their skills, build their confidence and remove barriers to employment.
n in Ontario, jobLink will help welfare recipients get back to work by giving them the supports and services they need to prepare for and find jobs. jobLink Resource Centres will provide “visible doors” in communities and make existing training and job creation programs more accessible and effective for welfare recipients.
“What is needed is a renewed and strengthened set of employment development services capable of providing more highly structured and predictable assistance to the unemployed.”
Creating jobs through productivity
Electrical and Electronic Manufacturers’ Association Sectoral Council
The Electrical and Electronic Manufacturers’ Association Sectoral Council — representing both workers and employers in the industry — has shown that employer-based training not only boosts productivity, but creates jobs.
Unions and management set up a training fund, with contributions from participating firms and their employees, matched by a joint federal-provincial contribution. The fund is used to support training based on three key principles:
n decisions about the kind of training offered are made at the local plant level;
n the best place to train people is on the shop floor; and
n training decisions are made by consensus — recognizing that effective training must benefit both workers and employers.
Productivity gains sparked by the training fund have already created new jobs, as companies become more competitive in the marketplace. The industry’s training fund provides a model for one approach to building a stronger training culture in Canada — by strengthening the links between training and the competitive needs of an industry, with all partners involved in the decision-making process.
With a relatively small investment from the federal government, thousands of employees have re-invented their jobs — avoiding unemployment, and ensuring that one of the key growth sectors of the new economy can remain strong and vibrant.
Creating jobs through entrepreneurship
In Rimouski, Québec, an innovative training program helps women without income who have a business creation project to start their own business. Through a combination of general and individualized training, participants are able to develop their entrepreneurial talents and create their own job opportunity. To improve access to the program, funding has been set aside for child care.
This employment initiative is a good example of collaboration between community partners including the Canada Employment Centre in Rimouski, Ficelles and the CEGEP de Rimouski.
“Rigorous assessment of results should be the basis for developing enhanced employment development services.
The emphasis must shift from following inflexible rules and procedures towards getting people the training and other help they need to get jobs.”
Strategic Initiatives
Finding new ways to help people
Strategic Initiatives developed in partnership with provinces will test new ways to help people get and keep jobs. For example:
n in Prince Edward Island, Ready to Learn will help young UI claimants and social assistance recipients aged 18 to 26 avoid long-term dependency on the social safety net. Peer tutors will provide literacy, lifeskills, academic upgrading and skills training, under the guidance of a professional counsellor.
n in New Brunswick, NB Job Corps is an innovative employment project for older, unemployed workers. It gives them meaningful work and the opportunity to contribute to their communities. About 1,000 older New Brunswickers will benefit from a steady income of up to $12,000 a year, to work in areas such as silviculture, improving beaches, developing nature trails and library automation.
“While the federal government remains committed to providing income support to those who truly need it, Canadians want