Posted: Wednesday, 20 October 2010

Andrew Jackson, the CLC’s chief Economist, appeared before the House of Commons Standing Committee on Finance on Wednesday, October 20 regarding the 2011 federal budget. On behalf of the CLC, Jackson called on the federal government to address three key issues in the next budget — job creation, Employment Insurance and pensions.

On behalf of the 3.2 million members of the Canadian Labour Congress, we want to thank you for affording us the opportunity to present our views.

The CLC calls on the federal government to address three key issues in the next Budget — Pensions, Employment Insurance, and Jobs.

The economic crisis has exposed major faults at the heart of our pension system. Our public pensions — Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), plus the Canada Pension Plan (CPP) — provide a secure income in retirement. But the maximum value of public pensions falls well short of replacing the 50% to 70% of pre-retirement income which is needed to maintain living standards.

Meanwhile, the private part of our pension system is in deep trouble. Only about one in five workers in the private sector now belongs to an employer pension plan. The average pension plan is seriously underfunded because of low interest rates and the recent collapse of stock markets. RRSPs have failed to offset the decline of defined benefit pension plan coverage because people do not save nearly enough, because administrative fees and costs are scandalously high, and because financial returns are highly variable and uncertain.

The CLC has called for a fully pre-funded doubling of annual benefits earned under the Canada Pension Plan, from 25% to 50% of pensionable earnings, with the needed premium increase of about 3% for each of workers and employers phased in over seven years.

We are pleased that the federal government and almost all provinces have agreed to seriously consider modest expansion of the CPP, and we hope that enabling legislation to implement a concrete plan will be introduced as part of federal and provincial budgets in 2011.

Our second key priority is to improve income security for unemployed workers.

EI is a critically important program in tough economic times. Unemployed workers need adequate benefits to support themselves and their families. And improving EI is an effective form of economic stimulus which helps maintain hard-hit community economies.

While the EI program has assisted many workers to deal with the impacts of the recession, it still leaves far too many Canadians, especially women and lower wage, insecure workers, out in the cold. Less than half — in fact just 45% — of unemployed workers qualify for regular benefits today. Between June 2009 and July 2010, the number of regular EI beneficiaries fell by 144,000 while the number of unemployed workers fell by 99,000. Over one in five unemployed workers has been out of work for more than six months, and many are exhausting their benefits before finding a new job. The EI program is forecast to cost $1.5 billion less this year than was forecast in the last Budget, mainly because workers are exhausting benefits before they can find new jobs.

We repeat our call for a uniform national entrance requirement of 360 hours, raising benefits from 55% to 60% of previous earnings, and extending benefits to at least 50 weeks in all regions. At a minimum, the special benefit extensions, including the five-week extension for all workers which recently expired, should be continued through 2011 given that the national unemployment rate is expected to remain at or near 8% and given that a huge surplus was accumulated in the EI Account before the recession.

Our third key priority is jobs.

The recent Update of Economic and Fiscal Projections claimed that “all of the jobs lost during the recession have now been recouped.” While that is technically true, most of the jobs created during the recent recovery have been part-time or temporary. We are still down 211,000 permanent full-time employee positions compared to October 2008, and the “real” unemployment rate which takes into account involuntary part-time workers and labour force dropouts is still over 10%. The youth unemployment rate is 14.9%.

In short, the jobs crisis is still very much with us. This forces us to question the wisdom of ending the economic stimulus package, including infrastructure investment programs, as of the end of March 2011.

The CLC again calls for the federal government to launch, in partnership with the provinces and cities, a major multi-year public investment program which would create jobs now, promote our environmental goals, and build new “green” industries for the future. A comprehensive plan would cover roads, sewers, and basic municipal infrastructure; health and educational facilities; mass transit; passenger rail; affordable housing; energy conservation through building retrofits; and renewable energy. Federal government support for all infrastructure and environmental investments should be linked to “Made in Canada” procurement policies so goods and services inputs are purchased in Canada. The federal government should also make investments in child care, home care, and long-term care for the elderly which would create new jobs while promoting our social goals.

Canada has a very low level of public debt, and borrowing costs for the federal government are at historically all-time lows. Currently, the interest rate on 10-year bonds is well under 3%. Many public investments yield a much higher rate of return in terms of public benefits and growth of private sector productivity. Canadian households are saving rather than spending to reduce record high levels of debt; private sector investment is still very depressed; and our export growth will be held back by a high dollar and a very weak U.S. economy.

Now is not the time for the federal government to turn from support for jobs to fiscal austerity. The actions announced in the 2009 Budget did not go as far as we wanted, but they made a significant difference for working people hit by a global crisis which was not of their making. The federal government helped support jobs and the unemployed. The federal government can and must continue to lead if we are to enjoy a solid economic recovery based on the expansion of high quality jobs.

Thank you very much.